“Q & A” with Select Sands CEO

Joe Bleackley conducted this email interview with the CEO of Select Sands ($SNS.V / $CLICF), Rasool Mohammad over the time period of March 6- March 8 2016.

Joe: What is your background and can you tell us the story of how you got involved as CEO of Select Sands, and how you found the current Asset?

RM:  I have a B.Sc. (Mining Engineering) and have worked in the mining and mineral exploration industry for over 20 years on projects ranging from greenfield to 50,000 ton per day operations for both major international and smaller companies. I have worked on mining projects in Canada, the USA, Mexico, Columbia, Peru and Brazil. I also speak English, Spanish, Urdu and Pashto.  Originally, Select Sands (originally called LaRonge Gold) was focused on its gold assets in Saskatchewan, where it owns 429,000 oz. of gold. When the gold market softened in 2013 and 2014, we started to look at possibly finding commercial silica sand.  I conducted an extensive global search of over 200 properties which led us to the current Sandtown property in Arkansas where I found the purest, roundest commercial silica in a formation known as St Peter Sandstone.

Joe: Can you speak on the rest of the management team and on any accomplishments and experiences they bring to the table?

RM: I am surrounded by a very strong and diverse group of people including our C.O.O. Zigurds Vitols who had previously been employed as the President, Mid-South Division, of Martin Marietta Materials Inc.  We also recently hired Carl Buchanan to lead our sales to the industrial market.  Carl used to work for 16 years for U.S. Silica in industrial sales. Carl is a great asset to our team.  Our group brings in finance, legal, technical (geology/mining), sales, marketing and corporate governance expertise.

Joe: Can you assign a current dollar value to the Select Sands property?

RM: We have drilled-indicated 42 million tons of high purity commercial silica as per the February 2016 Tetra Tech engineering report.  Back in June 2015, we had obtained a PEA based upon 40% of our property which set a net present value for that 40% interest at US $160,000,000 (NPV at 8%). That was based upon a somewhat stronger oil and gas market. While I don’t have a precise valuation for our 42 million tons, I can tell you that the value is substantial and is not at all reflected in our market cap.

Joe: A common misconception is that Select Sands is “tethered” to the Energy sector. Can you comment on this?  What is the company’s main focus right now?

RM:  Our silica sand is being marketed to both the oil and energy industry as much as we are marketing to the industrial market.  In fact, we hired Carl as our full time sales manager to focus only on the industrial sector which includes selling to foundries, the construction sector (roofing, grout for tile, floor and brick, coatings, and glass).  We are in active negotiations with large companies both in the energy and industrial sectors. The energy bid/ask does not make economic sense at this time but the fundamentals are improving (WTI prices stabilizing). However, we see sales into the industrial market are remaining strong. The sales cycle to sell to industrial companies is longer because of quality control concerns which our high quality silica will meet.  The US construction spending rose 10.4 % in Jan 2016 vs Jan 2015 to US$1.14 Trillion (US Commerce Department, Mar. 01, 2016). Several industrial customers are actively doing test works of our products and some are ready to do trial runs of our silica. The customers will be sponsoring the week-long trial runs of our products.

 

Joe: In my opinion the company is sitting in a great position.  You have cash in the bank, you have no debt, and you have established and proven a significant deposit of silica sand.  If things go your way, where will Select sands be in Q2/Q3/Q4?

RM:  You’re quite right. We have no debt and about $3 million CDN in treasury.  Our aim is to be a profitable business and it will take about 100,000 tons a year sale to cover our SG&A.  Our current capacity is about 600,000 tons per year but we can certainly expand that when the time is right.  We believe at some point in next year or two, we could probably increase our capacity to 1.5 to 2 million tons per year.

We are now beginning to get some contracts to sell into the industrial market (which are still relatively small but profitable) which we expect we will grow over next few quarters, Q2 to Q4.  We also expect that as oil and gas prices firm up later this year or early 2017, our sales into the energy market will pick up substantially with a reasonable profit margin. Given our lack of debt and our cash holdings, we are not forced into selling our product unless we can obtain reasonable margins.  By Q4 of 2016 we should be a lot further ahead than we are today.

Joe: Can you give us some examples of how much of your product a client could consume in a month or a year?

RM: Potential Sales into the industrial market [Not Energy Market]  which include foundry, roofing ,glass, grout ( tile, brick and floor, grouts) could range from 2,000 to up to 20,000 tons per month, per client. [24,000 – 240,000 per year]

Joe: You mentioned that in the next year or two, you may have to increase the site’s capacity.  Has there been any consideration of expanding the current property by acquiring surrounding land, or do you have any other locations in mind?

RM:We are at various levels of discussions regarding other opportunities including expansions. We will release that information to the public once these deals are materialized.

Joe: Thank you for speaking with me about your project.  As I learn more about your project, I can only see more value.  I look forward to seeing the project in person and sharing that experience with my readers.

 

If you follow us you will already know that Select Sands ($SNS.V / $CLICF) is currently our top pick and concurrently one of our largest holdings.

Read our previous article on Select Sands HERE

 

Disclaimer: At the time of publishing this article, I am a shareholder of Select Sands SNS.V

Please Read our Legal Here.

 

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Joe

 

Joe Bleackley
TradersBoardroom.com