Athabasca Minerals Inc. announced that AMI Silica Inc., a wholly owned subsidiary of AMI, has secured an anchor offtake agreement with Shell Canada Energy for its Duvernay Frac Sand Project.
AMI believes that the agreement will serve as a catalyst to AMI’s growth program to supply local premium domestic in-basin sand to offset U.S. imports. The agreement is a milestone that demonstrates AMI’s commitment to execute on delivering long-term value to its stakeholders from a strategic business unit within its portfolio.
The agreement with Shell provides for the procurement of frac sand from the Duvernay Project by a world-class investment-grade company. It is anticipated that the agreement with Shell will serve to commercialize AMI Silica’s in-basin strategy in the Duvernay and Montney plays.
The agreement is underpinned by a committed volume requirement that de-risks AMI’s corporate and project financing options at an improved cost-of-capital. The commercial terms of the Agreement also provide Shell with optionality to procure sand from AMI Silica’s future Montney Frac Sand Project.
The agreement, which includes certain take-or-pay provisions, carries a five-year term with two mutually acceptable and separate one-year extensions beginning on the later of mid-2021 or 30 days after the Duvernay Project facility has been commissioned. The agreement allows Shell to procure a minimum volume over five years or up to an annual maximum of frac sand that represents the majority of the Duvernay Project’s stated capacity.
Robert Beekhuizen, chief executive officer, stated, “The AMI team has worked diligently to bring value to the market and for our shareholders with this agreement. We are extremely pleased to have Shell as a primary customer, and will aim to provide them with a progressive Canadian solution that creates flexibility while providing risk mitigation and competitive advantage to imported sand serving the Western Canadian Sedimentary Basin. The agreement is a significant accomplishment for AMI as we continue to develop, realize and deliver on our asset portfolio, and namely our premium in-basin frac sand to current and future customers in the Montney and Duvernay.”