Athabasca Minerals Inc. Announces Strategic In-Basin Sand Supply Offtake Agreement with Shell Canada Energy and Launch of a Strategic Review
February 11, 2020
Athabasca Minerals Inc. Announces Strategic In-Basin Sand Supply Offtake Agreement with Shell Canada Energy and Launch of a Strategic Review
CALGARY, February 11, 2020 – Athabasca Minerals Inc. ("AMI" or the "Corporation") (TSX-V: AMI) is pleased to announce that AMI Silica Inc. ("AMI Silica"), a wholly-owned subsidiary of AMI, has secured an anchor offtake agreement (the "Agreement") with Shell Canada Energy ("Shell") for its Duvernay Frac Sand Project (the "Duvernay Project"). AMI believes that the Agreement will serve as a catalyst to AMI's growth program to supply local premium domestic in-basin sand to offset US imports. The Agreement is a milestone that demonstrates AMI's commitment to execute on delivering long-term value to its stakeholders from a strategic business unit within its portfolio.
Commercial Offtake Agreement
The Agreement with Shell provides for the procurement of frac sand from the Duvernay Project by a world-class investment-grade company. It is anticipated that the Agreement with Shell will serve to commercialize AMI Silica's in-basin strategy in the Duvernay and Montney plays. The Agreement is underpinned by a committed volume requirement that de-risks AMI's corporate and project financing options at an improved cost-of-capital. The commercial terms of the Agreement also provide Shell with optionality to procure sand from AMI Silica's future Montney Frac Sand Project (the "Montney Project").
The Agreement, which includes certain take-or-pay provisions, carries a five-year term with two mutually acceptable and separate one-year extensions beginning on the later of mid-2021 or 30 days after the Duvernay Project facility has been commissioned. The Agreement allows Shell to procure a minimum volume over five years or up to an annual maximum of frac sand that represents the majority of the Duvernay Project's stated capacity.
Robert Beekhuizen, Chief Executive Officer, states: "The AMI team has worked diligently to bring value to the market and for our shareholders with this Agreement. We are extremely pleased to have Shell as a primary customer, and will aim to provide them with a progressive Canadian solution that creates flexibility while providing risk mitigation and competitive advantage to imported sand serving the Western Canadian Sedimentary Basin. The Agreement is a significant accomplishment for AMI as we continue to develop, realize and deliver on our asset portfolio, and namely our premium in-basin frac sand to current and future customers in the Montney and Duvernay."
Value-Maximization & Strategic Alternatives for AMI Silica
AMI is progressing discussions with debt and strategic joint-venture parties to collaborate in the development of AMI Silica, including the Duvernay Project and Montney Project. AMI's Board of Directors (the "Board") support exploring alternate strategies for bringing AMI Silica to market to maximize value for its stakeholders.
Strategic alternatives to joint-venture partnership(s) may also include, but are not limited to, project investment(s), sale, merger, business combination, recapitalization, refinancing, or disposition of select, substantially all, or all of the assets of AMI Silica, or any combination of the foregoing.
The Board has hired Cormark Securities Inc. and Alcedio Capital Inc. as its co-financial advisors in connection with this review and analysis of strategic alternatives.
AMI has not set a definitive timetable for the conclusion of its strategic process and there can be no assurance that the strategic process will result in any transaction or other strategic change or outcome. AMI does not intend to comment further unless and until the Board has approved a specific course of action or AMI has determined further disclosure is required by law.
Advisors
Cormark Securities Inc. and Alcedio Capital Inc. acted as the co-financial advisors to AMI in connection with the offtake Agreement.
AMI Secures Term Financing Arrangement and Coffey Lake Update
AMI has independently secured term financing in support of opening the Coffey Lake pit, which further bolsters its cash liquidity position to sustain the development schedule for this project, and others in its portfolio. Over the last month AMI has cleared the Coffey Lake pit and is in the final stages of stripping the land, which should be completed by mid February. The project is tracking to open for sales in Q2-2020.