CanAm Coal diversifies with frac sand property purchase
Alabama-based coal mining company CanAm Coal Corp. has finalized plans to diversify its energy portfolio by purchasing a 100 per cent stake in the mineral rights of a parcel of land in central Alberta.
CanAm announced in October 2014 that a letter of intent had been signed for an Alberta Metallic and Industrial Minerals permit for a 1,200-acre, frac-sand-rich plot of land. The deal was finalized in December and completion of the $1.5 million transaction is set for February 2015.
The demand for frac sand, or high-quality quartz silica sand, has increased across North America in recent years, with consumption estimated around 95 billion pounds in 2014, up 30 per cent from 2013. The increased demand is due in large part to its use in fracking: helping oil, natural gas and natural gas liquids flow by propping open ground fractures.
Initial tests by Loring Laboratories (Alberta) Ltd. indicate the land contains sand that meets the criteria of tier 1 and tier 2 sands, also known as Northern White and Brady type sands.
When the letter of intent was signed, CanAm CEO Jos De Smedt said in a company news release that the mineral rights acquisition was a step towards transitioning from a pure coal company to a “broader energy company,” a move that reflected CanAm's demonstrated strengths of developing and operating surface mining projects.
The majority of Canadian-used frac sand originates from Wisconsin, Nebraska and Minnesota. The new property's central Alberta location means lower transportation costs from the source to British Columbia's Montney and Horn River shale plays and Alberta's Duvernay Formation.
In CanAm's December announcement, De Smedt said the company will now begin exploring, developing and getting permits for the property, with the hope of starting production within two years.