ROYALTY INTEREST IN THE MANIGOTAGAN DEPOSIT
Silica Frac Sand
Gossan holds a significant royalty on 9 quarry leases within a high-quality silica sand deposit, owned and operated by Canadian Premium Sand Inc. (TSX.V-CPS), known as the Wanipigow (formerly Seymourville) Silica Sand Project. Canadian Premium Sand is currently in the process of developing this permitted project into production of frac sand in the near-term. Alternatively, CPS is also actively examining the production of float glass, which may be a better and higher economic use for the high-purity silica sand.
Under the terms of the royalty agreement, semi-annual advance royalty payments of $50,000 each are payable as of June 18th and December 18th of each year. All frac sand produced, sold and paid from the nine Manigotagan leases (formerly held by Gossan) is subject to a $1.00 per tonne production royalty payable quarterly and all other products are subject to a $0.50 per tonne production royalty. Although the royalty is solely payable on production from the Manigotagan leases, the agreement also provides for a minimum production royalty from both the Manigotagan and the adjacent Seymourville properties held by Canadian Premium Sand, based on their relative mining reserves of frac sand at the time of permitting. Canadian Premium Sand can acquire one-half of Gossan’s production royalty interest for $1.5 million during the three years after commencing commercial production and $2 million for a further two years.
On June 12, 2019, Canadian Premium Sand announced the results of a new Preliminary Feasibility Study (PFS); a new Mineral Resource; and that it had obtained all necessary approvals from the Hollow Water First Nation, the local community of Seymourville and the Province of Manitoba. Additionally the Canadian Minister of Environment and Climate Change confirmed that the project would not require environmental assessment under federal law CEAA 2012.
As part of the PFS, and based on an additional 93-hole sonic drill program, a NI 43-101 Mineral Resource was defined at 49.6 million tonnes of Measured & Indicated and 97.3 million tonnes of Inferred. Additionally, a 30.6 million tonne Proven & Probable Mineral Reserve was defined.
The PFS was updated and on February 4, 2020, CPS announced a revised capital cost for the Wanipigow Sand Project of $120 million with a production rate of 1.25 million metric tonnes per year. Hi-Crush Inc. has been advising CPS and its OnCore mobile processing plant will be utilized. CPS expects to bring the project into production in early 2022. The company also announced a Master Services Agreement to provide Wisconsin frac sand to Western Canada starting in the second quarter of 2020. For additional information go to www.canadianpremiumsand.com.
On February 3, 2021, CPS announced that it was shifting the direction of its business strategy to focus on developing a sustainable float glass manufacturing and coating facility to produce solar glass for use in solar panels or ultra-clear energy efficient architectural glass for the construction of buildings. For additional information go to https://www.canadianpremiumsand.com.
The Manigotagan Property is located 170 km northeast of Winnipeg where Gossan held a silica sand deposit at Seymourville, on the east shore of Lake Winnipeg, directly across from Black Island where silica sand was extensively quarried prior to the island becoming a Provincial Park.
On June 25, 2013, Gossan entered into a purchase and sale agreement to vend its Manigotagan Silica Frac Sand Project, comprised of 9 quarry leases located near Seymourville Manitoba, to Claim Post Resources Inc., now Canadian Premium Sand Inc. Gossan had been seeking a joint-venture partner or a purchaser for the Project since completing a marketing study in late 2010. In 2012, Claim Post acquired the adjacent Seymourville Property to the south and announced plans to develop a frac sand operation. A consolidation of the two properties should improve the viability of the project.
To April 1, 2021, Canadian Premium Sand, formerly Claim Post Resources, has made total property payments of $1.28 million cash; 4 million shares of Claim Post (subsequently sold); and advance royalty payments of $500,000. The advance royalty payment of $50,000 that was due December 18, 2020 has yet to be received.
In 2006, Gossan conducted a 23-hole core and auger drill program at the 306-hectare Manigotagan Silica Property and in 2008 followed up with a 26-hole sonic drill program. These drill programs were successful in outlining two material zones of high-purity silica sand with limited overburden.
In 2009, Gossan commenced testing the silica sand for use as frac sand proppant, resulting in consistent ISO 9K Proppant ratings for various mesh fractions. Pressure conductivity tests were also conducted with positive results.
In 2010, Gossan retained a marketing consultant for the project. The marketing study established that the highest and best use of Manigotagan silica sand is as frac sand proppant used in the oil and gas sector. The study provided an analysis of 17 companies producing frac sand proppant in North America and an assessment of candidates suitable for a strategic partnership in Gossan’s Project.