8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) July 18, 2017

FAIRMOUNT SANTROL HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware	001-36670	34-1831554
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
8834 Mayfield Road, Chesterland, Ohio		44026
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (800) 255-7263

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Item 1.01. Entry into a Material Definitive Agreement.

On July 18, 2017, FML Sand LLC (“FML”), a subsidiary of Fairmount Santrol Holdings Inc. (the “Company”), entered into a long-term Lease Agreement (the “Lease Agreement”) for real property with the Fernandes family ranch owners who have held the property for several generations and are named in the Lease Agreement (together, the “Owner”). The Lease Agreement provides that FML may initially mine approximately 165 million tons of sand on approximately 3,250 acres of the Owner’s real property located in Winkler County, Texas (the “Site”), during a lease term of 40 years (the “Term”). The Company intends to build a mine and processing facility on the Site capable of producing approximately three million tons of proppant sand annually. In connection with the Lease Agreement, FML also has agreed to pay the Owner a lease fee of up to $40 million in the aggregate, including an initial payment of $20 million made upon signing the Lease Agreement. The Lease Agreement also provides that FML shall pay to the Owner a royalty fee which is expected to average $2.90 per ton for sand mined, processed and sold from the Site during the Term. The Lease Agreement may be terminated prior to the end of the Term upon the occurrence of certain specified events.

The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Lease Agreement, a copy of which will be attached as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarterly period ending September 30, 2017.

Item 7.01 Regulation FD Disclosure.

On July 24, 2017, the Company issued a press release announcing FML’s entry into the Lease Agreement. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. Presentation materials, which are referenced in the Company’s press release and include information about the Site (the “Presentation Materials”), are also furnished as Exhibit 99.2 to this Current Report on Form 8-K. The Presentation Materials will also be accessible online at the Company’s website (www.fairmountsantrol.com) on the “Investor Relations” page under “Events & Presentations.”

The information in this Current Report on Form 8-K, including the exhibit attached hereto, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, and shall not be deemed incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
99.1	The Company’s press release, dated July 24, 2017, announcing FML’s entry into the Lease Agreement.
99.2	The Presentation Materials.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Fairmount Santrol Holdings Inc.
	(Registrant)
Date July 24, 2017
	/s/ Michael F. Biehl
	Michael F. Biehl Executive Vice President and Chief Financial Officer

Exhibit Index

Exhibit Number	Description
99.1	The Company’s press release, dated July 24, 2017, announcing FML’s entry into the Lease Agreement.
99.2	The Presentation Materials.

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

FAIRMOUNT SANTROL ANNOUNCES SIGNING OF LONG-TERM LEASE FOR DEVELOPMENT OF PERMIAN BASIN SAND FACILITY IN TEXAS

• 40-year lease for approximately 165 million tons of fine-grade reserves

• Construction of mining facility expected to be complete by second-quarter 2018 with annual production capacity of approximately 3 million tons

• Total leasehold interest payments and capital expenditures, estimated at $100 million to $110 million, expected to be funded with cash

• Reserves located near Kermit, Texas, with access to the Delaware and Midland basins; complement Fairmount Santrol’s broad product portfolio

• Company re-opens its Shakopee, Minnesota, Northern White sand mine due to increased customer demand

• Finalizing customer commitments for the majority of sand production from both the Kermit and Shakopee facilities

• Company has also prepaid $50 million of term debt at end of second-quarter 2017

CHESTERLAND, Ohio, July 24, 2017 (GLOBE NEWSWIRE) — Fairmount Santrol (NYSE:FMSA), a leading provider of high-performance sand and sand-based product solutions, today announced it has entered into a definitive 40-year lease agreement for approximately 3,250 acres of sand reserves located in Winkler County, Texas, in the Permian basin near Kermit. The reserves contain approximately 165 million tons of fine-grade 40/70 and 100 mesh sand. The Company intends to build a mine and processing facility on the leased land with approximately 3 million tons of proppant sand production annually. Over the past several months, the Company has ordered equipment and started to prepare the property for construction, which should accelerate the process and support the Company’s plan for sand production by the beginning of the second quarter of 2018.

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Total leasehold interest payments and capital expenditures are estimated at $100 million to $110 million over the next 12 months. The Company expects to fund this investment through a combination of cash on hand and cash flow generated from operations. An average royalty of less than $3 per ton, which includes water rights, will also be paid over the term of the lease on sand sold from the Kermit facility, with no minimum annual royalty.

“The unique characteristics of this property, which include contiguous reserves of fine mesh sand, water availability and prime access to existing roads, make this an excellent opportunity for Fairmount Santrol to expand our broad product offering by providing a low-cost, in-basin solution to meet the changing requests from some of our customers,” said Jenniffer Deckard, President and Chief Executive Officer. “By leasing the reserves instead of an outright purchase, we will enhance our net return on investment and ensure greater financial flexibility. The ability to expand our capacity to meet growing market demand, while continuing the progress in strengthening our capital structure, creates value for our customers, shareholders and other stakeholders.”

In addition, on June 30, 2017, Fairmount Santrol prepaid $50 million of term loans outstanding under its existing credit agreement. The prepayment was made utilizing existing cash on hand. The $50 million term loan prepayment will reduce annual interest expense by approximately $2 million.

Further, due to increased customer demand, Fairmount Santrol has proceeded to reopen its Shakopee, Minnesota, mine and sand processing plant, which are located on the Union Pacific railroad. Once fully ramped up, the facility will have annual capacity of approximately 700,000 tons. The Company expects that the plant will be operational by the end of the third quarter of 2017.

For both the Kermit and Shakopee facilities, the Company is in the process of finalizing customer commitments for the majority of the tons that will be mined and processed. The Company also expects to receive prepayments from certain customers who sign long-term volume contracts to secure tonnage.

Fairmount Santrol is currently in a quiet period. The Company has provided a presentation related to the Kermit transaction on its website and looks forward to providing additional detail during its second-quarter earnings conference call that will be held on August 3, 2017, at 10:00 am Eastern Time.

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About Fairmount Santrol

Fairmount Santrol is a leading provider of high-performance sand and sand-based product solutions used by oil and gas exploration and production companies to enhance the productivity of their wells. The Company also provides high-quality products, strong technical leadership and applications knowledge to end users in the foundry, building products, water filtration, glass, and sports and recreation markets. Its expansive logistics capabilities include a wide-ranging network of distribution terminals and railcars that allow the Company to effectively serve customers wherever they operate. As one of the nation’s longest continuously operating mining organizations, Fairmount Santrol has developed a strong commitment to all three pillars of sustainable development, People, Planet and Prosperity. Correspondingly, the Company’s motto and action orientation is: “Do Good. Do Well.” For more information, visit FairmountSantrol.com.

Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent the Company’s expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company’s control that could cause actual results to differ materially from the results discussed in the forward-looking statements. These factors include: changes in prevailing economic conditions, including continuing pressure on and fluctuations in demand for, and pricing of, our products; loss of, or reduction in business from the Company’s largest customers or their failure to pay the Company; possible adverse effects of being leveraged, including interest rate, event of default or refinancing risks, as well as potentially limiting the Company’s ability to invest in certain market opportunities; the level of cash flows generated to provide adequate liquidity; our ability to successfully develop and market new products, including Propel SSP^® and related products; our rights and ability to mine our property and our renewal or receipt of the required permits and approvals from government authorities and other third parties; our ability to implement and realize efficiencies from capacity expansion plans and facility

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reactivation initiatives within our time and budgetary parameters; increasing costs or a lack of dependability or availability of transportation services or infrastructure and geographic shifts in demand; changing legislative and regulatory initiatives relating to our business, including environmental, mining, health and safety, licensing, reclamation and other regulation relating to hydraulic fracturing (and changes in their enforcement and interpretation); silica-related health issues and corresponding litigation; seasonal and severe weather conditions; and other operating risks that are beyond our control.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Fairmount Santrol Holdings Inc.’s filings with the Securities and Exchange Commission (“SEC”). The risk factors and other factors noted in our filings with the SEC could cause our actual results to differ materially from those contained in any forward-looking statement.

Investor contacts:

Indrani Egleston

440-214-3219

Indrani.Egleston@fairmountsantrol.com

Matthew Schlarb

440-214-3284

Matthew.Schlarb@fairmountsantrol.com

Source: Fairmount Santrol

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EX-99.2

FMSA Kermit Presentation

JULY 2017

Exhibit 99.2

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Forward-Looking Statements

This presentation contains forward-looking statements. These statements can be identified by the use of forward-looking terminology

including “will,” “may,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” or other similar words. These statements discuss future

expectations including company growth expectations, demand for our products, expectations regarding future prices, capacity expansion

plans, market trends, liquidity, transportation services, commercial product launches and research and development plans and may

contain

projections of financial condition or of results of operations, or state other “forward-looking” information. These forward-looking statements

involve risks and uncertainties. Many of these risks are beyond management’s control. When considering these forward-looking statements,

you should keep in mind the risk factors, Management’s Discussion and Analysis of Financial Condition and Results of Operations,

and other

cautionary statements in the company’s SEC filings. Forward-looking statements are not guarantees of future performance or an assurance

that our current assumptions or projections are valid. Our actual results and plans could differ materially from those expressed

in any forward-

looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information or

future events, except as required by law.

FORWARD-LOOKING INFORMATION

Commitment to People, Planet & Prosperity

Technology & Innovation

Broad Product Portfolio

Strengthened by new Kermit, TX facility

Operational Scale & Efficiencies

Extensive Distribution and Unit Train Capabilities

Core Differentiators for Long-Term Value Creation

FAIRMOUNT SANTROL

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Market Supply / Demand Dynamics

INVESTMENT THESIS

FMSA’s footprint will be well-suited to meet demand for both local/regional sands in the

Permian and highest quality Northern White Sand across all basins

Permian basin demand expected to grow

~15-20M tons in 2018 and reach ~45-50M

tons by end of 2018

A number of customers have shown interest

in sourcing fine mesh demand locally

Local Permian supply is largely finer grades

with majority 100 mesh

Estimated ~30-40M tons of in basin Permian

capacity to come on line by the end of 2018

Permian demand will be served concurrently

by new cost-effective Permian capacity (100

mesh in particular) as well as Northern

White and Texas Gold® products

Significant Permian demand for 40/70 as

well as vast majority of coarser grades will

continue to be served cost-effectively by

FMSA’s Northern White or Texas Gold®

Demand for finer grades will grow in other

key basins, which can also be efficiently

served by FMSA’s footprint and logistics

network

As FMSA’s I&R business grows it will

continue to consume more finer grades

particularly 100 mesh

MARKET FACTORS

FMSA THESIS

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Located in Winkler County, TX (Permian basin) near Kermit

~3,250 acres under lease with reserves of  ~165M tons

Fine mesh sand reserves (40/70 and 100 mesh), with ~75% 100 mesh

PROPERTY

FMSA Kermit Details

Kermit low-cost facility further broadens FMSA’s extensive product portfolio

and allows Company to meet growing and changing market demand

Capacity of approximately 3 million annual tons of frac sand

Facility expected to be in operation by beginning of Q2 2018

Manufacturing cost per ton in first quartile of cost curve even with royalty

MINE AND PRODUCTION

FACILITY

Total leasehold interest payments and capex between $100 million to $110

million funded over next 12 months

Royalty structure, which includes water rights, on each ton sold from plant

that will average less than $3 with no minimum royalty

Financing expected to be through cash on hand and/or operating cash flow

FINANCING

Located between both Midland and Delaware basins

Easy access to existing roads

Significant water resources available on site

LOGISTICS

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FMSA Kermit Addresses Permian Sands’ Known Risks

FMSA Kermit facility

addresses known

risks while

positioning FMSA to

capture growing

Permian demand

Roads

Oil & Gas Infrastructure

Sand Dune Lizard

Location has easy access to Highway 115

and other major roads

Evaluating habitat in line with our legacy

sustainable development principles &

practices

Leased acreage contains contiguous mining

space

Utilities

Power and water easily accessible

FMSA Kermit Location

FMSA Kermit Location

FMSA Kermit Location

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Benefits from Expanded Capacity in Kermit

High-Purity Northern

White Silica Sands

Tier 2

regional

sand

Precured Resin-

Coated Sand

Highest

strength

Increased

flowback

protection

Curable Resin-

Coated Sand

Highest

flowback

protection

Increased

strength

Texas Gold®

Frac Sand

Tier 1 NWS

99.8% pure silica

Expands Product Offerings for Nearly Every Well Design

Proppant coating that

enhances well productivity and

operational efficiency through

improved proppant transport

and frac geometry optimization

PRODUCTS/

APPLICATIONS

Lower-cost,

API-certified

sand

applications

High-temperature /

pressure wells where

proppant needs extra

strength & fines

encapsulation

Wells where

flowback is a

challenge

Medium cost,

delivers

higher productivity

versus regional

sands

In any well to optimize

water, chemical and

horsepower required to

place the targeted proppant

volume and mesh size

RAW SAND

Propel SSP

®

RESIN-COATED SAND

TRANSPORT

TECHNOLOGY

WELL PRESSURE

(Based on 40/70

Up to 6,000 psi

Up to 9,000 psi

Up to 14,000 psi

Up to 16,000 psi

Dependent on

underlying proppant

Tier 3 local

sand

Lowest-cost

option for wells

in Permian basin

Up to 8,000 psi

Regional Frac

Sand

FMSA KERMIT BENEFITS

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CHARACTERISTICS

substrate)

Expands Capacity to Meet Growing Market Demand

FMSA KERMIT BENEFITS

Lease will add approximately 165 million

tons of reserves to bring company total

to nearly 900 million tons, allowing for

long-term organic growth

Locations, grade mixes and logistics

capabilities provide flexibility to meet

changes in market demand

Regional / local sands expected to

represent ~30% of active production

capacity when Kermit is at full

production capacity

Re-opened Shakopee with expectations

to be operational by end of Q3-17

Northern

White Sand

Mines

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FAIRMOUNT SANTROL STATED ANNUAL

RAW FRAC SAND CAPACITY

(in millions of tons)

Expands Footprint in Key Basins Through Facilities and Terminals

FMSA Terminal

FMSA Mining & Processing

Unit Train Destination

Unit Train Origin (Mining &

Processing)

Coating Operation

New Kermit facility will strengthen

FMSA’s position in Permian basin

for tier 3 local sands

FMSA KERMIT BENEFITS

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Canada

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Strategic Location to Serve All of Permian Basin

Oil & Gas Terminals

Unit Train Destination

FMSA Mining & Processing

Well Site

New FMSA Kermit facility is well-

positioned to serve both the

Delaware and Midland basins

Delaware Basin

Midland Basin

FMSA KERMIT BENEFITS

Unique Opportunity for FMSA

Local Permian supply strengthens FMSA’s position by adding a low-cost, in-basin solution

near the Delaware basin that complements our strong position in the Midland basin

Meets key success criteria for new supply in the Permian basin including access to water,

existing roads and infrastructure, and contiguous reserves of quality sand

Lease structure requires less upfront capital, provides a more variable cost structure

(through royalty on tons sold) and generates higher return on net investment

Finalizing customer contracts for the majority of sand production from both Kermit and

Shakopee with possibility of prepayments from certain customers with long-term

commitments

FMSA KERMIT BENEFITS

Flexibility of lease structure optimizes cash, which enables FMSA to

make investments to grow business and to prepay $50M of term loans

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FMSA Kermit –

Timeline for Delivery

Q3 ‘17

Q4 ‘17

Q1 ‘18

Q2 ‘18

Lease and capital expenditures ~$70-75M

Lease and capital expenditures ~$30-35M

Total investment = $100M-$110M

Finalized leasehold

agreement

Permits filed

Equipment on order

Customer contracts

finalized

Staffing Plant

Plant Construction

Plant

operational by

beginning of

Q2 2018

Plant expected to be at

full capacity by Q4 ‘18

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Industry Leader Well-Positioned for Growth

WHY INVEST IN FMSA?

Technology & innovation

Broad product portfolio -

strengthened by

Kermit facility

Operational scale & efficiencies

Distribution & unit train capabilities

Dynamic onshore completions activity

Increased proppant intensity per well

Increased operator focus on long-term

well productivity and flowback mitigation

Continued solid demand in I&R

STRONG MARKET DRIVERS

KEY LONG-TERM DIFFERENTIATORS

AND VALUE CREATORS

Commitment to People, Planet & Prosperity

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