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"Sand Is The New Gold"?

Tyler Durden's picture




 

Thanks to the growing use of fracking, or extracting oil and natural gas from shale formations, shares of U.S. companies which supply sand to energy producers are surging, and as Bloomberg reports, it does not look set to stop anytime soon. “Sand is the new gold,” says Ivaylo Ivanov, founder of Ivanhoff Capital, as Ole Slorer, a New York-based analyst at Morgan Stanley, expects demand for fracking sand in 2016 will be 96 percent higher than last year’s level. Nope, no bubble here...

 

 

As Bloomberg adds,

Emerge Energy, a Southlake, Texas-based partnership that made its initial public offering at $17 a share, changed hands for more than $140 yesterday. Hi-Crush, based in Houston, and U.S. Silica, based in Frederick, Maryland, more than tripled during the past 15 months.

 

...

 

Demand for fracking sand in 2016 will be 96 percent higher than last year’s level, Ole Slorer, a New York-based analyst at Morgan Stanley, wrote two days ago in a report. The sand helps prop open fractures in shale, which eases the flow of oil and gas. He expects shortages for years, with supplies in 2016 trailing demand by 10 percent.

 

Slorer raised his 12-month price estimate for U.S. Silica by 36 percent, to $80, and wrote that the stock may reach $95. U.S. Silica traded yesterday at a record $71.29 and closed at $70.72, up 4 percent. Emerge Energy, whose main business is fuel processing and distribution, rose 2.6 percent. Hi-Crush added 3.2 percent.

Source: Bloomberg

*  *  *

Nope, no bubble here at all...

 

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Fri, 08/29/2014 - 17:34 | 5160350 blu
blu's picture

How long before there is an ETF for sand. Oh how about dirt. Maybe another for dust bunnies under the fridge.

I refuse to believe it. I just refuse. I can't stand it anymore.

Fri, 08/29/2014 - 17:43 | 5160381 Stackers
Stackers's picture

It takes a special sand that has to be "mined". Only a few places to extract it. Wisconsin has the biggest deposits.

Fri, 08/29/2014 - 17:46 | 5160395 Jethro
Jethro's picture

That's right.  Construction grade sand actually isn't all that common.  The gradation isn't quite the same as common river sand.  You can process it, but it costs money.

Fri, 08/29/2014 - 19:25 | 5160743 OldPhart
OldPhart's picture

We've got mountains of it.  Forwarded article to Chief Peddler.

Sat, 08/30/2014 - 03:46 | 5161810 saveandsound
saveandsound's picture

This is hilarious!

BTFD

Fri, 08/29/2014 - 17:46 | 5160396 0b1knob
0b1knob's picture

But...But....   Fracking doesn't make any economic sense!   And all the oil companies that do it will collapse soon!

Everybody on Zerohedge says so.  And have said so for years now....

Fri, 08/29/2014 - 17:59 | 5160441 GooseShtepping Moron
GooseShtepping Moron's picture

Fracking doesn't make any economic sense apart from ZIRP, which is why it was not done on a vast scale prior to that. It is no coincidence (as the Marxists say) that the peak in conventional oil production shortly preceded the financial crisis, which preceded ZIRP, which preceded "frack the shit out of every square inch of North America." I can pull up to the link to the chart that shows American oil majors being cash-flow negative since 2012, if you really want to see it. They can't amortize their production costs with a real income stream, so they finance them through the interest rate Ponzi. The normalization of interest rates will do to the fracking industry what Asian blast furnaces did to Pittsburgh steel.

Fri, 08/29/2014 - 18:10 | 5160462 hedgeless_horseman
hedgeless_horseman's picture

 

 

Fracking doesn't make any economic sense!   And all the oil companies that do it will collapse soon!

 

Everybody on Zerohedge says so.  And have said so for years now....

...well, not everybody.

http://www.zerohedge.com/contributed/2013-11-05/hockey-sticks-day

http://www.zerohedge.com/contributed/2012-12-17/fracking-responsible-big...

http://www.zerohedge.com/article/chris-martenson-and-james-howard-kunstl...

Wed, 11/17/2010 - 13:48 | 734632
hedgeless_horseman

Hey man, I am peak oil aware.  Check my history on this blog.  Nevertheless, you do know that producers in Eagle Ford are using horizontal drilling and fracking technology to produce oil, not gas?  They are having success all the way up to Dallas county.  I know this only buys a few months of global demand, but Kunstlers statement re shale requiring huge investment is false.  This I do know, and with this knowledge has come some excellent returns.

Fri, 08/29/2014 - 17:46 | 5160398 McMolotov
McMolotov's picture

Wisconsin: Come smell the dairy air.

Fri, 08/29/2014 - 18:24 | 5160537 studfinder
studfinder's picture

Some deposits (central WI area) the sand that comes out of the ground is almost perfect...very little cleaning involved.  Other areas might have sand that needs to be cleaned more (washing/drying).   Its best to have a rail line near.  Last winter was very hard on the industry here...rail doesn't like subzero temps, neither do workers.   The problem i see is rail lines are fighting for freight, coal (some power plants here are complaining they might run out of coal this winter if they don't get supply in here now), sand and of course oil (the stuff that goes boom).

Good industry.  Good pay.  You work as much as your body can handle.  Plants can go 7 days a week/24hr a day. 

Fri, 08/29/2014 - 18:44 | 5160589 Kirk2NCC1701
Kirk2NCC1701's picture

Given: "Sand is the New Gold"

 

[1] Sand = New Gold

[2] Sand + Heat = Glass

[3] Desert = Sea of Sand

[4] Nukes = Sea of Heat

Req'd:  Solve the above Equations for making the Saudis the Kings of Gold (Hint: need Sea of Glass)

Fri, 08/29/2014 - 18:52 | 5160633 thatthingcanfly
thatthingcanfly's picture

The desired sand grade depends on the depth of the well. And the E&Ps use it all, depending on what and where they're drilling. Regarding sand grade deposits: in the northern states, the coarser grades like 20/40 are prevalent; while here in Arkansas (I work for a competitor for U.S. Silica), we make more 40/70 and 100 mesh, with some 30/50 as a by-product. 

I can confirm that the business is booming. The fracking isn't going away any time in the next 5 years (or more). My company is investing in expanding our capacity. Too bad we're not public; I'd be buying company stock hand over fist. No sarcasm at all here.

Fri, 08/29/2014 - 19:58 | 5160835 boattrash
boattrash's picture

Thatthingcanfly Thanks for the informative post. Maybe you can elaborate on this thought...Today I was discussing former sandblasting (silica) jobs we (our family) have done,  yet did not realize it is considered such a hazardous substance, that nearly all of the locals have stopped diong it, and it's practically unavailable for purchase.

If that's true nationwide, the country should be completely FLUSH with sand, and glad to have a replacement market. Is it just another make-shift bubble? How bad are production Regs? (Ark. Also)

Fri, 08/29/2014 - 21:02 | 5161067 thatthingcanfly
thatthingcanfly's picture

The hazards to which you refer are most certainly references to silicosis; and are most certainly overrated. Silicosis can be avoided by design engineering and PPE - both of which are used by all serious users and producers of silica sand. The operational hazards are well known, easily mitigated, and not a serious impediment to their usage.

The regulations are provided by MSHA. The silica sand producer I work for meets and greatly exceeds the MSHA standards. I do not believe we're unique in that regard.

Fri, 08/29/2014 - 22:02 | 5161233 boattrash
boattrash's picture

That's my take as well. Good answer. Have a great Labor Day & enjoy these Ozarks.

PS 25 years ago, I blasted w/supplied air (air conditioned) hood. You didn't want to come out of it on a summer day.

Sat, 08/30/2014 - 03:15 | 5161797 prmths2
prmths2's picture

Silicosis isn't overrated in the context of sandblasting. The high velocity impact of sand against a hard surface fractures the sand grains and produces small, very sharp particles. I once spent a few days sandblasting the grain storage bins of a brewery that was under construction. In the darkness the impact of the sand against the concrete wall produced a hemispherical region of blue light with a radius of 1-2 inches. The light was due to the energy released by the fracture of the sand particles. It was strange watching that blue light sweeping back and forth for hours on end. I had a hood and air supply, but  looking back, I wonder about the people working on the ground floor, where all of the spent sand and dust was being deposited. This was in the '70s and my awareness of silicosis was practically nil.

Sat, 08/30/2014 - 09:01 | 5162043 thatthingcanfly
thatthingcanfly's picture

Forty years ago, silicosis knowledge wasn't quite what it is today. Design engineering (read: air filtration baghouses) and PPE (respirators) have rendered silicosis a thing of the past. Today, it's said that if you work at a sand mine, you'll inhale more silica dust driving down a gravel road with the windows down than you will at work.

Wed, 09/03/2014 - 10:59 | 5175500 Obadiah
Obadiah's picture

Hey there thatthingcanfly  I tried to contact you thru chat.  I would like to discuss this business with you.  My familys been in the gravel biz in the past and now I m thinking I need to explore this idea more in depth.

reach out to me szutavern at yahoo  dotcom

 

thanks

Fri, 08/29/2014 - 17:43 | 5160383 FreeMktFisherMN
FreeMktFisherMN's picture

Don't forget the triple leveraged inverse and bullish ETFs. USAND and DSAND

Fri, 08/29/2014 - 17:51 | 5160408 TalkToLind
TalkToLind's picture

You'll know sand's time has arrived when its value plunges 2 - 3% every night in pre-market.

Fri, 08/29/2014 - 18:44 | 5160608 Yancey Ward
Yancey Ward's picture

Its symbol will be POUND.

Fri, 08/29/2014 - 20:29 | 5160966 Stoploss
Stoploss's picture

Gonna have to be PACK.  Four letter limitation.

End result is the same anyway.

Fri, 08/29/2014 - 19:20 | 5160727 garypaul
garypaul's picture

That's it. I'm putting all my money into Sandgold Resources. How can I go wrong?  lol

Fri, 08/29/2014 - 17:36 | 5160356 buzzsaw99
buzzsaw99's picture

In Philadelphia it's worth fifty bucks. [/pawn shop owner]

Fri, 08/29/2014 - 17:44 | 5160385 Jethro
Jethro's picture

One of the very first engineering projects I had was to design a rail spur for a frac sand company.  The paid in full, up front, and never constructed it.  The perfect project. 

Fri, 08/29/2014 - 17:55 | 5160425 stant
stant's picture

What did Milton Friedman say about the gov and sand?

Fri, 08/29/2014 - 18:04 | 5160459 jon dough
jon dough's picture

Not sure what Uncle Milty said but I say the Gov should go pound it up their ass.

Fri, 08/29/2014 - 18:54 | 5160649 stant
stant's picture

If the gov was incharge of the Sahara desert in 5 yrs there would be no sand

Fri, 08/29/2014 - 22:50 | 5161389 FreeMktFisherMN
FreeMktFisherMN's picture

Too bad Friedman was an apologist for the monetary politburo. There is a huge gulf between the Austrians and the so-called 'free market' Chicago School. Austrian ownage!

Fri, 08/29/2014 - 18:00 | 5160442 hotrod
hotrod's picture

How come there was never a shortage in Gold,  Seems like the demand was always met.  Oh  GLD

I guess with Sand you actually got to have the Physical.

Fri, 08/29/2014 - 18:12 | 5160501 ozzzo
ozzzo's picture

Time for JP Morgan and Goldman to start building sand warehouses. Or maybe they can use the "recently" vacated gold vaults...

Fri, 08/29/2014 - 18:13 | 5160503 SpanishGoop
SpanishGoop's picture

Well there will never be a shortage of sand.

 

Fri, 08/29/2014 - 18:11 | 5160498 SpanishGoop
SpanishGoop's picture

SNDUSD, paper sand...

 

Fri, 08/29/2014 - 18:53 | 5160648 edifice
edifice's picture

Paper beats Rock. (sand is just small rocks)

Fri, 08/29/2014 - 18:36 | 5160588 Bendromeda Strain
Bendromeda Strain's picture

Sand is the new Gold...

Well alrighty then, he's in luck because my cat is selling.

(don't mind the chunks)

SELL! SELL! SELL!

Fri, 08/29/2014 - 18:45 | 5160611 lasvegaspersona
lasvegaspersona's picture

We still make stuff?

...even the fact that we make dirt surprises me...

Fri, 08/29/2014 - 18:46 | 5160614 Yancey Ward
Yancey Ward's picture

How long before Robert Redford and Matt Damon make a movie about the disappearing beaches in Florida and Hawaii, and the broken souls that it causes?

Sat, 08/30/2014 - 09:05 | 5160647 thatthingcanfly
thatthingcanfly's picture

... with George C. Scott shouting, "We cannot afford a sand gap!"

Fri, 08/29/2014 - 18:51 | 5160641 10mm
10mm's picture

I always knew that fuckin Jersey sand was Gold lol.

Fri, 08/29/2014 - 19:57 | 5160830 esum
esum's picture

AS HOWARD HUGHES PREDICTED .......  without a bra tis sag.....LSMFT .... LOOSE STRAPS MEAN FLOPPY TITS (redd fox)

any ZH readers remember LIUCKY  STRIKE  .... ???

and THE MOST IMPORTANT RESOURCE IS   W A T E R  

he planned for the eventual collapse of kalifornication into the pacific ocean

and vegas as waterfront prop....  he lived in the old SANDS.. RIP and thanks for San Simeon

 

Fri, 08/29/2014 - 20:47 | 5161036 BeansBulletsBandaids
BeansBulletsBandaids's picture

There's about half a dozen new sand mines near the small town in Texas where I live. The little town is booming now, but the locals sure don't like the mines. Or the influx of new folks.
We just moved there and the first question I get is, "you work at the sand mine?"

Fri, 08/29/2014 - 21:03 | 5161075 hmmmm
hmmmm's picture

New high-purity silica play apt to run imo RRS.V http://sectornewswire.com/release082914rrs.htm "With ~35.3 million shares outstanding (~55.2M fully diluted), RRS.V has a tight share structure, and is apt to rise on good news. The Company appears undervalued with a market cap under $4 million; it is well capitalized to execute on near-to-mid-term objectives (with recent (August 26, 2014) closing of ~$2 million financing), and clearly possesses large inherent value in its diversified portfolio which justifies a market cap several times the current."

Sun, 08/31/2014 - 11:08 | 5164522 oddjob
oddjob's picture

Adjusted for share consolidations that stock has gone from $190 to 9 cents.

http://www.stockwatch.com/Chart/Advanced.aspx?action=go&time=10&symbol=RRS&region=C

Fri, 08/29/2014 - 21:46 | 5161193 Rootin' for Putin
Rootin' for Putin's picture

They need more frackins sand?   Fracking more wells or fracking the same wells more?

Sat, 08/30/2014 - 00:13 | 5161557 bilbert
bilbert's picture

Now is a good time to take Sand profits, and short Sand vigorously.

Remember:

1.  You can't eat sand

2.  Sand costs less than $5 an ounce to bring it out of the ground.

You're welcome.

B

Sat, 08/30/2014 - 00:31 | 5161593 TalkToLind
TalkToLind's picture

You're hired!  Please report to CNBC's HR offices next Tuesday, you will be placed on air straightaway.

Sat, 08/30/2014 - 00:27 | 5161585 DarthVaderMentor
DarthVaderMentor's picture

Is it Ivanhoff Capital or more like IVANHOE CAPITAL? I smell a Robin Hood somewhere.

Sat, 08/30/2014 - 00:37 | 5161606 TalkToLind
TalkToLind's picture

<-- Fiat paper

<-- Sand paper

Just wondering which is more absorbent for when the SHTF.

Sat, 08/30/2014 - 01:19 | 5161679 bid the soldier...
bid the soldiers shoot's picture

GAWD  

DOESN'T THIS JUST REMIND YOU OF Y2K?

S4F  (sand for fracking)

Fracking gas doesn't need any help.  There's more gas around than at the Guermantes' annual Beanfest.

Fracking oil, of course, is a very expensive proposition and railroad cars full of sand aren't going to make the EROEI of shale oil any more palatable.

According to Tyler "the sand helps prop open fractures in shale, which eases the flow of oil and gas.

Conceivably a producer can extract more shale oil with this method, but won't he lose a lot of the oil that gets absorbed into the sand?

No doubt, Goldman Sachs and Smith Barney would love to sell you some of their sand stock at top dollar that they bought for pennies before they started the rumors.

Without those rumors and all that talk about the collapse of every computer on January 1, 2000, the NASDAQ never would have made it to 5000 and I wouldn't have recouped all the money I lost since 1965.

 

Sat, 08/30/2014 - 09:21 | 5162070 thatthingcanfly
thatthingcanfly's picture

You have stated some falsehoods here.

Sand, and other proppants, are absolutely necessary to keep the fractures in the shale open after the hydraulic pressure is removed. Without proppants, the well would deplete rapidly, and the operator would not recover his investment.

These sand grains are pure silica (some are phenolic resin coated) and are non-absrobant. Imagine a glass jar full of marbles. Pour water into the jar; then pour it back out. None of the water is absorbed by the marbles, it is? This is a suitable analogy for how the hydrocarbons (gas and liquid shale oil) flow through the slugs of sand particles injected into the well during the fracking process. You can't discern this with your naked eyes due to the small size as compared to marbles in a jar; but this is what's happening.

Comparing the boom in frack sand demand right now to the Y2K tech bubble is a leap Evel Kneivel couldn't make. Energy is not elective, tech gadgets and the Internet are. For this boom to bust, fracking would have to magically become unaffordable due to collapsing oil/gas prices (ain't gonna happen) OR widespread governmental crackdown stopping operators from using the practice (which would cause oil/gas prices to skyrocket, and so: ain't gonna happen).

Sat, 08/30/2014 - 21:38 | 5163346 bid the soldier...
bid the soldiers shoot's picture

I meant no harm with my falsehoods (if there were more than one).

I only meant to save a gaggle of greater fools from throwing their money away because they  heard rumors about stock in a booming industry.

To wit:  "Silica sands are routinely employed in the relatively shallow deposits, such as the Marcellus shale. Hellman said engineered synthetic proppants, which are substantially stronger and more spherical, will be required for deeper deposits that contain other condensed phases and that experience substantially higher closer stresses, such as the Utica and Bakken plays.”

According to Industrial Minerals, a market leading resource for minerals intelligence, each year more than 30 million tons ofproppants are used in hydrofracturing, and demand is projected to increase to 45 million tons by 2017. Engineering proppants from waste materials offers not only a savings in costs but the additional environmental benefit of diverting millions of tons of waste from landfills.

http://news.psu.edu/story/303833/2014/02/12/research/industrial-waste-ca..."

Someone as informed as you obviously are knows the difference between Oil Shale and Shale Oil.  But does Joe Oddlot?  

When he hears there are several trillion barrels of oil locked in shale formations, does he know that silica sand and the more cost effective, engineered synthetic proppants,  are not involved in the extraction of oil from Oil Shale?  And that the reserves of Oil Shale are greater than those of Shale Oil?

Finally, my friend, who is the real beneficiary of the confusion of having two distinct and different products and two different extraction processes with such similar names?  

Wall Street , that's who.

Sat, 08/30/2014 - 06:52 | 5161913 Wahooo
Wahooo's picture

Sand might be the new gold, but who the hell cares? Go ahead and stack it all.

Gold has been irrelevant since the end of WWII. In that time, oil became the true store of wealth and became the commodity behind the reserve currency, and it will remain so until oil is no longer the lifeblood of the planet's economies. Doesn't matter if the dollar, yuan, or ruble is the reserve currency, the value of the currency is defined by oil.

Sat, 08/30/2014 - 08:59 | 5162036 Mareka
Mareka's picture

Need to import sand from the middle east to become energy independent from the middle east.

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