Prime Meridian enters global market with ceramics proppants buy

By Kasia Patel
Published: Tuesday, 25 November 2014

The Canadian junior hopes to gain a strategic foothold in the region through the majority acquisition and expansion of Indian ceramics proppants producer, Hallmark. Kasia Patel, Deputy Editor

TSX-V listed Prime Meridian Resources Corp. is in the process of acquiring a majority interest in a ceramic proppants producer in India, Hallmark Minerals Pvt Ltd.

The Canadian company signed two binding letters of intent (LOI) with Hallmark, which is located 200km southeast of Mumbai in Pune. It has its own range of ceramic proppants which it has patented, developed, produced and sold in India.

The deal forms part of Prime’s strategic plan to build a globally integrated proppants company, and Michael Dehn, Prime’s president, told IM that the company feels India and the surrounding regions represent some of the best growth opportunities over the next five to 10 years. 

"It’s got a booming oil and gas industry, the fracking side of its industry is quite immature and will require tremendous expansion," Dehn said.

"We’re coming into a sector where it’s not commonplace to be fracking and much of the equipment is not up to North American standards. Hallmark has proven itself to a have a superior proppant product already in production in India, so we’re buying into an established and well respected business in an industry that’s growing very rapidly," he added.

Under the terms of the agreement, the first LOI allows Prime to acquire a 10% share of the Indian Company for Canadian dollar (C$) 500,000 ($440,700*). The second LOI allows it to acquire a further 50% interest by either expanding the production of Hallmark by an extra 25,000 tpa, or by completing maximum capital expenditure of C$7m.

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Hallmark’s ceramic proppants plant in India
Prime Meridian

Dominating the region 

Prime’s global strategy is to integrate the elements of the proppant value chain with a focus on which type of proppant best serves the needs of each region.

Hallmark’s current proppant capacity is at 10,000 tpa including lightweight, intermediate strength and high strength. The first phase of expansion will be to grow the existing plant by 5,000 tonnes, while the second phase will include the building of a new plant with a production capacity of 20,000 tpa.

"The reason we are doing this transaction is because we feel there is increasing demand in the region and frac sand is not so plentiful as it is in North America, otherwise we wouldn’t be carrying out this aggressive expansion," Dehn told IM.

"Our goal will really be to dominate the Indian Ocean region because there are all sorts of new projects coming on stream in the Middle East, East Africa as well as in the Eastern Mediterranean, markets which India is very well located to service," he added. 

Dehn said the company has plans to transplant the existing Indian technology into Africa, the Middle East and Australia, which will enable Prime to gain a strategic footprint for the future.

Working together with Hallmark, Prime will have a competitive advantage in the region, as Hallmark is the only existing ceramic proppants producer in India, currently sourcing the bauxite and kaolin used in its product locally.

According to Dehn, production from the rest of the region is limited, which will enable Prime and Hallmark to meet local demand in the region from strategic locations. He explained that China has around 30 ceramic proppants producers, a few in Russia and one expected to come on stream in Poland.

"Hopefully you’ll see us with production of over 100,000 tonnes in India, and then from that beachhead expanding to places where the market is expected to grow very quickly but not yet  be big enough for the likes of CARBO Ceramics or Fairmount Santrol to get into." Dehn told IM.

"Kenya will probably need a lot of supply for the next five or 10 years to meet the local demand, so if we can keep getting into markets early in strategic locations then we will be ahead of everyone else," he added. 

Cooking up new recipes

Prime is also in the process of testing frac sand and advanced materials for proppant suitability from three projects: frac sand from the Peace River Frac Sand joint venture (JV) in Western Canada; titanium/iron from the Dissimieux Lake JV in Quebec; and silica from the Chambord JV, also in Quebec (all under options from Phoenix Metals).

Deyn told IM that testing was progressing well, and that Prime’s main focus  will be deep wells, which it sees as an opportunity as it says there are not many other companies targeting this area.

"Development of the projects will be market driven more than technology driven, as the technology seems to be going very well," Dehn outlined. "We will really cater to what the market expectation is for material - we have to know that the customers want a specific product and that’s what the next plant will be, as opposed to what we think is the best product for the market."

*Conversion made November 2014