Select Sands Corp. provided an operations update, including higher than previously expected sales volumes for the second quarter of 2017.
The company now anticipates second quarter 2017 total frac/industrial sand sales volumes to be at least twice the 22,427 tons sold and shipped during the first quarter. Select Sands had previously expected frac/industrial sales volumes to increase 40 to 60 percent over the first quarter, after accounting for the impact on production and related shipments from flooding during an approximate two-week period earlier in the second quarter.
For the 2017 second quarter, the company currently anticipates the blended average selling price for frac/industrial sand will be approximately 13 percent higher than the 2017 first quarter.
Reconfiguration of operations processes has been completed and the processing facility now has the capability to produce at a rate of 600,000 tpy. However, to ensure optimal inventory management, the company is producing at levels consistent with its ability to deliver product, which is primarily by rail. A typical rail car can hold approximately 110 tons of product.
While accumulation of committed rail cars from customers has occurred at a slower pace than originally anticipated, the number of cars and the rate at which the cars are being received continues to increase. A total of 300 in-service rail cars are expected by the end of this month, which is significantly higher than the 67 rail cars in-service at the end of the first quarter.
Select Sands is also pursuing opportunities for securing additional rail cars for product shipments through new and broadened customer relationships. Certain long lead time equipment has been purchased and is anticipated to be installed along with other components later this year once enhanced logistics capabilities are in place to support the company’s plans for further capacity expansion of the processing facility.
Zig Vitols, president and chief executive officer, commented, “I have been extremely pleased with the progress we have made since starting commercial production early this year. During the second quarter, our dedicated management team and operational personnel have continued to do an outstanding job of ensuring that we safely produce premium quality sand. We are currently focused on enhancing our logistics by working closely with customers to secure additional rail cars. The build-out of our delivery capability is expected to allow us to utilize our maximum production rate late in the second half of 2017.”
The company advises that the production decision on the sandtown deposit was not based on a feasibility study of mineral reserves, demonstrating economic and technical viability, and, as a result, there may be an increased uncertainty of achieving any level of recovery of minerals or the cost of such recovery, including increased risks associated with developing a commercially mineable deposit. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee that production will occur as anticipated or that anticipated production costs will be achieved.