Canadian Premium Sand delays production until 2022

Job estimates of 150 originally predicted may not materialize

By Don Norman

Canadian Premium Sand issued a press release on February 4 that updated the status of their Wanipigow silica sand mine project. The company is now predicting the mine will go into production in early 2022.

No firm date had been set for production but earlier estimates were more optimistic about when the mine would begin producing. The press release notes that market conditions should see a rebound in the price for silica sand by that time.

Subject to financing, permitting and a final investment decision, the Company plans to bring the Project into production in early 2022 at a time when market conditions, drilling activity and silica sand prices in Western Canada are expected to improve. The Company expects silica sand pricing in early 2022 to have recovered to $150 CAD per metric tonne in Grande Prairie area.

The company has also made some adjustments to their business model that was able to reduce the costs associated with the project, thereby making it more profitable.

CPS has identified numerous opportunities that significantly lower the revised capital cost estimate for the Project with a similar production capacity included in the Preliminary Feasibility Study and Mineral resource Report that was issued last June. CPS estimates a revised capital cost of CAD $120 million for facilities required to extract, produce and market silica sand at a production rate of 1.25 million metric tonnes per year. This figure is approximately CAD $80 million less than originally estimated. The revised capital cost results from an operational and design approach that adjusts the way the sand is processed using a mobile processing unit solution provided by Hi-Crush Inc. The Company will be filing an updated preliminary feasibility study validating the following conclusion and recommendations within 45 days of this announcement.

“We re-examined every aspect of the Wanipigow Project with invaluable input from the Hi-Crush Inc. team and our skilled consultants and were able to achieve a result that we are confident will provide an attractive and achievable path forward to the next phase of the Project, which is the build out,” said Company President & CEO, Glenn Leroux. “Wanipigow provides a long term supply of premium quality sand. Our challenge was designing an operation that could get it to market cost effectively and in a manner that aligned with our customers’ buying practices. We have now done so. This is a major milestone for our shareholders and our local stakeholders.”

Leroux said that the change in the processing strategy won’t significantly change the operation in Wanipigow. “The operational approach CPS is taking using the Hi-Crush mobile plant system does not change the process required to produce saleable products from the silica sand deposit,” said Leroux. “It does however reduce the footprint and infrastructure requirements when compared to the original proposal. The Wanipigow site will see the sand extracted, washed and first cut sizing performed before shipping.”

Early estimates for jobs created by the operation were in the range of 150. The Advocate asked Leroux if any of these new developments would change that estimate. He didn’t go as far as to walk back that number but he was a little more cautious. “It is too early to comment on that question as we have not arrived at a definitive job count yet,” said Leroux. “Over the coming months we will be working on the finer details of our design and operational plan and that process will generate the headcount needed to run our operations. Our new approach is a change from the original plant design but ultimately we intend to produce a volume of sand per year that is very close to that associated with the original plant,” he said.

But he cautioned that the original plan wasn’t viable and ultimately the viability of the business model is going to supersede any commitment to a firm job number. “CPS spent the past several months developing a plan that is viable,” explained Leroux. “The 150 jobs associated with a plan that was not viable were not going to materialize. If there ends up being fewer jobs when the viable plan is up and running it is far better than no jobs.”

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