Daren Industries clarifies Hanson Lake plans
Daren Industries Ltd DIL
Shares issued 2,346,349 2000-01-20 close $0.16
Friday Jan 21 2000
Mr. Gary Giroux reports
This news release is intended to expand and clarify previous news in Stockwatch Jan. 4 and 17, 2000. Daren Industries has five quarry leases in the Hanson Lake area of Saskatchewan. On Thursday Jan. 6, 2000, Foran Mining announced the securing of environmental approval on a proposed underground test mine at the company's McIlvenna Bay deposit, located at Hanson Lake in Saskatchewan. The proposed surface camp and underground test mine is approximately 500 metres southwest of Daren's quarry lease No. Y7549. It is expected that 9.5 kilometres of road access to Foran's camp will be created this winter, allowing for access to this area for 12 months of the year.
The Winnipeg formation sands, which hosts Daren's deposit, have been the most extensively investigated silica sands in Saskatchewan. The Hanson Lake area was mapped in the early fifties with stratigraphy of the Winnipeg formation investigated in 1960 and 1971. Information regarding the quartz grain distribution, roundness and sphericity was investigated in 1952, 1955, 1961, 1977 and most extensively by Norwest Mine Service Ltd. (Norwest) of Calgary on behalf of Saskatchewan Oil and Gas Corporation. Norwest completed a feasibility study in 1989. The feasibility study estimated that 137.8 million tonnes of dry silica sand underlies a 2,050-hectare area within the original Saskatchewan Oil and Gas prospecting boundary. Daren purchased from Saskatchewan Oil and Gas five quarry leases (Y7549, Y7537, Y7542, Y7531 and Y7535) totalling 385 hectares of this prospecting boundary.
It has been estimated by Daren Industries that quarry lease No. Y7549 contains an estimated 11.0 million tonnes of dry silica sand, of which about 4.0 million tonnes fall within the 20 to 40 mesh size range, suitable for use as frac sand in the oil and gas industry. This estimate is supported by the 1989 feasibility study conducted by Norwest. Daren Industries also holds a 50-per-cent interest in a Crown reserve protective area covering 21,000 hectares around the five specific leases purchased from Saskatchewan Oil and Gas.
Daren Industries has prepared a detailed business plan for joint venture/financing purposes in order to bring these silica sands to market. In February, 1999, the company received operating approval for the establishment of a quarry on lease Y7549. This will permit the company to establish a quarry and a processing unit on site.
The silica sand at Hanson Lake has been tested positively to American Petroleum Institute standards. Norwest concluded at the end of its testing program that washing of the sands, followed by either tumbling or attrition in a Denver cell, would produce the desired American Petroleum Institute standards. Norwest reported that "all trial samples passed the API crush resistance, roundness and sphericity specifications." Additional tests were done for Daren by Canadian Fracmaster in 1998 on material from a 30-tonne bulk sample which concluded that the washed 20 to 40 mesh sample tested passed the API specifications for roundness, sphericity, turbidity, acid solubility and crush resistance.
Sand similar to Hanson Lake sand is currently imported from the United States and is sold for $100 a tonne FOB Medicine Hat, $115 Red Deer and $135 Grande Prairie, all in Alberta. These prices were quoted from current suppliers and consumers of silica sand. The current frac sand market in Alberta and Saskatchewan has been estimated by Daren at 300,000 tonnes. In late 1999, it was reported in the Calgary Herald by Ed Peplinski, an analyst with Calgary-based ARC Financial, that producers are expected to drill 7,200 gas wells in 2000, up from an estimated 6,400 in 1999. In the same article, Roland George, a natural gas markets analyst with Purvin & Gertz in Calgary, said he believed the industry in the region had to drill 4,000 to 5,000 gas wells annually to keep production from declining and another 3,000 to fill the new pipeline capacity. Frac sand is used in the well stimulation process to increase the flow of the hydrocarbon from the reservoir to the wellhead.
The silica sands will be transported to market in bulk form either by rail or truck and trailer. Transportation cost is the biggest single expense and can represent up to $50 per tonne. Hanson Lake has a considerable location advantage compared with the existing U.S. suppliers. Other operating costs associated with the extraction and processing of silica sands are expected to fall below $25 a tonne. These estimated costs have been obtained from various sources, including an independent market study, local contractors, trucking companies, rail companies and extensive research by Daren. |
