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U.S. Silica to Construct Frac Sand Plant in Permian Basin


U.S. Silica’s SLCA board has approved the construction of a new frac sand mine and plant in West Texas to cater the fast-growing Permian Basin. The state-of-the-art facility is expected to produce around 4 million tons annually.

The facility is part of U.S. Silica’s earlier announced plan to add roughly 8-10 million tons of new brownfield and greenfield capacity to address rising frac sand demand. The 3,200-acre site has more than 30 years of reserves of fine grade 40/70 and 100 mesh sand.

The company plans to finance the $225 million project using cash on hand and cash flow from operations. U.S. Silica had $660.9 million in cash and cash equivalents at the end of first-quarter 2017.

The project will also be supported by long-term supply contracts with leading oilfield companies. Construction works are expected to start immediately with initial production slated in late fourth-quarter 2017.

U.S. Silica has underperformed the Zacks categorized Mining-Miscellaneous industry over a year. The company’s shares gained around 12% over this period, compared with roughly 36.4% gain recorded by the industry.

U.S. Silica’s healthy balance sheet provides it with ample opportunities for making strategic investments that will ensure its long-term competitive position in the market. The company’s decision to raise capital enhanced its financial flexibility and reinforced its balance sheet.

U.S. Silica continues to evaluate opportunities for greenfield expansions in the Permian Basin and is also expanding production capacities and efficiencies across some of its existing facilities. The company is also executing many cost improvement projects throughout its supply chain.

U.S. Silica is a Zacks Rank #3 (Hold) stock.

U.S. Silica Holdings, Inc. Price and Consensus

U.S. Silica Holdings, Inc. Price and Consensus | U.S. Silica Holdings, Inc. Quote

Stocks to Consider

Better-ranked stocks in the basic materials space include UR-Energy Inc. URG, Huntsman Corporation HUN and The Chemours Company CC, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

UR-Energy has an expected earnings growth of 267% for the current year.

Huntsman has an expected long-term earnings growth of 7%.

Chemours has an expected long-term earnings growth of 15.5%.

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