Canadian Premium Sand Inc. (CPS) announced that it has concluded a comprehensive capital optimization review relating to the company’s Wanipigow Sand Project. 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 company also estimates that the Project will have a robust after-tax internal rate of return (IRR) of 40% or greater. The company will be filing an updated preliminary feasibility study validating the following conclusion and recommendations within 45 days of this announcement.
The company 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 disclosed in the company’s June 12, 2019, press release. The revised capital cost of CAD$120 million (before contingency) results from an operational and design approach that employs OnCore Processing, the recently announced mobile processing unit solution provided by Hi-Crush Inc.
The after-tax IRR for the project, based on company’s internal calculations and estimates is anticipated to be 40% or greater and will be supported in an updated preliminary feasibility study. 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 resulting in a robust IRR and a payback period of under four years.
The company expects silica sand pricing in early 2022 to have recovered to CAD$150 per metric tonne in Grande Prairie area. John T. Boyd Co. has been contracted to prepare the Updated Technical Report utilizing the revised capital cost and execution plan.
The Updated Technical Report will also provide details of all assumptions and market data that are utilized to arrive at the IRR for the Project.
“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 and 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.”