technicalreportsummaryfr






  TECHNICAL  REPORT  SUMMARY    FRAC  SAND  RESOURCES  AND  RESERVES    OAKDALE  MINE  Monroe County, Wisconsin          Prepared For  SMART  SAND,  INC.          By  John T. Boyd Company  Mining and Geological Consultants  Pittsburgh, Pennsylvania, USA            Report No.  3555.021  JANUARY  2022  





 






    John T. Boyd Company    Mining and Geological Consultants        January 31, 2022  File: 3555.021        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    Oakdale Mine    Monroe County, Wisconsin    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) holdings 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  U.S. 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 I - Oakdale 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  ........................................................................................ 1-3   1.5 Frac Sand Reserves and Quality ...................................................... 1-3   1.6 Operations  ......................................................................................... 1-5    1.6.1 Mining  .................................................................................... 1-5    1.6.2 Processing  ............................................................................ 1-5    1.6.3 Infrastructure  ......................................................................... 1-7   1.7 Financial Analysis  ............................................................................. 1-7    1.7.1 Market Analysis  ..................................................................... 1-7    1.7.2 Historic Capital Expenditures, Operating Costs, and Pricing1-12    1.7.3 Projected Sales Revenue, Production Costs, and CAPEX  1-13    1.7.4 Economic Analysis ............................................................... 1-13   1.8 Regulation and Liabilities  ................................................................ 1-15   1.9 Conclusions ..................................................................................... 1-15        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  ................................................................ 3-1    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  .............................................................................................. 3-4      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  ................................................................................ 5-4      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  .............................................................................. 6-4   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   8.2 Conclusion ......................................................................................... 8-3      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 Revenues .............................................................. 11-1    11.4 Projected Production, Sales, and Costs .......................................... 11-4    11.4.1 Production and Sales Projections ........................................ 11-4    11.4.2 Operating Cost Projections .................................................. 11-5    11.4.3 Projected Capital Expenditures ............................................ 11-6      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 .............................................................. 12-4      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 Oakdale Mine Exploration Drilling Campaign Summary  .............................. 1-3  1.2 Reserves as of December 31, 2021 .............................................................. 1-4  1.3 Oakdale API/ISO Test Results for the DDH-1-10 Composite Sample ......... 1-4  1.4 Historical Capital Expenditures .................................................................... 1-12  1.5 Historical Sales Statistics ............................................................................. 1-12  1.6 Historical Average Mine Gate Pricing .......................................................... 1-12  1.7 Historical Cost of Production ....................................................................... 1-12  1.8 Oakdale Sales Projections........................................................................... 1-13  1.9 Annual Dollars per Ton Sold Cash Cost Projections .................................. 1-13  1.10 Summary Cash Flow Statement .................................................................. 1-14  1.11 DCF-NPV ..................................................................................................... 1-14  3.1 Climate Data for Oakdale Mine – Monroe County, Wisconsin  .................... 3-4  5.1 Oakdale Mine Exploration Drilling Campaign Summary  .............................. 5-1  5.2 Weighted Average Particle Size Distribution  ................................................ 5-3  5.3 Oakdale API/ISO Test Results for the DDH-1-10 Composite Sample ......... 5-4  6.1 Oakdale 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 Average Mine Gate Pricing  ......................................................... 11-2  11.4 Historical Cost of Production ....................................................................... 11-4  11.5 Oakdale Production Projections .................................................................. 11-4  11.6 Oakdale Sales Projections........................................................................... 11-5  11.7 Annual Cash Cost Projections ..................................................................... 11-5  11.8 Annual Dollars Per Ton Sold Cash Cost Projections .................................. 11-6  12.1 Summary Cash Flow Statement  ................................................................. 12-2  12.2 DCF-NPV  .................................................................................................... 12-2  12.3 Pre-Tax and After-Tax Cash Flow Analysis ................................................ 12-3  12.4 Sensitivity Analysis – Weighted Average Sales Prices  .............................. 12-4  12.5 Pre-Tax DCF-NPV at 10%  .......................................................................... 12-4  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% ......................................................................... 12-5  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 Oakdale Processing Plants and Rail Loadouts  ............................................ 1-6  1.2 Permian Basin HZ Permit Submissions vs. Rigs .......................................... 1-8  1.3 Permian Oil Production and Natural Gas Production .................................... 1-8  1.4 Permian Drilled but Uncompleted Wells ........................................................ 1-9  1.5 Appalachian Rig Count and Production per Rig  ........................................ 1-10  1.6 Appalachian Gas Production ....................................................................... 1-10  1.7 Niobrara Oil and Gas Rig Count and Productivity ....................................... 1-11  1.8 Niobrara Oil and Gas Production................................................................. 1-11  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 West Side “bluff” Mining at Oakdale  ............................................................. 7-2  7.2 Oakdale Proposed Mine Plan  ....................................................................... 7-4  8.1 Oakdale Processing Plants and Rail Loadouts ............................................. 8-1  8.2 East Wet 1 and Dry 2 ..................................................................................... 8-2  8.3 East Side Rail Loading Facilities ................................................................... 8-3  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  11.2 Oakdale Contact and Spot Sales ................................................................ 11-3  11.3 Oakdale Top 5 Customers (Grouped) as a Percentage of Total Revenues11-3    Q:\ENG_WP\3555.021 - SS S-K 1300\WP\RPT\Section I - Oakdale 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.  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,  but are not restricted to: mining; processing; metallurgical;  





 






 3       GLOSSARY  OF  ABBREVIATIONS  AND  DEFINITIONS  -  Continued          JOHN  T.  BOYD  COMPANY  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  NSR : New Source Review  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  Surficial : Relating to the earths surface or the geology that is on the  surface.  Ton : Short Ton. A unit of weight equal to 2,000 pounds  tph : Tons per Hour  





 






 4       GLOSSARY  OF  ABBREVIATIONS  AND  DEFINITIONS  -  Continued          JOHN  T.  BOYD  COMPANY  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  Oakdale, Wisconsin (the “Oakdale 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  Oakdale 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 audit concerning Smart Sand’s estimate of the frac sand resources and  reserves underlying the Oakdale, Wisconsin property. The basis for these estimates is a  volumetric geologic model estimating the reserves and resources compiled by Smart  Sand in July 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 Oakdale Mine is a surface mining operation located in Monroe County,  Wisconsin. Frac sand is extracted from the Mt. Simon Formation and the Wonewoc  Formation both extensively mined for frac sand in the area. Smart Sand controls  approximately 1,256 contiguous acres of property which is owned fee simple. The  general location of this property (the “Oakdale Property”) is provided on Figure 3.1.    The Oakdale Mine was one of the first frac sand mines in the area commencing  operations in 2012. The mine exploits the Mt. Simon sand formation which generally lies  





 






  1-2       JOHN  T. BOYD  COMPANY  at, or below, the water table in the area. Additionally, “bluff mining” occurs on the above  grade ridges within the property where Wonewoc Formation sand is mined.       1.3 Geology   Northern white sands (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, and can be  observed in Figure 4.1 which presents the various stratigraphic rock units in Wisconsin.    The Oakdale Property is underlain by the Mount Simon Formation, which on a regional  basis, ranges in thickness from 300 ft to over 2,000 ft (in Indiana). The Mount Simon  sands can be described as poorly consolidated, poorly sorted, fine-grained, quartz  sandstone. These sands are typically white in color, but can show a color change to a  yellowish-gray or to a grayish-red.    The Mount Simon Formation is of Cambrian age and underlying the Mount Simon is  pre-Cambrian age granite. Above the Mt. Simon, in the bluffs, is the Wonewoc  Formation. The Wonewoc is generally somewhat coarser in grain size than the  Mt. Simon, ranges in thickness from 60 ft to 90 ft, and exhibits similar API quality  attributes.    The surface of the Oakdale Property is overlain by a veneer of poorly sorted glacial till  ranging from a few feet to over 30 ft in depth. Beneath the glacial fill is the Mount Simon  Formation. Above grade, in the surrounding ridges lies the Wonewoc Formation. Both  formations are extensively mined on the property    Within the property, the surface topography is predominately flat lying except for the  western-southwestern portion of the property where the surface elevation increases as a  series of hills or bluffs are present (vertical relief of 125 ft to 150 ft). The size consist of  the sand found in the above drainage bluff areas is a coarser mix in comparison to the  sands found in the alluvial material and in the in-place below drainage sand formations.     Structure of the Mount Simon and Wonewoc formations, on the Oakdale Property,  appears to be flat lying with no evidence of faulting or other geologic features. Total  thickness of the Mount Simon Formation contained on the property was not determined  





 






  1-3       JOHN  T. BOYD  COMPANY  as the deepest drill hole (240 ft in length) was stopped while still in the sandstone  formation.      1.4 Exploration   Based on information provided to BOYD by Smart Sand, there have been six different  drilling campaigns on the Oakdale Property. The first drilling program commenced in  December 2010, and the last drilling program was completed in 2018.     A total of 37 holes were drilled, with 30 of the holes providing sufficient sand core data  that was utilized by Smart Sand in their reserve model and subsequently by BOYD to  verify the Smart Sand model. Seven of the drill holes were not utilized because of  varying reasons, such as insufficient core recovery, hole abandoned, BOYD  confirmatory drill holes (duplicated data), and no data provided. Table 1.1 provides  additional summary information on the drilling campaigns.      Number of Sand Cores Drill Holes Year Holes Drilled Data Used Thickness (ft) Not Used Reason Not Used 2010 2                  -            NA 2              Insufficient Core Recovery 2011 13                12             1,581              1              Hole Abandoned 2011-BOYD 3                  -            NA 3              Duplicated Results 2012 3                  2              330                 1              No data provided 2016 12                12             1,765              -             2018 4                  4              965                 -             Total 37                30             4,641              7               Table 1.1: Oakdale Mine Exploration Drilling Campaign Summary     BOYD reviewed the drilling and sampling methodologies utilized in the various  exploration campaigns at the Oakdale Property, as well as the equipment utilized, and  the sampling, logging, and field work performed. We note that methodologies and  procedures indicate that the data obtained were carefully and professionally collected,  prepared, and documented in conformance with generally accepted industry standards.  BOYD opines that this work is thorough and complete for purposes of evaluating and  estimating frac sand resources and reserves on the Oakdale Property.      1.5 Frac Sand Reserves and Quality  This technical report summary provides an estimate of frac sand reserves for Smart  Sand’s Oakdale Mine in accordance with the requirements set forth in S-K 1300. These  estimates were independently audited by BOYD. This report, and previous reports,  include a thorough geologic investigation of the property, appropriate modeling of the  





 






  1-4       JOHN  T. BOYD  COMPANY  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 Oakdale Property  total 250 million saleable product tons, as of December 31, 2021.    Table 1.2 presents the estimated Reserve tons by product (size), that are anticipated to  be produced at Smart Sand’s Oakdale Property.    Table 1.2: Reserves as of December 31, 2021  Smart Sand Oakdale Property Reserves    Mesh Size    Tons (000) By Classification     Proven   Probable   Total  30/50   48,367  31,785  80,152  50/140   96,818  72,984  169,802       Total   145,186  104,769  249,955    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 2.8 million tons per year, the  operation has an expected LOM of approximately 90 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  was performed on the 20/40, 40/70, and 70/140-mesh product sizes. The test results are  presented in Table 1.3.           DDH-1-10 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 0.8 ≥ 0.6 0.7 0.7 ≥ 0.6 Roundness 0.7 ≥ 0.6 0.7 0.6 ≥ 0.6 Acid Solubility (%) 0.7 ≤ 2.0 0.9 1.3 ≤ 3.0 Turbidity (NTU) 30 ≤ 250 16 16 ≤ 250 K-Value (000 psi) 7 - 9 12 - * Note: Currently, 70/140-mesh proppant sand material does not have an API/ISO specification. Table1.3:  Oakdale API/ISO Test Results for the DDH-1-10 Composite Sample 





 






  1-5       JOHN  T. BOYD  COMPANY  The composited sample testing suggested that the Oakdale Mine produces frac sand  products which meet minimum API/ISO recommended testing characteristics. BOYD  notes that the Oakdale operation has been selling various frac sand sized products to  their E&P and drilling services customers since 2012.       1.6 Operations   1.6.1 Mining  The Oakdale Mine property is broadly separated into two sections, the east section and  the west section. The property is bisected by the loadout rail spur and access roads  entering the site. The office, process plants and unit train loadouts are generally located  within the interior of the property.     The mine has two distinct mining schemes that are employed at the property. The  eastern side of the property generally consists of lowlands with some interspersed  wetlands. This area served as the initial mining area for approximately the first five to six  years of the operation. Typical excavator and articulated truck method is employed in a  series of benches downward. There is very little overburden overlying the sand and the  overburden that is stripped is utilized in berms or hauled to a dump area. The sand is  drilled and blasted on a very wide pattern to “fluff” or disaggregate the sand grains. The  sand is then hauled to a wet process plant located on the eastern side of the property for  processing. The pits are continuously dewatered, and the water is pumped into a holding  pond at the northeast area of the property prior to sampling and discharging.    Currently, and for the immediate future, the majority of the run-of-mine (ROM) sand is  mined from the western side of the property. Here, the “bluffs” are mined which generally  lie above ground level to approximately 970 ft mean sea level (msl) in elevation. Typical  of other Wonewac Formation “bluff” mines, there is little overburden and following  vegetation grubbing a bench is drilled and blasted in approximate 50 ft high benches  progressing from the highest elevation downward. Excavators load articulated trucks  which haul the ROM material to a primary crusher located on the western side of the  property.    1.6.2 Processing  The Oakdale plant area is actually a series of two wash plants, three dry plants, and  three rail loadouts that are centered around the railroad tracks in the interior of the  property. The original layout (Wet 1, Dry 1, Loadout 1) was constructed in 2012. An  additional dry plant (Dry 2) was subsequently added which was fed by Wet 1. The most  recent expansion in Q1 2018 included a new wet plant, dry plant, and loadout on the  





 






  1-6       JOHN  T. BOYD  COMPANY  west side of the rail loadout (Wet 2, Dry 3, Loadout 3). This newer plant is where the  majority of the sand is now processed and loaded. The adjacent mining pit essentially  excavates the higher “bluff” sand material. The east side plants are utilized for  incremental production as a “peaking” type facility when demand for product cannot be  satisfied from the west side facility. A fourth loadout, which is off site, is for UP bound  frac sand product. Figure 1.1 illustrates the Oakdale facility layout.      Figure 1.1: Oakdale Processing Plants and Rail Loadouts    The overall complex has an approximate annual finished product capacity of 5.5 million  tons.  The entire complex is staffed by approximately 160 employees at the site. This  number can fluctuate based on product demand.     The average process yield is reported to be 81.2%; as such, 3.5 million ROM tons are  expected to produce approximately 2.8 million tons of finished product per year.    The entire operation conforms to a 2-2 3-2 2-3 rotating shift schedule which uses four  teams (crews) and two 12-hour shifts to provide 24/7 coverage. Personnel work an  average 42 hours per week. The quarry pit generally operates on 12-hours daily utilizing  this rotation for the entire operation.       





 






  1-7       JOHN  T. BOYD  COMPANY  1.6.3 Infrastructure  The Oakdale Mine is serviced by three phase power that is routed along County Road  CA and into the plant at the southern end of the property. The pipeline providing natural  gas supply for the drying equipment is also routed along this corridor. Plant process  water is supplied by surface water retention ponds and a backup drilled high capacity  well if needed. Additionally, the wash process water is recycled after fines are removed  via settling in a 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 holding tanks and disposed of on a regular basis. Potable water is provided  by a public water system.     On-site facilities include a scale house, office, shop, and a quality laboratory located in  the dry process plants. The operation employs approximately 160 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      





 






  1-8       JOHN  T. BOYD  COMPANY  filed per working rig this summer is tracking at multi-year highs as evidenced in Figure  1.2 below.        Figure 1.2: 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 1.3 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 1.3: 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) 





 






  1-9       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 1.4). These data dovetail with increased crude oil and natural  gas production in the basin.       Figure 1.4: 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 (DJ)  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 from Figures 1.5  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 





 






  1-10       JOHN  T. BOYD  COMPANY  becoming more efficient from a cost perspective and overall natural gas production is  stable as can be seen from Figure 1.6.       Figure 1.5:  Appalachian Rig Count and Production per Rig (Source: EIA)      Figure 1.6: Appalachian Gas Production (Source: EIA)       





 






  1-11       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 1.7.      Figure 1.7:  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 1.8 illustrates the overall yearly gas and oil  production in the basin.    Figure 1.8:  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.       





 






  1-12       JOHN  T. BOYD  COMPANY  1.7.2 Historic Capital Expenditures, Operating Costs, and Pricing  The Oakdale operation’s CapEx, and Historical Sales for the years 2019, 2020, and  2021 (September YTD), is presented in Tables 1.4 and 1.5 below.    CapEx ($000)* Year 2019 10,527                         Year 2020 1,737                           Sep YTD 2021 1,962                              Total 14,227                          *Oakdale operation only, excludes transload sites  and other locatons/activities.  Table 1.4: Historical Capital Expenditures     Year 2019 Year 2020 SepYTD2021 Tons Sold (000) 2,462            1,779            1,752             Total Revenues ($000)* 103,865        67,827          70,546           Average Sales Price ($ per ton sold) 42.19            38.14            40.26             *Revenues are a mix of point of sale, and as such are not all mine gate prices. Table 1.5:  Historical Sales Statistics     Smart Sand provided BOYD with historical average mine gate pricing (Table 1.6), which  eliminates the additional revenue received for transportation services from the mine gate  to the customer’s delivery point.   Average Mine Gate Pricing  - $ per ton sold Year 2019 Year 2020 Year 2021 25.11 22.89 20.00 Table 1.6:  Historical Average Mine Gate Pricing     Table 1.7 presents Oakdale’s historical cash operating costs for the years 2019, 2020,  and 2021 (September YTD). Operating costs represent the costs incurred associated   with the mining, ongoing reclamation, wet processing, dry processing, on-site rail  loadout, and other related costs.           $ (000) $ per ton sold Cash Operating Costs: Year 2019 Year 2020 SepYTD2021 Year 2019 Year 2020 SepYTD2021 Wages and benefits 15,837       10,577       8,012               6.43            5.95            4.54                   Excavation 5,297          3,135          3,640               2.15            1.76            2.06                   Utilities 7,622          4,600          5,029               3.10            2.59            2.85                   Equipment 5,834          3,493          2,480               2.37            1.96            1.41                   Maintenance 3,863          2,148          1,984               1.57            1.21            1.12                   Other costs 2,360          2,410          1,475               0.96            1.36            0.84                      Total Cash Operating Costs 40,813       26,362       22,620             16.62          14.82          12.81                Note: Rounding Errors Table 1.7:  Historical Cost of Production 





 






  1-13       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) 2,800        2,800        2,800        2,800        2,800         30/50-Mesh 898           898           898           898           898            50/140-Mesh 1,902        1,902        1,902        1,902        1,902         Revenues ($000) 56,000      56,000      56,000      56,000      56,000       Product Pricing ($ per ton sold) Average Price for all products 20.00        20.00        20.00        20.00        20.00         Table 1.8: Oakdale 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)           Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 Cash Operating Expense: Wages and benefits 3.86          3.86          3.86          3.86          3.86           Excavation 2.06          2.06          2.06          2.06          2.06           Utilities 2.85          2.85          2.85          2.85          2.85           Equipment 1.18          1.18          1.18          1.18          1.18           Maintenance 1.12          1.12          1.12          1.12          1.12           Other costs 0.86          0.86          0.86          0.86          0.86              Subtotal Cash Operating Expense 11.93        11.93        11.93        11.93        11.93         Royalty 0.25          0.25          0.25          0.25          0.25           SG&A 4.98          4.98          4.98          4.98          4.98           Final Reclamation Escrow 0.08          0.08          0.08          0.08          0.08              Total Cash Cost of Goods Sold 17.24        17.24        17.24        17.24        17.24         Table 1.9: Annual Dollars per Ton Sold Cash Cost Projections           Smart Sand provided BOYD with the annual sustaining CapEx estimate of $4 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 Oakdale 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%  





 






  1-14       JOHN  T. BOYD  COMPANY  discount rate), on a pre-tax and after-tax basis, that supports the statement of frac sand  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 Oakdale operation.    Summary Cash Flow  Statement ($ 000)       2022 2032 2042 2052 2062 2072 2082 2092 2102 to 2031 to 2041 to 2051 to 2061 to 2071 to 2081 to 2091 to 2101 to 2111 Total Total Tons Sold (000) 28,000   28,000   28,000   28,000   28,000   28,000   28,000   28,000   25,955   140,000     Revenues 560,000 560,000 560,000 560,000 560,000 560,000 560,000 560,000 519,100 2,800,000  COGS 482,617 484,017 485,417 486,817 488,217 489,617 491,017 492,417 461,556 2,427,083  CapEx 40,000   40,000   40,000   40,000   40,000   40,000   40,000   40,000   34,000   200,000        Net Pre-Tax Cash Flow 37,383   35,983   34,583   33,183   31,783   30,383   28,983   27,583   23,544   172,917     Federal and State Income Taxes -         -         -         7,352     9,185     8,781     8,376     7,972     6,868     16,537          After-Tax Net Cash Flow 37,383   35,983   34,583   25,832   22,598   21,603   20,607   19,612   16,675   156,380     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 $26.4 million to $38.3 million. The  after-tax DCF-NPV ranges from approximately $26.3 million to $37.8 million. Table 1.11  summarizes the results of the pre-tax and after-tax DCF-NPV analyses:    DCF-NPV ($ 000)    10% 12% 15% Pre-Tax 38,282      32,382      26,397       After-Tax 37,836      32,171      26,324       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 Oakdale 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.         





 






  1-15       JOHN  T. BOYD  COMPANY  1.8 Regulation and Liabilities  The Oakdale Mine’s operations are predominantly regulated by a Monroe County,  Wisconsin non-metallic reclamation permit which contains detailed reclamation plans for  the property. Mine operators must submit annual reports to Monroe County containing  information on the reclamation status of their mines and pay annual fees based on the  disturbed acres. They must also provide written certification that the reclamation plan is  being followed. A significant portion of the Probable Reserves underlie current wetlands  areas. These areas will be mitigated if designated wetlands prior to mining. These  reserves are not in the current five-year plan.     Air emissions are regulated by the Wisconsin Department of Natural Resources, Bureau  of Air Management. Smart Sand monitors air emissions and has current permits.      Based on our review of information provided by Smart Sand and available public  information, it is BOYD’s opinion that the Oakdale Mine’s record of compliance with  applicable mining, water quality, and environmental regulations is generally superior 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 Oakdale Mine’s 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 are other relevant  data or information material to the Oakdale 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 I - Oakdale 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 Oakdale 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 commenced operations at their  Oakdale Mine in 2012 and 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 Oakdale Mine. This is the first technical report summary filed by Smart Sand for the  Oakdale 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 to verify that the Smart  Sand estimated resources and reserves, used as the basis for this report, were  reasonable.    





 






  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 Oakdale 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 Oakdale  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 a July  2021 volumetric model compiled by Smart Sand. This model was verified by BOYD and  plant production records were utilized 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 Oakdale operation was made by two of BOYD’s senior  geology and mining staff—both qualified persons and co-authors of this report—on  October 26, 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  Smart Sand volumetric model and 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 i - oakdale reserves\ch-2 - introduction.docx  





 






  3-1       JOHN  T.  BOYD  COMPANY   3.0 PROPERTY  OVERVIEW      3.1 Description and Location  Smart Sand’s Oakdale Mine surface frac sand mining operation is located on a  contiguous block of acres controlled by Smart Sand, in Monroe County, Wisconsin. The  subject property is less than 2 miles southwest of the town of Oakdale.    Geographically, the Oakdale frac sand processing plant is located at approximately  43°57'5.46” N latitude and 90°24'14.22” W longitude. Figure 3.1 illustrates the location of  the Oakdale Property and Mine.      3.2 History  The Smart Sand Oakdale Property has operated since 2012 and 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.    Oakdale’s Mine Safety and Health Administration (MSHA) identification number  (4703625) was assigned in 2012, with mining operations commencing in the third  quarter 2012.       3.3 Property Control  The Oakdale Property comprises approximately 1,256 contiguous acres and are 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.  No royalties are paid  to former landholders or mineral rights owners.  However, a royalty (commission) is paid  related to the sale of only 20/70-mesh sized products.    3.3.1 Mineral Ownership  Smart Sand owns 100% of the mineral rights to the entire subject property. The current  estimated mineable area is approximately 837 acres, or 67% of the total property, after  observing setbacks, right of ways, processing areas, and other non-mining acreage.   





 






 





 






  3-3       JOHN  T.  BOYD  COMPANY  3.3.2 Surface Ownership  Smart Sand owns 100% of the surface rights to the entire subject property.      3.4 Adjacent Properties  Wisconsin frac sand mining and processing activity occurs in three general  regions/districts: the Barron, Blair, and Oakdale districts. Smart Sand’s Oakdale  operation is in the Oakdale district. All three districts have seen extensive mining of the  sand deposits for purposes of producing frac sand. All currently existing frac sand mining  operations are located to the northwest of the Oakdale Mine.      3.5 Regulation and Liabilities  Mining and related activities for the Oakdale operation are regulated by five Federal  agencies, seven State of Wisconsin agencies, and three Local agencies.      3.6 Accessibility, Local Resources, and Infrastructure  Smart Sand’s Oakdale Mine is located near a number of small towns in southwestern  Wisconsin. Monroe County and the four surrounding counties have a combined  population of over 240,000 people, according to 2020 population estimates for the State  of Wisconsin.    General access to the Oakdale 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 State Route 12, with nearby access to Interstate 90/94.    The Oakdale Property has on-site rail access to the Canadian Pacific rail network, and  access to the Union Pacific rail network via an off-site transload facility located in Byron  Township, approximately 3 miles from the site.    The Oakdale operation has access to numerous airports as there are:    • Five International airports within a 240-mile radius of the site.  • Five Domestic airports within a 120-mile radius of the site.  • Six Local airports within a 60-mile radius of the site.    





 






  3-4       JOHN  T.  BOYD  COMPANY  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; the operation was issued a public water  system permit in 2015.      3.7 Physiography  The Oakdale Property is located in the Western Upland, a geographical region that  comprises the western half of Wisconsin. The Western Upland region is rugged and hilly  and is divided by streams and rivers. The region contains numerous rocky outcrops and  small caves.     The surface of the Smart Sand property is overlain by a veneer of poorly sorted glacial  till ranging from a few feet to over 30 ft in depth. Beneath the glacial fill is the Mt. Simon  Formation, one of the primary sources of NWS.    Surface topography within the property is predominately flat lying except for the  western-southwestern portion of the property where the surface elevation increases, and  a series of hills or bluffs are present (vertical relief of 125 ft to 150 ft).       3.8 Climate  For the Oakdale operation, average monthly high temperatures range from 28oF to 83oF,  with June, July, and August being the hottest months. Average monthly low  temperatures range from 9oF to 60oF, with the months of November, December,  January, February, and March exhibiting average lows at or below freezing (32oF).     Average annual rainfall is 3 in. with approximately 75 days of rain.  Average annual  snowfall is about 38 in. with approximately 23 days of snowfall.     Table 3.1 provides National Oceanic and Atmospheric Administration’s (NOAA) monthly  average climate data for Monroe County, Wisconsin.    Averages Units Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec High Temp oF 28 31 45 59 70 79 83 80 74 60 46 32 Low Temp oF 9 10 23 34 46 56 60 58 49 38 28 15 Rainfall inches 0.9 0.9 1.9 3.4 4.4 4.7 4.2 4.3 3.8 2.4 2.0 1.2 days 4 3 5 8 9 9 7 8 7 6 5 4 Snowfall inches 10.0 7.8 6.2 2.1 0.0 0.0 0.0 0.0 0.0 0.1 2.9 9.3 days 6 5 3 1 0 0 0 0 0 0 2 6 Source:  National Oceanic and Atmospheric Administration Table 3.1:  Climate Data for Oakdale Mine - Monroe County, Wisconsin 





 






  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, and can be observed in   Figure 4.1, on the following page, which presents the various stratigraphic rock units in  Wisconsin.    The Oakdale Property is underlain by the Mount Simon Formation, which on a regional  basis, ranges in thickness from 300 ft to over 2,000 ft (in Indiana). The Mount Simon  sands can be described as poorly consolidated, poorly sorted, fine-grained, quartz  sandstone. These sands are typically white in color, but can show a color change to a  yellowish-gray or to a grayish-red.    The Mount Simon Formation is of Cambrian age and underlying the Mount Simon is  pre-Cambrian age granite.       4.2 Local Stratigraphy  The surface of the Oakdale Property is overlain by a veneer of poorly sorted glacial till  ranging from a few feet to over 30 ft in depth. Beneath the glacial fill is the Mount Simon  Formation.    Within the property, the surface topography is predominately flat lying except for the  western-southwestern portion of the property where the surface elevation increases as a  series of hills or bluffs are present (vertical relief of 125 ft to 150 ft). The size consist of  the sand found in the above drainage bluff areas is a coarser mix in comparison to the  sands found in the alluvial material and in the in-place below drainage sand formations.     Structure of the Mount Simon Formation, on the Oakdale Property, appears to be flat  lying with no evidence of faulting or other geologic features. Total thickness of the Mount  Simon Formation contained on the property was not determined as the deepest drill hole  (240 ft in length) was stopped while still in the sandstone formation.   





 






 





 






  4-3       JOHN  T.  BOYD  COMPANY  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-Mount Simon 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  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 i - oakdale reserves\ch-4 - geology.docx  





 






  5-1       JOHN  T.  BOYD  COMPANY  5.0 EXPLORATION  DATA      5.1 Background  BOYD has been involved with Smart Sand’s Oakdale Property since mid-2011. At that  time, under BOYD’s supervision, three confirmatory drill holes were completed with frac  sand core samples submitted to Stim-Lab for API testing. BOYD used the results of this  program to confirm prior drilling data on the property and in combination with the prior  drill hole data, BOYD was able to map the frac sand deposit and calculate the initial  resource estimate for the Oakdale Property.       5.2 Exploration Procedures  5.2.1 Drilling and Sampling  Based on information provided to BOYD by Smart Sand, there have been six different  drilling campaigns on the Oakdale Property. The first drilling program commenced in  December 2010, and the last drilling program was completed in 2018.     From 2010 to 2018, a total of 37 holes were drilled, with 30 of the holes providing  sufficient sand core data that were utilized by Smart Sand in their reserve model and  subsequently by BOYD to verify the Smart Sand model. Seven of the drill holes were not  utilized for varying reasons, such as, insufficient core recovery, hole abandoned, BOYD  confirmatory drill holes (duplicated data), and no data provided. Table 5.1 provides  additional summary information on the drilling campaigns.      Number of Sand Cores Drill Holes Year Holes Drilled Data Used Thickness (ft) Not Used Reason Not Used 2010 2                  -            NA 2              Insufficient Core Recovery 2011 13                12             1,581              1              Hole Abandoned 2011-BOYD 3                  -            NA 3              Duplicated Results 2012 3                  2              330                 1              No data provided 2016 12                12             1,765              -             2018 4                  4              965                 -             Total 37                30             4,641              7               Table 5.1: Oakdale Mine Exploration Drilling Campaign Summary     BOYD reviewed the drilling and sampling methodologies utilized in the various  exploration campaigns at the Oakdale Property, as well as the equipment utilized, and  the sampling, logging, and field work performed. We note that methodologies and  





 






  5-2       JOHN  T.  BOYD  COMPANY  procedures indicate that the data obtained were carefully and professionally collected,  prepared, and documented in conformance with generally accepted industry standards.  BOYD opines that this work is thorough and complete for purposes of evaluating and  estimating frac sand resources and reserves on the Oakdale Property.    5.2.2 Frac Sand Quality Testing  Stim-Lab performed sieve analyses on numerous samples taken on the Oakdale  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 on several composite samples (DDH-1-10 drilled in 2010, a composite sample  of the three BOYD confirmation holes drilled in July 2011, and on the three “bluff” holes  drilled in 2012). The DDH-1 composite sample (comprised of sample material from the  depth range of 9 ft to 59 ft) had a full suite of tests, while the BOYD hole and “bluff” hole  only had sphericity, roundness, and crush resistance tests performed.    When the samples were received by Stim-Lab, the general initial preparation was for  each sample to be washed, dried (to remove moisture), and disassociated. After which,  a composite sieve analysis was conducted on each sample. Composite samples of the  anticipated frac sand product sizes, such as 20/40, 30/50, 40/70, and 70/140-mesh,  were created and tested per API RP 19C/ISO 13503-2 standards.     Results from the various testing performed on the DDH-1 sample from the Oakdale  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 Oakdale Property.      5.3 Laboratory Testing Results  The relatively uniform nature of the Mount Simon sand formation underlying the Oakdale  Property, combined with the results of independent laboratory testing (Stim-Lab)  indicated that the Oakdale Property was capable of producing a suite of 20/140-mesh  frac sand products that meet customer specifications for frac sand use.        





 






  5-3       JOHN  T.  BOYD  COMPANY  5.3.1 Grain Size Distribution  Grain size distribution was analyzed according to API RP 19C/ISO 13503-2, Section 6.   A table of weighted average grain size distribution of the in situ sand deposit, based on  laboratory testing results, is shown in Table 5.2.     Approximate In-Place Product Distribution     % Retained By Mesh Size % Product >30 30/50 50/140 <140 30/50 50/140 7           27         58         8           32         68          Table 5.2: Weighted Average Particle Size Distribution     The preceding table highlights the relative size mix of the sand found within the Oakdale  Property, indicating approximately 85% of the sand particles are concentrated between  the “passing 30-mesh” and “retained 140-mesh” size fraction. Moreover, of the  30/140-mesh sand faction, approximately 68% of the marketable product consists of the  finer 50/140-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 in the sample were reported.    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 DDH-1-10 composite sample gathered during the initial exploration was tested by  Stim-Lab for API RP 19C/ISO 13503-2 proppant sand characteristics. Testing was  performed on the 20/40, 40/70, and 70/140-mesh product sizes. The test results are  presented in Table 5.3.    DDH-1-10 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 0.8 ≥ 0.6 0.7 0.7 ≥ 0.6 Roundness 0.7 ≥ 0.6 0.7 0.6 ≥ 0.6 Acid Solubility (%) 0.7 ≤ 2.0 0.9 1.3 ≤ 3.0 Turbidity (NTU) 30 ≤ 250 16 16 ≤ 250 K-Value (000 psi) 7 - 9 12 - * Currently, 70/140-mesh proppant sand material does not have an API/ISO specification. Table 5.3:  Oakdale API/ISO Test Results for the DDH-1-10 Composite Sample     The composited sample testing suggested that the Oakdale Mine could produce frac  sands which meet minimum API/ISO recommended testing characteristics. BOYD notes  that the Oakdale operation has been selling various frac sand sized products to their  E&P and drilling services customers since 2012.       5.4 Data Verification  For purposes of this report, BOYD notes that we prepared the initial resource/reserve  report for the Oakdale Property in 2012 and have prepared updates (additions or  reductions) to the estimated resources and reserves tons through December 31, 2020.     The December 31, 2021, reserve estimate for the Oakdale Property is based on historic  drill hole data previously used by BOYD in the preparation of our prior reserve estimates.  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 i - oakdale reserves\ch-5 - exploration.docx  





 






  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 independently prepared estimates of in-place frac sand for the Oakdale Property  by performing the following tasks:    1. Available drilling logs and laboratory testing results were reviewed to check for  accuracy and to support development of the geologic model. The geologic database  utilized for modeling and estimation consists of results of 30 drillholes as the holes  from the first campaign were twinned by two campaigns in 2014 and 2016 for  verification purposes. Two of the drillholes from the initial drilling campaign were left  out, because the accurate locations of the drillholes were not identified in the  records. The existing drillhole data were complimented by an excavation sample  





 






  6-3       JOHN  T.  BOYD  COMPANY  collected more recently. Based on the data from the excavation sample and an  adjacent drillhole, a dummy hole was also added to the drillhole dataset to make  sure that overburden thickness is modeled properly. The geologic data were  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. 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 thusly:  a. There is minimal overburden material across the property. The top of the  mineable sand interval was defined as the current ground surface as provided by  several aerial topographic surveys conducted from the beginning of the project  until July of 2021. The local pit areas were included and for the areas where the  facilities are located, the original LIDAR data were used to define the ground  surface to get accurate reserves.  b. The bottom of the mineable sand interval was established at an 800 ft level.  Although the sand layer extends below the 800 ft level, due to waste material  stockpile space constraints, it is unlikely that mining the material below this level  is operationally feasible.  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 then reviewed the proposed mining regions identified by Smart Sand.  Estimation of the in-place frac sand resources for the Oakdale Property 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 inside of property lines.  b. Site infrastructures, including the railroad areas and plants were eliminated from  the resource areas.  5. A 75 degree highwall with a 30 ft catch bench for every 100 ft drop and a floor  elevation of 800 ft. In-place volumes for each of the proposed mining blocks were  calculated from the geologic model within Carlson Software. A dry, in-place, bulk  density of 125 pounds per cubic foot was used to calculate the in-place tonnage of  frac sand. It is based on a density study done by Smart Sand in 2019. The overall  mineable area was divided into West and East areas. West area includes two  sections with proven reserves (West_1 and West_2 pits) and three sections with  probable reserves (West_3, West_4, and West_5 pits). East area consists of two  sections with proven reserves (East_1 and East_2 pits) and one section with  probable reserves (East_3 pit).   





 






  6-4       JOHN  T.  BOYD  COMPANY  6. BOYD then compared the volumetric estimate derived from its geologic modeling to  that of the model provided by Smart Sand. The volumetric estimates from the two  models were reasonably similar. The Smart Sand volumetric estimate is therefore  utilized as the basis for this reserve estimate.     7. BOYD utilized provided production data 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 Oakdale Mine:    Table 6.1: Oakdale Property Drill Hole Spacing Parameters    Resource Classification   Spacing Requirement (ft)  (Nominal Maximum)  Measured  1,750  Indicated  3,500  Inferred  7,000    The Qualified Person has determined that all of the estimated frac sand resources within  the Oakdale 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 Oakdale Mine. Quantities of frac sand controlled by Smart Sand within  the defined boundaries of the Oakdale 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.    6.2.4 Validation  BOYD independently estimated in-place frac sand resources for the Oakdale Mine  based on the provided drilling, sampling, and testing data obtained by Smart Sand.  





 






  6-5       JOHN  T.  BOYD  COMPANY  Utilizing industry-standard grid modeling techniques we have estimated volumes of frac  sand indicated by such data. Based on the favorable comparison of our estimate to that  of Smart Sand’s well-documented geologic exploration and volumetric estimate, we are  of the opinion that Smart Sand’s estimate is 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 Oakdale 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:     The mining recovery factor utilized in the estimates assumes that approximately 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.   A 95% dry processing recovery, which accounts for losses in the dry processing  plant due to minor inefficiencies, was used in the estimate of the reserves. In  addition, for each of the mining sections, a wet plant recovery factor, which accounts  for removal of out-sized (i.e., larger than 30-mesh and smaller than 140-mesh) sand  was derived from sieve analysis results from drilling campaigns. The overall wet  plant recovery is 85.5%.     The overall product yield (after mining and processing losses) for the Oakdale Mine is  estimated at 77.1%. That is, for every 100 tons of in-place frac sand resources mined,  approximately 77.1 tons will be recovered and sold as product.    At the request of Smart Sand, BOYD utilized provided October – December 2021  production volumes to estimate the frac sand reserves for the Oakdale Mine as of      





 






  6-6       JOHN  T.  BOYD  COMPANY  December 31, 2021. The following table presents the estimated tons that are anticipated  to be produced at Smart Sand’s Oakdale Property.  Table 6.2: Mineable and Reserve Tons as of December 31, 2021    Oakdale Property In-Place Resource and Reserve Tons       Tons (000)        In-Place(a)    Run-of-Mine(b)    Product(c)    West Pit    202,854    192,305     156,210    East Pit    121,736    115,406     93,745         Total    324,590    307,712     249,955                            a. In-place tons calculated using an in situ dry density of 125 pcf.     b. ROM tons calculated using a 94.8% mining recovery.          c.  Product tons calculated using 95% dry plant and 85.5% wet plant   recoveries.       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 Oakdale Property frac sand deposit.    6.3.3 Frac Sand Reserve Estimate  Smart Sand’s estimated surface mineable frac sand reserves for the Oakdale Property  total 250 million saleable product tons, as of December 31, 2021.    The following table presents the estimated Reserve tons by product (size), that are  anticipated to be produced at Smart Sand’s Oakdale Property.    Table 6.3: Reserves as of December 31, 2021  Smart Sand Oakdale Property Reserves    Mesh Size    Tons (000) By Classification     Proven   Probable   Total  30/50   48,367  31,785  80,152  50/140   96,818  72,984  169,802       Total   145,186  104,769  249,955    The reported reserves include only frac sand which is reportedly owned as of December  31, 2021.        





 






 





 






  6-8       JOHN  T.  BOYD  COMPANY  The frac sand reserves of the Oakdale Mine are well-explored and defined. It is our  conclusion that over 58% of the stated reserves can be classified on the proven  reliability category (the highest level of assurance) with the reminder classified as  probable. It should be noted that we classified wetlands located at the reserve areas as  probable reserves.     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 Oakdale Property, and other frac sand operations in the area, have a  well-established history of mining and selling frac sand products into the Permian Basin  energy fields as well as other regions. 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 i - oakdale reserves\ch-6 - mineral resources and reserves.docx  





 






  7-1       JOHN  T.  BOYD  COMPANY  7.0 MINING  OPERATIONS      7.1 Mining Method  The Oakdale Mine property is broadly separated into two sections, the east section and  the west section. The property is bisected by the loadout rail spur and access roads  entering the site. The office, process plants and unit train loadouts are generally located  within the interior of the property.     The mine has two distinct mining schemes that are employed at the property. The  eastern side of the property generally consists of lowlands with some interspersed  wetlands. This area served as the initial mining area for approximately the first five to six  years of the operation. Typical excavator and articulated truck method is employed in a  series of benches downward. There is very little overburden overlying the sand and the  overburden that is stripped is utilized in berms or hauled to a dump area. The sand is  drilled and blasted on a very wide pattern to “fluff” or disaggregate the sand grains. The  mined sand is crushed then hauled to a wet process plant located on the eastern side of  the property for processing. The pits are continuously dewatered, and the water is  pumped into a holding pond at the northeast area of the property prior to sampling and  discharging.    Currently, and for the immediate future, the majority of the ROM sand is mined from the  western side of the property. Here, the “bluffs” are mined which generally lie above  ground level to approximately 970 ft msl in elevation. Typical of other Wonewac  Formation “bluff” mines, there is little overburden and following vegetation grubbing a  bench is drilled and blasted in approximate 50 ft high benches progressing from the  highest elevation downward. Excavators load articulated trucks which haul the ROM  material to a primary crusher located on the western side of the property. Figure 7.1  illustrates the benching and primary crusher on the west side of the property.        





 






  7-2       JOHN  T.  BOYD  COMPANY  The current mine plan and exploration drilling have projected the pit(s) to extend down to  a basement elevation of approximately 800 ft msl.        Figure 7.1: West Side “bluff” Mining at Oakdale    Typically, blasting occurs twice per week in the pit. The drilling and blasting are  contracted to a third-party vendor.       7.2  Mine Schedule, Equipment, and Staffing  The entire operation conforms to a 2-2 3-2 2-3 rotating shift schedule which uses four  teams (crews) and two 12-hour shifts to provide 24/7 coverage. Personnel work an  average 42 hours per week. The quarry pit generally operates on 12 hours daily utilizing  this rotation for the entire operation.    The primary pit mobile equipment involved in sand excavation includes:    • Four Cat 988 loaders.  • Two Cat 982 loaders.  





 






  7-3       JOHN  T.  BOYD  COMPANY  • Eight Volvo A45 haul trucks.  • Three Cat 745 haul trucks.  • One Cat 390 excavator.  • One Cat 349 excavator.  • One Volvo 480 excavator.    In addition, there are numerous support vehicles (maintenance trucks, skid steers, water  truck, etc.) to complement the fleet.      7.3 Mine Production  7.3.1 Historical Mine Production  Oakdale predominantly produces 30/50-mesh and 50/140-mesh (100-mesh) frac sand  products for sale to destinations served by the Canadian Pacific and Union Pacific  railways. All of the finished product is railed to the final destination.    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  5,133  2020*  2,765  2021  5,760 est      * Included Covid period.    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)     3,447    3,447    3,447    3,447    3,447    The average process yield is reported to be 81.2%; as such, 3.5 million ROM tons are  expected to produce approximately 2.8 million tons of finished product.        





 






  7-4       JOHN  T.  BOYD  COMPANY  7.3.3  Expected Mine Life  As of December 31, 2021, the reserve estimate for the Oakdale Mine is estimated at  250 million saleable tons. Projecting an average yearly sales volume of 2.8 million tons  per year, the operation has a LOM of approximately 90 years.       Figure 7.2: Oakdale Proposed Mine Plan    The illustration above depicts the proposed LOM plan for the Oakdale Mine. The LOM  plan assumes a steady-state sales volume in the 2.8 to 3.0 million product tons per year  range for approximately 85 years through year 2106. 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 Oakdale 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  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 i - oakdale reserves\ch-7 - mining operations.docx  





 






  8-1       JOHN  T.  BOYD  COMPANY  8.0 PROCESSING  OPERATIONS    8.1 Overview   The Oakdale plant area is actually a series of two wash plants, three dry plants, and  three rail loadouts that are centered around the railroad tracks in the interior of the  property. The original layout (Wet 1, Dry 1, Loadout 1) was constructed in 2012. An  additional dry plant (Dry 2) was subsequently added which was fed by Wet 1. The most  recent expansion in Q1 2018 included a new wet plant, dry plant, and loadout on the  west side of the rail loadout (Wet 2, Dry 3, Loadout 3). This newer plant is where the  majority of the sand is now processed and loaded. The adjacent mining pit essentially  excavates the higher “bluff” sand material. The east side plants are utilized for  incremental production as a “peaking” type facility when demand for product cannot be  satisfied from the west side facility. Figure 8.1 illustrates the layout and location of the  process and loadout facilities.     The overall complex has an approximate annual finished product capacity of 5.5 million  tons.      Figure 8.1 Oakdale Processing Plants and Rail Loadouts        





 






  8-2       JOHN  T.  BOYD  COMPANY  There are three major process components which are typical in the frac sand industry. At  the Oakdale operation these components include:    • Wet Process Plants- These facilities include the west plant (Wet 2) and the east plant  (Wet 1). ROM material from the pit is hauled to a primary crusher to reduce oversize  before entering the wet plant. Sand that is greater than 30-mesh and less than  140-mesh including silt material is removed in a typical screen/hydrosizer/cycone wet  classification system. The resulting 30 x 140-mesh WIP material is stockpiled and  decanted before being fed into the dry plants. The silt and fine waste (<140-mesh) is  captured in a series of ponds. Plant process water is recycled from these ponds. The  plants have a nominal capacity of approximately 3 million tons per year or 650 tons  per hour (tph) of WIP material. The west plant produces the majority of the sand and  the east plant is utilized during periods of high demand.  • Dry Process Plants- The damp 30 x 140-mesh material produced by the wet process  plant is loaded into a feed hopper and metered into one of five Carrier fluid bed  dryers. Each dryer has a nominal finished capacity of approximately 1.1 million tons  per year. Each dryer operates in the 220 tph to 250 tph range of feed input  depending on moisture content. Three dryers are located on the east side serving  the dry plants and two dryers are located within the west plant. Once the sand is  dried it is separated by Rotex multi-deck screens into finished product sizes. The  material is then conveyed to storage silos before being loaded predominantly into  railcars. The plant produces mainly 30 x 50-mesh, 40 x 70-mesh, and 70 x 140-mesh  (100-mesh) products. Figure 8.2 illustrates the east side wet plant and a dry plant.    Figure 8.2  East Wet 1 and Dry 2  





 






  8-3       JOHN  T.  BOYD  COMPANY  • Storage and Loadout- Finished products are stored in 13 product silos (6 at west  plant, 7 at east plants). Approximate finished storage capacity of all the silos is  36,000 tons. There are three on-site rail loadouts that service the Canadian Pacific  Railway. One loadout is supplied directly by the west plant and the other two  loadouts are located on the east side at Dry 1 and Dry 2. There is a nearby fourth rail  loadout that services the Union Pacific Railway. Finished product is hauled to this  facility by truck. The on-site rail spur is capable of loading unit train shipments and  the off- site loadout is a manifest loadout. Figure 8.3 illustrates the two east side  loadouts.    Figure 8.3  East Side Rail Loading Facilities    The entire complex is staffed by approximately 160 employees at the site. This number  can fluctuate based on product demand.      8.2 Conclusion  Based on our review of the Oakdale 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 i - oakdale reserves\ch-8 - processing operations.docx  





 






  9-1       JOHN  T.  BOYD  COMPANY  9.0 MINE  INFRASTRUCTURE    The Oakdale Mine is serviced by three phase power that is routed along County Road  CA and into the plant at the southern end of the property. The pipeline providing natural  gas supply for the drying equipment is also routed along this corridor. Plant process  water is supplied by surface water retention ponds and a backup drilled high capacity  well if needed. Additionally, the wash process water is recycled after fines are removed  via settling in a 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 holding tanks and disposed of on a regular basis. Potable water is provided  by a public water system.     On-site facilities include a guard house, office, shop, and a quality laboratory located in  the dry process plants. The operation employs approximately 160 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 Oakdale Mine’s near-term and long-term  operating plans. Substantial excess production capacity is installed as the nameplate  capacity of the facility is approximately 5.5 million tons per year with current yearly sales  projected in the 2.8 to 3.0 million tons per year range.    q:\eng_wp\3555.021 - ss s-k 1300\wp\rpt\section i - oakdale 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-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.      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 I - Oakdale Reserves\CH-10 - Market Analysis.docx  





 






  11-1       JOHN  T. BOYD  COMPANY  11.0 CAPITAL,  REVENUES,  AND  OPERATING  COSTS      11.1 Introduction  Smart Sand commenced mining and processing operations at the Oakdale Mine in July  2012. Smart Sand provided BOYD with production, sales, CapEx, and financial data for  the years 2019, 2020, and September YTD 2021.    We remind the reader of the significant effect the COVID-19 pandemic had on drilling  and fracking activities in the oil & gas industry in 2020.      11.2 Historical Capital Expenditures  The Oakdale operation’s CapEx, for the years 2019, 2020, and 2021 (September YTD),  is presented in Table 11.1 below.    CapEx ($000)* Year 2019 10,527                         Year 2020 1,737                           Sep YTD 2021 1,962                              Total 14,227                          *Oakdale 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 Revenues  Table 11.2 presents Smart Sand’s historical sales data for the years 2019, 2020, and  2021 (September YTD).     Year 2019 Year 2020 SepYTD2021 Tons Sold (000) 2,462            1,779            1,752             Total Revenues ($000) (a) 103,865        67,827          70,546           Average Sales Price ($ per ton sold) 42.19            38.14            40.26             *Revenues are a mix of point of sale, and as such are not all mine gate prices. Table 11.2:  Historical Sales Statistics     





 






  11-2       JOHN  T. BOYD  COMPANY  Figure 11.1 presents the product sizes sold as a percent of total tons sold. About 90% of  the tons sold consists of the finer size 40/70-mesh and 100-mesh products with about  10% 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    Based on the statistics presented in Table 11.2 above, the average realization ranges  from a low of $38.14 per ton sold to a high of $42.19 per ton sold. The revenues and  average sales price are not 100% free-on-board (FOB) mine gate but represent a mix of  point-of-sale revenues.    Smart Sand provided BOYD with historical average mine gate pricing (Table 11.3),  which eliminates the additional revenue received for transportation services from the  mine gate to the customer’s delivery point.     Average Mine Gate Pricing  - $ per ton sold Year 2019 Year 2020 Year 2021 25.11 22.89 20.00 Table 11.3:  Historical Average Mine Gate Pricing     Over the past three years, the average mine gate prices have decreased from $25.11  per ton in Year 2019 to $20.00 per ton in Year 2021 (September YTD).       0% 10% 20% 30% 40% 50% 60%  Year 2019  Year 2020  Sep YTD 2021 Product Size as a % of Total Tons Sold  30/50-Mesh and Coarser  40/70-Mesh  100-Mesh 





 






  11-3       JOHN  T. BOYD  COMPANY  The Oakdale operation has both contract and spot sales. Figure 11.2 presents annual  contract and spot sales as a percent of total tons sold for the years 2019, 2020, and  2021 (September YTD).       Figure 11.2: Oakdale Contract and Spot Sales    Oakdale’s customer portfolio primarily consists of E&P and Well Services Companies.  Figure 11.3 presents Top 5 Customers (as a group) based on total revenues for the  years 2019, 2020, and 2021 (September YTD).      Figure 11.3: Oakdale Top 5 Customers (Grouped) as a Percentage of Total Revenues    Table 11.4 presents Oakdale’s historical cash operating costs for the years 2019, 2020,  and 2021(September YTD). Operating costs represent the costs incurred associated   0% 20% 40% 60% 80% 100%  Year 2019  Year 2020  Sep YTD 2021 Contract and Spot Sales as a % of Total Revenues Contract Spot 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%  Year 2019  Year 2020  Sep YTD 2021 Top 5 Customers as a % of Total Revenues 





 






  11-4       JOHN  T. BOYD  COMPANY  with the mining, ongoing reclamation, wet processing, dry processing, on-site rail  loadout, and other related costs.    $ (000) $ per ton sold Cash Operating Costs: Year 2019 Year 2020 SepYTD2021 Year 2019 Year 2020 SepYTD2021 Wages and benefits 15,837       10,577       8,012               6.43            5.95            4.54                   Excavation 5,297          3,135          3,640               2.15            1.76            2.06                   Utilities 7,622          4,600          5,029               3.10            2.59            2.85                   Equipment 5,834          3,493          2,480               2.37            1.96            1.41                   Maintenance 3,863          2,148          1,984               1.57            1.21            1.12                   Other costs 2,360          2,410          1,475               0.96            1.36            0.84                      Total Cash Operating Costs 40,813       26,362       22,620             16.62          14.82          12.81                Note: Rounding Errors Table 11.4:  Historical Cost of Production     Based on the statistics presented in Table 11.4 above, total cash operating costs  declined from $16.62 per ton sold in 2019 to $12.81 per ton sold in 2021.       11.4 Projected Production, Sales, and Costs  Smart Sand provided BOYD with production, sales, and cost projections for the Oakdale  operation. We reviewed and adjusted the cost projections based on current year and  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 11.5 below, presents frac sand production projections for the years 2022 through  2026.    Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 ROM Production (000) 3,447        3,447        3,447        3,447        3,447         Wet Plant Feed 3,447        3,447        3,447        3,447        3,447            Processing Recovery (%) 85.5          85.5          85.5          85.5          85.5           Wet Plant Product 2,947        2,947        2,947        2,947        2,947         Dry Plant Feed 2,947        2,947        2,947        2,947        2,947            Processing Recovery (%) 95.0          95.0          95.0          95.0          95.0           Dry Plant Product 2,800        2,800        2,800        2,800        2,800         Table 11.5: Oakdale Production Projections     Annual forecasted ROM production is based on the dry plant producing 2.8 million tons  per year of saleable product after a processing (wet and dry processing plant) loss of  





 






  11-5       JOHN  T. BOYD  COMPANY  approximately 18.8%, as discussed in Chapter 6. Forecasted dry processing plant  production is within the operation’s current infrastructure capacities and capabilities.  Table 11.6 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) 2,800        2,800        2,800        2,800        2,800         30/50-Mesh 898           898           898           898           898            50/140-Mesh 1,902        1,902        1,902        1,902        1,902         Revenues ($000) 56,000      56,000      56,000      56,000      56,000       Product Pricing ($ per ton sold) Average Price for all products 20.00        20.00        20.00        20.00        20.00         Table 11.6: Oakdale Sales Projections     Sales of the projected dry processing plant product are about 32% for 30/50-mesh  product and approximately 68% for 50/140-mesh product and are based on reserve  product size data provided to BOYD by Smart Sand.     The sales price forecast presented in Table 11.6 above is based on Smart Sand’s  current year (2021) mine gate pricing discussed above. BOYD opines that these are  reasonable price projections.    11.4.2 Operating Cost Projections  Table 11.7 below, presents the cash cost projections for the years 2022 through 2026.  These projections were based on a review of historic costs, and SG&A data provided to  BOYD by Smart Sand, as well as other information.     Summary Cash Cost of Goods Sold ($000)        Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 Cash Operating Expense Wages and benefits 10,800      10,800      10,800      10,800      10,800       Excavation 5,771        5,771        5,771        5,771        5,771         Utilities 7,974        7,974        7,974        7,974        7,974         Equipment 3,307        3,307        3,307        3,307        3,307         Maintenance 3,147        3,147        3,147        3,147        3,147         Other costs 2,400        2,400        2,400        2,400        2,400            Subtotal Cash Operating Expense 33,399      33,399      33,399      33,399      33,399       Royalty 698           698           698           698           698            SG&A 13,944      13,944      13,944      13,944      13,944       Final Reclamation Escrow 221           221           221           221           221               Total Cash Cost of Goods Sold 48,262      48,262      48,262      48,262      48,262       Table 11.7: Annual Cash Cost Projections     





 






  11-6       JOHN  T. BOYD  COMPANY  BOYD notes that the Oakdale property is owned in fee, and the royalty expense is not  paid to a former landowner/mineral owner. The royalty is on only the sales of  20/70-mesh sized products.    Smart Sand provided BOYD with the current estimated final reclamation cost  ($19.7 million) of the Oakdale operation/site. BOYD calculated a rate of approximately  $0.08 per ton sold to recognize the current estimated cost over the life of the operation.    Table 11.8 below, presents the above table’s cost projections on a cost per ton sold  basis for the years 2022 through 2026.    Summary Cash Cost of Goods Sold ($ per ton sold)           Year 2022 Year 2023 Year 2024 Year 2025 Year 2026 Cash Operating Expense: Wages and benefits 3.86          3.86          3.86          3.86          3.86           Excavation 2.06          2.06          2.06          2.06          2.06           Utilities 2.85          2.85          2.85          2.85          2.85           Equipment 1.18          1.18          1.18          1.18          1.18           Maintenance 1.12          1.12          1.12          1.12          1.12           Other costs 0.86          0.86          0.86          0.86          0.86              Subtotal Cash Operating Expense 11.93        11.93        11.93        11.93        11.93         Royalty 0.25          0.25          0.25          0.25          0.25           SG&A 4.98          4.98          4.98          4.98          4.98           Final Reclamation Escrow 0.08          0.08          0.08          0.08          0.08              Total Cash Cost of Goods Sold 17.24        17.24        17.24        17.24        17.24         Table 11.8: 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 $4 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 i - oakdale reserves\ch-11 - capital and operating costs - oakdale.docx  





 






  12-1       JOHN  T. BOYD  COMPANY  12.0 ECONOMIC  ANALYSIS      12.1 Introduction  Cash flow projections for the Oakdale 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 estimate discussed in Chapter 6 of this report.  BOYD estimates that the  Oakdale operation reserves would be depleted in Year 2111.    • Forecasted revenues at the on-site loadout (mine gate) is based on sales of 30/50,  40/70 and 70/140-mesh size products to be delivered to its customer base in the  various energy basins.    • Operating and Other Costs (as discussed in Chapter 11) include:  − Employee wages and benefits.  − Excavation.  − Utilities.  − Equipment.  − Maintenance.  − Other Operating Expenses.  − Royalty.   − Selling, General and Administrative.    • Reclamation costs include:  − Final reclamation cost to reclaim the Oakdale operation/site.    • Capital Expenditures (as discussed in Chapter 11) include:  − Sustaining/Maintenance.    • Taxes are based on:  − Federal Business Income Tax Rate of 21%.  − Wisconsin State Income Tax Rate of 7.9%.    • Adjustments used to determine After-Tax cash flows:  − Current depreciation expense was provided by Smart Sand for the Oakdale  operation.  − Depreciation expense for new fixed assets (from sustaining/maintenance CapEx)  are 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       JOHN  T. BOYD  COMPANY  12.2 Economic Analysis  BOYD prepared an economic analysis, as of January 1, 2022, for the Oakdale 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, cost of goods sold, CapEx and other  estimates discussed above for the Oakdale operation.    Summary Cash Flow  Statement ($ 000)       2022 2032 2042 2052 2062 2072 2082 2092 2102 to 2031 to 2041 to 2051 to 2061 to 2071 to 2081 to 2091 to 2101 to 2111 Total Total Tons Sold (000) 28,000   28,000   28,000   28,000   28,000   28,000   28,000   28,000   25,955   140,000     Revenues 560,000 560,000 560,000 560,000 560,000 560,000 560,000 560,000 519,100 2,800,000  COGS 482,617 484,017 485,417 486,817 488,217 489,617 491,017 492,417 461,556 2,427,083  CapEx 40,000   40,000   40,000   40,000   40,000   40,000   40,000   40,000   34,000   200,000        Net Pre-Tax Cash Flow 37,383   35,983   34,583   33,183   31,783   30,383   28,983   27,583   23,544   172,917     Federal and State Income Taxes -         -         -         7,352     9,185     8,781     8,376     7,972     6,868     16,537          After-Tax Net Cash Flow 37,383   35,983   34,583   25,832   22,598   21,603   20,607   19,612   16,675   156,380     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.    The pre-tax DCF-NPV ranges from approximately $26.4 million to $38.3 million. The  after-tax DCF-NPV ranges from approximately $26.3 million to $37.8 million. Table 12.2  summarizes the results of the pre-tax and after-tax DCF-NPV analyses:    DCF-NPV ($ 000)    10% 12% 15% Pre-Tax 38,282      32,382      26,397       After-Tax 37,836      32,171      26,324       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.    





 






TABLE  12.3 PRE-TAX  AND  AFTER-TAX  CASH  FLOW  ANALYSIS SMART  SAND  -  OAKDALE  OPERATION Monroe  County,  Wisconsin Prepared For             SMART  SAND,  INC             By  John T. Boyd Company Mining and Geological Consultants January 2022 2032 2042 2052 2062 2072 2082 2092 2102 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 Total Production Statistics (Tons 000): ROM Production off Fee Property 3,447    3,447    3,447    3,447    3,447    3,447    3,447    3,447    3,447    3,447    34,470    34,470    34,470    34,470    34,470    34,470    34,470    31,952    307,712       Processing Statistics (Tons 000): Wet Plant Feed 3,447    3,447    3,447    3,447    3,447    3,447    3,447    3,447    3,447    3,447    34,470    34,470    34,470    34,470    34,470    34,470    34,470    31,952    307,712          Processing Recovery (%) 85.5      85.5      85.5      85.5      85.5      85.5      85.5      85.5      85.5      85.5      85.5         85.5         85.5         85.5         85.5         85.5         85.5         85.5         85.5             Wet Plant Product 2,947    2,947    2,947    2,947    2,947    2,947    2,947    2,947    2,947    2,947    29,474    29,474    29,474    29,474    29,474    29,474    29,474    27,321    263,110       Dry Plant Feed 2,947    2,947    2,947    2,947    2,947    2,947    2,947    2,947    2,947    2,947    29,474    29,474    29,474    29,474    29,474    29,474    29,474    27,321    263,110          Processing Recovery (%) 95.0      95.0      95.0      95.0      95.0      95.0      95.0      95.0      95.0      95.0      95.0         95.0         95.0         95.0         95.0         95.0         95.0         95.0         95.0             Dry Plant Product 2,800    2,800    2,800    2,800    2,800    2,800    2,800    2,800    2,800    2,800    28,000    28,000    28,000    28,000    28,000    28,000    28,000    25,955    249,955          Overall Processing Recovery (%) 81.2      81.2      81.2      81.2      81.2      81.2      81.2      81.2      81.2      81.2      81.2         81.2         81.2         81.2         81.2         81.2         81.2         81.2         81.2             Sales and Financial Data: Saleable Product Tons Sold (000): 30/50-Mesh 898       898       898       898       898       898       898       898       898       898       8,980       8,980       8,980       8,980       8,980       8,980       8,980       8,321       80,161         50/140-Mesh 1,902    1,902    1,902    1,902    1,902    1,902    1,902    1,902    1,902    1,902    19,020    19,020    19,020    19,020    19,020    19,020    19,020    17,634    169,794          Total Tons Sold 2,800    2,800    2,800    2,800    2,800    2,800    2,800    2,800    2,800    2,800    28,000    28,000    28,000    28,000    28,000    28,000    28,000    25,955    249,955       Product Pricing ($ per ton) 30/50-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           50/140-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           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           Revenues ($ 000) 30/50-Mesh 17,960  17,960  17,960  17,960  17,960  17,960  17,960  17,960  17,960  17,960  179,600  179,600  179,600  179,600  179,600  179,600  179,600  166,420  1,603,220   50/140-Mesh 38,040  38,040  38,040  38,040  38,040  38,040  38,040  38,040  38,040  38,040  380,400  380,400  380,400  380,400  380,400  380,400  380,400  352,680  3,395,880      Total Sales Revenues 56,000  56,000  56,000  56,000  56,000  56,000  56,000  56,000  56,000  56,000  560,000  560,000  560,000  560,000  560,000  560,000  560,000  519,100  4,999,100   COGS ($ 000): Cash Operating Expense: Wages and benefits 10,800  10,800  10,800  10,800  10,800  10,800  10,800  10,800  10,800  10,800  108,000  108,000  108,000  108,000  108,000  108,000  108,000  102,600  966,600       Excavation 5,771    5,771    5,771    5,771    5,771    5,771    5,771    5,771    5,771    5,771    57,708    57,708    57,708    57,708    57,708    57,708    57,708    53,493    515,157       Utilities 7,974    7,974    7,974    7,974    7,974    7,974    7,974    7,974    7,974    7,974    79,744    79,744    79,744    79,744    79,744    79,744    79,744    73,920    711,872       Equipment 3,307    3,307    3,307    3,307    3,307    3,307    3,307    3,307    3,307    3,307    33,070    33,070    33,070    33,070    33,070    33,070    33,070    31,417    295,977       Maintenance 3,147    3,147    3,147    3,147    3,147    3,147    3,147    3,147    3,147    3,147    31,472    31,472    31,472    31,472    31,472    31,472    31,472    29,173    280,949       Other costs 2,400    2,400    2,400    2,400    2,400    2,400    2,400    2,400    2,400    2,400    25,400    26,800    28,200    29,600    31,000    32,400    33,800    33,182    264,382          Total Cash Operating Expense 33,399  33,399  33,399  33,399  33,399  33,399  33,399  33,399  33,399  33,399  335,394  336,794  338,194  339,594  340,994  342,394  343,794  323,785  3,034,937      $ per ROM ton 9.69      9.69      9.69      9.69      9.69      9.69      9.69      9.69      9.69      9.69      9.73         9.77         9.81         9.85         9.89         9.93         9.97         10.13       9.86                $ per ton sold 11.93    11.93    11.93    11.93    11.93    11.93    11.93    11.93    11.93    11.93    11.98       12.03       12.08       12.13       12.18       12.23       12.28       12.47       12.14           Royalty 698       698       698       698       698       698       698       698       698       698       6,976       6,976       6,976       6,976       6,976       6,976       6,976       6,467       62,276            $ per ton sold 0.25      0.25      0.25      0.25      0.25      0.25      0.25      0.25      0.25      0.25      0.25         0.25         0.25         0.25         0.25         0.25         0.25         0.25         0.25             S,G&A 13,944  13,944  13,944  13,944  13,944  13,944  13,944  13,944  13,944  13,944  139,440  139,440  139,440  139,440  139,440  139,440  139,440  129,256  1,244,776   $ per ton sold 4.98      4.98      4.98      4.98      4.98      4.98      4.98      4.98      4.98      4.98      4.98         4.98         4.98         4.98         4.98         4.98         4.98         4.98         4.98             Final Reclamation Escrow 221       221       221       221       221       221       221       221       221       221       2,206       2,206       2,206       2,206       2,206       2,206       2,206       2,049       19,700         $ per ton sold 0.08      0.08      0.08      0.08      0.08      0.08      0.08      0.08      0.08      0.08      0.08         0.08         0.08         0.08         0.08         0.08         0.08         0.08         0.08             Total COGS 48,262  48,262  48,262  48,262  48,262  48,262  48,262  48,262  48,262  48,262  484,017  485,417  486,817  488,217  489,617  491,017  492,417  461,556  4,361,689   $ per ton sold 17.24    17.24    17.24    17.24    17.24    17.24    17.24    17.24    17.24    17.24    17.29       17.34       17.39       17.44       17.49       17.54       17.59       17.78       17.45           EBITDA 7,738    7,738    7,738    7,738    7,738    7,738    7,738    7,738    7,738    7,738    75,983    74,583    73,183    71,783    70,383    68,983    67,583    57,544    637,411       $ per ton sold 2.76      2.76      2.76      2.76      2.76      2.76      2.76      2.76      2.76      2.76      2.71         2.66         2.61         2.56         2.51         2.46         2.41         2.22         2.55             CapEx ($ 000): Total CapEx 4,000    4,000    4,000    4,000    4,000    4,000    4,000    4,000    4,000    4,000    40,000    40,000    40,000    40,000    40,000    40,000    40,000    34,000    354,000       Net Pre-Tax Cash Flow 3,738    3,738    3,738    3,738    3,738    3,738    3,738    3,738    3,738    3,738    35,983    34,583    33,183    31,783    30,383    28,983    27,583    23,544    283,411          Federal and State Income Taxes -        -        -        -        -        -        -        -        -        -        -           -           7,352       9,185       8,781       8,376       7,972       6,868       48,534         After-Tax Net Cash Flow 3,738    3,738    3,738    3,738    3,738    3,738    3,738    3,738    3,738    3,738    35,983    34,583    25,832    22,598    21,603    20,607    19,612    16,675    234,877       DCF-NPV Analysis: Pre-Tax Discounted Cash Flows at 12% 3,532    3,154    2,816    2,514    2,245    2,004    1,790    1,598    1,427    1,274    6,928       2,144       662          204          63            19            6              2              32,382         Cumulative Pre-Tax Discounted Cash Flows at 12% 3,532    6,686    9,502    12,017  14,262  16,266  18,056  19,653  21,080  22,354  29,282    31,426    32,088    32,292    32,355    32,374    32,380    32,382     After-Tax Dis\counted Cash Flows at 12% 3,532    3,154    2,816    2,514    2,245    2,004    1,790    1,598    1,427    1,274    6,928       2,144       536          145          45            14            4              1              32,171         Cumulative After-Tax Discounted Cash Flows at 12% 3,532    6,686    9,502    12,017  14,262  16,266  18,056  19,653  21,080  22,354  29,282    31,426    31,962    32,107    32,152    32,165    32,170    32,171     12-3 JO H N   T.  B O Y D  C O M PA N Y   





 






  12-4       JOHN  T. BOYD  COMPANY  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 Oakdale 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%  base revenues; the corresponding 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% base  costs. BOYD notes that the royalty expense in COGS was not adjusted (kept constant)  in the sensitivity analysis.    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% 29.0 58.4 87.8 117.1 146.5 175.8 205.2 234.6 263.9 -15.0% 2.0 31.3 60.7 90.1 119.4 148.8 178.2 207.5 236.9 -10.0% (25.1) 4.3 33.7 63.0 92.4 121.7 151.1 180.5 209.8 -5.0% (52.1) (22.8) 6.6 36.0 65.3 94.7 124.1 153.4 182.8 0.0% (79.2) (49.8) (20.4) 8.9 38.3 67.6 97.0 126.4 155.7 5.0% (106.2) (76.9) (47.5) (18.1) 11.2 40.6 70.0 99.3 128.7 10.0% (133.3) (103.9) (74.5) (45.2) (15.8) 13.5 42.9 72.3 101.6 15.0% (160.3) (130.9) (101.6) (72.2) (42.9) (13.5) 15.9 45.2 74.6 20.0% (187.4) (158.0) (128.6) (99.3) (69.9) (40.6) (11.2) 18.2 47.5 Revenues CO GS  a nd  C ap Ex 





 






  12-5       JOHN  T. BOYD  COMPANY  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% 24.6 49.3 74.0 98.7 123.4 148.1 172.8 197.5 222.2 -15.0% 1.9 26.6 51.3 76.0 100.6 125.3 150.0 174.7 199.4 -10.0% (20.9) 3.8 28.5 53.2 77.9 102.6 127.3 152.0 176.7 -5.0% (43.6) (18.9) 5.8 30.4 55.1 79.8 104.5 129.2 153.9 0.0% (66.4) (41.7) (17.0) 7.7 32.4 57.1 81.8 106.5 131.2 5.0% (89.1) (64.5) (39.8) (15.1) 9.6 34.3 59.0 83.7 108.4 10.0% (111.9) (87.2) (62.5) (37.8) (13.1) 11.6 36.3 61.0 85.6 15.0% (134.7) (110.0) (85.3) (60.6) (35.9) (11.2) 13.5 38.2 62.9 20.0% (157.4) (132.7) (108.0) (83.3) (58.6) (33.9) (9.2) 15.4 40.1 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% 20.1 40.1 60.1 80.2 100.2 120.2 140.2 160.2 180.2 -15.0% 1.7 21.7 41.7 61.7 81.7 101.8 121.8 141.8 161.8 -10.0% (16.8) 3.2 23.3 43.3 63.3 83.3 103.3 123.3 143.4 -5.0% (35.2) (15.2) 4.8 24.8 44.8 64.9 84.9 104.9 124.9 0.0% (53.7) (33.7) (13.6) 6.4 26.4 46.4 66.4 86.5 106.5 5.0% (72.1) (52.1) (32.1) (12.1) 8.0 28.0 48.0 68.0 88.0 10.0% (90.6) (70.5) (50.5) (30.5) (10.5) 9.5 29.5 49.6 69.6 15.0% (109.0) (89.0) (69.0) (49.0) (28.9) (8.9) 11.1 31.1 51.1 20.0% (127.5) (107.4) (87.4) (67.4) (47.4) (27.4) (7.3) 12.7 32.7 Revenues CO G S  an d  Ca pE x     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% 29.0 56.4 81.4 104.9 126.5 147.4 168.2 189.1 210.0 -15.0% 2.0 31.2 58.4 83.3 106.6 128.0 148.8 169.7 190.6 -10.0% (25.1) 4.3 33.5 60.4 85.1 108.2 129.4 150.3 171.2 -5.0% (52.1) (22.8) 6.6 35.7 62.4 86.9 109.8 130.9 151.8 0.0% (79.2) (49.8) (20.4) 8.9 37.9 64.3 88.7 111.4 132.4 5.0% (106.2) (76.9) (47.5) (18.1) 11.2 40.0 66.3 90.5 112.9 10.0% (133.3) (103.9) (74.5) (45.2) (15.8) 13.5 42.2 68.2 92.3 15.0% (160.3) (130.9) (101.6) (72.2) (42.9) (13.5) 15.9 44.3 70.1 20.0% (187.4) (158.0) (128.6) (99.3) (69.9) (40.6) (11.2) 18.2 46.4 Revenues CO G S  an d  Ca pE x          





 






  12-6       JOHN  T. BOYD  COMPANY  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% 24.6 48.2 69.9 90.2 108.5 126.1 143.6 161.2 178.7 -15.0% 1.9 26.5 49.9 71.5 91.6 109.7 127.3 144.8 162.4 -10.0% (20.9) 3.8 28.4 51.6 73.1 93.0 110.9 128.5 146.0 -5.0% (43.6) (18.9) 5.8 30.3 53.3 74.6 94.3 112.1 129.7 0.0% (66.4) (41.7) (17.0) 7.7 32.2 55.0 76.2 95.6 113.3 5.0% (89.1) (64.5) (39.8) (15.1) 9.6 34.0 56.7 77.8 96.9 10.0% (111.9) (87.2) (62.5) (37.8) (13.1) 11.6 35.9 58.4 79.3 15.0% (134.7) (110.0) (85.3) (60.6) (35.9) (11.2) 13.5 37.7 60.1 20.0% (157.4) (132.7) (108.0) (83.3) (58.6) (33.9) (9.2) 15.4 39.5 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% 20.1 39.6 57.8 74.9 90.0 104.2 118.4 132.7 146.9 -15.0% 1.7 21.7 41.1 59.2 76.1 90.9 105.2 119.4 133.6 -10.0% (16.8) 3.2 23.2 42.5 60.5 77.2 91.9 106.1 120.4 -5.0% (35.2) (15.2) 4.8 24.8 44.0 61.9 78.3 92.9 107.1 0.0% (53.7) (33.7) (13.6) 6.4 26.3 45.4 63.2 79.4 93.8 5.0% (72.1) (52.1) (32.1) (12.1) 8.0 27.9 46.8 64.5 80.4 10.0% (90.6) (70.5) (50.5) (30.5) (10.5) 9.5 29.4 48.2 65.8 15.0% (109.0) (89.0) (69.0) (49.0) (28.9) (8.9) 11.1 30.9 49.6 20.0% (127.5) (107.4) (87.4) (67.4) (47.4) (27.4) (7.3) 12.7 32.4 Revenues CO G S  an d  Ca pE x       Q:\ENG_WP\3555.021 - SS S-K 1300\WP\RPT\Section I - Oakdale Reserves\CH-12 - Economic Analysis - Oakdale.docx  





 






  13-1       JOHN  T.  BOYD  COMPANY  13.0 PERMITTING  AND  COMPLIANCE        13.1 Permitting  The Oakdale Mine’s operations are predominantly regulated by a Monroe County,  Wisconsin non-metallic reclamation permit which contains detailed reclamation plans for  the property. Mine operators must submit annual reports to Monroe County containing  information on the reclamation status of their mines and pay annual fees based on the  disturbed acres. They must also provide written certification that the reclamation plan is  being followed. A significant portion of the Probable Reserves underlie current wetland  areas. These areas will be mitigated as designated wetlands prior to mining. These  reserves are not in the current five-year plan.     Air emissions are regulated by the Wisconsin Department of Natural Resources, Bureau  of Air Management. Smart Sand monitors air emissions and has current permits.      The operation also has developed an Environmental Management System and Quality  Management System. They have successfully completed an outside surveillance audit of  their Environmental Management System to the ISO 14001: 2015 standard on June 21,  2019.      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 Oakdale Mine’s record of compliance with  applicable mining, water quality, and environmental regulations is generally superior 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 i - oakdale reserves\ch-13 - environmental.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 Oakdale 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 249.9 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 Oakdale 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 i - oakdale reserves\ch-14 -  conclusions.docx