Mine project looks to capitalize on LNG market
Mine project looks to capitalize on LNG market
Written by Frank Peebles for The Prince George Citizen, January 21 2014
Growth in the liquefied natural gas industry could revive the stalled development of a Northern B.C. mining project.
The Angus Project, owned and developed by Stikine Energy, would mine frac sand, which is used specifically in the recipe for hydraulic fracturing (the high-pressure injection system used to liberate LNG from its underground chambers). The two northern B.C. claims staked by Stikine are the nearest supplies to the burgeoning natural gas activities in the northeast corner of the province.
The Angus claim is located about 60 kilometres north of Prince George, only about 25 kilometres down the Darby Forest Service Road from Highway 97 and CN’s north/south rail lines, making the mine’s startup and operational costs less than most mines.
Stikine has invested more than a quarter of a million dollars so far to test the material and analyze the Angus site’s potential (they also did work at their Nonda claim near the Yukon border). At Angus, 11 holes were drilled in July, 2011, producing a total of 1,850 metres of core. The grid covered a space about 2,500 metres long and 430 metres wide.
The core samples were crushed and studied at a mill station in Abbotsford. The results were encouraging.
“Stikine plans to sell frac sand to the northeast B.C. market to meet the demands of oil and gas companies operating in the region,” said a technical report and preliminary economic assessment written for Stikine by veteran geologists Bob Lane and John Degrace and filed with the provincial government in late 2011.
“Currently, there are no developed sources of frac sand in northeast B.C.,” the report explained. “Oil and gas companies operating in the region must import frac sand from out-of-province locations such as Alberta, Saskatchewan, and the US. Stikine will have a competitive advantage over current suppliers, because the project’s proximity to northeast B.C. shale basins will result in lower transportation and delivered frac sand costs compared with out-of-province suppliers.”
With an all-industries meeting of the minds in Prince George this week at the Premier’s Natural Resources Forum, the LNG sector is hoping to get more projects past the planning stages, pending environmental and aboriginal consultations.
Until more proposals get the green light, said Stikine president and CEO Scott Broughton, the Angus Project will remain on hold.
“We are stuck in this poor funding market, so we are stalled,” he said. “We have done lots of baseline work, we are ready to file applications, but in the absence of sufficient funding, we are not going ahead right now.”
The other investment scenario, the one Broughton prefers, is the LNG proponents themselves could come to him directly, now, and secure the asset. He could then get working on drilling and milling to have the sand supply ready when they are.
“It’s surprising to me that oil and gas producers can spend a ginourmous amount of money in setting up water supplies, logistics, drill pads, all that stuff – and they have done a great job of driving their costs down as an industry in recent times – but they aren’t locking onto this opportunity with frac sand,” he said. “Frac sand is probably 10 to 20 per cent of their completion costs, a huge number, a strategic material, and if they don’t have a ready supply there are expensive standby delays.”
If the mine were to begin work tomorrow, it would likely produce about 1 million tonnes of frac sand per year. “We struggled with what is the right size to build?,” Broughton said, before they arrived at the production plan they did. However, he stresses that if demand is more drawn out, or in a bigger hurry, the operational plan can be adjusted accordingly.
As it is on paper currently, it would involve about 300 people in the on-site mining, the processing plant workers, and shipping personnel to get the sand to the rigs.
“The mining concept is based on a series of adjacent pits of increasing dimensions, which will allow for the progressive backfilling of tailings and avoid the need for an external tailings management facility,” said the technical report. “This concept has considerable environmental and cost benefits. The objective of the processing plant will be to liberate sandstone into specifically sized frac sand. The proposed process will be entirely mechanical, and will require no chemical treatments.”
According to Stikine’s research, “Almost all of the Angus project is overlaid by the traditional territory of the McLeod Lake First Nation, with some of Stikine’s claim area extending into Lheidli T’enneh First Nation. The West Moberly First Nation is also a band of consideration in Stikine’s plans.”
Some preliminary consultations have occurred with both the general public and the affected First Nations, said Broughton, but until the project has a fiscal mandate to move ahead, there is little need to go any further with community outreach.
Broughton did stress, though, that the economic impacts will be centred almost entirely on the logal region.
According to the technical report “Duz Cho Construction Ltd. of the McLeod Lake First Nation, and Radius Drilling Corporation of Prince George have already done site work,” as a start to that spinoff, plus hiring the analytical services of Lane and DeGrace, helicopter time, surface geology work, a small drilling program, some heavy equipment and some truck hauling.