Victory Nickel

t This Point Canada May Be The Best Way To Play This

I think the American frack sand companies are likely a good place for investors for the next ten years. However, I think looking at Canadian companies in the same business is an even better way to go.

The companies are younger and are not closely followed by the market.

In the United States the Bakken, Eagle Ford, Marcellus and Permian Basin are booming and that is going to continue. What I like about focusing on frack sand producers in Canada is that the horizontal boom is not just going to continue but significantly accelerate.

There are two big drivers in Canada that are going to create an increase in horizontal drilling and along with it frack sand demand. Those drivers are the construction of West Coast LNG terminals and development of the massive Duvernay play which is tabbed as being Canada's answer to the Eagle Ford.

The figures relating to these LNG Export facilities are staggering.

There are four proposed LNG export facilities that can be taken seriously. Combined, these facilities are going to require over 6 billion cubic feet of natural gas production every day.

To put this into perspective all of Canada in 2011 produced only 14.5 billion cubic feet of natural gas.

To provide enough natural gas for the LNG terminals Canada is going to have to increase natural gas production over the coming years by 41%.

To generate that production tens of thousands of wells are going to have to be drilled and fractured.

The Duvernay is a big and deep resource play. It is just now hitting its development phase and alone could require 1,000 wells per year for an extended run.

The LNG drilling will be focused on the Horn River and Montney resource plays both of which are like the Duvernay and located a long way from sources of American frack sand which is located in Wisconsin or other Great Lakes states.

Fracking a single horizontal well takes a huge amount of proppant, on average estimated to be 25 railcars of sand. Relative to the cost of actually producing the sand itself, the cost of transportation is quite significant.

That makes having a proximity close to where the drilling is happening a big advantage.

However, there are few publicly traded options for investors interested in Canadian frack sand companies that are closer to the Alberta and British Columbia action.

The companies currently offering the most direct exposure would include:

- Athabasca Minerals (OTCPK:ABCAF)

- La Ronge (OTC:CLICF)

- Victory Nickel (OTCPK:VNCKF)

These companies are small and trying to get their ducks in a row before the Duvernay and LNG drilling really hits the ground running.

Two years ago there wasn't a single publicly traded frack sand player in the United States. Today there are several and they are among the top performing stocks in the market.

With LNG drilling and the Duvernay about to take off perhaps two years from now we may be saying the same thing about Canadian frack sand suppliers.