In the last six months, Rainmaker Resources (TSXV: RMG) has acquired frac sand assets in both Canada and the U.S. that are close to key infrastructure and existing frac sand operations.
In February the junior picked up four permits in northwestern Alberta that are adjacent to the Peace River frac sand quarry owned by Canadian Silica Industries, which produces 500,000 tonnes of silica sand a year. The company followed up that acquisition in June with the Bray frac sand property in northeastern Arkansas, 8 km northeast of the operating Bluebird Sand LLC frac sand operation.
Rainmaker has focused on acquiring and developing silica sand deposits with low capital and operating costs since December 2013, and says it is targeting the sector due to increasing market demand and favourable economics. Rick Patmore, the company’s president and CEO, emphasizes that Rainmaker is only interested in properties that will support at least a decade-long mine life.
“A lot of mines out there have a mine life of four to six years, but it’s not economical to build a plant for a mine that will produce for less than 10 years,” he explains in a telephone interview from his office in Calgary.
Patmore describes the market for frac sand as “extremely strong,” and growing at an estimated annual rate of between 16% and 24%. “As long as there is a need for oil and gas, the market for frac sand is going to get bigger,” he says, estimating that a 24-hour fracking operation can take anywhere from 10 to 25 railway cars full of sand.
The permits Rainmaker optioned earlier this year in Alberta from Zimtu Capital Corp. and 877384 Alberta Ltd. extend for 40 km along the Peace River — straddling both the East and West banks — and are also close to the Horn River, Montney and Cardium basins, which are central to the frac sand market in northwestern Alberta. Rainmaker’s geologists have completed initial sampling and Rainmaker is awaiting the results. “The initial findings look good, but we have to verify them with independent lab results,” Patmore says.
In Arkansas, drilling at the Bray frac sand property has demonstrated sand thicknesses of 30 metres deep. In the nearby Mt. Pleasant area, the sand ranges from between 41 and 46 metres thick, according to reports from the Arkansas Geological Survey.
Patmore notes that the Bray property could service the nearby Eagle Ford, Fayetteville and New Albany shale plays. He also says that the company could have an even larger client base further south in the future. “Mexico is going to allow them to frack next year, and with what they’re planning, we’ll probably supply that market as well,” he says. “If this property is as large as we think it is, the Canadian market could also be a possible market for our sand.”
The Bray property is just off the state highway and 20 minutes from a railhead at Batesville 48 km south, which has a loading dock for frac sand.
In terms of permitting, Rainmaker is in discussions with the same consultant who was responsible for guiding the nearby Blue Bird operation through the permitting process, which took three years from start to finish. Now that a process is in place, Patmore says, permitting Bray should be closer to eight or nine months.
Underlain by St. Peter sandstone, the Bray property consists of pure quartz sand. The St. Peter sandstone, which is also known as “Ottawa sand” in commercial operations, is a major source of frac sand in the U.S.
Rainmaker’s first acquisition in January 2014 was of a 14.7 sq. km quarry permit on the Jayjay Lake silica sand project in northern Saskatchewan, 185 km northeast of Prince Albert. It is also 150 km from Flin Flon, Man. An all-season road crosses through the centre of the property.
The sand deposit at Jayjay Lake lies at surface and consists entirely of beach sand from the shores of Lake Agassiz, a glacial lake that covered much of the central Prairies until 10,000 years ago. The lake is said to have formed 11,500 years ago from a massive melted ice sheet that had previously covered all of Manitoba.
The government of Manitoba says that “at its maximum, the lake was larger than any other on the continent, covering in total more than 500,000 sq. km of Manitoba, Saskatchewan, Ontario, North Dakota and Minnesota.
“During its 4,500-year history, Lake Agassiz rose and fell several times with advances and retreats of the glacier and the opening and closing of various drainage channels. Whenever the lake stabilized for a time, waves created low cliffs and beach ridges, which are still visible.”
Rainmaker says that wave action on the beaches has resulted in clean, well-rounded sand grains that may be suitable for hydraulic fracturing. The sand is derived from a marine quartzose sandstone horizon in the Cretaceous Mannville formation.
Rainmaker says that work in the eighties confirmed the presence of high-quality sand, but that at the time, “the markets were limited, and the selling prices were much lower than today.”
On July 15, the company announced it had acquired three quarry permits spanning 5.18 sq. km adjacent to its Jayjay Lake property. The additional permits bring its total property package at Jayjay Lake to 20.2 sq. km.
Over the last year Rainmaker’s shares have traded in a range of 4¢ to 56¢ per share. At press time Rainmaker shares changed hands at 15¢ apiece.
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