Calgary, Alberta / ACCESSWIRE / October 29, 2014 / CanAm Coal Corp. (COE.V) ("CanAm" or the "Company")
today announced it has signed a binding Letter of Intent ("LOI") to acquire a 100% interest in an Alberta Metallic and Industrial Minerals Permit covering approximately 1,200 acres (567 ha) of land containing high quality silica sand (or
Frac Sand) in Western Canada (the "Property"). Based on an historical resource calculation, the property may contain at least 10 million cubic yards of sand. This estimate however is non NI 43-101 compliant and therefore cannot, and
should not be relied upon.
The acquisition is at arm's length and, pursuant to the LOI, the purchase price for the Property will be settled through a combination of cash, $215,000, and common shares, 25,700,000 shares at a deemed price of $0.05 per common share,
of CanAm for a total purchase price of $1.5 million. Both the cash and the common share portion of the purchase price are contingent on the achievement of certain milestones and/or performance criteria. A cash payment of $15,000 was made and
1,000,000 common shares were issued and delivered to the vendor upon signing of the LOI. The remaining shares, 24,700,000, will be escrowed and vest in accordance with the following criteria: 20% upon closing of the transaction, 20% upon completion
of a NI 43-101 resource report, 25% upon completion of a Preliminary Economic Assessment and 35% upon receipt of final permits. The LOI has a term of 60 days during which both parties will perform the required due diligence.
The transaction is subject to regulatory approval including approval by the TSX Venture Exchange.
"This acquisition will allow us to transition from a pure coal player to a more broader energy company and plays into our strength of developing and operating surface mining operations", commented Jos De Smedt, CEO of the Company.
The North American frac sand market has been growing rapidly over the last couple of years largely as a result of North America's strong energy renaissance. Industry analysts predict that demand for frac sand will accelerate in the next couple
of years and consumption is expected to reach 95 billion pounds (43 million tons) this year, up 30% from last year, according to energy specialists at PacWest Consulting Partners. The Canadian frac sand market is still in its infancy but growing
quickly. Currently, the majority of the sand used in the Canadian market is imported from the US and can travel
up to 3,000 km from the frac sand producing States of Wisconsin, Nebraska and Minnesota into the major Canadian shale plays of Alberta and British Columbia. Canadian frac sand consumption is expected to grow to 15 billion pounds per year (6.8
million tons) by 2016, representing a 19.6% CAGR, according to industry analysts at Raymond James.
In the context of these overall market dynamics, key differentiating factors in the frac sand market are quality and delivered cost. The Property acquired by the Company has a number of compelling attributes.
Frac Sand meets API and ISO standards
Frac sand is high-purity quartz silica sand produced for the petroleum industry. It is used in the hydraulic fracturing process known as fracking to aid in the flow of oil, natural gas and natural gas liquids. Frac sand is also referred to as a
Proppant because it props the fractures open to allow easier flow of oil and gas. The specifications for frac sand are governed by API and ISO standards and basic properties include: sand sphericity and roundness, crush (K value), acid solubility,
turbidity and silicon dioxide (per cent) content.
Sand quality is a key factor in the frac sand market and quality is mainly defined by crush strength, sphericity and uniformity. On that basis, frac sand is categorized into Tier 1 to 3 with Tier 1 representing the highest quality product. Tier 1
and 2 sands are typically also referred to as "Northern White" and "Brady Type" sands.
Prior to entering into the LOI, initial testing of unprocessed and washed silica sand samples from the Property was completed and all testing to date has indicated the Property's silica sand meets or exceeds industry-wide API and ISO standards
for frac sand. More importantly these initial tests indicated that the sand meets the criteria of Tier 1/Tier 2 quality for sphericity and roundness which would make this a highly desirable product for the fracking industry. The initial tests were
conducted by Loring Laboratories (Alberta) Ltd. and the Company will commission further testing by Stim-Lab Inc. and PropTester Inc. in the near term.
Geographical location significantly reduces the delivered cost to the end consumer
In addition to sand quality, the delivered cost of frac sand is a critical element in the decision making process. Industry experts estimate that logistics (transportation and
handling/transloading) can account for 60%+ of the delivered cost to the end consumer and such costs could be as high as $150/ton for sand imported from the US. Currently, the majority of the sand used in the Canadian market is imported from the
US and can travel up to 3,000 km from the frac sand producing States of Wisconsin, Nebraska and Minnesota into the major Canadian shale plays of Alberta and British Columbia.
The Property's strategic location in Western Canada provides it with a significant logistics cost advantage due to its relative proximity to major Western Canadian shale plays such as the Duvernay, Montney and Horn River.
Tim Bergen, Vice Chairman of the Board and responsible for Business Development at CanAm, commented: "With all industry analysts predicting robust growth over the next 3 to 5 years in North America, and in particular the Western Canadian frac
sand market, we believe the Property provides us with an excellent opportunity to capitalize on this emerging market segment. As well, this is only a first step for our Company and we believe that our core competencies in mining, logistics and
product quality control, position us well to pursue further initiatives and become an integrated player in this industry". Jon Legg, Chairman of the Board added: "This diversification into frac sand is a logical step into the evolution
of our Company as the development, mining and marketing of frac sand is very similar to our existing coal mining operations. It is all about bringing a property into production and moving dirt in the most efficient way and I believe that our team
has a solid track record of executing on this strategy. We are confident that this asset will create significant shareholder value for our Company."
About CanAm Coal Corp.
CanAmis a coal producer and development company focused on growth through the acquisition, exploration and development of coal resources. CanAm's main activities and assets include its four operating coal mines in Alabama. Other coal
and resource opportunities continue to be evaluated on an ongoing basis.
For Further Information:
CanAm Corporate Office:
Jos De Smedt, CEO
Tel: 403.262.3797
Toll Free: 1.877.262.5888
Email: jdesmedt@canamcoal.com
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release may contain certain forward-looking information. All statements included herein, other than statements of historical fact, is forward-looking information and such information involves various risks and uncertainties. There can
be no assurance that such information will prove to be accurate, and actual results and future events could differ materially from those anticipated in such information. A description of assumptions used to develop such forward-looking information
and a description of risk factors that may cause actual results to differ materially from forward-looking information can be found in the Company's disclosure documents on the SEDAR website at www.sedar.com. The Company does not undertake to update
any forward-looking information except in accordance with applicable securities laws.
SOURCE: CanAm Coal Corp.