Select Sands Corp. announced that it has entered into a binding agreement with Tutle Holding, LLC and Steve Hackmann, Ozark Premium Sand LLC (OPS) pursuant to which Select Sands’ wholly owned subsidiary, American Select Corp., will purchase certain OPS equipment and shall have the option to purchase OPS’ dry processing plant, operating equipment, saleable inventory and customer lists amongst other miscellaneous assets owned by OPS.
Included in the assets, in respect to which the company will have an option to purchase, is a 26-acre fully operational drying facility with storage located within 50 miles of Select Sands’ Sandtown quarry in Arkansas. The 26-acre facility is located on the Union Pacific Rail Line. If the option is exercised, this transaction will transform Select Sands into a fully integrated, self-sufficient Tier 1 sand producer with capacity to process more than 600,000 tpy with an excellent logistics and storage advantage, the company said. In addition, the facility can be easily expanded to increase the amount of sand that can be processed.
Rasool Mohammad, president and CEO of Select Sands, said, “We are very pleased to come to terms on this transaction that is very favorable for both parties moving forward. In the energy market, Tier-1 regional (40/70 and 100 mesh) sand is in high demand right now, and the market is tightening for this finer sand. Our timing to become a new supplier of high-purity, finer mesh sand couldn’t come at a better time for our shareholders.”
Pursuant to the terms of the agreement, Select Sands will pay $500,000 upon signing of the agreement to the vendors in respect of the purchase of certain heavy equipment. Select Sands will take title to these assets upon payment of the $500,000.
Select Sands will then have 60 days to complete its due diligence on the remaining assets that are subject to the agreement. If Select Sands is satisfied with its due diligence, then before the end of the due diligence period, it must pay an additional $250,000 to the vendors for certain specified additional heavy equipment and $250,000 as a payment for the option to acquire the remaining assets within the period expiring on the one-year anniversary of the date of payment of the above referenced $250,000 option payment. The purchase price for the remaining assets subject to the option will be $3,317,000, after deducting the $250,000 option payment.
As per the June 2015 PEA report by Tetra Tech of Golden, Colo., and Vancouver, B.C., Canada, the Sandtown property has a pre-tax net present value of $160 million and a post-tax net present value of $92 million.
“This transaction demonstrates our commitment to become a fully integrated producer in the most accretive way possible and demonstrates our aligned interests with shareholders,” Mohammad said.