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Select Sands Corp.

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Select Sands Reports Results for the Third Quarter 2018

VANCOUVER, British Columbia, Nov. 14, 2018 (GLOBE NEWSWIRE) -- Select Sands Corp. (“Select Sands” or the “Company”) (TSXV: SNS, OTC: SLSDF) today announced operational and financial results for Q3 2018 and the filing of its financial statements and associated management’s discussion and analysis on www.sedar.com.  The Company’s financial statements are presented in U.S. dollars to better reflect Select Sands’ operations and to improve investors’ ability to compare the Company’s financial results with other publicly traded silica sand businesses in the U.S.  Prior to reporting its Q4 2017 and full year results, Select Sands’ financial statements were stated in Canadian dollars.  The Company will host a conference call on Thursday, November 15, 2018 at 10:00 A.M. Central to discuss its Q3 2018 results (see “Conference Call Information” section in this release for access information).

Q3 2018 Highlights

  • Sold 81,626 tons of frac and industrial sand during Q3 2018, with the decrease in frac sand demand from Q2 2018 levels primarily driven by an accelerated slowdown in well completions in the Permian Basin as a result of temporary takeaway capacity constraints, exploration and production budget exhaustion for 2018 and in-basin supply additions;
       
  Q3 2018 Q3 2017 Q2 2018
 Frac sand81,604 114,567 164,848
 Industrial sand22 283 24
 Frac and Industrial sand81,626  114,850  164,872
 Other sand & gravel2,165 3,632 1,401
  83,791 118,482 166,273
       
  • Generated revenue of $4.0 million and gross profit of $0.7 million in Q3 2018, as compared to $9.5 million and $3.0 million, respectively, in Q2 2018;
  • Reported a net loss of $0.1 million, or $0.00 per basic and diluted share, in Q3 2018 versus net income of $1.6 million, or $0.02 per basic and diluted share, in the preceding quarter;
  • Generated Q3 2018 adjusted EBITDA(1) of $0.2 million as compared to $2.9 million in Q2 2018; and
  • As of September 30, 2018, cash and cash equivalents were $5.3 million, inventory on hand was $2.6 million, accounts receivable was $0.8 million and working capital was $6.4 million.  This is compared to cash and cash equivalents of $4.2 million, inventory on hand of $1.8 million, accounts receivable of $4.0 million and working capital of $7.0 million as of June 30, 2018.

    (1)  Adjusted EBITDA is a non-IFRS financial measure and is described and reconciled to net loss in the table under “Non-IFRS Financial Measures”.

Recent Updates      

  • On October 18, 2018, the Company announced it had placed certain employees at its Arkansas operations on temporary furlough until further notice.  Shipments and limited production continue, and Select Sands is pursuing additional opportunities, including evaluating sand production and sand-related business opportunities in or near other basins.
  • The Company’s Independence property expansion project remains on hold, with progress resuming once frac sand demand reaches appropriate levels.

Zig Vitols, President and Chief Executive Officer, commented, “Along with other frac sand producers in the industry, we were not immune to the widespread disruptions that impacted demand during the third quarter.  Given this backdrop, we quickly took the necessary steps to manage costs and preserve working capital, including moving to single shift operations to ensure optimal control of overhead.  As one would expect, this has been a difficult situation for our employees and contract-personnel and I want to thank them for their continued assistance and hard-work.”

Financial Summary

The following table includes summarized financial results for the three months ended September 30, 2018, September 30, 2017 and June 30, 2018:

           
Select Sands Corp.
Summarized Consolidated Interim Statements of Operations and Comprehensive (Loss) Income
(Expressed in United States Dollars)
(Unaudited)
     
  For the Three Months Ended
  September 30,September 30,June 30,
  201820172018
     
Revenue$3,992,438  $5,135,956  $9,504,445  
Cost of goods sold (excluding depreciation and depletion) 3,295,315  3,941,999  6,457,938 
Gross Profit$697,123  $1,193,957  $3,046,507  
General and administrative ("G&A") expenses (1) 640,063  240,078  625,164 
Depreciation and depletion 243,818  149,499  235,293 
Interest on long-term debt 44,840  -  40,741 
Operating (Loss) Income$(231,598)$804,380  $2,145,309  
Interest income 9,076  3,106  872 
Foreign exchange gain (loss) 44,000  (444,985) 97,073 
Share of (loss) in equity investee (17,815) (40,449) (51,904)
(Loss) Income Before Income Taxes$(196,337)$322,052  $2,191,350  
Provision for income taxes 60,197  -  (586,272)
Net (Loss) Income $(136,140)$322,052  $1,605,078  
Foreign currency translation adjustment 10,930  (16,554) (159,991)
Comprehensive (Loss) Income$(125,210)$305,498  $1,445,087  
Basic (Loss) Earnings Per Share$(0.00)$0.00  $0.02  
Diluted (Loss) Earnings Per Share$(0.00)$0.00  $0.02  
Basic Weighted Average Number of Shares Outstanding 88,501,033   87,003,316   88,313,316  
Diluted Weighted Average Number of Shares Outstanding 95,845,596   97,044,429   98,102,429  
     
Adjusted EBITDA (2)$171,046  $339,005  $2,945,343  
     
(1)Includes non-cash share-based compensation of $60,915, ($172,995) and $426,055 for the third quarter 2018, third quarter 2017 and second quarter 2018.
(2)Excludes depreciation and depletion, non-cash share-based compensation, interest on long-term debt, share of (loss) in equity investee and provision for income taxes. See table under "Non-IFRS Financial Measures” for reconciliation to net (loss) income.
  

Outlook

Mr. Vitols concluded, “Given the strong underlying long-term fundamentals of the North American oil and gas industry, we view the decrease in demand faced by frac sand producers as transitory in nature.  While it is difficult to estimate the specific timing, we currently expect market conditions to improve in early 2019, as budgets for E&P operators reset and well completion activity accelerates.  We also anticipate further expansion of offtake capacity in the Permian, which will improve pricing differentials and thereby drive more activity in the region.  Given the high-quality silica offerings we produce and our strategic location near key oil and gas basins in the U.S., in this improved environment we expect to return to full rate production.  In addition, we will be in a better position to move forward with the Independence property expansion project, which will increase our production capacity to one million tons per year – a 67% increase over current capacity – and significantly lower the cost profile of our overall operations.”

Elliott A. Mallard, PG of Kleinfelder is the qualified person as per the NI-43-101 and has reviewed and approved the technical contents of this news release.

Conference Call Information

The Company will host a conference call on Thursday, November 15, 2018 at 10:00 a.m. Central (CT) to discuss Q3 of 2018 results. To access the conference call, callers in North America may dial toll free 1-855-669-9657 and callers outside North America may dial 1-412-542-4135. Please call ten minutes ahead of the scheduled start time to ensure a proper connection and ask to be joined into the Select Sands call.

A playback of the conference call will be available in MP3 format by contacting investor relations below.

About Select Sands Corp.

Select Sands Corporation is an industrial silica product company, which owns a number of properties in Arkansas and is currently in production at its 100% owned, Tier-1, silica sands property located near Sandtown, Arkansas, U.S.A. Select Sands’ goal is to become a key supplier of premium industrial silica sand and frac sand to North American markets. Select Sands’ Arkansas properties have a significant logistical advantage of being significantly closer to oil and gas markets located in Oklahoma, Texas and Louisiana than sources of similar sands from the Wisconsin area. The Tier-1 reference above is a classification of frac sand developed by PropTester, Inc., an independent laboratory specializing in the research and testing of products utilized in hydraulic fracturing & cement operations, following ISO 13503-2:2006/API RP19C:2008 standards.

Select Sands’ Sandtown project has NI 43-101 compliant Indicated Mineral Resources of 42.0MM tons (TetraTech Report; February, 2016) and Bell Farm has Inferred Mineral Resources of 49.6MM tons (Kleinfelder Report; April, 2017). Both deposits are considered Northern White finer-grade sand deposits of 40-70 Mesh and 100 Mesh.

Forward-Looking Statements

This news release includes forward-looking information and statements, which may include, but are not limited to, information and statements regarding or inferring the future business, operations, financial performance, prospects, and other plans, intentions, expectations, estimates, and beliefs of the Company.  Information and statements which are not purely historical fact are forward-looking statements. The forward-looking statements in this press release relate to comments that include, but are not limited to improved customer demand for frac sand, returning to full production levels, further capacity expansion and a lower cost profile. Forward-looking information and statements involve and are subject to assumptions and known and unknown risks, uncertainties, and other factors which may cause actual events, results, performance, or achievements of the Company to be materially different from future events, results, performance, and achievements expressed or implied by forward-looking information and statements herein. Although the Company believes that any forward-looking information and statements herein are reasonable, in light of the use of assumptions and the significant risks and uncertainties inherent in such information and statements, there can be no assurance that any such forward-looking information and statements will prove to be accurate, and accordingly readers are advised to rely on their own evaluation of such risks and uncertainties and should not place undue reliance upon such forward-looking information and statements. Any forward-looking information and statements herein are made as of the date hereof, and except as required by applicable laws, the Company assumes no obligation and disclaims any intention to update or revise any forward-looking information and statements herein or to update the reasons that actual events or results could or do differ from those projected in any forward-looking information and statements herein, whether as a result of new information, future events or results, or otherwise, except as required by applicable laws.

Company Contact

Please visit www.selectsandscorp.com  or call:

Zigurds Vitols
President & CEO
Phone: (604) 639-4533

Investor Relations Contact

Arlen Hansen
SNS@kincommunications.com
Phone: (604) 684-6730

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

      
Select Sands Corp.
Consolidated Interim Statements of Operations and Comprehensive Income (Loss)
(Expressed in United States Dollars)
(Unaudited)
  Three monthsThree monthsNine monthsNine months
  endedendedendedended
  September 30,September 30,September 30,September 30,
  2018
2017
2018
2017
      
Revenue$   3,992,438  $5,135,956 $   19,152,293  $8,539,797 
      
Cost of Goods Sold (excluding depreciation and depletion)   3,295,315   3,941,999    14,084,597   6,908,187 
      
Gross Profit    697,123   1,193,957    5,067,696   1,631,610 
      
Operating Expenses    
 Compensation and consulting   292,768   396,888    744,239   698,346 
 Depreciation and depletion   243,818   149,499    704,344   382,381 
 Interest on long-term debt   44,840   -    117,750   - 
 Selling, general and administrative   286,385   16,185    429,528   484,894 
 Share-based compensation   60,910   (172,995)   488,154   1,948,213 
Total Operating Expenses   (928,721) (389,577)   (2,484,015) (3,513,834)
      
Operating Income (Loss)   (231,598) 804,380    2,583,681   (1,882,224)
      
Other (Expense) Income    
 Interest income   9,076   3,106    12,731   16,948 
 Foreign exchange gain (loss)   44,000   (444,985)   40,207   (790,266)
 Share of (loss) in equity investee   (17,815) (40,449)   (67,548) (201,292)
Total Other (Expense) Income   35,261   (482,328)   (14,610) (974,610)
      
Net Income (Loss) Before Income Taxes   (196,337) 322,052    2,569,071   (2,856,834)
      
Provision for income taxes   60,197   -    (526,075) - 
      
Net Income (Loss) $   (136,140)$322,052 $   2,042,996  $(2,856,834)
      
Other Comprehensive (Loss) Income    
 Foreign currency translation adjustment   10,930   (16,554)   (153,507) 19,525 
      
Comprehensive Income (Loss) $   (125,210)$305,498 $   1,889,489  $(2,837,309)
      
Basic Earnings (Loss) Per Share$   (0.00)$0.00 $   0.02  $(0.03)
Diluted Earnings (Loss) Per Share$   (0.00)$0.00 $   0.02  $(0.03)
      
Basic Weighted Average Number of Shares Outstanding   88,501,033   87,003,316    88,376,576   86,488,031 
Diluted Weighted Average Number of Shares Outstanding   95,845,596   97,044,429    95,721,139   86,488,031 
      

 

    
Select Sands Corp.
Consolidated Interim Statements of Financial Position
(Expressed in United States Dollars)
(Unaudited)
    
  As at
  September 30,December 31,
  20182017
ASSETS  
Current  
 Cash and cash equivalents$   5,299,781  $2,047,515 
 Accounts receivable   756,137   3,385,597 
 Inventory   2,560,041   1,961,573 
 Prepaid expenses   83,446   83,223 
Total Current Assets   8,699,405   7,477,908 
    
Deposits   320,994   364,580 
Deferred income taxes   2,165,121   2,356,000 
Investment in Affiliate   1,270,603   1,275,409 
Property, Plant and Equipment   15,631,747   13,415,238 
    
Total Assets$   28,087,870  $24,889,135 
LIABILITIES  
Current  
 Accounts payable and accrued liabilities$   1,122,994  $1,418,182 
 Current portion of long-term debt   1,170,616   778,051 
Total Current Liabilities   2,293,610   2,196,233 
    
Long-term Debt   2,955,388   2,284,096 
Total Liabilities   5,248,998   4,480,329 
    
EQUITY  
Share Capital   34,803,675   34,717,344 
Share-based Payment Reserve   5,328,477   4,874,231 
Accumulated Other Comprehensive (Loss) Income   (95,969) 57,538 
Deficit   (17,197,311) (19,240,307)
Total Equity   22,838,872   20,408,806 
    
Total Liabilities and Equity$   28,087,870  $24,889,135 
    

 

     
Select Sands Corp.
Consolidated Interim Statements of Cash Flows
(Expressed in United States Dollars)
(Unaudited)
     
   For the Nine Months Ended
   September 30,September 30,
   20182017
Operating Activities  
 Net income (loss) for the period$   2,042,996  $(2,856,833)
 Adjustments for non-cash items:  
  Depreciation and depletion   704,344   382,381 
  Share-based compensation   488,154   1,948,213 
  Foreign exchange   101,011   204,735 
  Gain on sale of equipment   -    (1,196)
  Share of loss in equity investee   67,548   201,292 
  Accretion on finance leases   55,171   - 
  Provision for income taxes   127,152   - 
 Changes in non-cash operating assets and liabilities:  
  Accounts receivable   2,629,460   (2,473,237)
  Inventory   (598,468) (1,953,157)
  Prepaid expenses   (223) 4,380 
  Accounts payable and accrued liabilities   (558,455) 749,900 
Total Cash Provided by (Used in) Operating Activities   5,058,690   (3,793,522)
     
Investing Activities   
 Deposits   43,586   (231,928)
 Investment in affiliate   (100,000) - 
 Proceeds from disposal of equipment   -    5,955 
 Property, plant and equipment   (1,155,800) (3,612,562)
Total Cash Used in Investing Activities   (1,212,214) (3,838,535)
     
Financing Activities   
 Warrants exercised   37,279   796,776 
 Options exercised   15,144   297,805 
 Proceeds from short-term loan   900,000   - 
 Repayments of short-term loan   (900,000) - 
 Proceeds from long-term debt   266,558   - 
 Principal repayments of long-term debt   (759,684) - 
Total Cash (Used in) Provided by Financing Activities   (440,703) 1,094,581 
     
Effect of Exchange Rate Changes on Cash   (153,507) 354,365 
     
Increase (Decrease) in Cash and Cash Equivalents   3,252,266   (6,183,111)
     
Cash and Cash Equivalents, Beginning of Period   2,047,515   8,770,627 
     
Cash and Cash Equivalents, End of Period$   5,299,781  $2,587,516 
     

Non-IFRS Financial Measures

The following information is included for convenience only.  Generally, a non-IFRS financial measure is a numerical measure of a company’s performance, cash flows or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS.  Adjusted EBITDA is not a measure of financial performance (nor does it have a standardized meanings) under IFRS.  In evaluating non-IFRS financial measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts.

The Company uses both IFRS and certain non-IFRS measures to assess operational performance and as a component of employee remuneration.  Management believes certain non-IFRS measures provide useful supplemental information to investors in order that they may evaluate Select Sands' financial performance using the same measures as management.  Management believes that, as a result, the investor is afforded greater transparency in assessing the financial performance of the Company.  These non-IFRS financial measures should not be considered as a substitute for, nor superior to, measures of financial performance prepared in accordance with IFRS.

     
Reconciliation of Net (Loss) Income to EBITDA to Adjusted EBITDA:
     
  For the Three Months Ended
  September 30,September 30,June 30,
  201820172018
     
Net (Loss) Income $   (136,140)$   322,052  $   1,605,078
     
Add Back   
 Depreciation and depletion 243,818  149,499  235,293
 Share-based compensation 60,910  (172,995) 426,055
 Interest on long-term debt 44,840  -  40,741
 Provision for income taxes (60,197) -  586,272
EBITDA$   153,231  $   298,556  $   2,893,439
     
Add Back   
 Share of loss of equity investee 17,815  40,449  51,904
Adjusted EBITDA$   171,046  $   339,005  $   2,945,343
     

The Company defines Adjusted EBITDA as net (loss) income before finance costs, income taxes, depreciation and amortization, non-cash share-based compensation and share of loss from equity investee. Select Sands uses Adjusted EBITDA as a supplemental financial measure of its operational performance.  Management believes Adjusted EBITDA to be an important measure as they exclude the effects of items that primarily reflect the impact of long-term investment and financing decisions, rather than the performance of the Company’s day-to-day operations.  As compared to net income according to IFRS, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company's business, the charges associated with impairments, termination costs or Proposed Transaction costs.  Management evaluates such items through other financial measures such as capital expenditures and cash flow provided by operating activities.  The Company believes that these measurements are useful to measure a company’s ability to service debt and to meet other payment obligations or as a valuation measurement.

Indicated Resources Disclosure

The Company advises that the production decision on the Sandtown deposit (the Company’s current “Sand Operations”) was not based on a Feasibility Study of mineral reserves, demonstrating economic and technical viability, and, as a result, there may be an increased uncertainty of achieving any level of recovery of minerals or the cost of such recovery, including increased risks associated with developing a commercially mineable deposit.  Historically, such projects have a much higher risk of economic and technical failure.  There is no guarantee that production will occur as anticipated or that anticipated production costs will be achieved.

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