: CollinGallant
A mining company looking to get into the frac sand supply business will open its initial operation in Seven Persons, it was announced Thursday by Victory Nickel.
The junior mining company has purchased 3R Sand, a recycling plant for sand used in the shallow gas drilling that closed its doors as work in the local conventional drilling landscape dried up.
Now one of the former owners has agreed to a deal worth $710,000 on completion to takeover the plant and upgrade it to process new sand from Manitoba and the United States.
"I'm happy to get it going again," said Ken Murdock, CEO of Victory Silica, a subsidiary which will operate the plant that will see in the neighbourhood of $3.5-million worth of upgrades before production begins, possibly this summer.
"I wasn't all that happy with mothballing the place and now we're hiring 30-some people plus support staff. It's going to be a good thing all the way around."
Murdock was an original partner in the facility that was under control of a secured creditor before the purchase by Victory.
The acquisition is part of the company's plan to become a major supplier of sand after it opens a major Minago nickel, about 200 kms south of Thompson, Man.
"Essentially Victory is sitting on a deposit in northern Manitoba and overlying the nickel ore is 30 feet of frac sand," said Murdock, who estimates mine development will produce 14 million tonnes of sand of a quality needed in the increasingly common practice of fracture drilling.
It will be marketed to supply the eight major drilling companies that maintain shops in Medicine Hat – a business that Murdock is familiar with.
"That plant has been selling sand to every major service company since 2000," he said.
The company eventually hopes to open a large plant in Manitoba to handle the bulk of production but initially the company has secured a contract to bring in up to 400,000 tonnes of sand from Wisconsin for finishing at Seven Persons.
The location also allows truck shipment within a few hours to most of southern Alberta, southwest Saskatchewan, or parts of Montana.
Murdock also says the key point in the business model includes continued, steady production at Seven Persons.
Victory plans to ship less-processed sand from Manitoba for finishing closer to the well head in Alberta.
That will reduce backlogs on the rail lines during drilling shutdowns as well as breakdowns of the product in the handling process, he said.
"Worst-case scenario is that we build inventory when the service companies are shut down, but we're continuously shipping 10,000 tonnes per week," said Murdock.
The sale is subject to a change of license application.
A $10,000 initial payment was made when the deal was signed, and the remainder will be paid as approval is granted from the Alberta Energy Resource Conservation Board, which has been asked for a change of licence