Fairmount Santrol Holdings Inc (NYSE:FMSA) has announced that it has signed a long-term definitive lease agreement that will facilitate the development of a Permian Basin Sand Facility located in Texas.

The company revealed that it signed the long-term lease agreement yesterday and that it spans 40 years. The lease involves roughly 3,250 acres of sand reserves located in the Permian basin in Winkler County, Texas. Fairmount Santrol plans to set up a mining and processing facility on the land and it expects to produce about 3 million tons of proppant sand every year. The Permian Basin reportedly contains 165 million tons of 100 mesh sand and fine-grade 40/70 sand.

Fairmount Santrol has already been preparing in advance for the operations on the land. The company has already started preparing the property for construction activities and it has already ordered the equipment. The reason for all this preparation is for the company to speed up its plans for production which is currently scheduled to commence in the second quarter of 2018.

The company expects the total capital expenditures and leasehold interest payments to be between $100 million and $110 million in the next year. Fairmount plans to fund the massive investment through a mix of cash on hand as well as cash flow generated by its operations.

“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,” stated Jenniffer Deckard, the CEO of Fairmount.

Deckard further pointed out that leasing the reserves rather than purchasing will boost the company’s net return on investment while making sure that it allows for more financial flexibility. Expanding the capacity is great for the company’s customers because it will lead to a stronger capital structure. This will be a valuable move for shareholders. The company has also reopened its Shakopee, Minnesota, mine.

Fairmount stock closed the latest trading session on Monday at $2.65.