1. No category

October 2014
FRAC SAND ̶ a vital industrial ingredient in
the extraction of oil and natural gas
www.larongegold.com
TSX.V: LAR
DISCLAIMER
This corporate presentation (the “Presentation”) has been prepared by management of La Ronge Gold Corp. (the “Corporation”) based on public information and
the Corporation’s confidential information. This Presentation is for information purposes only and is being made available on a confidential basis solely to enable
the prospective investor to evaluate the securities of the Corporation (the “Securities”). This Presentation does not constitute an offer to sell to any person, or a
general offer to the public of, or the general solicitation from the public of offers to subscribe or purchase, any of the Securities. Any unauthorized use of this
Presentation is strictly prohibited. Distribution or copying of this Presentation, in whole or in part in any medium, to any person other than the prospective
investor is prohibited without the prior written consent of the Corporation. The information contained in these slides, the Presentation made to you verbally and
any other information provided to you (in writing or otherwise) in connection with the Corporation and its business (the “Presentation Materials”) is subject to
updating, completion, revision, verification and amendment without notice which may result in material changes.
The Presentation Materials are not intended to provide financial, tax, legal or accounting advice and do not purport to contain all the information that a
prospective investor may require. Each prospective investor should perform and rely on its own investigation and analysis of the Corporation and the terms of
any offering of the Securities, including the merits and risks involved, and are advised to seek their own professional advice on the legal, financial and taxation
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No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this presentation, and any representation to the
contrary is an offence. Neither the Corporation nor the agent of the Corporation makes any representation or warranty, express or implied, and assumes no
responsibility for the accuracy or completeness of the information contained in this Presentation or any other oral or written communication transmitted to
prospective investors, and nothing contained in this summary is, or shall be relied upon as, a promise or representation by the Corporation or the agent of the
Corporation as to the past or future performance of the Corporation.
The Corporation does not undertake to provide any additional further information or to enter into negotiations regarding the investment opportunity to which
these Presentation Materials relate. The Corporation retains the right, at any time, to terminate any discussions or negotiations with prospective investors. In the
event of such termination the Corporation will not be under any obligation to disclose the reasons for such termination nor will they have any liability to any
recipient hereof for any costs whatsoever incurred in the consideration of the information contained in these Presentation Materials.
Certain statements contained in this Presentation are forward looking statements. These forward looking statements are not based on historical facts but rather
on the expectations of management of the Corporation regarding the resulting company's future performance. All statements, other than statements of
historical fact, may be forward looking statements. Forward looking statements are often, but not always, identified by the use of words such as “seek”,
“anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “propose”, “potential”, “targeting”, “intend”, “could”, “might”,
“should”, “believe” and similar expressions. Although the Corporation believes in light of the experience of its officers and directors, current conditions and
expected future developments and other factors that have been considered appropriate that the expectations reflected in this forward-looking information are
reasonable, undue reliance should not be placed on them because the Corporation can give no assurance that they will prove to be correct, and actual results,
performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. Forward-looking statements
contained in this Presentation include, but are not limited to, statements with respect to the Corporation's business strategy, the market in which the
Corporation operates; the ability of the Corporation to successfully integrate businesses; the timing and nature of equity offerings to be completed by the
Corporation; the Corporation's potential revenue; the ability of the Corporation to successfully complete mergers and acquisitions; the ability of the Corporation
to realize on the potential of target companies; and other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or
performance. Forward-looking statements contained in this Presentation reflect the current beliefs and assumptions of the Corporation's management based on
information in its possession as of the date of this Presentation.
Readers are cautioned that the foregoing list is not exhaustive. The forward-looking statements contained herein are expressly qualified in their entirety by this
cautionary statement. The forward-looking statements included in this presentation are made as of the date of this presentation and the Corporation does not
undertake and is not obligated to publicly update such forward-looking statements to reflect new information, subsequent events or otherwise unless so
required by applicable securities laws.
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SHARE STRUCTURE
Capital Structure as of September 2nd, 2014
Shares Issued and Outstanding:
41,676,408
Warrants:
1,368,850
Options:
2,426,500
Fully Diluted:
44,471,758
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BOARD OF DIRECTORS / SENIOR MANAGEMENT
Rasool
Mohammad
President &
CEO/ Director
• 15 years experience in the mining and mineral exploration industry.
• Mr. Mohammad has worked for companies such as BHP, Miramar Mining, Hunter
Dickinson Inc., Cumberland Resources Ltd., and several other Vancouver-based
junior exploration companies.
Gord Davidson
Vice President,
Exploration
• Has spent over 30 years exploring for and discovering mineral deposits.
• He is credited with having a significant role in the discovery of Areva's Andrew
Lake uranium deposit in the Kiggavik Trend of the North Thelon Basin, Canada.
Director
• Consulting geologist with over 20 years experience in diamond, precious and
base metal exploration.
• Holds an Honours Bachelor of Science degree in Geology and is a Qualified
Professional Geoscientist.
• President of Lakehead Geological Services Inc.
• director on the boards of Oromin Explorations Ltd., Astur Gold Corporation,
Grizzly Discoveries Inc. and La Ronge Gold Corp.
Leonard D.
Jaroszuk
Director
• Mr. Jaroszuk has been involved in and has managed a number of public
companies engaged in real estate, construction, natural resources and
exploration over the past 28 years.
• Chairman of Enterprise Group, Inc. (TSX - E), a growing consolidator of profitable
businesses providing services to the utility, energy, and infrastructure
construction sectors.
• Serves as a Director on several oil & gas service and manufacturing companies.
Larry Johnson
CFO, Corporate
Secretary and
Director
• Mr. Johnson has worked with junior resource companies for over 30 years, many
of them as the CFO.
• His North American mineral exploration experience includes a focus on
diamonds, gold and base metals.
Douglass
Turnbull
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TRANSACTIONS OVERVIEW
Transaction 1
• Completed acquisition of 22% ownership of frac sand mine and plant in
Saskatchewan
• Purchase price funding of capex of $1.0 million, completed
Transaction 2
•
Acquisition of Arkansas, US Tier 1 project
• Consideration of 4,000,000 common shares of La Ronge issued to raise
$1MM for project acquisition, Engineering, Permitting and G&A
• Funding of capex potentially through a debt financing
5
US AND CANADA SHALE ENERGY BASINS- LOCATION ADVANTAGES
6
CANFRAC SANDS LTD.
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EXECUTIVE SUMMARY- CANFRAC SANDS
• La Ronge has a 22% equity stake in Canfrac Sands Corporation.
• CanFrac produces superior quality, “Tier 2”, sand, used in unconventional fracturing of oil and natural gas
wells, which meets ISO/API requirements. Operation is 100% owned.
• Sand deposits and processing facilities are strategically located near Lloydminster, Saskatchewan, within
the Western Canada Sedimentary Basin (WCSB).
• Significant portion of deposit falls within a 20/40 and 40/70 mesh size – the most desired sizes for oil and
gas industry applications.
• Canfrac's audited financial year ended December 31, 2013, indicates gross sales of $3.28 million on the
sale of 32,990 tonnes (t) of frac sand vs unaudited Q1-2014 total of 15,000 t sold.
• September 2014 net income of $294,000 over revenue of $895,000.
• Highly skilled workforce and existing operations team.
• Current capacity is over 100,000 t/year of a wet gross product comprised of 16/30, 20/40, 40/70 and finer
mesh products.
• Existing customers include large Canadian oilfield services (OFS) and exploration and production (E&P)
companies.
8
FRAC SAND PROJECT LOCATION MAP- VIKING OIL PLAY SK/AB (WCSB)
CanFrac Sands
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ARKANSAS, USA, LOCATION & FRAC SAND PRODUCERS
KEY TIGHT OIL & SHALE GAS REGIONS
Bluebird, AR
Arkansas Project
www.eia.gov/petroleum/drilling/pdf/dpr-full.pdf
• Six regions account for 90% of oil growth
& virtually all gas growth 2011-12
Unimin(Guion), AR
Unimin,
AR
Unimin
10
ST PETER FORMATION, ARKANSAS, USA
Arkansas Project
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EXECUTIVE SUMMARY- ARKANSAS PROJECT
• Premium “Tier 1” (highest quality), also known as “ Ottawa White”/”Northern White”, frac sand target.
• 40/70 & 100 mesh (finer mesh) sand project of 99% pure quartz up to 14K PSI Crush.
• About 600 miles closer than Wisconsin to the major Texas and Louisiana shale-plays, offering 25% savings
per ton(T) in transportation costs.
• Year-round operation forecasted.
• Drilling and Permitting estimated completion by 1Q 2015.
• Estimated frac sand costs of production at US$21.8/T; sales US$44.4/T, generating gross profit margin of
US$22.6/T.
“We expect a multi-year frac sand shortage (10%
undersupply in 2016) as sand/well trends drive demand
growth above long-lead time supply growth. We expect
sand demand to nearly double (+96%) in 2016 vs. 2013,
driven by 59% sand/well growth, vs. capacity growth of
only 76%.”
Source: Morgan Stanley
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N. AMERICAN PROPPANT DEMAND (Built on Play-by-Play Analysis)
Source: HPDI, Company Reports, Raymond James & Associates, Raymond James Ltd.
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PROPPANT INTENSITY- LBS CONSUMED BY LATERAL FOOT
Source: Drilling Info (HPDI), Raymond James & Associates, Raymond James Ltd.
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OLD VS. NEW WELL COMPLETION SAND INTENSITY
Source: Drilling Info (HPDI), Raymond James & Associates, Raymond James Ltd.
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OLD VS. NEW WELL INITIAL PRODUCTION
Source: Drilling Info (HPDI), Raymond James & Associates, Raymond James Ltd.
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PROPPANT INTENSITY (EOG VS. PEERS; EAGLE FORD)
Source: Drilling Info (HPDI), Raymond James & Associates, Raymond James Ltd.
17
WELL PERFORMANCE (EOG VS. PEERS; EAGLE FORD)
Source: Drilling Info (HPDI), Raymond James & Associates, Raymond James Ltd.
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ARKANSAS PROXIMITY ADVANTAGE TO MAJOR U.S. SHALE PLAYS
CanFrac Sands
Wisconsin
Arkansas Project
Source: University of Illinois, Minnesota Department of Natural Resources, Missouri Geological Survey,
Raymond James Ltd.
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FRAC SAND DELIVERED COST TO THE WELL SITE ($/ton)*
1.
2.
3.
Assume Mining Costs of $40/ton and Site Equipment Costs of $20/ton (Per PacWest)
Assumes 35 mile dray at $2.50/mile and 20 tons/Truck (RJ Estimates)
Extrapolated from STB Data, also including railcar lease payment
Source: PacWest, Raymond James Ltd.
* Illustrative Purposes, Actuals could vary substantially!
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ARKANSAS TIER 1 FRAC SAND PROJECT- ESTIMATED COSTS, SALES & MARGIN
Cost US $/ton
Sales US $/ton
Mining (Drilling & Blasting)
4.0
100 Mesh*
36
Trucking
4.9
40/70 Mesh**
49
Wet Processing
4.6
20/40 Mesh**
70
Dry Processing
4.3
G&A
2.0
Royalty
2.0
21.8
*
**
***
44.4
Margin US $/ton
22.6***
Assuming an off-take agreement for 100 mesh @ US$ 36 / ton FOB of 500K t / year for 5 years
Using spot price for 40 / 70 and 20 / 40 mesh (Aug 2014); assuming 6 % of 20/40, 57 % 40/70
& 34 % of 100 mesh in a ton of sand mined (3% waste)
Gross Profit
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PRO FORMA CAPITAL STRUCTURE & ENTERPRISE VALUE
Share Structure
Issue
Price
La Ronge- Current
Shares
Gross
Proceeds
Valuation @
$0.25
37,676,408
Ownership
82.5%
Financing (completed) 1
$0.25
4,000,000
$1,000,000
8.8%
Arkansas, US,
Engineering/Permitting 2
$0.25
4,000,000
$1,000,000
8.8%
45,676,408
$2,000,000
Total Shares Out- Basic
$11,419,102
100.0%
Enterprise Value
Market Capitalization
$11,419,102
Commercial Loan (Major US Bank) 3
$30,000,000
TOTAL
$41,419,102
1.
2.
3.
22 % Ownership of Canfrac Sand Ltd.
Plant & Mine Design; Plant Permitting ( Private Placement to conclude in September, 2014)
Assumes 100% Capex debt financing from major US Bank; Final Capex costs to come from an
Economic Study
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ARKANSAS TIER 1 FRAC SAND PROJECT- TIMELINE & KEY MILESTONES
2014
Q4
2015
Q1
Q2
2016
Q3
Q4
Q1
Q2
Drilling
Financing
*Debt
Instrument
P.E.A.
Permitting
Construction
Production
Key Milestones:
1.
2.
3.
4.
5.
Q4 2014: NI 43-101 Resource Assessment, equity financing
Q1 2015: Preliminary Economic Assessment commenced, quarry permit application, plant site engineering and permitting
Q2 2015: Equity financing
Q3-Q4 2015: Start of construction, Capex funding expected through a debt instrument
Q1-Q2 2016: Production and delivery expected to commence
Note: Milestones contingent on successful completion of previous milestone
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PEER GROUP ANALYSIS
PEER GROUP ANALYSIS
Company
CARBO Ceramics Inc.
Hi-Crush Partners LP
Emerge Energy Services LP
U.S. Silica Holdings, Inc.
Symbol
NYSE:CRR
NYSE:HCLP
NYSE:EMES
NYSE:SLCA
Average
1.
Share
1
Price
$142.00
$49.24
$101.95
$51.31
Market
Cap.
Enterprise
Value
$mm
$mm
3,281
1,631
2,409
2,758
3,194
1,749
2,515
2,971
Sales Gross EBITDA
LTM Margin Margin
$mm
668
178
948
604
LTM
EV/ Sales
2014E 2015E 2016E
LTM
LTM
29.2%
40.5%
12.6%
33.6%
26.0%
36.9%
9.2%
25.7%
4.8x
9.8x
2.7x
4.9x
4.6x
5.5x
2.2x
3.8x
3.9x
4.1x
1.9x
3.3x
2 9 .0 % 2 4 .5 %
5 .5 x
4 .0 x
3 .3 x
3.5x
3.7x
1.7x
2.6x
EV/ EBITDA
LTM 2 0 1 4 E 2 0 1 5 E 2 0 1 6 E
18.4x
26.7x
28.9x
19.1x
16.3x
14.1x
20.8x
14.9x
12.6x
10.4x
14.1x
11.1x
11.4x
9.0x
10.5x
7.7x
2 .9 x 2 3 .3 x 1 6 .5 x 1 2 .1 x
9 .7 x
Prices as at June 13, 2014
“North American frac sand demand over the next three to five
years, with aggregate consumption expected to reach ~78 mln tons
by 2016, representing a ~22% CAGR between 2013 and 2016
.Underpinning this outlook, we point to a secular (upward) shift in
several key factors associated with new horizontal drilling and
fracturing techniques, including: (i) the number of horizontal rigs
deployed; (ii) the number of horizontal wells drilled per rig; (iii) the
length of each lateral well; (iv) the number of fracturing stages per
well; and (v) the amount of frac sand used per frac stage.”
Source: Raymond James
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U.S. PUBLICALLY LISTED FRAC SAND PRODUCERS
Share Price Performance
25
GENERAL FRAC SAND INFO
Two significant sources worldwide:
Frac Sand is a naturally occurring silica (or
quartz) sand used as a proppant to keep an
induced hydraulic fracture open during the
fracking process.
• St. Peter Formation - Tier 1
(Wisconsin/Minnesota/Arkansas)
• Winnipeg Formation - Tier 2
(Saskatchewan)
These two areas contain the highest quality of quartz-rich
accessible frac sand that meet ISO/API requirements.
ISO/API Frac Sand Specifications:
Alternative Proppants: Other alternatives to
silica sand exist, including ceramic beads and
resin-coated silica, but they are more costly
to produce and the demand is less.






must be greater than 98% quartz (Si02)
round
highly spherical
high crush resistance
consistent size or well sorted
unconsolidated and friable
20/40, 40/70 and 100 are the three most commonly
used mesh sizes in oil and gas production.
A rare mineral in the required quality.
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ADVANCES IN FRAC TECHNOLOGY
• Plug & Perf results in
higher production
• Increase in volume of
sand used per
fracturing stage
(previously 800
tons/well and
currently 1,900 –
8,000 tons/well)*
• increase in well space
density
* “The oil and gas industry can’t get enough fracking sand”, US Silica CEO says.
Source: Whiting Petroleum
Friday May 02,2014 :06:58 PM ET · SLCA
U.S. Silica (SLCA) surged 9% in today's regular session on strong Q1 results which showed demand for fracking sand jumped 45% Y/Y, helping drive a 47% increase in
revenue to $180M.
SLCA forecasts full-year EBITDA in the upper end of the range of $180M-$200M, seeing demand for fracking sand outstripping supply for the rest of the year.
More drillers are saying that fracking with more sand is the quickest, cheapest way to increase oil and gas output, CEO Bryan Shinn said in today's earnings call; a
year ago, the average well used ~2,500 tons of sand, while today’s wells often use double that amount, and some wells have as much as 8K tons of sand pumped
into them.
Read more at Seeking Alpha:
http://seekingalpha.com/currents/post/1711853?source=iphoneportfolioapp_email
27
Average Daily Oil Production
OIL PRODUCTION INCREASES WITH PROPPANT USE
(IP = Initial Production)
Source: Whiting Petroleum
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CONTACT INFORMATION
ADDRESS:
701-675 West Hastings Street
Vancouver, British Columbia
Canada V6B 1N2
OFFICE: 604.639.4533
INVESTOR RELATIONS:
Daniel Caamano
Extension 305
[email protected]
www.larongegold.com
Canfrac Sands Ltd. – Dry Storage Facility
29