Athabasca finds aggregate demand remains strong

VANCOUVER — Despite recent uncertainty surrounding production in Canada’s oil sands — due to issues like volatile crude prices and ongoing pipeline debates — growth remains the word for supply-oriented companies in the region, such as Edmonton-based aggregate outfit Athabasca Minerals (ABM-V).

Athabasca maintains two contracts with the Alberta government for the management of aggregate operations in the Fort McMurray area, and, with a portfolio of industrial mineral projects, the company is working to meet a broadening demand for extracting salt, sand and aggregates that stems from booming activity in northeastern Alberta.

And business has been good for Athabasca, with the company registering a 69% boost in net income during 2012 that translated to record earnings of 17¢ per share. The company sold roughly 11 million tonnes of aggregate during the year, which led to net income of $4.7 million.

“A profitable fourth quarter completed a highly successful fiscal 2012,” commented president and CEO Dom Kriangkum. “During the past year [Athabasca] has grown significantly, has restructured its bank financing, and made capital investments which will allow for increased future activity. In addition, we have advanced the Firebag property frac sand deposit and continue to evaluate and explore industrial minerals critical to the oil sands and infrastructure projects in Western Canada.”

Athabasca’s Susan Lake operation has been named the top aggregate supplier in Canada, and production at the site jumped 37% in 2012 to 10.6 million tonnes, which represents the second largest amount of annual aggregate demand in its history. In addition, the company identified a new potential aggregate source north of the Susan Lake pit, where it discovered a deposit containing granite and dolomite.

Though Athabasca has made a relatively smooth transition from primarily performing aggregate management services to increasing its aggregate supply from corporate-owned operations, the company had a few setbacks in first quarter 2013 that led to a net loss of roughly $375,000. The difficulties stemmed mostly from seasonal challenges related to aggregate delivery, though the company continues to expand operationally with new aggregate locations being added to its existing Logan, Kearl and House River pits.

Despite rising costs related to wintery conditions — specifically at the Kearl pit where production was delayed — Athabasca registered a strong year-on-year rise in output. The company saw record revenues of $6.7 million, which marks an 84% jump from first-quarter 2012, resulting from a 223% increase in net aggregate sales from its corporate-owned operations. The company also fulfilled more than 25% of a 375,000 tonne aggregate contract from its Logan pit operation.

“[We] continue to see strong demand for aggregates in and around Fort McMurray,” commented Kriangkum. “As Athabasca continues to expand corporate-owned operations, we will focus on continual improvement with operating efficiency, consistent with our objective to maximize shareholder value.”

On top of its aggregate portfolio, Athabasca is currently evaluating its wholly-owned Firebag silica sand property, which testing has revealed would be suitable for use in hydraulic fracturing and gravel packing operations. The company filed an application in March for an 80 acre land parcel at Firebag and intends to eventually develop a larger 20-sq.km package that will require an environmental impact assessment.

Based on strong results, Athabasca shareholders have had a nice boost over the past 52-weeks, with the stock up 83% since May 2012. The company has had a bit of a rough start to the year, however, with share prices down 37%, or 56¢, since early January en route to a $1.02 per share close at press time. At the end of February, Athabasca reported roughly $3.6 million in working capital and had 28 million shares outstanding at the time of writing for a $28.4 million market capitalization.