TSX-V: SNS OTCQX : SLSDF FIRST IN QUALITY UNIQUELY POSITIONED FOR SUCCESS CORPORATE PRESENTATION. September 2017

Transcription

1 TSX-V: SNS OTCQX : SLSDF CORPORATE PRESENTATION September 2017 FIRST IN QUALITY UNIQUELY POSITIONED FOR SUCCESS 1

2 DISCLAIMER This presentation includes forward-looking information and statements, which may include, but are not limited to, information and statements regarding or inferring the future business, operations, financial performance, prospects, and other plans, intentions, expectations, estimates, and beliefs of the Company. Information and statements which are not purely historical fact are forwardlooking statements. Forward-looking information and statements involve and are subject to assumptions and known and unknown risks, uncertainties, and other factors which may cause actual events, results, performance, or achievements of the Company to be materially different from future events, results, performance, and achievements expressed or implied by forward-looking information and statements herein. Although the Company believes that any forward-looking information and statements herein are reasonable, in light of the use of assumptions and the significant risks and uncertainties inherent in such information and statements, there can be no assurance that any such forward-looking information and statements will prove to be accurate, and accordingly readers are advised to rely on their own evaluation of such risks and uncertainties and should not place undue reliance upon such forward-looking information and statements. Any forward-looking information and statements herein are made as of the date hereof, and except as required by applicable laws, the Company assumes no obligation and disclaims any intention to update or revise any forward-looking information and statements herein or to update the reasons that actual events or results could or do differ from those projected in any forward-looking information and statements herein, whether as a result of new information, future events or results, or otherwise, except as required by applicable laws. 2

3 OUR VALUE PROPOSITION In demand, high purity Northern White premium silica sand located in Arkansas, with a significant distance advantage to Texas, Oklahoma, Colorado, New Mexico basins compared to Wisconsin/Minnesota sources. 3

4 KEY INVESTMENT HIGHLIGHTS Strong Industry Fundamentals Commercial Silica Deposit Significant Logistics Advantage Optimal Operating Environment More wells drilled per rig, longer lateral lengths, more frac stages per lateral foot and more sand per frac stage Rapid technological advancements are making drilling profitability possible at current commodity prices Meets the best of Northern White Sand specifications Inferred/Indicated Resources of ~90MM tons* Internally funded capex for near term expansions Semi regional producer utilizing truck and rail logistics Serving: SCOOP/STACK/Woodford, Haynesville, Permian, DJ and Eagle Ford Mild winters, including favorable ground conditions (no sub-zero temperatures) operational year-round Arkansas has shown to be Pro-business with a favorable regulatory environment * Bell Farm 49.6MM tons inferred 4 Mineral Resources Keinfelder, April 2017 * Sandtown 42.0MM tons Indicated Mineral Resources Tetra Tech, February 2016

5 TIMELINE Oct 2014 Sandtown Property Acquisition Oct 2015 Test Mining 2016 Sales to Industrial Markets through toll manufacturer Dec 2016 Ozark Premium Sand Acquisition & New CEO Jan 2017 First Rail Shipment to O&G Customer Jan 2017 Bell Farm Property Acquisition Mar 2017 High Volume Multi-year Contract Mar 2017 Acquire rail loading facility Apr 2017 Total Inferred and indicated ~90M tons Jun 2017 Q2 volumes greater than double from Q1 Sept 2017 Q3 volumes greater than double from Q2 Oct 2017 Option on property: geographic platform for future expansion Nov 2017 First Barge Order * Bell Farm 49.6MM tons inferred 5 Mineral Resources Keinfelder, April 2017 * Sandtown 42.0MM tons Indicated Mineral Resources Tetra Tech, February 2016

6 SELL SIDE: MORE SAND IS COMING Johnson Rice and Co. We believe the U.S. frac sand market demand is currently running at approximately 70MM tons per year compared to approximately 35MM tons during We estimate total domestic frac sand market capacity should increase to approximately 73MM tons per year during The previous peak cycle demand for frac sand was approximately 65MM to 70MM tons per [year]. We estimate that available industry capacity is approximately 95MM tons per year with a meaningful component of that being higher cost. Additionally a percentage of the 95MM tons per year of capacity may not be the appropriate grade [mesh] demanded by the market. (HCLP Initiation, June 22, 2017) Coker Palmer... we think the BHI U.S. working land rig count of ~761 rigs (horizontal + directional) supports annualized demand of ~69mmtpa based on ~5,000 tons per well. A progression to ~6,000 tons per well, which we think will continue to develop this year, would be supportive of ~83mmtpa of annualized demand on flat rig counts. (Frac Sand Update, April 28, 2017) KeyBanc Another tailwind for frac sand demand growth is the continuing increase in proppant consumption per well. The amount of frac sand consumed in each well has been driven higher by longer average horizontal well lengths, closer spacing of frac stages along the wellbore and increasing amounts of sand pumped per stage. The average well completion in 2016 used 75% more frac sand than the average well completion in the effect of a 55% increase in the average horizontal rig count and a 20% increase in average proppant loading per well is 70-80% growth in frac sand consumption in (Energy: Oil & Gas Drilling / Diversified Metals & Mining Industry Update, January 18, 2017) 6

7 E&P: FRAC SAND INTENSITY IS INCREASING Laredo Petroleum Completed 3 wells with 15,000'+ laterals post 2Q17 Has completed several wells testing 3,300 lbs of proppant per lateral foot. Those wells are outperforming the 1.3MMboe type curve by 86%. Pioneer Version 3+ Completions North University - LSS ~9,000 laterals. 3,000 lbs/ft sand Hutt - Wolfcamp B ~9,700 laterals. 3,000 lbs/ft sand South University - Wolfcamp B ~9,800 laterals. 2,500 lbs/ft sand Hess Corp We continue to test higher stage counts and proppant loading in line with our focus on maximizing the value of our DSUs. We currently have 6-60-stage wells online and 11 wells completed with proppant loading of up to 140,000 pounds per stage. Core Labs We are still proponents of longer laterals, more sand, closer clusters and more stages. I think the complexity of the combination of sand that will be pumped will continue to increase. Cabot O&G they are experimenting for now with more sand not less. The company also talked about more sand per well in the Marcellus Patterson UTI We saw it (sand consumption/well) move slightly up with our customers Longer horizontal laterals, combined with advancements in completion designs, are leading to more stages per well. RPC proppant per stage is higher, and lateral lengths are continuing to grow, which yields more proppant per well from both those variables. Basic Energy Frac sand usage was up 10% Q/Q Source: Various public documents 7

8 19-Feb Apr Jun-10 6-Aug-10 1-Oct Nov Jan Mar May-11 8-Jul-11 2-Sep Oct Dec Feb Apr-12 8-Jun-12 3-Aug Sep Nov Jan Mar May-13 3-Jul Aug Oct Dec Feb Apr-14 6-Jun-14 1-Aug Sep Nov Jan Mar-15 8-May-15 2-Jul Aug Oct Dec Feb-16 8-Apr-16 3-Jun Jul Sep Nov Jan Mar-17 5-May Jun-17 Horizontal Rig Count STRONG INDUSTRY FUNDAMENTALS 1,600 1,400 1,200 1, U.S. DRILLING ACTIVITY US Drilling Activity Horizontal Vertical + Directional U.S. FRAC SAND DEMAND SNESITIVITY ANALYSIS (MM TONS) Average Sand Per Well (tons) 4,500 5,000 5,500 6,000 6,500 7,000 7, Source: CPI Research 18.3 Wells/Rig Horizontal Rig Count Wells/Rig/Year Horizontal Wells Sand Use/Horizontal Well SAND CONSUMPTION TRENDS (tons) 2014 Current Potential 1, ,125 2, ,140 5, ,368 7,500 Total Sand Consumption 53,550,000 88,770, ,260,000 8

9 STRATEGICALLY LOCATED Most Active US Land Basins Permian Eagle Ford SCOOP/STACK Williston Marcellus Haynesville Processing facility Active Drilling Rigs Source: GE Baker Hughes. Year Ago Current 300 mile trucking radius 9

10 DESTINATIONS Industrial Frac 10

11 PROPERTIES Quarry Type Resource Quantity Mile to Rail Status Sandtown Mono Crystalline Silica Indicated 42MM Tons Miles Active Bell Farm Mono Crystalline Silica Inferred 49MM Tons Miles Cleared Ready Sandtown Bell Farm * Bell Farm 49.6MM tons inferred 11 Mineral Resources Keinfelder, April 2017 * Sandtown 42.0MM tons Indicated Mineral Resources Tetra Tech, February 2016

12 FROM MINE TO MARKET 12

13 Thousands of Tons $ Thousands CAD Q3 2017: OPERATIONAL HIGHLIGHTS Canadian $ and U.S. Short Tons Quarterly Performance $400.0 Q3 Operating Income $1,124,160, and Net Income at $506, $200.0 $0.0 Q sales volumes for total frac and industrial sand increased 136% from Q Q1 Q2 Q3 $200.0 $400.0 $600.0 $800.0 Q3 increased another 117% from Q2 Process facility now has capability to produce at rate of 600K tons per year New private road from quarry to newly rebuilt federal highway to be completed in December of 2017 Frac/Industrial EBITDA Adjusted* *Excludes depreciation, depletion and amortization; non-cash share-based compensation; gain on sale of equipment; and, loss from flooding at plant. Further detail available in Select Sands Third Quarter 2017 Financial Results 13

14 Q2 2017: SELECT SANDS SOLID FINANCIAL IMPROVEMENT Three Months Ended September 30, 2017 Three Months Ended June 30, 2017 Three Months Ended March 31, 2017 Revenue $ 6,623,185 $ 3,083,192 $ 1,458,553 Cost of Goods Sold 5,073,735 2,116,518 1,766,126 Depreciation and Depletion 187, , ,289 Income from Sand Operations $ 1,361,937 $ 777,548 $ (428,862) General and Administrative ( G&A ) Expenses (1) 236,100 1,173,682 2,684,280 Depreciation in G&A Expenses 1, Operating Income (Loss) $ 1,124,160 $ (396,454) $ (3,113,142) Interest income 3,689 8,045 10,424 Foreign exchange (loss) gain (572,729) (631,708) 170,999 Gain on sale of equipment - 1,596 - Loss from flooding at plant - (76,737) - Share of loss in equity investee (48,556) (57,554) (157,059) Net Income (Loss) $ 506,564 $ (1,152,812) $ (3,088,778) Foreign currency translation adjustment (22,613) 356,876 (308,736) Comprehensive Income (Loss) $ 483,951 $ (795,936) $ (3,397,514) Basic and Diluted Income (Loss) Per Common Share $ 0.01 $ (0.01) $ (0.04) Weighted Average Number of Shares Outstanding 87,003,316 86,959,360 85,484,729 Adjusted EBITDA (2) $ 412,520 $ (254,316) $ (771,071) Summarized Consolidated Interim Statements of Operations and Comprehensive Income (Loss) (Expressed in Canadian Dollars) (Unaudited) Excludes depreciation. Includes non-cash share-based compensation of ($283,234), $633, and $2,196,418 for the third, second and first quarters, respectively. Excludes depreciation, depletion and amortization; non-cash share-based compensation; gain on sale of equipment; and, loss from flooding at plant. See table under Non-IFRS Financial Measures for reconciliation to net loss.

15 UNIQUELY POSITIONED FOR SUCCESS Arkansas location and quality Advantaged semi-regional sand provider with the quality characteristics of Northern White Premium Sand Positioned closer than Wisconsin/Minnesota sources to oil & gas basins in Texas, Oklahoma, Colorado, New Mexico and Louisiana than Northern White mines in the Upper Midwest Continued growth of sand intensity Upside opportunity Grow to >1MM tons per year with minimal capital investment Asset matching properties of resources and future expansion Solid balance sheet and financial position 15

16 APPENDIX 16

17 NON-IFRS RECONCILIATION: ADJ. EBITDA (In Canadian dollars) Reconciliation of Net Income (Loss) to EBITDA to Adjusted EBITDA: Three Months Three Months Three Months Ended Ended Ended September 30, 2017 June 30, 2017 March 31, 2017 Net Loss $ 506,564 $ (1,512,812) $ (3,088,778) Add Back Depreciation and depletion 189, , ,289 Share-based compensation (283,234) 633,910 2,196,418 EBITDA $ 412,520 $ (329,456) $ (771,071) Add Back Loss from flooding at plant - 76,949 - Deduct For Gain on sale of equipment - (1,564) - Adjusted EBITDA $ 412,520 $ (254,071) $ (771,071) The above information is included for convenience only. Generally, a non-ifrs financial measure is a numerical measure of a Company s performance, cash flows or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. EBITDA is not a measure of financial performance (nor does it have a standardized meanings) under IFRS. In evaluating non-ifrs financial measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts. The Company uses both IFRS and certain non-ifrs measures to assess operational performance and as a component of employee remuneration. Management believes certain non-ifrs measures provide useful supplemental information to investors in order that they may evaluate Select Sands' financial performance using the same measures as management. Management believes that, as a result, the investor is afforded greater transparency in assessing the financial performance of the Company. These non-ifrs financial measures should not be considered as a substitute for, nor superior to, measures of financial performance prepared in accordance with IFRS. 17

18 SELECT SANDS CORPORATION West Hasting Street, Vancouver, British Columbia, Canada V6C 1E1 +1 (604) SELECT SANDS AMERICA CORPORATION 363 North Sam Houston Parkway, Suite 1050 Houston, TX OZARK OPERATIONS 9470 Harrison Street Newark, AR 72562