technicalreportsummar7a5






  TECHNICAL  REPORT  SUMMARY    FRAC  SAND  RESOURCES  AND  RESERVES    UTICA  MINE     LaSalle County, Illinois            Prepared For  SMART  SAND,  INC.          By  John T. Boyd Company  Mining and Geological Consultants  Pittsburgh, Pennsylvania, USA            Report No.  3555.022  JANUARY  2022  





 






    John T. Boyd Company    Mining and Geological Consultants        January 31, 2022  File: 3555.022        Mr. Lee Beckelman  Chief Financial Officer  Smart Sand, Inc.   1725 Hughes Landing Blvd, Suite 800  The Woodlands, TX 77380    Subject: Technical Report Summary      Frac Sand Resources and Reserves    Utica Mine     LaSalle County, Illinois    Dear Mr. Beckelman:    This SK-1300-compliant technical report summary provides  the results of John T. Boyd Company’s (BOYD) independent  audit of the frac (proppant) sand resources and reserves for  Smart Sand, Inc.’s (Smart Sand) Utica Mine as of December  31, 2021.    We wish to acknowledge the cooperation of Smart Sand  management and staff for providing the technical, financial,  and legal information used in completing this project. Our  findings are based on BOYD’s extensive experience in  preparing frac sand resource and reserve estimates used in  US Securities and Exchange Commission (SEC) filings, and  our knowledge of frac sand mining in Wisconsin, Illinois, and  throughout North America.    Respectfully submitted,    JOHN  T.  BOYD  COMPANY  By:        John T. Boyd II  President and CEO    Q:\ENG_WP\3555.021 - SS S-K 1300\WP\RPT\Section II - Utica Reserves\Cover Letter.docx    Chairman    James W. Boyd      President and CEO    John T. Boyd II      Managing Director and COO    Ronald L. Lewis      Vice Presidents     Robert J. Farmer    Matthew E. Robb    John L. Weiss    Michael F. Wick    William P. Wolf      Managing Director - Australia    George Cumplido      Managing Director - China    Jisheng (Jason) Han      Managing Director – South America    Carlos F. Barrera      Managing Director – Metals    Gregory B. Sparks          Pittsburgh     4000 Town Center Boulevard, Suite 300    Canonsburg, PA 15317    (724) 873-4400    (724) 873-4401 Fax    jtboydp@jtboyd.com        Denver    (303) 293-8988    jtboydd@jtboyd.com      Brisbane     61 7 3232-5000    jtboydau@jtboyd.com      Beijing     86 10 6500-5854    jtboydcn@jtboyd.com      Bogota     +57-3115382113    jtboydcol@jtboyd.com         www.jtboyd.com    





 






JOHN  T.  BOYD  COMPANY   TABLE  OF  CONTENTS       Page  LETTER  OF  TRANSMITTAL      TABLE  OF  CONTENTS      GLOSSARY  AND  ABBREVIATIONS      1.0 EXECUTIVE  SUMMARY  ............................................................................ 1-1   1.1 Introduction  ...................................................................................... 1-1   1.2 Property Description  ........................................................................ 1-1   1.3 Geology  ........................................................................................... 1-2   1.4 Exploration  ....................................................................................... 1-2   1.5 Frac Sand Reserves and Quality  ..................................................... 1-3   1.6 Operations  ....................................................................................... 1-4    1.6.1 Mining  .................................................................................. 1-4    1.6.2 Processing  ........................................................................... 1-5    1.6.3 Infrastructure  ........................................................................ 1-6   1.7 Financial Analysis  ............................................................................ 1-6    1.7.1 Market Analysis  .................................................................... 1-6    1.7.2 Historic Capital Expenditures, Operating Costs, and       Pricing ................................................................................. 1-11    1.7.3 Projected Sales Revenue, Production Costs, and CAPEX  1-12    1.7.4 Economic Analysis .............................................................. 1-12   1.8 Regulation and Liabilities  ............................................................... 1-13   1.9 Conclusions  ................................................................................... 1-14        2.0 INTRODUCTION  ......................................................................................... 2-1   2.1 Registrant and Purpose  ................................................................... 2-1   2.2 Terms of Reference  ......................................................................... 2-1   2.3 Expert Qualifications  ........................................................................ 2-2   2.4 Principal Sources of Information  ...................................................... 2-3    2.4.1 Site Visits  ............................................................................. 2-3    2.4.2 Reliance on Information Provided by the Registrant  ............ 2-4   2.5 Effective Date  .................................................................................. 2-4   2.6 Units of Measure  .............................................................................. 2-4       3.0 PROPERTY  OVERVIEW  ........................................................................... 3-1   3.1 Description and Location  ................................................................. 3-1   3.2 History .............................................................................................. 3-1   3.3 Property Control ............................................................................... 3-1    3.3.1 Mineral Ownership  ............................................................... 3-3    3.3.2 Surface Ownership  .............................................................. 3-3  





 






     TABLE  OF  CONTENTS - Continued                        Page    JOHN  T.  BOYD  COMPANY   3.4 Adjacent Properties  ......................................................................... 3-3   3.5 Regulation and Liabilities  ................................................................. 3-3   3.6 Accessibility, Local Resources, and Infrastructure  .......................... 3-3   3.7 Physiography  ................................................................................... 3-4   3.8 Climate ............................................................................................. 3-5      4.0 GEOLOGY  .................................................................................................. 4-1   4.1 Regional Geology  ............................................................................ 4-1   4.2 Local Stratigraphy  ............................................................................ 4-1   4.3 Frac Sand Geology  .......................................................................... 4-3         5.0 EXPLORATION  DATA  ............................................................................... 5-1   5.1 Background ...................................................................................... 5-1   5.2 Exploration Procedures  ................................................................... 5-1    5.2.1 Drilling and Sampling  ........................................................... 5-1    5.2.2 Frac Sand Quality Testing  ................................................... 5-2    5.2.3 Other Exploration Methods  .................................................. 5-2   5.3 Laboratory Testing Results  .............................................................. 5-2    5.3.1 Grain Size Distribution .......................................................... 5-3    5.3.2 Grain Shape (Sphericity and Roundness) ............................ 5-3    5.3.3 Crush Resistance .................................................................. 5-3    5.3.4 Acid Solubility ........................................................................ 5-3    5.3.5 Turbidity  ............................................................................... 5-4    5.3.6 Quality Summary .................................................................. 5-4   5.4 Data Verification  .............................................................................. 5-5      6.0 FRAC  SAND  RESOURCES  AND  RESERVES  ....................................... 6-1   6.1 Applicable Standards and Definitions  .............................................. 6-1   6.2 Frac Sand Resources  ...................................................................... 6-2    6.2.1 Methodology  ........................................................................ 6-2    6.2.2 Classification  ........................................................................ 6-4    6.2.3 Frac Sand Resource Estimate  ............................................. 6-4    6.2.4 Validation  ............................................................................. 6-5   6.3 Frac Sand Reserves  ........................................................................ 6-5    6.3.1 Methodology  ........................................................................ 6-5    6.3.2 Classification  ........................................................................ 6-6    6.3.3 Frac Sand Reserve Estimate  ............................................... 6-6         





 






     TABLE  OF  CONTENTS - Continued                        Page    JOHN  T.  BOYD  COMPANY  7.0 MINING  OPERATIONS   ............................................................................. 7-1   7.1 Mining Method  ................................................................................. 7-1   7.2 Mine Schedule, Equipment, and Staffing  ......................................... 7-2   7.3 Mine Production  ............................................................................... 7-3    7.3.1 Historical Mine Production  ................................................... 7-3    7.3.2 Forecasted Production  ......................................................... 7-3    7.3.3 Expected Mine Life  .............................................................. 7-4    7.3.4 Mining Risk ........................................................................... 7-4      8.0 PROCESSING  OPERATIONS   .................................................................. 8-1   8.1 Overview  .......................................................................................... 8-1    8.1.1 Wet Plant ................................................................................. 8-1    8.1.2 Decant/Dry Plant ...................................................................... 8-2   8.2 Conclusion ........................................................................................ 8-2      9.0 MINE  INFRASTRUCTURE ......................................................................... 9-1      10.0 MARKET  ANALYSIS   ............................................................................... 10-1   10.1 Permian Basin ................................................................................ 10-2   10.2 Appalachian Basin (Marcellus/Utica Play) and Niobrara Basin ...... 10-4       11.0 CAPITAL, REVENUES,  AND  OPERATING  COSTS  .............................. 11-1   11.1 Introduction  .................................................................................... 11-1   11.2 Historical Capital Expenditures  ...................................................... 11-1   11.3 Historical Revenues and Operating Costs  ..................................... 11-1    11.3.1 Historical Sales .................................................................... 11-1    11.4 Projected Production, Sales, and Costs ......................................... 11-3    11.4.1 Production and Sales Projections ........................................ 11-3    11.4.2 Operating Cost Projections .................................................. 11-4    11.4.3 Projected Capital Expenditures ........................................... 11-5      12.0 ECONOMIC  ANALYSIS   .......................................................................... 12-1   12.1 Introduction  .................................................................................... 12-1   12.2 Economic Analysis  ......................................................................... 12-2    12.2.1 Cash Flow Analysis ............................................................. 12-2    12.2.2 Sensitivity Analyses ............................................................. 12-3      13.0 PERMITTING  AND  COMPLIANCE   ........................................................ 13-1   13.1 Permitting ....................................................................................... 13-1   13.2 Compliance  .................................................................................... 13-1      14.0 INTERPRETATION  AND  CONCLUSIONS   ............................................ 14-1   14.1 Findings  ......................................................................................... 14-1   14.2 Significant Risks and Uncertainties  ............................................... 14-1  





 






     TABLE  OF  CONTENTS - Continued                        Page    JOHN  T.  BOYD  COMPANY  List of Tables  1.1 Reserves as of December 31, 2021 ............................................................. 1-3  1.2 Utica Year 2018 ISO/API Test Results for the Four Sized Samples ............ 1-4  1.3 Historic ROM Production .............................................................................. 1-5  1.4 Forecasted ROM Production Tons ............................................................... 1-5  1.5 Historical Capital Expenditures................................................................... 1-11  1.6 Historical Sales Statistics ........................................................................... 1-11  1.7 Historical Cost of Production ...................................................................... 1-11  1.8 Utica Sales Projections .............................................................................. 1-12  1.9 Annual Dollars per Ton Sold Cash Cost Projections .................................. 1-12  1.10 Summary Cash Flow Statement ................................................................. 1-13  1.11 DCF-NPV ................................................................................................... 1-13  3.1 Climate Data for Utica Mine – LaSalle County, Wisconsin  .......................... 3-5  5.1 Average Particle Size Distribution  ............................................................... 5-3  5.2 Utica Year 2011 API/ISO Test Results by Product Size  .............................. 5-4  5.3 Utica Year 2018 API/ISO Test Results for the Four Sized Samples ............ 5-4  6.1 Utica Property Drill Hole Spacing Parameters  ............................................. 6-4  6.2 Mineable and Reserve Tons as of December 31, 2021 ............................... 6-6  6.3 Reserves as of December 31, 2021 ............................................................. 6-6  7.1 Historic ROM Production  ............................................................................. 7-3  7.2 Forecasted ROM Production Tons  .............................................................. 7-3  11.1 Historical Capital Expenditures .................................................................. 11-1  11.2 Historical Sales Statistics ........................................................................... 11-1  11.3 Historical Cost of Production ...................................................................... 11-2  11.4 Utica Production Projections ...................................................................... 11-3  11.5 Utica Sales Projections .............................................................................. 11-3  11.6 Annual Cash Cost Projections .................................................................... 11-4  11.7 Annual Dollars Per Ton Sold Cash Cost Projections .................................. 11-5  12.1 Summary Cash Flow Statement  ................................................................ 12-2  12.2 DCF-NPV  .................................................................................................. 12-3  12.3 Pre-Tax and After-Tax Cash Flow Analysis ................................................ 12-4  12.4 Sensitivity Analysis –Average Sales Prices  ............................................... 12-3  12.5 Pre-Tax DCF-NPV at 10%  ........................................................................ 12-5  12.6 Pre-Tax DCF-NPV at 12%  ........................................................................ 12-5  12.7 Pre-Tax DCF-NPV at 15%  ........................................................................ 12-5  12.8 After-Tax DCF-NPV at 10%........................................................................ 12-6  12.9 After-Tax DCF-NPV at 12%........................................................................ 12-6  12.10 After-Tax DCF-NPV at 15%........................................................................ 12-6    





 






     TABLE  OF  CONTENTS - Continued                        Page    JOHN  T.  BOYD  COMPANY  List of Figures  1.1 Permian Basin HZ Permit Submissions vs. Rigs .......................................... 1-7  1.2 Permian Oil Production and Natural Gas Production ................................... 1-7  1.3 Permian Drilled but Uncompleted Wells ....................................................... 1-8  1.4 Appalachian Rig Count and Production per Rig  .......................................... 1-9  1.5 Appalachian Gas Production ........................................................................ 1-9  1.6 Niobrara Oil and Gas Rig Count and Productivity ...................................... 1-10  1.7 Niobrara Oil and Gas Production................................................................ 1-10  3.1 General Location Map .................................................................................. 3-2  4.1 Bedrock Strategraphic Units in Wisconsin.................................................... 4-2  6.1 Relationship Between Frac Sand Resources and Frac Sand Reserves  ..... 6-2  6.2 Topographic Map Showing Proven and Probable Reserves ........................ 6-7  7.1 Utica Quarry Pit Looking North  .................................................................... 7-2  7.2 Utica Proposed Mine Plan  ........................................................................... 7-4  8.1 Utica Wet Processing Plant .......................................................................... 8-1  8.2 Decant Shed and Dry Processing Plant ....................................................... 8-2  10.1 WTI Crude Oil CME Futures Price ............................................................. 10-1  10.2 Permian Basin HZ Permit Submissions vs. Rigs ........................................ 10-2  10.3 Permian Oil Production and Natural Gas Production  ................................ 10-3  10.4 Permian Drilled but Uncompleted Wells ..................................................... 10-3  10.5 Appalachian Rig Count and Production per Rig ......................................... 10-4  10.6 Appalachian Gas Production ...................................................................... 10-5  10.7 Niobrara Oil and Gas Rig Count and Productivity ...................................... 10-5  10.8 Niobrara Oil and Gas Production................................................................ 10-6  11.1 Product Size as a Percentage of Total Tons Sold  ..................................... 11-2    Q:\ENG_WP\3555.021 - SS S-K 1300\WP\RPT\Section II - Utica Reserves\TOC.doc    





 






  1  JOHN  T.  BOYD  COMPANY  GLOSSARY  OF  ABBREVIATIONS  AND  DEFINITIONS    $ : US dollar(s)  % : Percent or percentage  Smart Sand : Smart Sand, Inc.  API : American Petroleum Institute  BOYD : John T. Boyd Company   CapEx : Capital expenditures  COGS : Cost of goods sold  Constant Dollar : A monetary measure that is not influenced by inflation and used to  compare time periods. Sometimes referred to as “real dollars”.  CY : Cubic yards  DCF : Discounted Cash Flow  Discount Rate : A rate of return used to discount future cash flows based on the  return investors expect to receive from their investment.  DUC : Drilled but uncompleted gas or oil well.   FOB : Free-on-Board  Frac Sand : Frac sand is a naturally occurring, high silica content quartz sand,  with grains that are generally well rounded and exhibit high  compressive strength characteristics relative to other silica sand. It  is utilized as a prop or “proppant” in unconventional shale frac well  completions.  Frac Sand  Resource  : Frac sand resource is a concentration or occurrence of sand  material of economic interest in or on the Earth’s crust in such  form, grade or quality, and quantity that there are reasonable  prospects for economic extraction. A mineral resource is a  reasonable estimate of mineralization, taking into account relevant  factors such as quality specifications, likely mining dimensions,  location or continuity, that, with the assumed and justifiable  technical and economic conditions, is likely to, in whole or in part,  become economically extractable. It is not merely an inventory of  all mineralization drilled or sampled.  Frac Sand  Reserve  : Frac sand reserve is an estimate of tonnage and grade or quality  of mineral resources that, in the opinion of the qualified person,  can be the basis of an economically viable project. More  specifically, it is the economically mineable part of a mineral  





 






 2       GLOSSARY  OF  ABBREVIATIONS  AND  DEFINITIONS  -  Continued          JOHN  T.  BOYD  COMPANY  resource, which includes diluting materials and allowances for  losses that may occur when the material is mined or extracted.  IDNR : Illinois Department of Natural Resources  Indicated Sand  Resource  : An Indicated Sand Resource is that part of a Sand Resource for  which quantity, grade or quality, densities, shape, and physical  characteristics are estimated with sufficient confidence to allow the  application of Modifying Factors in sufficient detail to support mine  planning and evaluation of the economic viability of the deposit.  Geological evidence is derived from adequately detailed and  reliable exploration, sampling and testing, and is sufficient to  assume geological and grade or quality continuity between points  of observation. An Indicated Sand Resource has a lower level of  confidence than that applying to a Measured Sand Resource and  may only be converted to a Probable Sand Reserve.  IRR : Internal rate-of-return  ISO : International Organization for Standardization  lb : Pound  LOM : Life-of-Mine  Measured Sand  Resource  : A Measured Sand Resource is that part of a Sand Resource for  which quantity, grade or quality, densities, shape, and physical  characteristics are estimated with confidence sufficient to allow the  application of Modifying Factors to support detailed mine planning  and final evaluation of the economic viability of the deposit.  Geological evidence is derived from detailed and reliable  exploration, sampling, and testing and is sufficient to confirm  geological and grade or quality continuity between points of  observation. A Measured Sand Resource has a higher level of  confidence than that applying to either an Indicated Sand  Resource or an Inferred Sand Resource. It may be converted to a  Proven Sand Reserve or to a Probable Sand Reserve.  Mesh : A measurement of particle size often used in determining the size  distribution of granular material.  Mineral Reserve : See “Frac Sand Reserve”  Mineral Resource : See “Frac Sand Resource”  Modifying Factors : The factors that a qualified person must apply to indicated and  measured sand resources and then evaluate to establish the  economic viability of sand reserves. A qualified person must apply  and evaluate modifying factors to convert measured and indicated  resources to proven and probable reserves. These factors include,  





 






 3       GLOSSARY  OF  ABBREVIATIONS  AND  DEFINITIONS  -  Continued          JOHN  T.  BOYD  COMPANY  but are not restricted to: mining; processing; metallurgical;  infrastructure; economic; marketing; legal; environmental  compliance; plans, negotiations, or agreements with local  individuals or groups; and governmental factors. The number, type  and specific characteristics of the modifying factors applied will  necessarily be a function of and depend upon the mineral, mine,  property, or project.  MSHA : Mine Safety and Health Administration. A division of the U.S.  Department of Labor.  msl : Mean sea level  NOAA : National Oceanic and Atmospheric Administration  NTU : Nephelometric turbidity units  NPV : Net Present Value  NWS : Northern White Sands  Probable Sand  Reserve  : A Probable Sand Reserve is the economically mineable part of an  Indicated and, in some circumstances, a Measured Sand  Resource. The confidence in the Modifying Factors applying to a  Probable Sand Reserve is lower than that applying to a Proven  Sand Reserve.  Proppant Sand : See “Frac Sand”  Proven Sand  Reserve  : A Proven Mineral Reserve is the economically mineable part of a  Measured Sand Resource. A Proven Sand Reserve implies a high  degree of confidence in the Modifying Factors.  PSI : Pounds per square inch  ROM : Run-of-Mine. The as-mined including in-seam clay partings mined  with the sand, and out-of-seam dilution.  SEC : U.S. Securities and Exchange Commission  S-K 1300 : Subpart 1300 and Item 601(b)(96) of the U.S. Securities and  Exchange Commission’s Regulation S-K  SG&A : Selling, General, and Administrative  Surficial : Relating to the earth’s surface or the geology that is on the  surface.  Ton : Short Ton. A unit of weight equal to 2,000 pounds  





 






 4       GLOSSARY  OF  ABBREVIATIONS  AND  DEFINITIONS  -  Continued          JOHN  T.  BOYD  COMPANY  tph : Tons per Hour  WIP : Work-in-process  WTI : West Texas Intermediate    Q:\ENG_WP\3555.021 - SS S-K 1300\WP\RPT\Glossary.docx  





 






  1-1       JOHN  T. BOYD  COMPANY  1.0 EXECUTIVE  SUMMARY      1.1 Introduction  BOYD was retained by Smart Sand to complete an independent technical audit of  mineral resource and mineral reserve estimates—hereafter referred to as frac sand  resource and frac sand reserve estimates—for their active mining operation located in  Utica, Illinois (the “Utica Mine”). This report summarizes the results of our audit and  satisfies the requirements for Smart Sand’s disclosure of frac sand resources and  reserves set forth in Subpart 1300 and Item 601(b)(96) of the SEC’s Regulation S-K  (S-K 1300). This is the first technical report summary filed by Smart Sand for the Utica  Mine.    BOYD’s findings are based on our detailed examination of the supporting geologic,  technical, and economic information obtained from: (1) Smart Sand provided files,  (2) discussions with Smart Sand personnel, (3) records on file with regulatory agencies,  (4) public sources, and (5) nonconfidential BOYD files. Our investigation was performed  to obtain reasonable assurance that Smart Sand’s frac sand resource and reserve  statements are free from material misstatement. This report provides results of an  independent estimate of the frac sand resources and reserves underlying the Utica,  Illinois property. The basis for these estimates is a volumetric geologic model estimating  the reserves and resources compiled by BOYD in July 2020. Production information  supplied by Smart Sand was utilized to adjust the reserve estimate to December 31,  2021.    This chapter provides a summary of primary information contained within this technical  report summary and is supported by remaining portions of this report including text,  figures, and tables. Weights and measurements are expressed in US customary units.  Unless noted, the effective date of the information, including estimates of frac sand  reserves, is December 31, 2021.      1.2 Property Description   Smart Sand’s Utica Mine is a surface mining operation located in LaSalle County,  Illinois. Frac sand is extracted from the St. Peter Formation which is extensively mined  for frac sand in the area. Smart Sand controls approximately 819 contiguous acres of  property which is owned fee simple. The general location of this property (the “Utica  Property”) is provided on Figure 3.1.    





 






  1-2       JOHN  T. BOYD  COMPANY  Smart Sand acquired the Utica operation from Eagle Materials Incorporated (Eagle  Materials) in 2020. The mine exploits the St. Peter sandstone formation which generally  lies approximately 40 ft to 60 ft below the land surface in the area.       1.3 Geology   The Utica Property’s target silica bearing formation is the St. Peter sandstone, which is a  massive formation in areal extent and thickness. Aerially, it extends from Minnesota to  Arkansas and from Illinois into Nebraska and South Dakota. On a regional basis, the St.  Peter ranges in thickness from a few feet to over 700 ft, with a general thickness of  100 ft to 200 ft. In northern Illinois, the thickness can be over 300 ft thick.    The surface of the Utica Property is overlain by overburden that ranges in thickness from  57 ft to 77 ft, with an average thickness of approximately 66 ft. The overburden material  consists of clay, sandy gravel, peat, and limestone cap rock. Beneath the overburden  material is the St. Peter sandstone formation.    The St. Peter deposit on the Utica Property is flat lying with no evidence of faulting, and  has been eroded to an average thickness of approximately 100 ft. The formation is a  white to buff, with fine to medium grained ortho-quartzite. It contains rounded, clear  polished sand quartz grains with minor secondary silica and clay cement. Care must be  taken in defining the presence of erosion channels, which can replace the critical upper  portion of the St. Peter sandstone formation locally.     Grain size distribution drives the mine planning. Iron tends to be concentrated near the  surface and is visible in orange staining. Iron also increases at the bottom sandstone  contact, occurring mostly as pyrite. The deposit is coarser in its top half. Where the  upper part of the formation is eroded, multiple mining faces must operate to ensure  adequate sand is available to meet product specifications.      1.4 Exploration   Based on information provided by Smart Sand to BOYD, we note that there were several  exploration drilling programs performed on the Utica Property, the most recent of which  was in 2017.  Overall, there were 29 holes drilled on the property. However, BOYD  utilized the results of only 14 exploration holes to develop the geologic model of the  Utica deposit.    The lithologic data obtained from the 14 holes, the results of the particle size distribution,  and the results of the Stim-Lab analyses, were compiled into a database for input into  





 






  1-3       JOHN  T. BOYD  COMPANY  the BOYD geologic model, which was the principal source of information used to define  the extent of the deposit on the property, the overburden volumes, the sand and waste  volumes and tonnages, the corresponding sand product distribution based on particle  size, and quality of the St. Peter sand underlying the Utica Property.       1.5 Frac Sand Reserves and Quality  This technical report summary provides an estimate of frac sand reserves for Smart  Sand’s Utica Mine in accordance with the requirements set forth in S-K 1300. These  estimates were independently estimated by BOYD. This report, and previous reports,  include a thorough geologic investigation of the property, appropriate modeling of the  deposit, development of life-of-mine (LOM) plans, and consideration of the relevant  processing, economic (including independent estimates of capital, revenue, and cost),  marketing, legal, environmental, socio-economic, and regulatory factors.     Smart Sand’s estimated surface mineable frac sand reserves for the Utica Property total  129 million saleable product tons, as of December 31, 2021.    Table 1.1 presents the estimated Reserve tons by product (size), that are anticipated to  be produced at Smart Sand’s Utica Property.    Estimated Reserve Tons By Classification as of December 31, 2021           Tons (000) 20/40-Mesh 40/70-Mesh 70/100-Mesh Total Proven 28,443            55,384            12,637            96,464             Probable 8,781             18,984            4,582             32,347             Total 37,224            74,368            17,219            128,811           Table 1.1: Reserves as of December 31, 2021     The reported reserves include only frac sand which is reportedly owned as of December  31, 2021. It is BOYD’s opinion that extraction of the reported frac sand reserves is  technically achievable and economically viable after the consideration of potentially  material modifying factors.    Projecting the historic sales volume of approximately 0.8 million tons per year, the  operation has an expected LOM of approximately 161 years.    Composite samples collected during the drilling of the initial exploration holes were  tested by Stim-Lab for API RP 19C/ISO 13503-2 proppant sand characteristics. Testing      





 






  1-4       JOHN  T. BOYD  COMPANY  was performed on the 20/40, 30/50, 40/70, and 70/140-mesh (100-mesh) product sizes.  The test results are presented in Table 1.2.      NWS, LLC Year 2018 Sample - Average API/ISO Test Results By Product Size API RP19C API RP19C Result Result Recommended Result Result Recommended Test 20/40-mesh 30/50-mesh Specification 40/70-mesh 100-mesh* Specification Sphericity 0.8 0.8 ≥ 0.6 0.7 0.7 ≥ 0.6 Roundness 0.7 0.7 ≥ 0.6 0.6 0.6 ≥ 0.6 Acid Solubility (%) 0.3 0.3 ≤ 2.0 0.3 No Test ≤ 3.0 Turbidity (NTU) 9 12 ≤ 250 7 No Test ≤ 250 K-Value (000 psi) 6 7 - 8 No Test - Clusters None Observed None Observed NA None Observed None Observed NA * Note: Currently, 70/140-mesh proppant sand material does not have an API/ISO specification. Table 1.2:  Utica Year 2018 API/ISO Test Results for the Four Sized Samples     The test results suggest that the Utica Mine could produce frac sands which meet  minimum API/ISO recommended testing characteristics. BOYD notes that the Utica  operation has a prior history of selling various frac sand sized products to oil service  companies prior to the Smart Sand acquisition in 2020.      1.6 Operations   1.6.1 Mining  The Utica Mine produces approximately 800,000 to 1 million tons of finished product per  year. The quarry exploits the St. Peter sandstone formation which is extensively mined  in the Ottawa-Utica, Illinois area. To produce 800,000 tons of frac sand product,  approximately 1 million tons of ROM sand is uncovered, drilled, blasted, and then hauled  to the slurry plant. Conventional excavators, front-end loaders, articulated haul trucks  and dozers are used to strip the overburden and recover the sand. Initially, 50 ft to 75 ft  of overburden is removed prior to exposing the approximately 90 ft thick sand formation.    Currently the mine pit operates two, 10-hour shifts, four days per week resulting in a  40-hour work week per shift. A 10-hour Friday shift is added if needed. Generally, there  are seven employees on the day shift and five employees on the night shift.       





 






  1-5       JOHN  T. BOYD  COMPANY  The sand is mined, processed, and stored from one contiguous property. The product is  trucked to the nearby Peru rail loadout. Production from the operation commenced in  mid-2012. Recent historic run-of-mine (ROM) production and forecast ROM production  are illustrated in Tables 1.3 and 1.4:    Table 1.3   Historic ROM Production  Year  Finished Tons (000)      2019  n/a  2020*  722        2021  1,136 est  * Acquired partial year    Table 1.4: Forecasted ROM Production Tons     Year  2022   Year  2023   Year  2024   Year  2025   Year  2026   ROM Production tons  (000)     982    982    982    982    982    The average process yield is reported to be 81.5%; as such, 982,000 ROM tons are  expected to produce approximately 800,000 tons of finished product.     The LOM plan, contained in Chapter 7, assumes a steady-state sales volume in the  800,000 product tons per year range for approximately 150 years through year 2172.  Future mine plan production, and hence the longevity of the mine, is directly related to  energy market demand for proppant sand. Actual yearly production volumes may, and  are likely to, fluctuate significantly based on this demand.     1.6.2 Processing  The Utica plant commenced wash plant operations in 2014. Initially, the work-in-process  (WIP) sand was railed to a dry process plant in Corpus Christi, Texas. In 2018, a 1.6  million tons per year dry process plant was constructed on-site and is currently utilized.  The ROM sand material is hauled to an in-pit feed hopper where it is slurried and  pumped to an enclosed wet process plant. Following removal of oversize and waste (<  140-mesh) material, the sand is pumped to a decant facility adjacent to the drying and  screening plant. After decanting, the sand is reclaimed, dried, and screened into the  various frac sand sizes. Finished product is stored in silos and trucked either to local  industrial customers or to their Burlington Northern rail loadout in nearby Peru, Illinois.     The wet plant employs typical screen/hydrosizer /cyclone classification and dewatering  technology and also has an ultrafine circuit and thickener. The wet plant operates two,  10-hour shifts, four days per week. Concerning the decant shed/dry plant, a drag chain  arrangement reclaims dryer sand from the top of the decant pile and conveys the sand  





 






  1-6       JOHN  T. BOYD  COMPANY  to a 250 tons per hour (tph) natural gas fired dryer. Dry sand is then screened into  predominantly 20/40-mesh, 30/50-mesh,40/70-mesh, and 70/140-mesh (100-mesh)  finished products. The finished products are stored in four 2,000-ton truck loadout silos  before being trucked to customers or the rail loadout.    1.6.3 Infrastructure  The Utica Mine is serviced by three phase power that is routed along US highway 6,  which runs north of the northern property line. The pipeline providing natural gas supply  for the drying equipment is also routed along this corridor. Plant process water is  supplied by water collected in the pit and ponds. Additionally, the wash process water is  recycled after fines are removed via settling with a flocculent in a thickener and series of  constructed ponds.    On-site facilities include a scale house, office, shop, and a quality laboratory located in  the dry process plant. The operation employs approximately 54 people and staffing  varies based on production demand.       1.7 Financial Analysis  1.7.1 Market Analysis  Although Smart Sand’s market area is essentially all of the energy basins in the United  States and western Canada, we have selectively focused on the Permian, Appalachian,  and Denver-Julesburg (DJ) as these are target markets for their frac sand. The Oakdale  Mine has advantaged delivered cost to the western basins like the DJ as the Oakdale  Mine directly loads onto the Canadian Pacific Railway, a very competitive option for  westbound sand to the DJ. Oakdale also own a loadout near the mine which enables  them to load directly on the Union Pacific Railway, the favored Permian basin rail. The  Utica Mine has access to their nearby Burlington Northern rail loadout which greatly  complements the Oakdale facility, especially when moving product to the Appalachian  (Marcellus-Utica) basin. Therefore, a high-level overview of demand in these basins  follows.    Permit submissions for horizontal oil and gas wells in the Permian indicate a  continuation of strong drilling ahead. According to InfillThinking, the number of permits      





 






  1-7       JOHN  T. BOYD  COMPANY  filed per working rig this summer is tracking at multi-year highs as evidenced in Figure  1.1 below.        Figure 1.1: Permian Basin HZ Permit Submissions vs. Rigs    Over the previous 52 weeks, rig counts in the Permian are up approximately 111%.  This  has led to increased production for both crude oil and natural gas. For the same time  period, crude oil (barrels per day) and natural gas production (thousand cubic feet per  day) in the Permian are up 10% and 9%, respectively.  As Figure 1.2 illustrates, Permian  daily crude oil production is nearing its pre-pandemic impacted peak, while   daily natural gas production in the Permian continues to make new records and now  stands at 18.6 billion cubic feet per day.      Figure 1.2: Permian Oil Production and Natural Gas Production   -  1,000,000  2,000,000  3,000,000  4,000,000  5,000,000  6,000,000 Ja n- 19 Fe b- 19 M ar -1 9 Ap r- 19 M ay -1 9 Ju n- 19 Ju l-1 9 Au g- 19 Se p- 19 O ct -1 9 N ov -1 9 De c- 19 Ja n- 20 Fe b- 20 M ar -2 0 Ap r- 20 M ay -2 0 Ju n- 20 Ju l-2 0 Au g- 20 Se p- 20 O ct -2 0 N ov -2 0 De c- 20 Ja n- 21 Fe b- 21 M ar -2 1 Ap r- 21 M ay -2 1 Ju n- 21 Ju l-2 1 Au g- 21 Permian Oil Production (bbl/d)  -  2,000,000  4,000,000  6,000,000  8,000,000  10,000,000  12,000,000  14,000,000  16,000,000  18,000,000  20,000,000 Ja n- 19 Fe b- 19 M ar -1 9 Ap r- 19 M ay -1 9 Ju n- 19 Ju l-1 9 Au g- 19 Se p- 19 O ct -1 9 N ov -1 9 De c- 19 Ja n- 20 Fe b- 20 M ar -2 0 Ap r- 20 M ay -2 0 Ju n- 20 Ju l-2 0 Au g- 20 Se p- 20 O ct -2 0 N ov -2 0 De c- 20 Ja n- 21 Fe b- 21 M ar -2 1 Ap r- 21 M ay -2 1 Ju n- 21 Ju l-2 1 Au g- 21 Permian Natural Gas Production (Mcf/d) 





 






  1-8       JOHN  T. BOYD  COMPANY  According to U.S. Energy Information Administration Drilling Productivity Report, drilled  but uncompleted wells (DUCs) in the Permian Basin have declined 43% since peaking in  July 2020 (refer to Figure 1.3). These data dovetail with increased crude oil and natural  gas production in the basin.       Figure 1.3: Permian Drilled but Uncompleted Wells    Although a majority of this large basin’s sand is sourced from local sand mines, Northern  White, Oakdale quality sand remains an important product for many well applications.     1.7.1.1 Appalachian Basin (Marcellus/Utica Play) and Niobrara Basin  Although smaller in size than the Permian energy fields, the Appalachian and Nioobrara  (DJ) are substantial natural gas and oil plays in North America. Unlike the Permian, the  Appalachian and Niobrara import the vast majority of the frac sand. Very few, notable in- basin sand operations exist. This creates an advantaged situation for the Oakdale and  Utica mines as they are advantaged, transport wise to the basin and there are few  substitutes for NWS.    Following the energy downturn in 2019 and thern Covid shutdown in 2020, the basin  wellfield activity appears to be rebounding. Horizontal rigs have stabilized over the past  two years as can be seen from Figures 1.4 but gas production per rig is substantially  higher. Energy companies are drilling longer laterals and optimizing each well pad       -  500  1,000  1,500  2,000  2,500  3,000  3,500  4,000 Ja n- 19 Fe b- 19 M ar -1 9 Ap r- 19 M ay -1 9 Ju n- 19 Ju l-1 9 Au g- 19 Se p- 19 O ct -1 9 N ov -1 9 De c- 19 Ja n- 20 Fe b- 20 M ar -2 0 Ap r- 20 M ay -2 0 Ju n- 20 Ju l-2 0 Au g- 20 Se p- 20 O ct -2 0 N ov -2 0 De c- 20 Ja n- 21 Fe b- 21 M ar -2 1 Ap r- 21 M ay -2 1 Ju n- 21 Ju l-2 1 Au g- 21 Permian Drilled but Uncompleted Wells 





 






  1-9       JOHN  T. BOYD  COMPANY  becoming more efficient from a cost perspective and overall natural gas production is  stable as can be seen from Figure 1.5.       Figure 1.4: Appalachian Rig Count and Production per Rig (Source: EIA)      Figure 1.5: Appalachian Gas Production (Source: EIA)       





 






  1-10       JOHN  T. BOYD  COMPANY  Similarly, the DJ basin has seen a rebound in rig count since the Covid shutdown. Both  gas and oil rig counts have risen but productivity per well has decreased as can be seen  in Figure 1.6.      Figure 1.6: Niobrara Oil and Gas Rig Count and Productivity (Source: EIA)    Overall gas and oil production remains relatively flat in the basin, but more wells are  being drilled to maintain this capacity. Figure 1.7 illustrates the overall yearly gas and oil  production in the basin.      Figure 1.7:  Niobrara Oil and Gas Production (Source: EIA)    Having survived the challenging environment of 2019 and 2020, Smart Sand’s  operations should continue to prove viable into the future notwithstanding a sustained  and significant energy price collapse. Their low-cost mining scheme, advantaged  transport to select basins, and high-quality product help to create an advantage  compared with other NWS producers.       





 






  1-11       JOHN  T. BOYD  COMPANY  1.7.2 Historic Capital Expenditures, Operating Costs, and Pricing  The Utica operation’s CapEx, and Historical Sales for the years 2020, and 2021  (September YTD), is presented in Tables 1.5 and 1.6 below.    CapEx ($000) Year 2020* -                              Sep YTD 2021 257                                Total** 257                             *Utica acquired on September 18, 2020  **Utica operation only, excludes transload sites and  other locatons/activities.  Table 1.5: Historical Capital Expenditures     Year 2020* SepYTD2021 Tons Sold (000) 106                  564                   Total Revenues ($000) (a) 2,256               11,553              Average Sales Price ($ per ton sold) 21.33               20.48                *Acquired in September 2020 Table 1.6 :  Historical Sales Statistics     Table 1.7 presents Utica’s historical cash operating costs for the short year 2020, and  September YTD 2021. Operating costs represent the costs incurred associated with the  mining, ongoing reclamation, wet processing, dry processing, trucking to the off-site rail  loadout, off-site rail loadout (Peru), and other related costs.  .  $(000) $ per ton sold Cash Operating Costs Year 2020* SepYTD2021 Year 2020* SepYTD2021 Wages and benefits 566            3,391            5.35           6.15               Excavation 50              859               0.47           1.56               Utilities 134            1,061            1.26           1.93               Equipment 78              342               0.74           0.62               Maintenance 154            551               1.46           1.00               Peru Trucking -             1,075            -             1.95               Real Estate taxes -             415               -             0.75               Other Costs (a) (2)              49                 (0.02)          0.09                  Total Cash Operating Costs 980            7,742            9.27           14.05             Note Rounding Errors *Acquired in September 2020 Table 1.7 :  Historical Cost of Production          





 






  1-12       JOHN  T. BOYD  COMPANY  1.7.3    Projected Sales Revenue, Production Costs, and Capex  Table 1.8 presents BOYD’s sales projections for the period 2022 through 2026. The  sales price forecast is constant dollar, by product, and is based on current quarter  average prices. We opine that these are reasonable price projections.    Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 Tons Sold (000) 800           800           800           800           800               40/70-Mesh and coarser 694           694           694           694           694               70/100-Mesh 106           106           106           106           106            Revenues ($000) 16,000      16,000      16,000      16,000      16,000       Product Pricing ($ per ton sold) Average Price for all products 20.00        20.00        20.00        20.00        20.00         Table 1.8: Utica Sales Projections     Table 1.9 below, presents the above table’s cost projections on a cost per ton sold basis  for the years 2022 through 2026.    Summary Cash Cost of Goods Sold ($ per ton sold):           Cash Operating Expense Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 Wages and benefits 6.00          6.00          6.00          6.00          6.00           Excavation 1.56          1.56          1.56          1.56          1.56           Utilities 1.93          1.93          1.93          1.93          1.93           Equipment 0.57          0.57          0.57          0.57          0.57           Maintenance 1.00          1.00          1.00          1.00          1.00           Peru Trucking 1.95          1.95          1.95          1.95          1.95           Real Estate taxes 0.75          0.75          0.75          0.75          0.75           Other Costs 0.09          0.09          0.09          0.09          0.09              Subtotal Cash Operating Expense 13.85        13.85        13.85        13.85        13.85         SG&A 1.42          1.42          1.42          1.42          1.42           Final Reclamation Escrow 0.07          0.07          0.07          0.07          0.07              Total Cash Cost of Goods Sold 15.34        15.34        15.34        15.34        15.34         Table 1.9: Annual Dollars per Ton Sold Cash Cost Projections           Smart Sand provided BOYD with the annual sustaining CapEx estimate of $1 million,  which includes maintenance of production equipment as well as other items for the  operation.     1.7.4 Economic Analysis  BOYD prepared an economic analysis, as of January 1, 2022, for the Utica Operation  using the production, sales, and financial projections presented in this report. Our  analysis confirms that the operation generates positive cash flows (based on a 12%  discount rate), on a pre-tax and after-tax basis, that supports the statement of frac sand  





 






  1-13       JOHN  T. BOYD  COMPANY  reserves herein. Table 1.10 below presents the pre-tax and after-tax cash flow  projections based on the proposed LOM production schedule, revenue, cost of goods  sold, CapEx and other estimates discussed above for the Utica operation.    Summary Cash Flow  Statement ($ 000)       2022 2032 2042 2052 2062 2072 2082 2092 2102 2112 2122 to 2031 to 2041 to 2051 to 2061 to 2071 to 2081 to 2091 to 2101 to 2111 to 2121 to 2182 Total Total Tons Sold (000) 8,000     8,000     8,000     8,000     8,000     8,000     8,000     8,000     8,000     8,000     48,811   128,811       Revenues 160,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000 976,220 2,576,220    COGS 122,696 122,856 123,016 123,176 123,336 123,496 123,656 123,816 123,976 124,136 767,135 2,001,295    CapEx 10,000   10,000   10,000   10,000   10,000   10,000   10,000   10,000   10,000   10,000   61,014   161,014          Net Pre-Tax Cash Flow 27,304   27,144   26,984   26,824   26,664   26,504   26,344   26,184   26,024   25,864   148,071 413,911       Federal and State Income Taxes 2,856     7,681     7,636     7,591     7,546     7,501     7,455     7,410     7,365     7,320     40,631   110,992          After-Tax Net Cash Flow 24,448   19,463   19,348   19,233   19,118   19,003   18,889   18,774   18,659   18,544   107,441 302,920       Table 1.10: Summary Cash Flow Statement     Discounted Cash Flow-Net Present Values (DCF-NPV) on a pre-tax and after-tax basis,  using discount rates of 10%, 12%, and 15%, were calculated utilizing the cash flows  above. The DCF-NPV values used mid-year discounting and all cash flows were on a  constant dollar basis.    The pre-tax DCF-NPV ranges from approximately $19.5 million to $28.5 million. The  after-tax DCF-NPV ranges from approximately $16.8 million to $23.8 million. Table 1.11  summarizes the results of the pre-tax and after-tax DCF-NPV analyses:    DCF-NPV ($ 000) 10% 12% 15% Pre-Tax 28,531      24,013      19,483       After-Tax 23,797      20,347      16,824       Table 1.11: DCF-NPV     The NPV estimate was made for purposes of confirming the economic viability of the  reported frac sand reserves and not for purposes of valuing the Utica Mine or its assets.  Internal rate-of-return (IRR) and project payback were not calculated, as there was no  initial investment considered in the financial model.      1.8 Regulation and Liabilities  The Utica Mine’s operations are predominantly regulated by LaSalle County, Illinois and  the State of Illinois concerning reclamation of the site. Air emissions are regulated by the  Illinois Environmental Protection Agency.      





 






  1-14       JOHN  T. BOYD  COMPANY  Based on our review of information provided by Smart Sand and available public  information, it is BOYD’s opinion that the Utica Mine’s record of compliance with  applicable mining, water quality, and environmental regulations is generally typical for  that of the industry. BOYD is not aware of any regulatory violation or compliance issue  which would materially impact the frac sand reserve estimate.       1.9 Conclusions  It is BOYD’s overall conclusion that Smart Sand’s Utica Mine frac sand reserves, as  reported herein: (1) were prepared in conformance with accepted industry standards and  practices, and (2) are reasonably and appropriately supported by technical evaluations,  which consider all relevant modifying factors. We do not believe there is other relevant  data or information material to the Utica Property that would render this technical report  summary misleading. Our conclusions represent only informed professional judgment.    The ability of Smart Sand, or any mine operator, to recover all of the reported frac sand  reserves is dependent on numerous factors that are beyond the control of, and cannot  be anticipated by, BOYD. These factors include mining and geologic conditions, the  capabilities of management and employees, the securing of required approvals and  permits in a timely manner, future sand prices, etc. Unforeseen changes in regulations  could also impact performance. Opinions presented in this report apply to the site  conditions and features as they existed at the time of BOYD’s investigations and those  reasonably foreseeable.    Q:\ENG_WP\3555.021 - SS S-K 1300\WP\RPT\Section II - Utica Reserves\CH-1 - Executive Summary.docx  





 






  2-1       JOHN  T. BOYD  COMPANY  2.0 INTRODUCTION      2.1 Registrant and Purpose  This technical report summary was prepared for Smart Sand in support of their  disclosure of frac sand reserves for the Utica Mine in accordance with S-K 1300  Regulations.     Smart Sand is a publicly traded corporation listed on the NASDAQ (SND) with  headquarters in The Woodlands, Texas. Smart Sand purchased the Utica Mine in  September 2020 from Eagle Materials. The company, since inception, has expanded  their footprint with operations and property in Wisconsin and Illinois. Smart Sand also  operates several rail transloads and offers “last mile” solutions with their SmartSystemTM  wellsite silo division. Smart Sand’s website is found at www.smartsand.com.      2.2 Terms of Reference  Smart Sand retained BOYD to prepare an SEC-compliant technical report summary to  support their disclosure of frac sand reserves following S-K 1300 requirements. Our  objective was to incorporate the results of the existing technical report along with  additional information that we reviewed into a compliant technical report summary.    The results of our review, presented in report form herein, were prepared in accordance  with the disclosure requirements set forth in Subpart 1300 and Item 601(b)(96) of the  SEC’s Regulation S-K. The purpose of this report is threefold: (1) to summarize available  information for the subject mining property, (2) to provide the conclusions of our  technical audit, and (3) to provide a statement of frac sand resources and reserves for  the Utica Mine. This is the first technical report summary filed by Smart Sand for the  Utica Mine.    BOYD’s findings are based on our detailed examination of the supporting geologic,  technical, and economic information provided by Smart Sand in formulating the  estimates of frac sand resources and reserves disclosed in this report. We  independently estimated the frac sand resources and reserves from first principles  based on third-party exploration information provided to BOYD. This estimate is  contained in BOYD Report 3555.019 issued in February 2021 shortly after the operation  was acquired from Eagle Materials.    





 






  2-2       JOHN  T. BOYD  COMPANY  We used standard engineering and geoscience methods, or a combination of methods,  that we considered to be appropriate and necessary to establish the conclusions set  forth herein. As in all aspects of mining property evaluation, there are uncertainties  inherent in the interpretation of engineering and geoscience data; therefore, our  conclusions necessarily represent only informed professional judgment.    The ability of Smart Sand, or any mine operator, to recover all of the estimated frac sand  reserves presented in this report is dependent on numerous factors that are beyond the  control of, and cannot be anticipated by, BOYD. These factors include mining and  geologic conditions, the capabilities of management and employees, the securing of  required approvals and permits in a timely manner, future sand prices, etc. Unforeseen  changes in regulations could also impact performance. Opinions presented in this report  apply to the site conditions and features as they existed at the time of BOYD’s  investigations and those reasonably foreseeable.    This report is intended for use by Smart Sand subject to the terms and conditions of its  engagement agreement with BOYD. The agreement permits Smart Sand to file this  report as a technical report summary with the SEC pursuant to Subpart 1300 and Item  601(b)(96) of Regulation S-K. Except for the purposes legislated under US securities  law, any other uses of or reliance on this report by any third party is at that party’s sole  risk. The responsibility for this disclosure remains with Smart Sand. The user of this  document should ensure that this is the most recent disclosure of frac sand resources  and reserves for the Utica Mine as it is no longer valid if more recent estimates have  been issued.      2.3 Expert Qualifications  BOYD is an independent consulting firm specializing in mining-related engineering and  financial consulting services. Since 1943, BOYD has completed over 4,000 projects in  the United States and more than 90 other countries. Our full-time staff comprises mining  experts in: civil, environmental, geotechnical, and mining engineering; geology; mineral  economics; and market analysis. Our extensive experience in frac sand  resources/reserve estimation and our knowledge of the subject property, provides BOYD  an informed basis on which to opine on the frac sand reserves available at the Utica  Mine. An overview of BOYD can be found on our website at www.jtboyd.com.    The individuals primarily responsible for this audit and the preparation of this report are  by virtue of their education, experience, and professional association considered  qualified persons as defined in Subpart 1300 of Regulation S-K.  





 






  2-3       JOHN  T. BOYD  COMPANY  Neither BOYD nor its staff employed in the preparation of this report have any beneficial  interest in Smart Sand, and are not insiders, associates, or affiliates of Smart Sand. The  results of our resource/reserve estimate and subsequent audit were not dependent upon  any prior agreements concerning the conclusions to be reached, nor were there any  undisclosed understandings concerning any future business dealings between Smart  Sand and BOYD. This report was prepared in return for fees based upon agreed  commercial rates, and the payment for our services was not contingent upon our  opinions regarding the project or approval of our work by Smart Sand and its  representatives.      2.4 Principal Sources of Information   Information used in this assignment was obtained from: (1) Smart Sand files,  (2) discussions with Smart Sand personnel, (3) records on file with regulatory agencies,  (4) public sources, and (5) nonconfidential BOYD files. The basis for this report is BOYD  Report 3555.019 issued in February 2021. This resource and reserve estimate compiled  by BOYD was used in conjunction with plant production records to adjust the resources  and reserves to year end 2021.    Additional information was provided by Smart Sand including:    • Financial forecasting models.  • Historical information, including:  - Production reports and reconciliation statements.  - Financial statements.  - Product sales and pricing.    The data and work papers used in the preparation of this report are on file in our offices.     2.4.1 Site Visits  A personal inspection of the Utica operation was made by two of BOYD’s senior geology  and mining staff—both qualified persons and co-authors of this report—on October 27,  2021. The site visit included: (1) observation of the active mining operations, (2) a tour of  the mine site’s surface infrastructure, and (3) a detailed discussion of the mine plan.  BOYD’s representatives were accompanied by Smart Sand management who openly  and cooperatively answered questions regarding, but not limited to: site geology, mining  conditions and operations, equipment usage, labor relations, operating and capital costs,  current and proposed processing operations, and frac sand marketing.        





 






  2-4       JOHN  T. BOYD  COMPANY  2.4.2 Reliance on Information Provided by the Registrant  In the preparation of this report we have relied, without independent verification, upon  information furnished by Smart Sand with respect to: property interests; exploration  results; current and historical production from such properties; current and historical  costs of operation and production; and agreements relating to current and future  operations and sale of production.     BOYD exercised due care in reviewing the information provided by Smart Sand within  the scope of our expertise and experience (which is in technical and financial mining  issues) and concluded the data are valid and appropriate considering the status of the  subject property and the purpose for which this report was prepared. BOYD is not  qualified to provide findings of a legal or accounting nature. We have no reason to  believe that any material facts have been withheld, or that further analysis may reveal  additional material information. However, the accuracy of the results and conclusions of  this report are reliant on the accuracy of the information provided by Smart Sand.     While we are not responsible for any material omissions in the information provided for  use in this report, we do not disclaim responsibility for the disclosure of information  contained herein which is within the realm of our expertise.      2.5 Effective Date   The frac sand reserves presented in this technical report summary are effective as of  December 31, 2021. The report effective date is December 31, 2021.       2.6 Units of Measure   The US customary measurement system has been used throughout this report. Tons are  dry short tons of 2,000 pounds-mass. Unless otherwise stated, all currency is expressed  in constant 2020 US Dollars ($).     q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-2 - introduction.docx  





 






  3-1       JOHN  T.  BOYD  COMPANY  3.0 PROPERTY  OVERVIEW      3.1 Description and Location  Smart Sand’s Utica surface frac sand mining operation is located on a contiguous block  of acres controlled by Smart Sand, in LaSalle County, Illinois, and is approximately  6 miles west of the city of Ottawa. Utica’s off-site rail loadout is in Peru, Illinois  approximately 7 miles west of the mining operation.    Geographically, the Utica frac sand processing plant is located at approximately  41°20'51.18"N latitude and 88°57'25.85"W longitude. Figure 3.1 illustrates the location  and general layout of the Utica Property and Mine.      3.2 History  Smart Sand purchased the Utica frac sand operation from Eagle Materials in September  2020. The acquisition included the purchase of the mineral reserves and associated  mining and processing facilities. Eagle Materials originally purchased the Utica  greenfield property in 2012 and 2013, with mining and wet processing operations  commencing in 2014.    The Utica operation has mined premium NWS for use in the oil/gas industry. NWS has  been extensively mined, via surface mining operations, in the north central area of the  United States (predominantly mined in Minnesota, Wisconsin, and Illinois, with lesser  amounts mined in Arkansas and Iowa). The primary sources of NWS are from the Saint  Peter, Jordan, Wonewoc, and Mt. Simon formations, which are found in an area ranging  from south central Minnesota into Wisconsin.    Utica’s Mine Safety and Health Administration (MSHA) identification number (1103253)  was assigned in 2012.       3.3 Property Control  The Utica Property comprises approximately 819 acres owned in fee by Smart Sand.  Ownership information provided by Smart Sand has been accepted as being true and  accurate for the purpose of this report.       





 






 





 






  3-3       JOHN  T.  BOYD  COMPANY  3.3.1 Mineral Ownership  Smart Sand owns 100% of the mineral rights to the entire subject property. The current  estimated area suitable for resource extraction is approximately 642 acres, or 78% of the  total mining property, after observing setbacks, right of ways, processing areas, and  other non-mining acreage.     3.3.2 Surface Ownership  Smart Sand owns 100% of the surface rights to the entire subject property.      3.4 Adjacent Properties  Most of the Illinois frac sand mining activity occurs in LaSalle County, with another  operation in nearby Ogle County.  Smart Sand’s Utica operation is in LaSalle County.  The mining activity in these two counties is in the St. Peter Formation and is for the  purpose of producing frac sand. All existing frac sand mining operations in LaSalle  County are located either northeast/east or northwest/west of the Utica Mine.      3.5 Regulation and Liabilities  Mining and related activities for the Utica operation are regulated by two Federal  agencies, three State of Illinois agencies, and two Local agencies.      3.6 Accessibility, Local Resources, and Infrastructure  Smart Sand’s Utica Mine is located near a number of small cities in north-central Illinois.  Ottawa has a population of about 18,000, while LaSalle County has over 108,000, based  on 2019 population estimates. There are nine counties adjacent to LaSalle County,  specifically, Lee, DeKalb, Kendall, Grundy, Livingston, Woodford, Marshall, Putnam and  Bureau counties.      General access to the Utica Mine is via a well-developed network of primary and  secondary roads serviced by state and local governments. These roads offer direct  access to the mine and processing facilities and are open year-round. Primary vehicular  access to the property is via US Highway 6, with nearby access to Interstate 80 and  Interstate 39.    The Utica operation has an off-site rail loadout facility in nearby Peru, Illinois,  approximately 7 miles from the site, with access to the BNSF rail network. Utica’s frac  





 






  3-4       JOHN  T.  BOYD  COMPANY  sand product is railed to the various energy basins via the BNSF or other connecting rail  carriers.    The Utica operation has access to major airports as there are:    • Five International airports within a 90-mile radius of the site.  • One Regional airport within an 80-mile radius of the site.  • One Local airport in Peru, Illinois.    Sources of three phase electrical power, natural gas, and other miscellaneous materials  are readily available. Water supplied to the operation is via various sources such as,  on-site wells, on-site ponds, and public water.      3.7 Physiography  The Utica Property in LaSalle County is in the Bloomington Ridged Plain of the Central  Lowland Province, and within the Fox Valley and Illinois River Valley regions in north  Illinois.  As stated in the Soil Survey of LaSalle County, Illinois, a USDA-NRCS  publication1, “The Bloomington Ridged Plain consists mainly of till of Wisconsinan age. It  is characterized by low, broad morainic ridges with intervening wide stretches of  relatively flat or gently undulating ground moraines2. The moraines form a series of  curves roughly concentric with the outer boundary of the county.”    “Most of La Salle County is drained by the Illinois River and its tributaries, the Fox,  Vermilion, and Little Vermilion Rivers. The Illinois River flows into the Mississippi River,   which empties into the Gulf of Mexico.”3  The Illinois River is about 2.5 miles south of the  mining property. Starved Rock State Park is about 3 miles southwest of the mining  property along the southern bank of the Illinois River.    The surface of the Utica Property is overlain by overburden that ranges in thickness from  57 ft to 77 ft, with an average thickness of approximately 66 ft.  The overburden material  consists of clay, sandy gravel, peat, and limestone cap rock. Beneath the overburden  material is the St. Peter sandstone formation, one of the primary sources of NWS. Care    1 Soil Survey of LaSalle County, Illinois, USDA-NRCS, pages 3 to 4.  2 Soil Survey of LaSalle County, Illinois, USDA-NRCS, pages 416: Moraine: In terms of  glacial geology, a mound, ridge, or other topographically distinct accumulation of unsorted,  unstratified drift, predominantly till, deposited primarily by the direct action of glacial ice in a  variety of landforms. Also, a general term for a landform composed mainly of till (except for kame  moraines, which are composed mainly of stratified outwash) that has been deposited by a glacier.  Some types of moraines are disintegration, end, ground, kame, lateral, recessional, and terminal.  3 Soil Survey of LaSalle County, Illinois, USDA-NRCS, page 4.  





 






  3-5       JOHN  T.  BOYD  COMPANY  must be taken in defining the presence of erosion channels, which can replace the  critical upper portion of the St. Peter sandstone formation locally.       3.8 Climate  For the Utica operation, average monthly high temperatures range from 31oF to 85oF,  with June, July, and August being the hottest months. Average monthly low  temperatures range from 14oF to 64oF, with the months of November, December,  January, February, and March exhibiting average lows at or below freezing (32oF).     Average annual rainfall is 36 in. with approximately 82 days of rain.  Average annual  snowfall is about 25 in. with approximately 13 days of snowfall.     Table 3.1 provides National Oceanic and Atmospheric Administration (NOAA) monthly  average climate data for LaSalle County, Illinois.    Climate Data for Utica Mine LaSalle County (City of Ottawa), Illinois Averages Units Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec High Temp oF 31 36 49 63 74 82 85 84 78 66 50 36 Low Temp oF 14 19 29 40 51 60 64 63 55 43 32 21 Rainfall inches 1.6 1.5 2.6 3.4 4.2 4.3 3.6 4.0 3.3 2.8 2.7 2.1 days 6 5 7 9 9 8 7 7 6 6 6 6 Snowfall inches 8.4 6.0 3.1 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.8 5.9 days 5 3 1 0 0 0 0 0 0 0 0 3 Source:  National Oceanic and Atmospheric Administration Table 3.1:  Climate Data for Utica Mine – LaSalle County, Wisconsin     q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-3 - property description.docx  





 






  4-1       JOHN  T.  BOYD  COMPANY  4.0 GEOLOGY      4.1 Regional Geology  NWS are generally located in the north-central portion of the United States  (predominantly in Minnesota, Wisconsin, and Illinois, with lesser amounts in Arkansas  and Iowa). NWS is found in poorly cemented Cambrian and Ordovician sandstones and  in unconsolidated alluvial deposits locally derived from these sandstones. The Saint  Peter, Jordan, Wonewoc, and Mount Simon Formations, located in south-central  Minnesota into Wisconsin, are the primary sources of NWS. Figure 4.1, on the following  page, presents the various stratigraphic rock units in Wisconsin, which are similar to the  rock units encountered in Illinois.    The Utica Property’s target silica bearing formation is the St. Peter Sandstone, which is  a massive formation in areal extent and thickness. Areally, it extends from Minnesota to  Arkansas and from Illinois into Nebraska and South Dakota. On a regional basis, the St.  Peter ranges in thickness from a few feet to over 700 ft, with a general thickness of  100 ft to 200 ft. In northern Illinois, the thickness can be over 300 ft thick.    Sand comprising the St. Peter Formation was originally deposited in clear shallow water  near the shore of a Paleozoic Sea. The St. Peter sandstone can be generally described  as well sorted, well rounded, fine to medium size frosted grains of exceptionally pure  quartz sands free from clay, carbonates, and heavy minerals that are friable or weakly  cemented. As such, the sand is valued in the marketplace for its high silica content and  is extensively quarried for silica sand. The St. Peter sandstone is one of the major  aquifers in Illinois.     On a regional basis the properties of the formation exhibit grain size that is generally  uniform and normally grades from medium to medium-coarse in the upper section, to  medium to fine-grained in the lower section. As a rule, the lower portion of the formation  is fine-grained with iron, alumina, and carbonate contamination increasing with depth.      The St. Peter Formation is of Ordovician age (early middle). It is the lower formation of  the Anceli Group and overlies the Shakopee Dolomite.       4.2 Local Stratigraphy  The surface of the Utica property is overlain by overburden that ranges in thickness from  57 ft to 77 ft, with an average thickness of approximately 66 ft. The overburden   





 






 





 






  4-3       JOHN  T.  BOYD  COMPANY  material consists of clay, sandy gravel, peat, and limestone cap rock. Beneath the  overburden material is the St. Peter sandstone formation.    The St. Peter deposit on the Utica Property is flat lying with no evidence of faulting, and  has been eroded to an average thickness of approximately 100 ft. The formation is a  white to buff, with fine to medium grained ortho-quartzite. It contains rounded, clear  polished sand quartz grains with minor secondary silica and clay cement. Care must be  taken in defining the presence of erosion channels, which can replace the critical upper  portion of the St. Peter sandstone formation locally.     Grain size distribution drives the mine planning. Iron tends to be concentrated near the  surface and is visible in orange staining. Iron also increases at the bottom sandstone  contact, occurring mostly as pyrite. The deposit is coarser in its top half. Where the  upper part of the formation is eroded, multiple mining faces must operate to ensure  adequate sand is available to meet product specifications.      4.3 Frac Sand Geology  Frac sand is a naturally occurring, high silica content quartz sand, with grains that are  generally well-rounded. The main difference between frac sand and other sands is that  frac sand grains are relatively pure in composition, consisting almost entirely of quartz;  other sands have numerous impurities that may be cemented to the quartz grains. The  pure quartz composition of frac sand grains, along with being well-rounded and spherical  in shape, gives these sands the characteristics (crush strength, high acid solubility, low  turbidity) that are branded as premium sands by the drilling service industry.    The NWS-St. Peter sands are generally characterized by a high silica content, high  roundness and sphericity, white color, and lack of deleterious material. Because of their  monocrystalline structure, these sands have superior grain strength when compared to  other silica sands and are suitable for pressure applications generally up to the  9,000-pounds per square inch (psi) range.    NWS is not classified as an in-basin frac sand. In-basin frac sands, such as those found  in west Texas, are a relatively new extension of the frac sand mining industry. The first  in-basin frac sand deposits mined (late-2017) in the United States were in the Permian  Basin of Texas. Permian basin oil and gas exploration and production companies noted  favorable results from locally sourced sands, and as such, nearly every other energy  basin has gone through a period of exploration to locate suitable local sources of frac  sands. Many E&Ps shifted their approach from requiring only premium branded frac  





 






  4-4       JOHN  T.  BOYD  COMPANY  sands, such as NWS, to using higher quantities of locally sourced and lower-priced frac  sands, with positive results.    q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-4 - geology.docx        





 






  5-1       JOHN  T.  BOYD  COMPANY  5.0 EXPLORATION  DATA      5.1 Background  As previously mentioned, Smart Sand acquired the Utica Property in September 2020  from Eagle Materials. BOYD, in February 2021, prepared a Resource and Reserve  Estimate for the Utica Proppant Sand Property as of the date of acquisition, which  utilized available exploration information provided to us by Smart Sand.      5.2 Exploration Procedures  5.2.1 Drilling and Sampling  Based on information provided by Smart Sand to BOYD, we note that there were several  exploration drilling programs performed on the Utica Property, the most recent of which  was in 2017. There were 29 holes drilled on the property. However, BOYD utilized the  results of only 14 exploration holes to develop the geologic model of the Utica deposit,  specifically SL-1 to SL-11 (11 holes), DI-5 (1 hole), EG-3 (1 hole), and LD-3 (1 hole), as  they were the only holes with sieve size, overburden and sand thickness data. Also, the  sand core in each hole was tested in 10-ft increments for particle size distribution.    Smart Sand provided BOYD with the results of two sets of sand samples (Year 2011 and  Year 2018) sent to Stim-Lab in Duncan, Oklahoma, for ISO/API analysis. Refer to  Section 5.2.2 for further information.     The lithologic data obtained from the 14 holes, the results of the particle size distribution,  and the results of the Stim-Lab analyses, were compiled into a database for input into  the BOYD geologic model, which was the principal source of information used to define  the extent of the deposit on the property, the overburden volumes, the sand and waste  volumes and tonnages, the corresponding sand product distribution based on particle  size, and quality of the St. Peter sand underlying the Utica Property.     BOYD notes we were not involved with any exploration activities associated with the  information presented above and were not provided information pertaining to the drilling  and sampling methodologies utilized in the various exploration campaigns at the Utica  Property. Other than the 14 exploration hole data provided by Smart Sand, we were not  provided information regarding the equipment utilized, and the sampling, logging, and  field work performed pertaining to the exploration work on the Utica property by the prior  owners of the property. BOYD notes that we cannot opine on whether those  methodologies and procedures used to obtain the exploration data were carefully and  





 






  5-2       JOHN  T.  BOYD  COMPANY  professionally collected, prepared, and documented in conformance with generally  accepted industry standards. We can confirm that the Stim-Lab results were  professionally prepared and documented in conformance with generally accepted  industry standards.     BOYD opines that although limited, the data provided were sufficient for the purposes of  evaluating and estimating frac sand resources and reserves on the Utica Property.    5.2.2 Frac Sand Quality Testing  Stim-Lab performed sieve analyses on two sets of sized-samples pertaining to the Utica  Property. In addition, they performed the API RP 19C/ISO 13503-2 proppant sand  characteristic tests for sphericity and roundness, acid solubility, crush resistance, and  turbidity. These specific sized samples are the following:    • Three sand samples labelled Illinois Cement 20/40, Illinois Cement 40/70, and Illinois  Cement 70/140 submitted by Eagle Materials on August 3, 2011.  • Four sand samples labelled NWS 20/40, NWS 30/50, NWS 40/70, and NWS 100M  submitted by Northern White Sand, LLC on August 3, 2018.    When the samples were received by Stim-Lab, they performed a sieve analysis on each  frac sand product sized sample and tested each product sized sample per API RP  19C/ISO 13503-2 standards.     Results from the various testing performed on the Year 2011 and Year 2018 sized sand  samples pertaining to the Utica Property is presented in Section 5.3.    5.2.3 Other Exploration Methods  No other methods of exploration (such as airborne or ground geophysical surveys) are  reported for the Utica Property.      5.3 Laboratory Testing Results  The relatively uniform nature of the St. Peter sand formation underlying the Utica  Property, combined with the results of independent laboratory testing (Stim-Lab)  indicated that the Utica Property could produce a suite of 20/100-mesh frac sand  products that meet customer specifications for frac sand use.   





 






  5-3       JOHN  T.  BOYD  COMPANY  5.3.1 Grain Size Distribution  Smart Sand provided BOYD the grain size distribution data, from the 14 holes selected.     A table, summarizing the 14 holes average grain size distribution of the in situ sand  deposit, based on sieve results, is shown in Table 5.1.    Approximate In-Place Product Distribution     % Retained By Mesh Size % Product >20 20/40 40/70 70/100 <100 20/40 40/100 1.0        22.2      49.0      12.4      15.4      26.6      73.4       Table 5.1: Average Particle Size Distribution     The preceding table highlights the relative size mix of the sand found within the Utica  Property, indicating approximately 84% of the sand particles are concentrated between  the “passing 20-mesh” and “retained 100-mesh” size fraction. Moreover, of the  20/100-mesh sand faction, approximately 73% of the marketable product consists of the  finer 40/100-mesh sands.     5.3.2 Grain Shape (Sphericity and Roundness)  Grain shape was analyzed according to ISO 13503-2/API RP19C, Section 7. Under this  standard, recommended sphericity and roundness values for proppants are 0.6 or  greater, and 0.7 or greater for high strength proppants. As part of the grain shape  analysis, the presence of grain clusters (weakly cemented grain aggregates) and their  approximate proportion were not observed in the seven sized samples.    5.3.3 Crush Resistance  Crush resistance is a key test that determines the amount of pressure a sand grain can  withstand under laboratory conditions for a two-minute duration. The sample was  analyzed according to ISO 13503-2/API RP19C, Section 11. Under this standard, the  highest stress level (psi) in which the proppant produces no more than 10% crushed fine  material is rounded down to the nearest 1,000 psi and reported as the “K-value” of the  material.    5.3.4 Acid Solubility  Acid solubility was analyzed according to ISO 13503-2/API RP19C, Section 8. Under  this standard, 5 grams of sand is treated with 100 milliliters of 12:3 hydrochloric acid to  hydrofluoric acid at 150oF for 30 minutes. The recommended maximum acid solubility for  proppants in the 6/12 through 30/50-mesh size range is 2.0%, and for proppants in the  40/70-mesh and finer size range is 3.0%.     





 






  5-4       JOHN  T.  BOYD  COMPANY  5.3.5 Turbidity  Turbidity was analyzed according to ISO 13503-2/API RP19C, Section 9. Under this  standard, the suggested maximum frac sand turbidity should be equal to or less than  250 nephelometric turbidity units (NTU).    5.3.6 Quality Summary  The three sized samples, 20/40, 40/70, and 70/140-mesh product sizes, provided to  Stim-Lab in August 2011 were tested for API RP 19C/ISO 13503-2 proppant sand  characteristics. The test results are presented in Table 5.2.    EM Year 2011 - Average API/ISO Test Results By Product Size API RP19C API RP19C Result Recommended Result Result Recommended Test 20/40-mesh Specification 40/70-mesh 70/140-mesh* Specification Sphericity 0.7 ≥ 0.6 0.6 0.6 ≥ 0.6 Roundness 0.7 ≥ 0.6 0.6 0.6 ≥ 0.6 Acid Solubility (%) 0.6 ≤ 2.0 0.9 1.2 ≤ 3.0 Turbidity (NTU) 44 ≤ 250 35 35 ≤ 250 K-Value (000 psi) 6 NA 7 9 NA Clusters None Observed NA None Observed None Observed NA * Note: Currently, 70/140-mesh proppant sand material does not have an API/ISO specification. Table 5.2:  Utica Year 2011 API/ISO Test Results for the Three Sized Samples     The four sized samples, 20/40, 30/50, 40/70, and 100-mesh product sizes, provided to  Stim-Lab in August 2018 were tested by for API RP 19C/ISO 13503-2 proppant sand  characteristics. The test results are presented in Table 5.3.    NWS, LLC Year 2018 Sample - Average API/ISO Test Results By Product Size API RP19C API RP19C Result Result Recommended Result Result Recommended Test 20/40-mesh 30/50-mesh Specification 40/70-mesh 100-mesh* Specification Sphericity 0.8 0.8 ≥ 0.6 0.7 0.7 ≥ 0.6 Roundness 0.7 0.7 ≥ 0.6 0.6 0.6 ≥ 0.6 Acid Solubility (%) 0.3 0.3 ≤ 2.0 0.3 No Test ≤ 3.0 Turbidity (NTU) 9 12 ≤ 250 7 No Test ≤ 250 K-Value (000 psi) 6 7 - 8 No Test - Clusters None Observed None Observed NA None Observed None Observed NA * Note: Currently, 70/140-mesh proppant sand material does not have an API/ISO specification. Table 5.3:  Utica Year 2018 API/ISO Test Results for the Four Sized Samples     The seven sized samples tested suggest that the Utica Mine could produce frac sands  which meet minimum API/ISO recommended testing characteristics. BOYD notes that  the Utica operation has a prior history of selling various frac sand sized products to oil  





 






  5-5       JOHN  T.  BOYD  COMPANY  service companies (Eagle Materials1 preacquisition by Smart Sand) and by Smart Sand  thereafter.      5.4 Data Verification  The December 31, 2021, reserve estimate for the Utica Property is based on historic drill  hole data previously provided to BOYD by Smart Sand in the preparation of our prior  reserve estimate. It is customary in preparing proppant sand resource and reserve  estimates to accept basic drilling and quality testing data as provided by the client,  subject to the reported results being judged representative and reasonable. As we have  judged the drilling and quality data representative and reasonable, we opine that they  are still representative and reasonable for use in the December 31, 2021, resource and  reserve estimate.     q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-5 - exploration.docx    1 2020EM 2020 Annual Report and Form 10-K March 31, 2020, page 19.  





 






  6-1     JOHN  T.  BOYD  COMPANY  6.0 FRAC  SAND  RESOURCES  AND  RESERVES      6.1 Applicable Standards and Definitions  Unless otherwise stated, frac sand resource and frac sand reserve estimates disclosed  herein are completed in accordance with the standards and definitions provided by S-K  1300. It should be noted that BOYD considers the terms “mineral” and “frac sand” to be  generally interchangeable within the relevant sections of S-K 1300.    Estimates of any mineral resources and reserves are always subject to a degree of  uncertainty. The level of confidence that can be applied to a particular estimate is a  function of, among other things: the amount, quality, and completeness of exploration  data; the geological complexity of the deposit; and economic, legal, social, and  environmental factors associated with mining the resource/reserve. By assignment,  BOYD used the definitions provided in S-K 1300 to describe the degree of uncertainty  associated with the estimates reported herein.     The definition of mineral (frac sand) resource provided by S-K 1300 is:    Mineral resource is a concentration or occurrence of material of economic  interest in or on the Earth's crust in such form, grade or quality, and quantity that  there are reasonable prospects for economic extraction. A mineral resource is a  reasonable estimate of mineralization, taking into account relevant factors such  as cut-off grade, likely mining dimensions, location or continuity, that, with the  assumed and justifiable technical and economic conditions, is likely to, in whole  or in part, become economically extractable. It is not merely an inventory of all  mineralization drilled or sampled.    Estimates of frac sand resources are subdivided to reflect different levels of geological  confidence into measured (highest geologic assurance), indicated, and inferred (lowest  geologic assurance)    The definition of mineral (frac sand) reserve provided by S-K 1300 is:    Mineral reserve is an estimate of tonnage and grade or quality of indicated and  measured mineral resources that, in the opinion of the qualified person, can be  the basis of an economically viable project. More specifically, it is the  economically mineable part of a measured or indicated mineral resource, which  includes diluting materials and allowances for losses that may occur when the  material is mined or extracted.    





 






  6-2     JOHN  T.  BOYD  COMPANY  Estimates of frac sand reserves are subdivided to reflect geologic confidence, and  potential uncertainties in the modifying factors, into proven (highest assurance) and  probable.    Figure 6.1 shows the relationship between frac sand resources and frac sand reserves.      Figure 6.1: Relationship Between Frac Sand Resources and Frac Sand Reserves    In this report, the term “frac sand reserves” represent the tonnage of frac sand products  that meets customer specifications and will be available for sale after processing of the   ROM sand.      6.2 Frac Sand Resources  6.2.1 Methodology   BOYD had previously estimated the in-place frac sand resources on the property as of  the date of acquisition by Smart Sand in September 2020. Incorporating our prior work,  which is discussed below, BOYD independently prepared estimates of in-place frac sand  resources for the Utica Property, as of December 31, 2021, by performing the following  tasks:    1. Available product size distribution data and laboratory testing results, provided by  Smart Sand, were compiled into a database for use in modeling the quality and  quantity of the mineable sand underlying the Utica Property. The geologic database  





 






  6-3     JOHN  T.  BOYD  COMPANY  utilized 14 of 29 holes, those with complete information including, sieve size,  overburden, and sand thickness data. The geologic data was imported into Carlson  Software, a geologic modeling and mine planning software suite that is widely used  and accepted by the mining industry.   2. A geologic model of the deposit was created in Carlson Software using  industry-standard grid modeling methods well-suited for simple stratigraphic  deposits, and for estimating overburden and sand volumes and associated product  distribution. The geologic model delineates the top and bottom of the mineable sand  horizon and the distribution of the product size fractions across the deposit. The top  and bottom of the mineable frac sand interval were established as follows:  a. Aerial mapping as of July 20, 2020, in conjunction with drilling data, was used as  the basis for estimating overburden and sand volumes and associated product  distribution in the Carlson geologic modeling program. It was reported to BOYD  that no mining was undertaken on the property between July 20, 2020, the date  of aerial photography, and September 18, 2020, the date of the acquisition.  Accordingly, no adjustments were made for depletion for this period.   b. As there is overburden material across the property, which ranges in thickness  from 57 ft to 77 ft, the top of the mineable sand interval was defined as the base  of the overburden material above the St. Peter sandstone unit.   c. The bottom of the mineable sand interval was based primarily on a target  mineable thickness of 90 ft. However, drill holes that exhibited higher  concentrations of fine materials near their bottoms also defined what depths  mining may be terminated.  3. After reviewing the continuity and variability of the deposit, suitable resources  classification criteria were developed and applied as per the discussion in Section  6.2.2.  4. BOYD defined the mineable resources within the property as the area defined by  management which included a mine plan. A viewshed was incorporated, which  involved leaving an earthen berm constructed mainly of overburden and topsoil  around the property in order to maintain a shielded view of the future mine from local  roadways. Areas on the property that were excluded from being considered mineable  were those that had fines and stormwater ponds, or processing facilities constructed,  as well as areas directly underlying property boundary viewshed areas. Estimation of  the in-place resources assumes mining operations using standard surface  excavation equipment, which is widely utilized for mining of similar deposit types. As  such, the estimates were subject to the following setbacks and slope requirements:  a. 100 ft offset inside of the entire property boundary line.  b. A final pit highwall slope of 80 degrees was applied from the top of the pit to the  bottom of the mineable sandstone interval.  c. The final pit floor was estimated to be at an elevation of between approximately  440 ft mean sea level (msl) and 460 ft msl.  





 






  6-4     JOHN  T.  BOYD  COMPANY  5. In-place volumes for each of the proposed mining blocks were calculated from the  geologic model within Carlson Software. An in-place sandstone dry density of  127 pounds per cubic foot was used to convert the in-place sand volumes to short  tons.  6. BOYD utilized provided production data, from the date of acquisition in September  2020 by Smart Sand, to reconcile the estimate from date of volumetric estimate to  December 31, 2021.    6.2.2 Classification  Geologic assuredness is established by the availability of both structural (thickness and  elevation) and quality (size fraction) information for the deposit. Resource classification  is generally based on the concentration or spacing of exploration data which can be  used to demonstrate the geologic continuity of the deposit. When material variations in  thickness, depth, and/or sand quality occur between drill holes, the allowable spacing  distance between drill holes is reduced. The following drill hole spacing criteria were   established by the Qualified Person after review of the available exploration data and  geologic models and used to classify the frac sand resources of the Utica Property:    Resource Spacing Requirement (ft) Classification (Nominal Maximum) Measured 1,500  (750 ft radius) Indicated 3,000  (1,500 ft radius) Table 6.1: Utica Property Drill Hole Spacing Parameters     The Qualified Person has determined that nearly all of the estimated frac sand resources  within the Utica Property are classified as either Measured or Indicated.     BOYD is of the opinion that there is a low degree of uncertainty associated with each of  the resource classifications.    6.2.3 Frac Sand Resource Estimate  There are no reportable frac sand resources excluding those converted to frac sand  reserves for the Utica Mine. Quantities of frac sand controlled by Smart Sand within the  defined boundaries of the Utica Property which are not reported as frac sand reserves  are not considered to have potential economic viability; as such, they are not reportable  as frac sand resources.    As a note, BOYD did not include the sand material located below the depths of the  planned pit floor (between approximately 440 ft and 460 ft msl) in the resource estimate.  There is the potential for some areas of this formation to be mineable to greater depths  than used to define resources herein. The lower lying sandstone could potentially be  





 






  6-5     JOHN  T.  BOYD  COMPANY  evaluated for resource and reserve consideration in the future, provided additional  exploration was conducted and subsequent mine planning was completed to determine  the ability to extract the lower lying sand material safely and economically.    6.2.4 Validation  BOYD independently estimated in-place frac sand resources for the Utica Mine based  on the provided drilling, sampling, and testing data obtained from Smart Sand. Utilizing  industry-standard grid modeling techniques we have estimated volumes of frac sand  indicated by such data. Based on our review of the information provided by Smart Sand,  we are of the opinion that the data provided are reasonable and appropriate.  Furthermore, it is our opinion that the estimation methods employed are both appropriate  and reasonable for the deposit type and proposed extraction methods.      6.3 Frac Sand Reserves  6.3.1 Methodology   Estimates of frac sand reserves for the Utica Mine were derived contemporaneously with  estimates of frac sand resources. To derive an estimate of saleable product tons (proven  and probable frac sand reserves), the following modifying factors were applied to the  in-place measured and indicated frac sand resources underlying the respective mine  plan areas:    • A 95% mining recovery factor, which assumes that 5% of the mineable (in-place) frac  sand resource will not be recovered for various reasons. Applying this recovery  factor to the in-place resource results in the estimated ROM sand tonnage that will  be delivered to the wet process plant.  • An overall 81% processing recovery. This recovery factor accounts for losses in the  wet and dry plants. This recovery factor accounts for removal of out-sized (i.e., larger  than 20-mesh and smaller than 100-mesh) sand and losses in the wet and dry  processing plants due to minor inefficiencies.    The overall product yield (after mining and processing losses) for the Utica Mine is  estimated at 77%. That is, for every 100 tons of in-place frac sand resources mined,  approximately 77 tons will be recovered and sold as product.    At the request of Smart Sand, BOYD utilized actual/estimated production data, provided  by Smart Sand, from the date of acquisition in September 2020 through December 31,  2021, to reconcile the estimate from the date of volumetric estimate to December 31,  2021.    





 






  6-6     JOHN  T.  BOYD  COMPANY  As previously noted, there are no reportable frac sand resource tons. However, Table  6.2 provides insight into the frac sand in-place resources tons that would be eventually  mined and converted into frac sand product tons for the Utica Mine. The frac sand  product tons are equivalent to the total reserve tons as of December 31, 2021, for the  Utica Mine.    Utica Property In-Place, ROM and Product Tons Tons (000) In-Place (a) ROM (b) Product (c) Measured 124,087             117,883             96,464                Indicated 42,379               40,260               32,347                Total 166,466             158,143             128,811              a: In-place tons calculated using an in situ dry density of 127 pcf. b: Run-of-Mine tons calculated using a 94.8% mining recovery. c: Product tons calculated using 77% processing recoveries. Table 6.2: Mineable and Reserve Tons as of December 31, 2021     6.3.2 Classification  Proven and probable frac sand reserves are derived from measured and indicated frac  sand resources, respectively, in accordance with S-K 1300. BOYD is satisfied that the  frac sand reserve classification reflects the outcome of technical and economic studies.  Figure 6.2 illustrates the reserve classification of the Utica Property frac sand deposit.    6.3.3 Frac Sand Reserve Estimate  Smart Sand’s estimated surface mineable frac sand reserves for the Utica Property total  128.8 million saleable product tons, as of December 31, 2021.    The following table presents the estimated Reserve tons by product (size) owned in fee,  which are anticipated to be produced at Smart Sand’s Utica Property.    Estimated Reserve Tons By Classification as of December 31, 2021           Tons (000) 20/40-Mesh 40/70-Mesh 70/100-Mesh Total Proven 28,443            55,384            12,637            96,464             Probable 8,781             18,984            4,582             32,347             Total 37,224            74,368            17,219            128,811           Table 6.3: Reserves as of December 31, 2021     Of the total frac sand reserves for the Utica Mine as of December 31, 2021, it is our  conclusion that approximately 75% of the stated reserves can be classified on the  proven reliability category (the highest level of assurance) with the reminder classified as  probable.   





 






 





 






  6-8     JOHN  T.  BOYD  COMPANY  The estimated product distribution of the frac sand reserves is based on available  laboratory gradation test data provided by Smart Sand. Grain size distribution and  overall yields may vary based on the depth and location at which mining occurs.     The Utica Property, and other frac sand operations in the area, have a well-established  history of mining and selling frac sand products into the various energy basin fields.  BOYD has assessed that sufficient studies have been undertaken to enable the frac  sand resources to be converted to frac sand reserves based on current and proposed  operating methods and practices. Changes in the factors and assumptions employed in  these studies may materially affect the frac sand reserve estimate.    The extent to which the frac sand reserves may be affected by any known geological,  operational, environmental, permitting, legal, title, variation, socio-economic, marketing,  political, or other relevant issues has been reviewed as warranted. It is the opinion of  BOYD that Smart Sand has appropriately mitigated, or has the operational acumen to  mitigate, the risks associated with these factors. BOYD is not aware of any additional  risks that could materially affect the development of the frac sand reserves.    Based on our independent estimate and operations review, we have a high degree of  confidence that the estimates shown in this report accurately represent the available frac  sand reserves controlled by Smart Sand, as of December 31, 2021.    q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-6 - mineral resources and reserves.docx  





 






  7-1       JOHN  T.  BOYD  COMPANY  7.0 MINING  OPERATIONS      7.1 Mining Method  The Utica Mine produces approximately 800,000 to 1 million tons of finished product per  year. The quarry exploits the St. Peter sandstone formation which is extensively mined  in the Ottawa-Utica, Illinois area. To produce 800,000 tons of frac sand product,  approximately 1 million tons of ROM sand is uncovered, drilled, blasted, and then hauled  to the slurry plant. Conventional excavators, front-end loaders, articulated haul trucks  and dozers are used to strip the overburden and recover the sand. Initially, 50 ft to 75 ft  of overburden is removed prior to exposing the approximately 90 ft thick sand formation.  The majority of the overburden is excavatable with the exception of thin caprock above  the sand which requires drill and blast. Approximately 60,000 tons per month of  overburden is stripped, mainly on the day shift, and hauled and dumped into the  mined-out area of the pit. Approximately one 90-ft high bench of sandstone is blasted  per month. The drilling and blasting is contracted to a third party. A continuous 90 ft shot  (no decking) on a 20 ft x 20 ft pattern is generally utilized. The night shift predominantly  loads and hauls the sand to the dump hopper. Approximately 6,000 to 9,000 tons of  ROM sand is generally hauled per 10-hour shift.           





 






  7-2       JOHN  T.  BOYD  COMPANY  Figure 7.1 below illustrates the stripping bench and the sand bench from the rim of the  pit. The operation has numerous dewatering pumps to maintain the working pit. The  mine plan in Section 7.3.3 illustrates the yearly advancement of the pit.     Figure 7.1: Utica Quarry Pit looking North      7.2  Mine Schedule, Equipment, and Staffing  Currently the mine pit operates two, 10-hour shifts, four days per week resulting in a  40-hour work week per shift. A 10-hour Friday shift is added if needed. Generally, there  are seven employees on the day shift and five employees on the night shift.    Stripping is generally completed during the day shift and sand is hauled to the wet plant  at night. Day shift primary equipment consists of:    • Four 40T articulated haul trucks.  • Three Various size front-end loaders.  • One Deere 870 excavator.  • One Grade  • One Dozer.    





 






  7-3       JOHN  T.  BOYD  COMPANY  In addition, there are numerous support vehicles (maintenance trucks, skid steers, water  truck, etc.) to complement the fleet.    The mine, plants and loadout operate year around. The entire complex employs  approximately 54 employees.      7.3 Mine Production  7.3.1 Historical Mine Production  Utica predominantly produces 20/40-mesh, 30/50-mesh, 40/70-mesh and 70/140-mesh  (100-mesh) frac sand products for sale to destinations served by predominantly the  Burlington Northern Railway. The majority of the finished product is railed to the final  destination after trucked and loaded onto rail at their nearby Peru, Illinois loadout facility.     The sand is mined, processed, stored, and shipped from one contiguous property.  Production from the operation commenced in mid-2012. Recent historic ROM production  is as follows:  Table 7.1: Historic ROM Production  Year  Finished Tons (000)      2019  n/a  2020*  722        2021  1,136 est  * Acquired partial year    7.3.2 Forecasted Production  Forecasted ROM sand production is estimated as follows:    Table 7.2: Forecasted ROM Production Tons     Year  2022   Year  2023   Year  2024   Year  2025   Year  2026   ROM Production tons  (000)     982    982    982    982    982    The average process yield is reported to be 81.5%; as such, 982,000 ROM tons are  expected to produce approximately 800,000 tons of finished product.        





 






  7-4       JOHN  T.  BOYD  COMPANY  7.3.3  Expected Mine Life  As of December 31, 2021, reserves for the Utica Mine are estimated at 129 million  saleable tons. Projecting an average yearly sales volume of 800,000 tons per year, the  operation has a LOM of approximately 161 years.       Figure 7.2: Utica Proposed Mine Plan    The illustration above depicts the proposed LOM plan for the Utica Mine. The LOM plan  assumes a steady-state sales volume in the 800,000 product tons per year range for  approximately 150 years through year 2172. Future mine plan production, and hence the  longevity of the mine, is directly related to energy market demand for proppant sand.  Actual yearly production volumes may, and are likely to, fluctuate significantly based on  this demand.     7.3.4 Mining Risk  Surface mines face two primary types of operational risks. The first category of risk  includes those daily variations in physical mining conditions, mechanical failures, and      





 






  7-5       JOHN  T.  BOYD  COMPANY  operational activities that can temporarily disrupt production activities. Several examples  are as follows:    • Water accumulations/soft floor conditions.  • Process water shortages.  • Power curtailments.  • Variations in grain size consistency.  • Encountering excessive clay and other waste material.  • Failures or breakdowns of operating equipment and supporting infrastructure.  • Weather disruptions (power outages, dust storms, excessive heat etc.).    The above conditions/circumstances can adversely affect production on any given day,  but are not regarded as “risk issues” relative to the long-term operation of a mining  entity. Instead, these are considered “nuisance items” that, while undesirable, are  encountered on a periodic basis at many mining operations. BOYD does not regard the  issues listed above as being material to the Utica Mine operations or otherwise  compromising its forecasted performance.     The second type of risk is categorized as “event risk.” Items in this category are rare but  include significant occurrences that are confined to an individual mine, and ultimately  have a pronounced impact on production activities and corresponding financial  outcomes. Examples of event risks are major fires or explosions, floods, or unforeseen  geological anomalies that disrupt extensive areas of proposed or operating mine  workings and require alterations of mining plans. Such an event can result in the  cessation of production activities for an undefined but extended period (measured in  months, and perhaps years) and/or result in the sterilization of frac sand reserves. This  type of risk is minimal in a relatively simple surface sand mining operation.       q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-7 - mining operations.docx  





 






  8-1       JOHN  T.  BOYD  COMPANY  8.0 PROCESSING  OPERATIONS    8.1 Overview   The Utica plant area commenced wash plant operations in 2014. Initially, the work in  process sand was railed to a dry process plant in Corpus Christi, Texas. In 2018, a  1.6 million tons per year dry process plant was constructed on site and is currently  utilized. The ROM sand material is hauled to an in-pit feed hopper where it is slurried  and pumped to an enclosed wet process plant.    8.1.1 Wet Plant   Figure 8.1 below shows the enclosed wet plant where the material between 20-mesh  and 140-mesh is classified and pumped onward to the dry process plant at the northeast  end of the property. The waste < 140-mesh sand and oversize is hauled back into a  mined out area of the pit. The wet plant employs typical screen/hydrosizer /cyclone  classification and dewatering technology and also has an ultrafine circuit and thickener.  The wet plant operates two, 10-hour shifts, four days per week. This schedule fluctuates  based on product demand. The nominal capacity of the plant is approximately 450 tph of  ROM sand.       Figure 8.1: Utica Wet Processing Plant  





 






  8-2       JOHN  T.  BOYD  COMPANY  8.1.2 Decant/Dry Plant   The slurried WIP (20/140-mesh) material is pumped to an enclosed decant shed for  dewatering prior to entering the dryer. A drag chain arrangement reclaims dryer sand  from the top of the decant pile and conveys the sand to a 250 tph natural gas fired dryer.   Dry sand is then screened into predominantly 20/40-mesh, 30/50-mesh,40/70-mesh, and  70/140-mesh (100-mesh) finished products. The finished products are stored in four  2,000-ton truck loadout silos. All product leaves the plant via truck. Several industrial  customers truck the sand directly to their plants. The majority of the product is trucked to  a nearby Peru, Illinois rail loadout servicing the Burlington Northern Railway. The dry  plant operates 20 hours per day, four to five days per week. Approximately 54 people  work at the Utica Facility.    Figure 8.2: Decant Shed and Dry Processing Plant      8.2 Conclusion  Based on our review of the Utica Mine, it is BOYD’s opinion that the processing methods  and existing equipment at the plant will be sufficient for the planned production of frac  sand.  q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-8 - processing operations.docx  





 






  9-1       JOHN  T.  BOYD  COMPANY  9.0 MINE  INFRASTRUCTURE      The Utica Mine is serviced by three phase power that is routed along US highway 6,  which runs north of the northern property line. The pipeline providing natural gas supply  for the drying equipment is also routed along this corridor. Plant process water is  supplied by water collected in the pit and ponds. Additionally, the wash process water is  recycled after fines are removed via settling with a flocculent in a thickener and series of  constructed ponds. As the mine progresses, silt ponds are constructed in mined-out  areas. Wastewater from offices and other buildings are collected via a municipal sewer  line. Potable water is provided by public water supply.     On-site facilities include a scale house, office, shop, and a quality laboratory located in  the dry process plant. The operation employs approximately 54 people and staffing  varies based on production demand.     The surface facilities currently located at the mine are well constructed and have the  necessary capacity/capabilities to support the Utica Mine’s near-term operating plans.  Operational preference may lead to the upgrading of some existing facilities if the  operation expands in the future.     q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-9 - infrastructure.docx  





 






10-1    JOHN  T.  BOYD  COMPANY  10.0 MARKET  ANALYSIS    The frac sand market is driven by unconventional horizontal drilling in the oil and gas  industry. In the late 1990s, rapid advances in horizontal drilling and hydraulic fracturing  (fracking) in North America ushered in large-scale commercial oil and gas production.  This fracking technique has been increasingly successful and modified over time to  extract oil and gas held in dense layers of shale rocks, whose low permeability had  previously prevented the flow of hydrocarbons.    Hydraulic fracturing uses a mixture of water, chemicals, and proppant (natural sand or  man-made sand-like substances) to fracture shale rock and release hydrocarbons such  as oil, natural gas and natural gas liquids. The proppant acts to keep the fractures open  (prop) while the pressurized fluids flow back up the well piping. Wells have become more  productive with the addition of horizontal drilling capabilities, longer lateral lengths, and  multi-stage fracks.    North America’s shale oil industry’s growing competitiveness gained through continuous  technology improvement and falling production costs have had major implications on the  global energy market. Oilfield service companies, including frac sand producers, made  significant cuts in 2020 to survive lower commodity prices because of the COVID-19  pandemic.  Figure 10.1 illustrates the CME Group’s West Texas Intermediate (WTI)  Crude Oil Annual Average Futures Price.  We estimate breakeven pricing for  unconventional oil wells in the Permian to be in the $30 to $40 per barrel range, with  some areas in the mid $20s per barrel.  2021 WTI futures pricing showed a strong  recovery following the 2020 COVID-19 impact.      $30.00 $35.00 $40.00 $45.00 $50.00 $55.00 $60.00 $65.00 $70.00 $75.00 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 WTI Crude Oil CME Futures Price ($/bbl) Figure 10.1: WTI Crude Oil CME Futures Price  





 






10-2    JOHN  T.  BOYD  COMPANY  Although Smart Sand’s market area is essentially all of the energy basins in the United  States and western Canada, we have selectively focused on the Permian, Appalachian,  and Denver-Joulesberg (DJ) as these are target markets for their frac sand. The  Oakdale Mine has advantaged delivered cost to the western basins like the DJ as the  Oakdale Mine directly loads onto the Canadian Pacific Railway, a very competitive  option for westbound sand to the DJ. Oakdale also owns a loadout near the mine which  enables them to load directly on the Union Pacific Railway, the favored Permian basin  rail. The Utica Mine has access to their nearby Burlington Northern rail loadout which  greatly complements the Oakdale facility, especially when moving product to the  Appalachian (Marcellus-Utica) basin. Therefore, a high-level overview of demand in  these basins follows.      10.1 Permian Basin  Permit submissions for horizontal oil and gas wells in the Permian indicate a  continuation of strong drilling ahead. According to InfillThinking, the number of permits  filed per working rig this summer is tracking at multi-year highs as evidenced in Figure  10.2 below.        Figure 10.2: Permian Basin HZ Permit Submissions vs. Rigs    





 






10-3    JOHN  T.  BOYD  COMPANY  Over the previous 52 weeks, rig counts in the Permian are up approximately 111%.  This  has led to increased production for both crude oil and natural gas. For the same time  period, crude oil (barrels per day) and natural gas production (thousand cubic feet per  day) in the Permian are up 10% and 9%, respectively.  As Figure 10.3 illustrates,  Permian daily crude oil production is nearing its pre-pandemic impacted peak, while   daily natural gas production in the Permian continues to make new records and now  stands at 18.6 billion cubic feet per day.      Figure 10.3: Permian Oil Production and Natural Gas Production    According to U.S. Energy Information Administration Drilling Productivity Report, drilled  but uncompleted wells (DUCs) in the Permian Basin have declined 43% since peaking in  July 2020 (refer to Figure 10.4). These data dovetail with increased crude oil and natural  gas production in the basin.       Figure 10.4: Permian Drilled but Uncompleted Wells     -  1,000,000  2,000,000  3,000,000  4,000,000  5,000,000  6,000,000 Ja n- 19 Fe b- 19 M ar -1 9 Ap r- 19 M ay -1 9 Ju n- 19 Ju l-1 9 Au g- 19 Se p- 19 O ct -1 9 N ov -1 9 De c- 19 Ja n- 20 Fe b- 20 M ar -2 0 Ap r- 20 M ay -2 0 Ju n- 20 Ju l-2 0 Au g- 20 Se p- 20 O ct -2 0 N ov -2 0 De c- 20 Ja n- 21 Fe b- 21 M ar -2 1 Ap r- 21 M ay -2 1 Ju n- 21 Ju l-2 1 Au g- 21 Permian Oil Production (bbl/d)  -  2,000,000  4,000,000  6,000,000  8,000,000  10,000,000  12,000,000  14,000,000  16,000,000  18,000,000  20,000,000 Ja n- 19 Fe b- 19 M ar -1 9 Ap r- 19 M ay -1 9 Ju n- 19 Ju l-1 9 Au g- 19 Se p- 19 O ct -1 9 N ov -1 9 De c- 19 Ja n- 20 Fe b- 20 M ar -2 0 Ap r- 20 M ay -2 0 Ju n- 20 Ju l-2 0 Au g- 20 Se p- 20 O ct -2 0 N ov -2 0 De c- 20 Ja n- 21 Fe b- 21 M ar -2 1 Ap r- 21 M ay -2 1 Ju n- 21 Ju l-2 1 Au g- 21 Permian Natural Gas Production (Mcf/d)  -  500  1,000  1,500  2,000  2,500  3,000  3,500  4,000 Ja n- 19 Fe b- 19 M ar -1 9 Ap r- 19 M ay -1 9 Ju n- 19 Ju l-1 9 Au g- 19 Se p- 19 O ct -1 9 N ov -1 9 De c- 19 Ja n- 20 Fe b- 20 M ar -2 0 Ap r- 20 M ay -2 0 Ju n- 20 Ju l-2 0 Au g- 20 Se p- 20 O ct -2 0 N ov -2 0 De c- 20 Ja n- 21 Fe b- 21 M ar -2 1 Ap r- 21 M ay -2 1 Ju n- 21 Ju l-2 1 Au g- 21 Permian Drilled but Uncompleted Wells 





 






10-4    JOHN  T.  BOYD  COMPANY  Although a majority of this large basin’s sand is sourced from local sand mines, Northern  White, Oakdale quality sand remains an important product for many well applications.       10.2 Appalachian Basin (Marcellus/Utica Play) and Niobrara Basin  Although smaller in size than the Permian energy fields, the Appalachian and Nioobrara  (DJ) are substantial natural gas and oil plays in North America. Unlike the Permian, the  Appalachian and Niobrara import the vast majority of the frac sand. Very few notable  in-basin sand operations exist. This creates an advantaged situation for the Oakdale and  Utica mines as they are advantaged, transport wise to the basin and there are few  substitutes for NWS.    Following the energy downturn in 2019 and then Covid shutdown in 2020, the basin  wellfield activity appears to be rebounding. Horizontal rigs have stabilized over the past  two years as can be seen on Figure 10.5, but gas production per rig is substantially  higher. Energy companies are drilling longer laterals and optimizing each well pad  becoming more efficient from a cost perspective and overall natural gas production is  stable as can be seen from Figure 10.6.       Figure 10.5: Appalachian Rig Count and Production per Rig (Source: EIA)    





 






10-5    JOHN  T.  BOYD  COMPANY    Figure 10.6: Appalachian Gas Production (Source: EIA)    Similarly, the DJ basin has seen a rebound in rig count since the Covid shutdown. Both  gas and oil rig counts have risen but productivity per well has decreased as can be seen  in Figure 10.7.      Figure 10.7: Niobrara Oil and Gas Rig Count and Productivity (Source: EIA)       





 






10-6    JOHN  T.  BOYD  COMPANY  Overall gas and oil production remains relatively flat in the basin, but more wells are  being drilled to maintain this capacity. Figure 10.8 illustrates the overall yearly gas and  oil production in the basin.      Figure 10.8:  Niobrara Oil and Gas Production (Source: EIA)    Having survived the challenging environment of 2019 and 2020, Smart Sand’s  operations should continue to prove viable into the future notwithstanding a sustained  and significant energy price collapse. Their low-cost mining scheme, advantaged  transport to select basins, and high-quality product help to create an advantage  compared with other NWS producers.    Q:\ENG_WP\3555.021 - SS S-K 1300\WP\RPT\Section II - Utica Reserves\CH-10 - Market Analysis.docx  





 






  11-1       JOHN  T. BOYD  COMPANY  11.0 CAPITAL,  REVENUES,  AND  OPERATING  COSTS      11.1 Introduction  Smart Sand acquired the Utica operation from Eagle Materials on September 18, 2020.  Smart Sand provided BOYD with production, sales, CapEx, and financial data for the  period September 2020 through September 2021. BOYD will not present any  pre-acquisition data for the Utica operation.      11.2 Historical Capital Expenditures  Table 11.1 below, presents CapEx for the period September 2020 through September  2021.    CapEx ($000) Year 2020* -                              Sep YTD 2021 257                                Total** 257                             *Utica acquired on September 18, 2020  **Utica operation only, excludes transload sites and  other locatons/activities.  Table 11.1: Historical Capital Expenditures       11.3 Historical Revenues and Operating Costs  11.3.1 Historical Sales  Table 11.2 presents Smart Sand’s historical sales data for the period September 2020  through September 2021.     Year 2020* SepYTD2021 Tons Sold (000) 106                  564                   Total Revenues ($000) (a) 2,256               11,553              Average Sales Price ($ per ton sold) 21.33               20.48                *Acquired in September 2020 Table 11.2:  Historical Sales Statistics     Figure 11.1 presents the product sizes sold as a percent of total tons sold. In 2021,  about 65% of the tons sold consists of the finer size products, 40/70-mesh and finer, with  





 






  11-2       JOHN  T. BOYD  COMPANY  about 35% of the products sold consisting of the coarser 20/40 and 30/50-mesh  products.         Figure 11.1: Product Size as a Percentage of Total Tons Sold    Since the acquisition in September 2020 and through September 2021, the Utica  operation has had only spot sales. In 2021, the Top 5 Customers (as a group)  represented 91% of their total revenues.    Table 11.3 presents Utica’s historical cash operating costs for the short year 2020, and  September YTD 2021. Operating costs represent the costs incurred associated with the  mining, ongoing reclamation, wet processing, dry processing, trucking to the off-site rail  loadout, off-site rail loadout (Peru), and other related costs.    $(000) $ per ton sold Cash Operating Costs Year 2020* SepYTD2021 Year 2020* SepYTD2021 Wages and benefits 566            3,391            5.35           6.15               Excavation 50              859               0.47           1.56               Utilities 134            1,061            1.26           1.93               Equipment 78              342               0.74           0.62               Maintenance 154            551               1.46           1.00               Peru Trucking -             1,075            -             1.95               Real Estate taxes -             415               -             0.75               Other Costs (a) (2)              49                 (0.02)          0.09                  Total Cash Operating Costs 980            7,742            9.27           14.05             Note Rounding Errors *Acquired in September 2020 Table 11.3:  Historical Cost of Production        0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%  Year 2020  Sep YTD 2021 Product Size as % of Tons Sold  30/50-Mesh and Coarser  40/70-Mesh  100-Mesh 





 






  11-3       JOHN  T. BOYD  COMPANY  11.4 Projected Production, Sales, and Costs  Smart Sand provided BOYD with production, sales, and cost projections for the Utica  operation. We reviewed and adjusted the price and cost projections based on historical  financial data. Forecasted financial data, product pricing, and costs are in 2021 constant  dollars. BOYD opines that the production and financial projections are reasonable and  are likely to be within ± 20% accuracy level.    11.4.1 Production and Sales Projections  Table 11.4 below, presents frac sand production projections for the years 2022 through  2027.    Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 ROM Production (000) 982           982           982           982           982            Wet Plant Feed 982           982           982           982           982               Processing Recovery (%) 84.0          84.0          84.0          84.0          84.0           Wet Plant Product 825           825           825           825           825            Dry Plant Feed 825           825           825           825           825               Processing Recovery (%) 97.0          97.0          97.0          97.0          97.0           Dry Plant Product 800           800           800           800           800            Table 11.4: Utica Production Projections     Annual forecasted ROM production is based on the dry plant producing 0.8 million tons  per year of saleable product after a processing (wet and dry processing plant) loss of  approximately 18.5%, as discussed in Chapter 6. Forecasted dry processing plant  production is within the operation’s current infrastructure capacities and capabilities.    Table 11.5 below, presents frac sand sales projections for the years 2022 through 2026.    Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 Tons Sold (000) 800           800           800           800           800               40/70-Mesh and coarser 694           694           694           694           694               70/100-Mesh 106           106           106           106           106            Revenues ($000) 16,000      16,000      16,000      16,000      16,000       Product Pricing ($ per ton sold) Average Price for all products 20.00        20.00        20.00        20.00        20.00         Table 11.5: Utica Sales Projections     Sales of the projected dry processing plant product are about 13% for 70/100-mesh  product and approximately 87% for the remaining suite of products (20/40, 30/50, and  





 






  11-4       JOHN  T. BOYD  COMPANY  40/70-mesh). These are in-line with the reserve product size data provided by Smart  Sand.    BOYD used a mine gate sales price of $20.00 per ton, which is slightly less than the  current year (2021) average pricing of $20.48 per ton. BOYD opines that these are  reasonable price projections, as they are in-line with Smart Sand’s mine gate pricing  data for 2021.    11.4.2 Operating Cost Projections  Table 11.6 below, presents the cash cost projections for the years 2022 through 2026.  These projections were based on a review of prior year and current year cost, and  Selling, General and Administrative (SG&A) data provided to BOYD by Smart Sand, as  well as other information.     Summary Cash Cost of Goods Sold ($000):        Cash Operating Expense Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 Wages and benefits 4,800        4,800        4,800        4,800        4,800         Excavation 1,248        1,248        1,248        1,248        1,248         Utilities 1,544        1,544        1,544        1,544        1,544         Equipment 456           456           456           456           456            Maintenance 800           800           800           800           800            Peru Trucking 1,560        1,560        1,560        1,560        1,560         Real Estate taxes 600           600           600           600           600            Other Costs 72             72             72             72             72                 Subtotal Cash Operating Expense 11,080      11,080      11,080      11,080      11,080       SG&A 1,136        1,136        1,136        1,136        1,136         Final Reclamation Escrow 54             54             54             54             54                 Total Cash Cost of Goods Sold 12,270      12,270      12,270      12,270      12,270       Table 11.6: Annual Cash Cost Projections     BOYD notes that the Utica Property has no royalty expense as it is owned in fee.    Smart Sand provided BOYD with the current estimated final reclamation cost  (approximately $8.6 million) of the Utica operation/sites. BOYD calculated a rate of  approximately $0.07 per ton sold to recognize the current estimated cost over the life of  the operation.       





 






  11-5       JOHN  T. BOYD  COMPANY  Table 11.7 below, presents the above table’s cost projections on a cost per ton sold  basis for the years 2022 through 2026.    Summary Cash Cost of Goods Sold ($ per ton sold):           Cash Operating Expense Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 Wages and benefits 6.00          6.00          6.00          6.00          6.00           Excavation 1.56          1.56          1.56          1.56          1.56           Utilities 1.93          1.93          1.93          1.93          1.93           Equipment 0.57          0.57          0.57          0.57          0.57           Maintenance 1.00          1.00          1.00          1.00          1.00           Peru Trucking 1.95          1.95          1.95          1.95          1.95           Real Estate taxes 0.75          0.75          0.75          0.75          0.75           Other Costs 0.09          0.09          0.09          0.09          0.09              Subtotal Cash Operating Expense 13.85        13.85        13.85        13.85        13.85         SG&A 1.42          1.42          1.42          1.42          1.42           Final Reclamation Escrow 0.07          0.07          0.07          0.07          0.07              Total Cash Cost of Goods Sold 15.34        15.34        15.34        15.34        15.34         Table 11.7: Annual Dollars per Ton Sold Cash Cost Projections           11.4.3 Projected Capital Expenditures  Smart Sand provided BOYD with the annual sustaining CapEx estimate of $1 million,  which includes maintenance of production equipment as well as other items for the  operation.     q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-11 - capital and operating costs.docx  





 






  12-1       JOHN  T. BOYD  COMPANY  12.0 ECONOMIC  ANALYSIS      12.1 Introduction  Cash flow projections for the Utica operation have been generated from the proposed  LOM production schedules, revenues, cost of goods sold (COGS), and CapEx estimates  discussed in Chapter 11. A summary of the key assumptions used is provided below.    • LOM ROM frac sand tons and product tons sold were based on the total frac sand  reserve estimates discussed in Chapter 6 of this report.  BOYD estimates that the  Utica operation reserves would be depleted in Year 2182.    • Forecasted revenues at the Peru off-site loadout (mine gate) are based on sales of  20/40, 30/50, 40/70, and 70/100-mesh size products to be delivered to its customer  base in the various energy basins via the BNSF railway or other connecting rail  carriers.    • Operating and Other Costs (as discussed in Chapter 11) include:  − Employee wages, and benefits.  − Excavation.  − Utilities.  − Equipment.  − Maintenance.  − Peru Trucking Costs.  − Real Estate Taxes.  − Other Operating Expenses.  − SG&A.    • Reclamation costs include:  − Final reclamation cost to reclaim the Utica operation/sites.    • Capital Expenditures (as discussed in Chapter 11) include:  − Sustaining/Maintenance.    • Taxes are based on:  − Federal Business Income Tax Rate of 21%.  − Illinois Corporate Income and Replacement Tax Rate of 9.5% (reduced to 7.3%  after Year 2024).    • Adjustments used to determine After-Tax cash flows:  − Current depreciation expense was provided by Smart Sand for the Utica  operation.  





 






  12-2       JOHN  T. BOYD  COMPANY  − Depreciation expense, for new fixed assets (from sustaining/maintenance  CapEx), is based on a straight-line depreciation calculation using a 10-year asset  life.  − Operating losses, if any, are carried forward in the tax computation.      12.2 Economic Analysis  BOYD prepared an economic analysis, as of January 1, 2022, for the Utica Operation  using the production, sales, and financial projections presented in this report. Our  analysis confirms that the operation generates positive cash flows (based on a 12%  discount rate), on a pre-tax and after-tax basis, that supports the statement of frac sand  reserves herein.     12.2.1 Cash Flow Analysis  Table 12.1 below presents the pre-tax and after-tax cash flow projections based on the  proposed LOM production schedule, revenue, COGS, CapEx and other estimates  discussed above for the Utica operation.    Summary Cash Flow  Statement ($ 000)       2022 2032 2042 2052 2062 2072 2082 2092 2102 2112 2122 to 2031 to 2041 to 2051 to 2061 to 2071 to 2081 to 2091 to 2101 to 2111 to 2121 to 2182 Total Total Tons Sold (000) 8,000     8,000     8,000     8,000     8,000     8,000     8,000     8,000     8,000     8,000     48,811   128,811       Revenues 160,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000 976,220 2,576,220    COGS 122,696 122,856 123,016 123,176 123,336 123,496 123,656 123,816 123,976 124,136 767,135 2,001,295    CapEx 10,000   10,000   10,000   10,000   10,000   10,000   10,000   10,000   10,000   10,000   61,014   161,014          Net Pre-Tax Cash Flow 27,304   27,144   26,984   26,824   26,664   26,504   26,344   26,184   26,024   25,864   148,071 413,911       Federal and State Income Taxes 2,856     7,681     7,636     7,591     7,546     7,501     7,455     7,410     7,365     7,320     40,631   110,992          After-Tax Net Cash Flow 24,448   19,463   19,348   19,233   19,118   19,003   18,889   18,774   18,659   18,544   107,441 302,920       Table 12.1: Summary Cash Flow Statement      DCF-NPV on a pre-tax and after-tax basis, using discount rates of 10%, 12%, and 15%,  were calculated utilizing the cash flows above. The DCF-NPV values used mid-year  discounting and all cash flows were on a constant dollar basis.       





 






  12-3       JOHN  T. BOYD  COMPANY  The pre-tax DCF-NPV ranges from approximately $19.5 million to $28.5 million. The  after-tax DCF-NPV ranges from approximately $16.8 million to $23.8 million. Table 12.2  summarizes the results of the pre-tax and after-tax DCF-NPV analyses:    DCF-NPV ($ 000) 10% 12% 15% Pre-Tax 28,531      24,013      19,483       After-Tax 23,797      20,347      16,824       Table 12.2: DCF-NPV     Refer to Table 12.3 on the next page for the detailed LOM cash flow analysis and  corresponding pre-tax and after-tax DCF-NPV analyses at a 12% discount rate.    BOYD notes that the NPV estimate was made for purposes of confirming the economic  viability of the reported frac sand reserves and not for purposes of valuing Smart Sand,  the Utica operation, or its assets. IRR and project payback were not calculated, as there  was no initial investment considered in the financial model. Risk is subjective, as such,  BOYD recommends that each reader should evaluate the project based on their own  investment criteria.    12.2.2 Sensitivity Analyses  Sensitivity analyses for the pre-tax and after-tax cash flows considering changes to  revenues and COGS/CapEx were prepared using discount rates of 10%, 12%, and 15%.  Revenues were adjusted in increments of 5% and range from minus 20% to plus 20% of  base revenues; the corresponding weighted average sales price would range from  $16.00 per ton sold to $24.00 per ton sold, with the base price of $20.00 per ton sold as  noted in Table 12.4 below.    Average Sales Price $ per ton sold -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 16.00     17.00     18.00     19.00     20.00     21.00     22.00     23.00     24.00      Table 12.4: Sensitivity Analysis – Average Sales Prices     Costs were adjusted in increments of 5% and range from minus 20% to plus 20% of  base costs.       





 






TABLE  12.3 PRE-TAX  AND  AFTER-TAX  CASH  FLOW  ANALYSIS SMART  SAND  -  UTICA  OPERATION LaSalle  County,  Illinios Prepared For             SMART  SAND,  INC             By  John T. Boyd Company Mining and Geological Consultants January  2022 2032 2042 2052 2062 2072 2082 2092 2102 2112 2122 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 to 2041 to 2051 to 2061 to 2071 to 2081 to 2091 to 2101 to 2111 to 2121 to 2182 Total Production Statistics (Tons 000): ROM Production off Fee Property 982       982       982       982       982       982       982       982       982       982       9,822       9,822       9,822       9,822       9,822       9,822       9,822       9,822       9,822       59,924    158,143       Processing Statistics (Tons 000): Wet Plant Feed 982       982       982       982       982       982       982       982       982       982       9,822       9,822       9,822       9,822       9,822       9,822       9,822       9,822       9,822       59,927    158,145          Processing Recovery (%) 84.0      84.0      84.0      84.0      84.0      84.0      84.0      84.0      84.0      84.0      84.0         84.0         84.0         84.0         84.0         84.0         84.0         84.0         84.0         84.0         84.0             Wet Plant Product 825       825       825       825       825       825       825       825       825       825       8,247       8,247       8,247       8,247       8,247       8,247       8,247       8,247       8,247       50,321    132,795       Dry Plant Feed 825       825       825       825       825       825       825       825       825       825       8,247       8,247       8,247       8,247       8,247       8,247       8,247       8,247       8,247       50,321    132,795          Processing Recovery (%) 97.0      97.0      97.0      97.0      97.0      97.0      97.0      97.0      97.0      97.0      97.0         97.0         97.0         97.0         97.0         97.0         97.0         97.0         97.0         97.0         97.0             Dry Plant Product 800       800       800       800       800       800       800       800       800       800       8,000       8,000       8,000       8,000       8,000       8,000       8,000       8,000       8,000       48,811    128,811          Overall Processing Recovery (%) 81.5      81.5      81.5      81.5      81.5      81.5      81.5      81.5      81.5      81.5      81.5         81.5         81.5         81.5         81.5         81.5         81.5         81.5         81.5         81.5         81.5             Sales and Financial Data: Saleable Product Tons Sold (000): 40/70-Mesh and coarser 693       693       693       693       693       693       693       693       693       693       6,930       6,930       6,930       6,930       6,930       6,930       6,930       6,930       6,930       42,250    111,550       70/100-Mesh 107       107       107       107       107       107       107       107       107       107       1,070       1,070       1,070       1,070       1,070       1,070       1,070       1,070       1,070       6,561       17,261            Total Tons Sold 800       800       800       800       800       800       800       800       800       800       8,000       8,000       8,000       8,000       8,000       8,000       8,000       8,000       8,000       48,811    128,811       Product Pricing ($ per ton) 40/70-Mesh and coarser 20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00           70/100-Mesh 20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00           Weighted Average 20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00    20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00       20.00           Revenues ($ 000) 40/70-Mesh and coarser 13,860  13,860  13,860  13,860  13,860  13,860  13,860  13,860  13,860  13,860  138,600  138,600  138,600  138,600  138,600  138,600  138,600  138,600  138,600  845,000  2,231,000   70/100-Mesh 2,140    2,140    2,140    2,140    2,140    2,140    2,140    2,140    2,140    2,140    21,400    21,400    21,400    21,400    21,400    21,400    21,400    21,400    21,400    131,220  345,220          Total Sales Revenues 16,000  16,000  16,000  16,000  16,000  16,000  16,000  16,000  16,000  16,000  160,000  160,000  160,000  160,000  160,000  160,000  160,000  160,000  160,000  976,220  2,576,220   COGS ($ 000): Cash Operating Expense: Wages and benefits 4,800    4,800    4,800    4,800    4,800    4,800    4,800    4,800    4,800    4,800    48,000    48,000    48,000    48,000    48,000    48,000    48,000    48,000    48,000    297,600  777,600       Excavation 1,248    1,248    1,248    1,248    1,248    1,248    1,248    1,248    1,248    1,248    12,480    12,480    12,480    12,480    12,480    12,480    12,480    12,480    12,480    76,145    200,945       Utilities 1,544    1,544    1,544    1,544    1,544    1,544    1,544    1,544    1,544    1,544    15,440    15,440    15,440    15,440    15,440    15,440    15,440    15,440    15,440    94,205    248,605       Equipment 456       456       456       456       456       456       456       456       456       456       4,560       4,560       4,560       4,560       4,560       4,560       4,560       4,560       4,560       28,272    73,872         Maintenance 800       800       800       800       800       800       800       800       800       800       8,000       8,000       8,000       8,000       8,000       8,000       8,000       8,000       8,000       48,811    128,811       Peru Trucking 1,560    1,560    1,560    1,560    1,560    1,560    1,560    1,560    1,560    1,560    15,600    15,600    15,600    15,600    15,600    15,600    15,600    15,600    15,600    95,181    251,181       Real Estate taxes 600       600       600       600       600       600       600       600       600       600       6,000       6,000       6,000       6,000       6,000       6,000       6,000       6,000       6,000       37,200    97,200         Other Costs 72          72          72          72          72          72          72          72          72          72          880          1,040       1,200       1,360       1,520       1,680       1,840       2,000       2,160       17,140    31,540            Total Cash Operating Expense 11,080  11,080  11,080  11,080  11,080  11,080  11,080  11,080  11,080  11,080  110,960  111,120  111,280  111,440  111,600  111,760  111,920  112,080  112,240  694,554  1,809,754      $ per ROM ton 11.28    11.28    11.28    11.28    11.28    11.28    11.28    11.28    11.28    11.28    11.30       11.31       11.33       11.35       11.36       11.38       11.39       11.41       11.43       11.59       11.44              $ per ton sold 13.85    13.85    13.85    13.85    13.85    13.85    13.85    13.85    13.85    13.85    13.87       13.89       13.91       13.93       13.95       13.97       13.99       14.01       14.03       14.23       14.05           S,G&A 1,136    1,136    1,136    1,136    1,136    1,136    1,136    1,136    1,136    1,136    11,360    11,360    11,360    11,360    11,360    11,360    11,360    11,360    11,360    69,312    182,912       $ per ton sold 1.42      1.42      1.42      1.42      1.42      1.42      1.42      1.42      1.42      1.42      1.42         1.42         1.42         1.42         1.42         1.42         1.42         1.42         1.42         1.42         1.42             Final Reclamation Escrow 54          54          54          54          54          54          54          54          54          54          536          536          536          536          536          536          536          536          536          3,269       8,629           $ per ton sold 0.07      0.07      0.07      0.07      0.07      0.07      0.07      0.07      0.07      0.07      0.07         0.07         0.07         0.07         0.07         0.07         0.07         0.07         0.07         0.07         0.07             Total COGS 12,270  12,270  12,270  12,270  12,270  12,270  12,270  12,270  12,270  12,270  122,856  123,016  123,176  123,336  123,496  123,656  123,816  123,976  124,136  767,135  2,001,295   $ per ton sold 15.34    15.34    15.34    15.34    15.34    15.34    15.34    15.34    15.34    15.34    15.36       15.38       15.40       15.42       15.44       15.46       15.48       15.50       15.52       15.72       15.54           EBITDA 3,730    3,730    3,730    3,730    3,730    3,730    3,730    3,730    3,730    3,730    37,144    36,984    36,824    36,664    36,504    36,344    36,184    36,024    35,864    209,085  574,925       $ per ton sold 4.66      4.66      4.66      4.66      4.66      4.66      4.66      4.66      4.66      4.66      4.64         4.62         4.60         4.58         4.56         4.54         4.52         4.50         4.48         4.28         4.46             CapEx ($ 000): Total CapEx 1,000    1,000    1,000    1,000    1,000    1,000    1,000    1,000    1,000    1,000    10,000    10,000    10,000    10,000    10,000    10,000    10,000    10,000    10,000    61,014    161,014       Net Pre-Tax Cash Flow 2,730    2,730    2,730    2,730    2,730    2,730    2,730    2,730    2,730    2,730    27,144    26,984    26,824    26,664    26,504    26,344    26,184    26,024    25,864    148,071  413,911          Federal Income and State Franchise Taxes 196       166       147       183       293       266       238       209       387       772       7,681       7,636       7,591       7,546       7,501       7,455       7,410       7,365       7,320       40,631    110,992       After-Tax Net Cash Flow 2,534    2,565    2,584    2,547    2,437    2,464    2,493    2,521    2,344    1,958    19,463    19,348    19,233    19,118    19,003    18,889    18,774    18,659    18,544    107,441  302,920       DCF-NPV Analysis: Pre-Tax Discounted Cash Flows at 12% 2,580    2,304    2,057    1,836    1,640    1,464    1,307    1,167    1,042    930       5,226       1,673       535          171          55            18            6              2              1              0              24,013         Cumulative Pre-Tax Discounted Cash Flows at 12% 2,580    4,884    6,940    8,777    10,416  11,880  13,187  14,354  15,396  16,327  21,553    23,225    23,761    23,932    23,987    24,005    24,010    24,012    24,013    24,013     After-Tax Dis\counted Cash Flows at 12% 2,395    2,164    1,946    1,713    1,463    1,321    1,193    1,078    894       667       3,747       1,199       384          123          39            13            4              1              0              0              20,347         Cumulative After-Tax Discounted Cash Flows at 12% 2,395    4,559    6,505    8,218    9,682    11,003  12,196  13,274  14,168  14,836  18,583    19,782    20,166    20,289    20,328    20,341    20,345    20,346    20,347    20,347     12-4 JO H N   T.  B O Y D   C O M PA N Y 





 






  12-5       JOHN  T. BOYD  COMPANY  12.2.2.1 Pre-Tax Sensitivity Analyses  The following three tables (Tables 12.5–12.7) summarize the results of the pre-tax  sensitivity analyses performed, which utilize discount rates of 10%, 12%, and 15% and  incorporate the changes to revenue and COGS/CapEx discussed above:    Table 12.5: Pre-Tax DCF-NPV at 10%  Pre-Tax DCF-NPV @ 10%  (US$ millions)        -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% -20.0% 22.8 31.2 39.6 48.0 56.4 64.7 73.1 81.5 89.9 -15.0% 15.8 24.2 32.6 41.0 49.4 57.8 66.2 74.6 83.0 -10.0% 8.9 17.3 25.7 34.1 42.4 50.8 59.2 67.6 76.0 -5.0% 1.9 10.3 18.7 27.1 35.5 43.9 52.3 60.7 69.0 0.0% (5.0) 3.4 11.8 20.1 28.5 36.9 45.3 53.7 62.1 5.0% (12.0) (3.6) 4.8 13.2 21.6 30.0 38.4 46.7 55.1 10.0% (18.9) (10.6) (2.2) 6.2 14.6 23.0 31.4 39.8 48.2 15.0% (25.9) (17.5) (9.1) (0.7) 7.7 16.1 24.4 32.8 41.2 20.0% (32.9) (24.5) (16.1) (7.7) 0.7 9.1 17.5 25.9 34.3 CO G S  an d  Ca pE x Revenues     Table 12.6: Pre-Tax DCF-NPV at 12%  Pre-Tax DCF-NPV @ 12%  (US$ millions)        -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% -20.0% 19.2 26.3 33.3 40.4 47.4 54.5 61.5 68.6 75.6 -15.0% 13.3 20.4 27.5 34.5 41.6 48.6 55.7 62.7 69.8 -10.0% 7.5 14.6 21.6 28.7 35.7 42.8 49.8 56.9 63.9 -5.0% 1.6 8.7 15.8 22.8 29.9 36.9 44.0 51.0 58.1 0.0% (4.2) 2.8 9.9 17.0 24.0 31.1 38.1 45.2 52.2 5.0% (10.1) (3.0) 4.1 11.1 18.2 25.2 32.3 39.3 46.4 10.0% (15.9) (8.9) (1.8) 5.3 12.3 19.4 26.4 33.5 40.5 15.0% (21.8) (14.7) (7.7) (0.6) 6.5 13.5 20.6 27.6 34.7 20.0% (27.6) (20.6) (13.5) (6.4) 0.6 7.7 14.7 21.8 28.8 Revenues CO G S  an d  Ca pE x     Table 12.7: Pre-Tax DCF-NPV at 15%  Pre-Tax DCF-NPV @ 15%  (US$ millions)        -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% -20.0% 15.6 21.3 27.0 32.7 38.5 44.2 49.9 55.6 61.3 -15.0% 10.8 16.6 22.3 28.0 33.7 39.4 45.2 50.9 56.6 -10.0% 6.1 11.8 17.5 23.3 29.0 34.7 40.4 46.1 51.8 -5.0% 1.3 7.1 12.8 18.5 24.2 29.9 35.7 41.4 47.1 0.0% (3.4) 2.3 8.0 13.8 19.5 25.2 30.9 36.6 42.4 5.0% (8.1) (2.4) 3.3 9.0 14.7 20.5 26.2 31.9 37.6 10.0% (12.9) (7.2) (1.4) 4.3 10.0 15.7 21.4 27.2 32.9 15.0% (17.6) (11.9) (6.2) (0.5) 5.2 11.0 16.7 22.4 28.1 20.0% (22.4) (16.7) (10.9) (5.2) 0.5 6.2 11.9 17.7 23.4 Revenues CO G S  an d  Ca pE x          





 






  12-6       JOHN  T. BOYD  COMPANY  12.2.2.2 After-Tax Sensitivity Analyses  The following three tables (Tables 12.8–12.10) summarize the results of the after-tax  sensitivity analyses performed, which utilize discount rates of 10%, 12%, and 15% and  incorporate the changes to revenues and COGS/CapEx discussed above:     Table 12.8: After-Tax DCF-NPV at 10%  After-Tax DCF-NPV @ 10%  (US$ millions) -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% -20.0% 19.9 25.9 31.9 37.8 43.8 49.8 55.7 61.7 67.7 -15.0% 14.4 20.9 26.9 32.8 38.8 44.8 50.7 56.7 62.7 -10.0% 8.6 15.5 21.9 27.8 33.8 39.8 45.7 51.7 57.7 -5.0% 1.9 9.8 16.6 22.8 28.8 34.8 40.7 46.7 52.7 0.0% (5.0) 3.4 11.0 17.7 23.8 29.8 35.7 41.7 47.7 5.0% (12.0) (3.6) 4.8 12.2 18.8 24.8 30.7 36.7 42.7 10.0% (18.9) (10.6) (2.2) 6.1 13.3 19.8 25.7 31.7 37.7 15.0% (25.9) (17.5) (9.1) (0.7) 7.4 14.5 20.7 26.7 32.7 20.0% (32.9) (24.5) (16.1) (7.7) 0.7 8.7 15.6 21.7 27.7 Revenues CO G S  an d  Ca pE x     Table 12.9: After-Tax DCF-NPV at 12%  After-Tax DCF-NPV @ 12%  (US$ millions) -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% -20.0% 17.1 22.1 27.1 32.2 37.2 42.2 47.2 52.2 57.2 -15.0% 12.4 17.9 22.9 28.0 33.0 38.0 43.0 48.0 53.0 -10.0% 7.3 13.3 18.7 23.7 28.8 33.8 38.8 43.8 48.8 -5.0% 1.6 8.4 14.3 19.5 24.6 29.6 34.6 39.6 44.6 0.0% (4.2) 2.8 9.4 15.2 20.3 25.4 30.4 35.4 40.4 5.0% (10.1) (3.0) 4.0 10.4 16.1 21.2 26.2 31.2 36.2 10.0% (15.9) (8.9) (1.8) 5.2 11.4 16.9 22.0 27.0 32.0 15.0% (21.8) (14.7) (7.7) (0.6) 6.3 12.4 17.8 22.8 27.8 20.0% (27.6) (20.6) (13.5) (6.4) 0.6 7.4 13.4 18.6 23.6 Revenues CO G S  an d  Ca pE x     Table 12.10: After-Tax DCF-NPV at 15%  After-Tax DCF-NPV @ 15%  (US$ millions) -20.0% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% -20.0% 14.2 18.3 22.4 26.4 30.5 34.5 38.6 42.6 46.7 -15.0% 10.3 14.9 18.9 23.0 27.1 31.1 35.2 39.2 43.3 -10.0% 6.0 11.1 15.5 19.6 23.6 27.7 31.8 35.8 39.9 -5.0% 1.3 6.9 11.9 16.2 20.2 24.3 28.4 32.4 36.5 0.0% (3.4) 2.3 7.8 12.7 16.8 20.9 24.9 29.0 33.1 5.0% (8.1) (2.4) 3.3 8.6 13.4 17.5 21.5 25.6 29.6 10.0% (12.9) (7.2) (1.4) 4.3 9.5 14.1 18.1 22.2 26.2 15.0% (17.6) (11.9) (6.2) (0.5) 5.2 10.3 14.7 18.8 22.8 20.0% (22.4) (16.7) (10.9) (5.2) 0.5 6.1 11.1 15.4 19.4 Revenues CO G S  an d  Ca pE x     Q:\ENG_WP\3555.021 - SS S-K 1300\WP\RPT\Section II - Utica Reserves\CH-12 - Economic Analysis.docx  





 






  13-1       JOHN  T.  BOYD  COMPANY  13.0 PERMITTING  AND  COMPLIANCE        13.1 Permitting  The Illinois Department of Natural Resources (IDNR) requires a Surface Mining Permit  for all operations that affect over 10 acres per year by mining or remove more than 10 ft  of overburden (soil on top of the rock or mineral being extracted). A Surface Mining  Permit application requires the operator to submit an operating plan that illustrates how  the land will be affected by mining operations as well as a reclamation plan that  describes how the mined land will be restored for future use. The mine reclamation plan  must be submitted for review to the LaSalle County Board. If the County Board requests,  a public hearing will be scheduled by the IDNR to receive comments on the proposed  reclamation plan. The Utica operation has a current IDNR permit.     Air emissions at the Utica facility are regulated by the Illinois Environmental Protection  Agency. A Title V permit for air emissions is currently issued to Northern White Sand  Company (Permit # 170090027), the company that filed the permit application prior to  Smart Sand’s acquisition.      13.2 Compliance  Mine safety is regulated by the federal government by MSHA as are all surface mining  operations. MSHA inspects the facilities a minimum of twice yearly. Smart Sand’s safety  record compares favorably with its regional peers.     Based on our review of information provided by Smart Sand and available public  information, it is BOYD’s opinion that the Utica Mine’s record of compliance with  applicable mining, water quality, and environmental regulations is generally typical for  that of the industry. BOYD is not aware of any regulatory violation or compliance issue  which would materially impact the frac sand reserve estimate.     q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-13 - permitting and compliance.docx  





 






  14-1       JOHN  T.  BOYD  COMPANY  14.0 INTERPRETATION  AND  CONCLUSIONS      14.1 Findings  Based on our independent technical review and geoscientific study of the Utica Mine,  BOYD concludes:    • Sufficient data have been obtained through the site exploration and sampling  program and mining operations to support the geological interpretations of seam  thickness, grain size distribution and API quality for the portions of the sand  underlying the controlled property. The data are of sufficient quantity and reliability to  reasonably support the sand resource and sand reserve estimates in this technical  report summary.  • Estimates of proppant sand reserves reported herein are reasonably and  appropriately supported by technical studies, which consider mining plans, revenue,  and operating and capital cost estimates.  • The 128.8 million product tons of frac sand reserves (as of December 31, 2021)  identified on the property are economically extractable under reasonable  expectations of market volumes and pricing for proppant sand products, estimated  operation costs, and capital expenditures.  • There is no other relevant data or information material to the Utica Mine that is  necessary to make this technical report summary not misleading.      14.2 Significant Risks and Uncertainties   As with any mining project there are certain inherent risks associated with the overall  operation of a facility. Smart Sand has sufficiently mitigated operational risk through  obtaining sufficient geologic sampling information and analysis. Additionally, Smart Sand  has engineered the processing plant to include parallel duplicate process circuits which  significantly increases plant availability. However, it should be noted that frac sand is  generally marketed exclusively to the energy industry which has historically been a  volatile industry.     q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section ii - utica reserves\ch-14 -  conclusions.docx