Just days after Toronto-based Victory Nickel (TSX:T.NI
, Stock Forum
) announced the first shipment of 900 tons of washed, concentrated sand
had moved to the company’s Seven Persons frac sand drying plant, shares in the company have tumbled.
"This first movement of premium-quality Jordan Formation sand concentrate to our 7P Plant for drying and screening is a tremendous milestone for Victory Nickel and Victory Silica," said Ken Murdock, Victory Silica's CEO in a January 30 news release.
"Construction of our 500,000 ton per year frac sand dry plant is approaching completion; required mobile equipment has been acquired and is ready at our plant and rail siding; and all the necessary supply and transport agreements are in place. All costs other than plant operating costs are fixed under contract and we look forward to commissioning our new plant and making that first sale of high-quality frac sand very shortly."
With the usual Q1-Q2 oil services breakup nearing, the market didn’t share Murdock’s enthusiasm, with Victory stocks touching $0.08 per common share on the day of the release now settling at $0.055, after touching as low as $0.05 Monday with 2.4 million traded.
According to Victory, “Frac sand is a proppant used in the oil and gas business as a part of the hydraulic fracturing process - a means of increasing flow to the wellhead. Frac sand must have particular characteristics including achieving certain levels of crush resistance, sphericity and roundness, and it is therefore a relatively rare commodity. Vast quantities of frac sand are consumed, and more is needed all the time, as shale gas and oil plays in Canada and the US rise to prominence.”
The drop has taken some $15m off the company market cap.