Mr. Charles Gryba reports

CLAIM POST RESOURCES INC. ANNOUNCES POSITIVE RESULTS OF AN INITIAL PEA ON THE SEYMOURVILLE FRAC SAND PROJECT

Claim Post Resources Inc. has released the results of a preliminary economic assessment for its Seymourville frac sand project located approximately 200 kilometres northeast of Winnipeg, Man. The PEA was prepared by P&E Mining Consultants Inc. of Brampton, Ont.

In June, 2014, Claim Post announced an initial National Instrument 43-101 inferred mineral resource estimate of 25,959,000 tonnes of high-quality silica sand on 20 per cent of the project lease area for the Seymourville frac sand project (SEDAR, June 20, 2014).

The initial PEA demonstrates the potential for development of a low-cost economically robust quarry operation in Seymourville, Man. At a Tier 1 frac sand price of $110 per tonne, the Seymourville frac sand project base case has an estimated $617-million aftertax net cash flow, a $151-million aftertax net present value at a 10-per-cent discount rate, an aftertax internal rate of return of 21 per cent, and an initial capital expenditure of $93-million for construction of a quarry, wash/screening plant and transloading truck to rail facility to produce one million tonnes per annum of product as of the third production year.

It is anticipated that the primary market for the frac sand will be to Western Canada locations and potentially to the Bakken oil field in the United States. The frac sand price of $110 per tonne is derived from a base price of $80 (U.S.) per tonne at an exchange rate of $1.00 (U.S.) equals 92 cents, plus transportation costs to Winnipeg and loading into rail cars. Rail transportation, offloading and haulage to the end-user are assumed to be reimbursed to Claim Post at cost.

The completed PEA technical report will be filed on SEDAR within 45 days of this news release.

Base-case operating highlights and project performance

Frac sand price:  Base-case economic evaluation of $110/tonne FOB Winnipeg transload

Mineral resource:  Inferred resource of 26 million tonnes at 94.31 per cent silicon dioxide, 1.94 per cent dialuminum trioxide, 0.91 per cent diferrous trioxide

Production:  One million tonnes per year of sand product as of year three over 18-year quarry life

Aftertax net cash flow:  $617-million

Cash cost:  $47.2/tonne sand FOB Winnipeg transload facility, including royalties

Initial capital cost:  $93-million (including 20-per-cent contingency)

Net present value at 10 per cent (after tax):  $151-million

Internal rate of return (after tax):  21 per cent

IRR (pretax):  27 per cent

Payback (after tax):  4.4 years

Sustaining capital:  $83-million

Charles Gryba, president and chief executive officer of Claim Post Resources, stated: "We are extremely pleased with the results of the initial PEA study for the Seymourville frac sand project. The PEA report shows an initial aftertax NPV of $151-million for the one-million-tonne-per-annum base case. The project will evolve quickly. Line cutting is in progress and sonic drilling will start Dec. 1, 2014, to commence an exploration program that is targeting resource expansion. Our social licence is in place for a year and the initial 20 sonic drill holes should be completed by Christmas. Additionally, Claim Post anticipates the Seymourville location will lead to highly competitive frac sand pricing due to it being situated approximately 1,000 kilometres closer to the market than existing producers. Transportation costs, which comprise the majority of frac sand price components, should give us a competitive advantage. We could also benefit from exchange rate considerations."

Project design and economics

The project considered in the PEA involves the shallow surface stripping of overburden, and quarrying and processing of the underlying silica sand. The proposed project starts with a 714,000-tonne-per-year quarry operation feeding sand to a wash plant at a 70-per-cent recovery rate, yielding 500,000 tonnes/year of sand product. In production year two, the wash plant capacity is increased by 100 per cent to enable a production rate of one million tonnes of sand product per year, resulting in a projected 18-year quarry life with total sand production of 16.4 million tonnes. Initial capital costs, including owner's costs and a 20-per-cent contingency, are estimated at $93-million. This includes overburden stripping to expose the first area of sand to be quarried and development of a pit for deposition of plant reject material. It also includes purchase of land for a transload facility in Winnipeg, and building the transload structure to enable offloading of trucks and loading of rail cars. Sand will be transported by highway trucks from the quarry site to Winnipeg, with a leased fleet, each unit being capable of hauling 32 tonnes. Sustaining capital costs over the project's life are projected to be an additional $83-million and include doubling the wash plant production rate during production year two. Projected average cash operating costs are $45.00/tonne of recovered sand ready to ship by rail at the Winnipeg transload facility, plus $2.15/tonne for royalties. Payback for initial capital is estimated at 4.4 years.

The PEA provides a basis to estimate project operating and capital costs, and establish a projection of the potential minable resource, including inferred resources, as permitted under National Instrument 43-101.

Mineral resource estimate

In June, 2014, P&E completed a National Instrument 43-101 mineral resource estimate for the Seymourville frac sand project (see news release dated June 20, 2014). There has been no further exploration since that date. The resulting resource estimate is summarized in the table. P&E considers that the Seymourville sand deposit is potentially amenable to quarrying by open-pit methods. Seymourville deposit size fraction distribution studies indicate that by weight an average of 11 per cent of the sand is in the 20/40 mesh range, 43 per cent is in the 40/70 mesh range and 40 per cent is in the 70/140 mesh range. API-ISO tests on samples from the Seymourville project have determined that sand meets or exceeds API guidelines for frac sand. Seymourville frac sand test samples have significantly exceeded API-ISO Tier 1 frac sand compressive strength specifications for 40/70 mesh, 50/140 mesh and 70/140 mesh frac sand.

                   INFERRED MINERAL RESOURCE ESTIMATE (1-4)

Tonnes                                    SiO2          Al2O3          Fe2O3 
                                            (%)            (%)            (%)

25,959,000                               94.31           1.94           0.91

(1) Mineral resources which are not mineral reserves do not have 
demonstrated economic viability. The estimate of mineral resources may be 
materially affected by environmental, permitting, legal, title, taxation, 
socio-political, marketing, or other relevant issues.
(2) The quantity and grade of reported inferred resources in this estimation
are uncertain in nature and there has been insufficient exploration to 
define these inferred resources as an indicated or measured mineral resource 
and it is uncertain if further exploration will result in upgrading them to 
an indicated or measured mineral resource category.
(3) The mineral resources were estimated using the Canadian Institute of 
Mining, Metallurgy and Petroleum standards on mineral resources and 
reserves, definitions, and guidelines prepared by the CIM standing committee 
on reserve definitions and adopted by the CIM council.
(4) Screening at SGS labs in Lakefield, Ont., indicates approximately 70 per 
cent of the sand/clay matrix is in the frac sand size range of 20 to 140 
mesh.

         PEA BASE CASE OPERATING HIGHLIGHTS AND PROJECT PERFORMANCE

                                                           Pretax  After tax

NPV0% ($M)                                                   $852       $617  
NPV5% ($M)                                                   $437       $306  
NPV10% (base case) ($M)                                      $230       $151  
IRR                                                         26.8%      21.0%
Payback period (years)                                        3.9        4.4 

Capital costs
Initial capital                                                  $93-million
Total sustaining capital                                         $83-million
Total capital                                                   $176-million

Operating cost                                         LOM      Sand product
                                                       ($M)             ($/t)

Quarrying cost                                $         87  $            5.3
Wash plant                                    $        219  $           13.3
Trucking cost to Winnipeg                     $        363  $           22.2
Winnipeg transload cost                       $         13  $            0.8
G&A fixed cost                                $         55  $            3.4
Total operating cost                          $        737  $           45.0

Operating plan
Prestrip period (years)                                                  0.5
Operating life (years)                                                    18
Quarrying sand (days/year)                                               180
Overburden stripping (days/year)                                         300
Wet plant (days/year)                                                    180
Dry plant (days/year)                                                    300

Quarrying
Average quarrying sand rate (tpd)                                      3,900
Average annual quarry material production (tpd)                        7,200
Total material moved over quarry life (Mt)                              45.2
Overall average strip ratio (W:O)                                        0.9

Wash plant (as of production year three)
Wet plant rate (Mtpa)                                                    1.4
Dry plant sand production (Mtpa)                                         1.0
Recovery (%)                                                              70

                         FRAC SAND PRICE SENSITIVITY

Price FOB Winnipeg                               NPV10%        IRR   Payback
($/t)                                               ($M)                 (yr)
 
$88                                         $        59      11.2%       5.9
$99                                         $       105      16.4%       5.0
$110 (base case)                            $       151      21.0%       4.4
$121                                        $       198      25.1%       4.0
$132                                        $       244      29.0%       3.6
$143                                        $       290      32.5%       3.4
$153                                        $       337      35.8%       3.1

                                 NPV SENSITIVITY 
                            (After tax, in millions)

                               -20%     -10%  0% base case     +10%     +20%

Capex                       $ 173.3  $ 162.3  $      151.3  $ 140.3  $ 129.3
Opex                        $ 191.4  $ 171.3  $      151.3  $ 131.3  $ 111.3

                                 IRR SENSITIVITY 
                                   (After tax)

                                -20%    -10%   0% base case    +10%    +20%

Capex                          26.4%   23.5%          21.0%   18.8%   16.9%
Opex                           24.9%   23.0%          21.0%   18.9%   16.8%

Quarrying

The quarrying operation is planned to primarily utilize dozers and excavators. No drilling/blasting is anticipated. Overburden stripping by dozers will clear the quarry blocks and subsequently backhoes will be used to feed a slurry pump system for delivering sand to the wet plant. The objectives of the quarrying method are:

• Minimize quarrying capital and operating costs by optimizing personnel and equipment requirements;
• Allow for six (summer) months of sand quarrying to feed the wet processing plant. Sand quarrying would take place 24 hours per day during the six-month operation period;
• Allow for 10 months of overburden stripping, operating during day shift only;
• Minimize noise and dust impacts on the local communities;
• Provide capacity to place plant reject material back into quarried areas as soon as possible;
• Allow pit backfilling and progressive reclamation to occur concurrently with the advance of quarrying.

Approximately 23.4 million tonnes of sand will be quarried from six nominal 16-hectare blocks of land over the course of the estimated project life. It is estimated that 21.8 million tonnes of overburden will be dozed, for total life of quarry material movement of 45.2 million tonnes at an overall strip ratio for the project of 0.93 to 1.

Wash plant

A mobile pump station will receive sand from the quarry operation and transport the sand as a slurry to the wash plant. Water used to slurry transport the sand to the wash plant will eventually be pumped back to sumps at the quarry and recycled.

The quarry and wet plant will operate during warm weather months only. These areas are sized to support year-round operation of the dry plant. Both the wet and dry plants will be enclosed in buildings. No reagents are required in the process. The grade of the final product is anticipated to be plus-99 per cent pure silica after scrubbing and washing operations.

The wet plant process is based on rougher hydroseparation for primary classification. Impurities generally occur as surface coatings and are liberated with attrition scrubbing. A second stage of hydroseparation is assigned for desliming to produce a clean proppant. The cleaner hydrosizer product is dewatered using a belt filter and then stored in a building with 250,000-tonne capacity. The bulk product storage building is equipped with a reclaim system to provide feed to the dry plant.

The dry plant is designed to operate all year. However, the design criteria are configured so that operation can be stopped when road limits are in effect. In this manner, total annual throughput can be achieved in a 300-day period of operation.

The dry plant process is based on receipt of product from the bulk storage building. The bulk product is dried using a propane fired rotary dryer. The dried product is then screened to four product sizes and conveyed to four loadout hoppers, suitably equipped to charge and weigh highway haulage trucks. It is expected that most of the product would be hauled to a transfer facility in Winnipeg and loaded into rail cars.

The project is scheduled to produce up to one million tonnes of frac sand per year. The quarry would be operated six months per year with half the production stockpiled in a storage building so that the wash plant can operate year-round. Wash plant reject materials including clay and rock particles would be pumped back to the quarry to reclaim the quarry cells.

Environmental and social management

P&E has reviewed and assessed the scope and permitting requirements for the sand quarry (a non-aggregate quarry); the sand processing facility and use of rejected materials in progressive rehabilitation; frac sand trucking; and social engagement activities to date. The project, whilst still at the conceptual level, already incorporates a number of relevant environmental protection controls, and takes progressive rehabilitation and final closure into consideration. P&E understands that the sand quarry could be permitted under Manitoba's Mines and Mineral Act and that the sand processing facility could be classified as a Class 1 project, and require an environmental review and public consultation as part of its permitting process under the Environment Act. Based on its current understanding of the project and permitting requirements, P&E is not aware of any insurmountable impediments to project permitting.

Upside case sensitivity analysis

The PEA considered an upside case sensitivity analysis that doubled production compared with the base case in order that as of the third year of production, the quarry operation would produce two million tonnes per annum of frac sand product. Compared with the base case, the upside case has less certainty that sales contracts could be established for the product, and the level of capital and operating cost estimating has not been carried out in as much detail as the base case.

At a Tier 1 frac sand price of $110 per tonne, the Seymourville frac sand project upside case has an estimated $617-million aftertax net cash flow, a $200-million aftertax net present value at a 10-per-cent discount rate, an aftertax internal rate of return of 29 per cent (pretax IRR of 37 per cent), and an initial capital expenditure of $95-million for construction of a quarry and wash/screening plant, and transloading facility in Winnipeg, to produce two million tonnes per annum of product as of the third production year. Sustaining capital costs over the 10-year quarry life are estimated at $177-million. The upside case requires a more detailed evaluation in the next stage of engineering study.

About the frac sand market

The market for natural frac sand continues to grow at a high rate in North America (approximately 35 per cent per annum) with production reaching about 38 million tonnes in the United States in 2013. Raymond James Ltd., in its June 30, 2014, research report, estimates a year-over-year increase in proppants of 13.2 million tons in 2014 and approximately 60 million tons by 2016. The Raymond James Aug. 19, 2014, North American sand rush research report updated the estimates the consumption of frac sand to approximately 78 million tons by 2016, substantially higher than the June report estimate. The Canadian market is about 10 per cent of the North American market.

Claim Post's Seymourville frac sand deposit is approximately 1,000 kilometres closer to the Canadian market than the Wisconsin sand deposits, indicating the potential for significant transportation savings in addition to the Canadian-dollar differential. The Canadian oil and gas industry will continue to import natural frac sand for the foreseeable future, thus Seymourville sand will be competitively priced relative to imported Tier 1 sand plus Claim Post should be able to capture some the freight cost savings from Wisconsin to Canada.

Claim Post is evaluating a transload facility at the Centre Port site in Winnipeg, which will provide unit train loading with access to CN, CPR and the BNSF railroads. In addition, Claim Post plans to provide bulk truck or container service to the oil industry in Manitoba, Saskatchewan and the U.S. side of the Williston basin. Containers delivered to the well site are very economic within a 600 km range from the Winnipeg transload facility.

Qualified person

Eugene Puritch, PEng, president of P&E, is the independent qualified person responsible for preparing the PEA. Mr. Puritch has reviewed and approved the technical contents of this news release.

We seek Safe Harbor.