California operator upgrades plant to create higher-margin products for the specialty sand market.

By Therese Dunphy, Editor-in-Chief

Sierra Silica Resources opened its new Oroville, Calif., plant on Dec. 31, 2011.

In today’s market, many operators are looking for ways to upgrade their operations, buy out partners, or simply tap into some of the business’ equity without losing control of their asset. But bank lending conditions continue to be tight, and it takes a creative approach to make these goals a reality. Oroville, Calif.-based Sierra Silica Resources leveraged just such creativity to transform a former construction sand and gravel site into a state-of-the-art silica sand production facility.

Several years ago, Chris VanVeldhuizen, owner and president of Sierra Silica Resources, was working with Clearwater Investments, an investment company that had owned the 1,200-acre reserve for approximately 12 years. Construction sand and gravel was being produced, but the deposit had a high-quality silica content that could be processed for higher-margin products.

Four high-frequency screens create the site’s five core products.

Extensive drilling of the deposit showed that the reserves had tremendous potential. “Our markets are very concerned about the chemistry content, including silica level, iron levels, alumina levels, titanium, and all the oxides,” says Travis Hoiseth, general manager. “They want to know everything that’s in the sand because it affects their process on the other end.”

Test results showed that the reserves contained more than 60,000,000 tons of sand, with a silica content of approximately 99 percent. Only one other permitted reserve in California had similar qualities in its deposit: Unimin Corp.’s operation in Ione. “Unimin was basically serving the entire California market,” VanVeldhuizen says. “We thought there was an opportunity for an independent, local producer to come in and take a part of that market share.”

Four pre-roll separators are employed inside the plant, while PLC controls allow each part of the plant to “talk” to each other.

But first, the plant had to go through extensive upgrades. “What was there before was basically an old wash plant. Essentially, they were taking steak and making hamburger out of it; that’s the best way to describe it,” VanVeldhuizen says. “To get this silica to a higher production volume and a higher-margin state, we had to not only wash it and scrub it more than they were currently doing, we also had to build a drying and sizing facility. This allowed us to get into the glass market, as well as other specialty industrial sand markets.”

Sierra Silica put together a business plan and spec’d the equipment upgrades needed to produce the quality and quantity of material they needed. “Our current permit allows us to remove 500,000 tons per year from our deposit,” VanVeldhuizen explains. “We built our dry plant facility with that in mind.”

Custom blending options allow the operation to create a virtually unlimited number of products.

Once the business plan was developed, the venture’s next step was to seek capital to fund the equipment purchases. For this aspect of the site development, Sierra Silica turned to Houston-based Natural Resource Partners, L.P. (NRP).

“The owner had let it run as a small sand and gravel business,” recalls Dennis Coker, NRP’s vice president, aggregates. “It was not making a lot of money, especially in the down market over the last two to three years, but they knew they had a very high-quality silica deposit that would be good for glass sand and other specialty uses, but it would take a significant investment in equipment to rebuild the wet plant, as well as the dry plant.”

After Sierra Silica reviewed various financial vehicles for the plant upgrade, such as adding debt to the business or bringing in additional equity partners, it opted for a sale/leaseback mechanism. Once NRP conducted its own due diligence on the reserves and reviewed Sierra Silica’s strategic plan, it agreed to a deal with the operator.