August 19, 2012

What makes a profitable sand mine site

Sand Mine Site

The Preferred Sands mine and processing plant near Blair, Wis., spans 400 acres.. The facility is among 107 existing or proposed frac sand operations in Wisconsin. June 20, 2012. Lukas Keapproth/Wisconsin Center for Investigative Journalism

To make money mining sand, the first step is securing a proper site.

Wisconsin has several sandstone formations that produce grains of sand that are spherical and strong, the keys to successful use in fracking. Even though any mine located in those formations should produce marketable sand, some sites are more expensive to mine than others, said Mark Zdunczyk, an independent consulting geologist from East Greenbush, N.Y.

Even when all the sand is marketable, different sized sand grains sell for different prices. More coarse sand, called “20-40” sand, is sold for oil drilling. Finer sand, called “40-70” sand, is sold for natural gas drilling.

The second factor that affects the profit margin of a sand mine is how much unmarketable material, called overburden, is sitting on top of the sand. The cost of moving and storing this excess soil can add up quickly, so smaller amounts of overburden mean higher profits.

“Look at Unimin. They have a staff of geologists who picked the perfect site,” Zdunczyk said, referring to the facility under construction in Tunnel City near Tomah. “On two rail lines, low overburden, good 20-40 sand, low environmental impacts.”

After good grain sizes and low overburden, many industry experts agree that the last key to a successful mine site is proximity to rail lines. Hauling sand by trucks is expensive, and every mile adds up. Facilities located on rail lines can make more profit on their sand because they eliminate trucking costs.

“Let’s say it costs $2 a ton to get it to the rail, but if the price drops $3 a ton, then it’s not worthwhile,” said Tom Hubbard, an engineer with Cedar Falls Building Systems Inc. in Menomonie who has worked with several mining companies. “But if you are on the rail, it’s still profitable.”

— Kate Prengaman

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