Merger and acquisition activity continued to plug along at a snail’s pace as 2011 closed. For the year, merger and acquisition activity resembled overall movement in the construction materials sector — slow and disappointing. With producers anticipating more of the same or even further declines in 2012, buyers remain on the sidelines waiting for more uncertainty to be removed from the equation.

Recent merger and acquisition activity continues to highlight strategic, bolt-on, acquisitions and corporate divestitures. Oldcastle Materials, Inc. and Summit Materials continue to set the pace of small- to medium-sized strategic acquisitions as they pursue consolidation strategies in existing markets. Cemex and Lafarge continue to lead the way in corporate divestitures as they seek to reduce debt and improve liquidity.

Recent transactions

Oldcastle Materials, Inc. has acquired the assets of Powers Stone, Inc. in Susquehanna County, Pa. The company consists of three aggregate quarries. The operations will join Oldcastle Materials’ Mid-Atlantic Division under Pennsy Supply. Powers Stone, Inc. enhances Oldcastle’s ability to better service the growing demand for aggregate, asphalt, and contracting services in the heart of the Marcellus Shale gas market.

Summit Materials has acquired Industrial Asphalt, Inc., Asphalt Paving Co. of Austin, Inc., and Ramming Paving Co., Ltd. in Austin, Texas. Industrial Asphalt, Inc. is based in south Austin and operates a quarry and two asphalt plants. Asphalt Paving is also based in Austin and is a longstanding paving business. Ramming Paving Co. is a quarry, asphalt, and paving services company with operations in Austin and San Antonio.

Cemex has sold its Russell Roof Tiles business to Russell Building Products, backed by investors from Mexico. Cemex announced this year it was seeking to dispose of all non-core assets, such as Russell Roof Tiles, in order to pay down debt.

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

Alabama

Vulcan Materials Co. named John McPherson as its senior vice president of strategy and business development. According to a company press release, McPherson was hired from international management firm McKinsey & Co., where he served as a senior partner in charge of human capital practice.

Arizona

El Mirage dropped a controversial proposal to annex mining property owned by the Salt River Pima-Maricopa Indian Community, The Arizona Republic reports. The city’s proposal raised the ire of neighboring Youngstown leaders, who threatened to sue. Under state mining laws, neither city has the regulatory ability to stop mining on the site, where such activities have taken place for decades. El Mirage Mayor Lana Mook told the newspaper that annexation would allow some control over operations and that some control (from one of the neighboring communities) was better than no control. City Council members canceled the meeting when the vote was to take place and allowed the proposal to expire.

California

Want to know how much concrete is needed for a job? There’s an app for that. Graniterock Co. recently released an updated version of a free iPhone application to help construction workers estimate the amount of materials needed for their projects. “We are a brick and mortar industry and maybe a little slow to adapt to new things,” company spokesman Keith Severson told the Monterey County Herald. But, he added, “We’re not old in spirit.” The original app was released in the spring; the new version boasts upgraded graphics. An Android version of the app is expected to be available soon.

Illinois

Meyer Material Co. recently filed a petition with the village of Cary seeking a four-year extension to its 2008 contract with the village. The Northwest Herald reports that the company agreed to pay the village $6.25 million over a 10-year window in exchange for permission to move its gravel pit beyond the Algonquin border. The company said that stagnant sales of sand and gravel would prohibit it from completing extraction, reclamation, and conveyance of the lands in a timely manner. Under the 2008 agreement, the company would owe the village $100,000 for every month it goes past the deadline. At Aggregates Manager press time, the village had not responded to the request.

Illinois

The North Aurora Village Board unanimously rejected Lafarge North America’s request to extend its aggregate mine beneath two 200-foot-wide electrical utility rights of way. According to The Beacon News, homeowners have complained about mine blasts shaking their houses and cracking their walls and foundation, however, Lafarge attorney Bruce Goldsmith told trustees that the mine has never violated village or federal limits on noise levels or vibrations from underground blasting. He noted that blasts near a 30-inch-wide natural gas line running through the right of way where the company hoped to mine would not damage the pipe, and local utility officials had approved the work, as long as they monitored vibration levels around the pipe using a seismograph. The attorney’s arguments did not persuade board members who rejected the proposal.

Iowa

The Telegraph-Herald reports the Prairie du Chien City Council voted 8-to-2 to greenlight an agreement that would allow Prairie Sand and Gravel Co. to build docks and boat slips along the river wall of St. Feriole Island. The docks will go up in 2012 on a one-year trial basis, with a number of conditions. The docks can’t be placed before May 1 and must be removed by Oct. 12. There can’t be any overnight docking, and the docks must be removed at the request of the city if the river level goes above 15.5 feet, a half-foot below flood stage. The company must also purchase a $1 million liability insurance policy.

Minnesota

By a slim 3-to-2 vote, a new gravel pit was permitted, and the expansion of an existing pit was granted. The Free Press reports that the two Mankato pits faced opposition from seven people who testified against the proposal, however owner/operator Pete Forrey prevailed in his effort to expand local aggregate supplies. The new mine is 38.86 acres and will be mined in 10-acre segments. The second site, at Hard Rock Quarry, received permission to expand the existing site by 18.25 acres.

Nevada

In late October, Clark County Commissioner Steve Sisolak hosted a trio of public meetings in Henderson. According to The Associated Press, the meetings were related to Service Rock Products and Cemex’s proposal to mine 1 square mile of federal Bureau of Land Management property in the Sloan Hills area over the next 20 years. The first hour of each meeting was an open house with specialists to answer questions, followed by a 30-minute presentation of the project and 90 minutes of public comment.

New Hampshire

The town of Winchester’s planning board faces a legal challenge to its handling of Mitchell Sand and Gravel’s new asphalt plant. The Keene Sentinel reports that four residents filed an appeal of the planning board’s decision in Cheshire County Superior Court. They allege the board failed to enforce some of the 23 conditions it placed when granting permission for the asphalt plant earlier this year. The town must file a written appearance form this month and has until Jan. 6, 2012, to respond to the appeal.

New York

Appellate justices again upheld a Supreme Court ruling nullifying the town of Nassau’s law banning commercial mining. According to The Times Union, the town re-appealed the justices’ March decision with information omitted in the original argument, but failed to sway the justices. Troy Sand & Gravel, the producer who has been involved in the eight-year dispute on mining rights, asked the court to render its special-use permit after their prolonged permitting efforts. The justices, however, noted that neither the town nor the town’s local laws provide for a default approval of a special-use permit when the town doesn’t comply with the appropriate time periods.

New York

An attorney for Dolomite Products Co., a part of Callanan Industries Inc., said she hopes that its plan for an asphalt plant on Route 67 will be on the town planning board’s December agenda. The Saratogian reports that the company filed an application with the Zoning Board because it needs a height variance to construct the plant, which is estimated to be 70 feet tall. If approved, the plant would begin the environmental impact review process. It would also need approval from the state Historic Preservation Office for archaeology issues, the newspaper reports.

Washington

Gravel mining could begin soon in Thurston County after an adversarial citizens’ group announced that it would not appeal a court decision allowing Maytown Sand and Gravel to mine the site. The Olympian reports that Friends of Rocky Prairie gave up its lengthy battle after a local judge ruled that it lacked standing to challenge a county land-use decision regarding the site. A spokesperson for the group said it would have needed a million dollars to cover a bond necessary to move the appeal forward. Port of Tacoma Commission President Connie Bacon told the newspaper that the public entity appreciated that the courts agreed with its legal assertions, but was discouraged by the amount of unnecessary time and money (estimates show the port’s costs to range up to $2 million) incurred through the legal challenges.

Wisconsin

Eau Claire County officials are considering an increase in mining fees to offset the costs associated with reviewing an anticipated increase in applications for silica sand mines. According to The Leader-Telegram, the county Finance and Budget Committee recommended the County Board increase its $35-per-acre charge to review proposed mines’ reclamation plans. The proposal would increase costs for a one- to five-acre mine to $200, while any mine larger than 102 acres would cost $7,000. The committee also recommended that public hearing fees be increased from $150 to $250. Buffalo County is also considering an increase in fees for new mines in that county.

Wisconsin

The Red Cedar Town Board voted 4-to-1 to send a proposed sand processing plant to Dunn County officials for their consideration, The Leader-Telegram reports. Radnor, Pa.-based Preferred Sands wants to build a 160-acre plant near the northeast corner or Menomonie. If approved, it would process sand from its own mines.

Province News

Sudbury (Ontario) city council members approved a proposal to ask the province to impose a levy on mining companies using municipal roads to haul material. According to cbc.ca, the online arm of the Canadian Broadcasting Corp., Councilor Andre Rivest proposed a system of royalties, similar to those already paid by sand and gravel companies, with profits going toward road repair. The city will now approach the Association of Municipalities of Ontario to lobby for a change in provincial law.

George Reddin

The number of merger and acquisition transactions in North America was up 13 percent for the three quarters ending Sept. 30, 2011, while the total value of these transactions was up 28 percent from the prior year. The construction materials sector, on the other hand, has been flat in 2011, with small- to medium-sized deals dominating.

At the end of October, the outlook for construction materials remained cloudy. The Federal Transportation Bill was funded until March of 2012; however, the overall outlook for federal and state funding remained gloomy. President Obama was promoting the American Jobs Act without much success. There appeared to be some light at the end of the tunnel in Europe until Greece decided to seek a referendum on the debt plan. Third quarter earnings reports were coming in with year-to-date shipments of aggregates below 2010 levels. Major companies were beginning their budgeting and business planning efforts for 2012, and the outlook was not positive. These factors continue to keep a damper on merger and acquisition activity in the construction materials sector.

Recent transactions

Aggregate Industries completed its acquisition of Ennstone, Inc., a vertically integrated construction materials company headquartered in Falmouth, Va., with ready mix, sand and gravel, and limestone. (See story below.)

Martin Marietta Materials, Inc. and Lafarge North America Inc. have agreed to an asset swap. Under the terms of the agreement, Martin Marietta Materials, Inc. will receive Lafarge’s aggregates quarry sites, ready-mixed concrete and asphalt plants, and a road paving business in the Colorado Front Range and Wyoming markets. In exchange, Lafarge will receive aggregates sites located along the Mississippi River in Mississippi, Tennessee, Kentucky, and Missouri, as well as distribution yards along the lower Mississippi River, associated barging equipment, and a cash payment.

Other news

Cemex has announced that it will reduce its debt by the end of the year to comply with debt agreements. The company has promised to cut debt to no more than 7.0 times earnings before interest, taxes, depreciation, and amortization (EBITDA) by the end of the year. At the end of September, Cemex had debt amounting to 7.2 times EBITDA. Asset disposal will be a major part of the strategy to reduce debt. Cemex raised U.S. $80 million in asset sales during the first nine months of this year and expects to raise an additional U.S. $100 million to U.S. $200 million during the fourth quarter, with total proceeds from asset sales reaching U.S. $1 billion by the end of 2012.

Aggregate Industries Ennstone buyout finalized

Aggregate Industries U.S., part of the Holcim Group, on Nov. 1 closed its asset purchase agreement with Ennstone Inc., a vertically integrated construction materials company headquartered in Falmouth, Va.

“The closing of this transaction is a good fit strategically for Aggregate Industries, in particular, Aggregate Industries’ Mid-Atlantic business, and will maximize value for our stakeholders – employees, customers, and shareholders alike,” Bernard Terver, president and CEO of Aggregate Industries U.S., said in a press release. “In addition, this transaction will enable Aggregate Industries to strengthen its presence in the region.”

– by Tina Grady Barbaccia, News and Digital Editor

The number of merger and acquisition transactions in North America was up 13 percent for the three quarters ending Sept. 30, 2011, while the total value of these transactions was up 28 percent from the prior year. The construction materials sector, on the other hand, has been flat in 2011, with small- to medium-sized deals dominating.

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

The construction materials sector is dependent on the housing market and highway funding. Both continue to be major disappointments. Housing construction put in place peaked in 2006 at a level of approximately $435 billion and is expected to be slightly more than $110 billion for 2011. This, together with the lack of a long-term federal transportation bill and troubled state departments of transportation, has led to a significant drop in stock prices for the sector’s publicly traded stocks in recent months. At the end of September, the construction materials peer group members were trading at nearly 50 percent of their 52-week highs, while, at the same time, the market indexes were only off by approximately 15 percent.

For example, Cemex stock fell to a 13-year low on concerns of its ability to meet debt obligations. At the end of September, Cemex shares had lost three-quarters of their value. Trading in shares of Cemex was temporarily suspended on Oct. 2 after the shares fell 15 percent from their previous close. Cemex’s debt is now 7.2 times the company’s EBITDA at the end of June. The peer group for construction materials producers has a median Debt/EBITDA ratio of approximately 4.6 times, which is up from only 2.0 times in 2006. The company is expected to sell $1 billion in non-core assets to appease creditors.

Recent transactions

Lafarge continues to divest of its assets in the United States and is expected to sell its Calera, Citadel, and Lakeshore operations in Birmingham, Ala., to Vulcan Materials Co. Earlier this year, Lafarge realized $760 million from the sale of assets to Cementos Argos. That transaction consisted of 79 ready-mixed plants in Georgia, Alabama, and Louisiana, cement plants in Harleyville, S.C., and Roberta, Ala., plus an Atlanta-area clinker grinding mill and six cement terminals. Aggregate Industries, a subsidiary of Holcim, is rumored to have purchased Ennstone, Inc. of Virginia. Ennstone operates three sand and gravel pits, one limestone quarry, and 17 Ready Mix Concrete Co. plants.

Other news

The House Committee on Transportation and Infrastructure has instructions to find the resources for a larger surface transportation reauthorization bill, but one that will not include an increase in the gas user fee. The committee will be working on a $350 billion, six-year surface transportation bill. This is up from the $230 billion, six-year bill outlined by the committee in July that would have represented a 34-percent cut from current funding levels. The committee will have to find about $100 billion in additional resources. This development boosts optimism for increased funding, which had recently hit rock bottom. The Senate Appropriations Committee has approved a draft FY12 appropriations bill for the Department of Transportation and Housing and Urban Development (THUD). The Senate bill maintains current funding levels for program obligation limitations of $41.1 billion for highways. This news provides optimism for highway funding, which is encouraging for merger and acquisition activity.

By Therese Dunphy, Editor-in-Chief

Illinois

Gov. Pat Quinn signed legislation to help reduce fuel and equipment costs for trucking companies throughout the state. According to a press release from the governor’s office, the new law allows the Illinois Department of Transportation (IDOT) to issue permits for loads that previously exceeded size and weight restrictions for travel on state highways, if specific conditions are met. Sponsored by Sen. William Haine and Rep. Daniel Beiser, Senate Bill 42 applies to “divisible” loads that previously had to be broken down into separate shipments to meet the standard truck weight limit of 80,000 pounds. IDOT can now issue the necessary permits for a truck hauling a load weighing more than 80,000 pounds if it is traveling less than 5 miles and will not negatively impact pavement conditions along its route.

California

Duarte city officials have taken another step in their efforts to stop Vulcan Materials Co.’s mining project in Azusa. According to the San Gabriel Valley Tribune, the city filed its objections to a superior court decision with the state appeals court. A three-judge panel will now review the case, which could take more than a year to complete. The city has been fighting the project since the Azusa City Council approved Vulcan’s plan to shift its mining operations from 80 acres on the eastern end of its 270-acre property to 80 acres on its western end, closer to Duarte.

Illinois

Two of Lafarge North America’s Illinois aggregate operations, Cave in Rock and Joliet, were recently awarded with the Illinois Association of Aggregate Producers (IAAP) Community Relations Award. The award recognizes producer member companies whose community involvement and support activities enhance the public’s perception of the member’s aggregate operation and the aggregate industry in general. The Cave in Rock quarry was recognized for its community efforts around wildlife habitat restoration, working with residents to help clean up the banks of the Ohio River, and donations of money, materials, and services to community groups. The Joliet Quarry award recognized its community efforts and donations to Habitat for Humanity, Morning Star Mission Ministries, and employee’s labor to clean up the shoreline along the Illinois River. “It is part of our operating philosophy to give back to the communities in which we operate,” said Matthew Dantinne, vice president and general manager for Lafarge Midwest Aggregates. “We enjoy being part of the communities and continue to look for opportunities where we can make a difference.”

Minnesota

The Zavoral project advisory committee met in late August and toured Tiller Corp.’s proposed mine site before hearing reports regarding dust emissions, visual impact, traffic, and reclamation of the project. According to the Country Messenger, approximately 70 people attended the meeting concerning the 114-acre site. An air quality expert said the proposed mine would exceed national air quality standards if mitigation measures were not used, but noted that water, dust control chemicals, and sweeping could offset those impacts. Mining would not be visible to boaters along the neighboring river. One member of the committee noted concerns about traffic safety, while a resident called for the operation to be liable for damage to neighboring homes. The group’s final meeting will be held Nov. 16.

Montana

The Montana Supreme Court unanimously upheld the decision of a local judge who threw out a lawsuit filed by a Gallatin citizens group. The Bozeman Daily Chronicle reports that the citizens group challenged the constitutionality of the way protests were handled concerning a gravel zoning district in the Gallatin Gateway area. The issue began when the Gallatin County Commission imposed a two-year temporary zoning district that required new and expanding gravel pits to go through a conditional-use permitting process, and area gravel operators, agricultural families, and developers protested the ordinance. Under a county law, property owners representing 50 percent of titled property in the proposed zoning district can protest and stop zoning. The citizens group argued that people, not land, vote, and the protest law infringed on the rights of others. The district judge did not rule on that issue because the law also required the county to act within 30 days of the protest period and either form the zoning district or throw it out. The county did not act on the zoning district.

New York

The state Department of Environmental Conservation (DEC) has scheduled hearings for Elam Sand and Gravel Corp.’s proposed mine in West Bloomfield. According to the Rochester Democrat and Chronicle, Administrative Law Judge Molly T. McBride will oversee the process. It will include two hearings; one for public comment and another to define, narrow, and possibly resolve issues related to the mine. Participation at that conference will be limited to DEC staff, the operator, and others requesting party status prior to the conference. In addition to the DEC permit, Elam requires a special-use permit from the town of West Bloomfield, which has adopted a moratorium on new special-use permits. The operator has filed lawsuits to force the town to act on the permit and to void the moratorium.

Oregon

Some Saginaw residents are upset by increased evening activity at Northwest Mineral Resources, KVAL 13 reports. The company has increased activity on Delight Valley School Road to supply its involvement in a repaving project for Interstate 5, but that paving can take place only between the hours of 7 p.m. and 9 a.m. Lane County is reviewing the company’s operation plan, and the county’s sand and gravel committee is expected to address the project’s impact on residents.

Texas

A state appeals court has ruled against Cemex in a suit that claimed the company owed Texas a half-billion dollars in mineral royalties from its quarry in McKelligon Canyon. The El Paso Times reports that Texas Land Commissioner Jerry Patterson sued the company, seeking $558 million in fees he says should have gone into the Texas Permanent School Fund. Texas property owners are generally required to lease mineral rights prior to extraction of oil, gas, and other materials from the ground. They then pay state royalties — a percentage of the market value — of what is removed from the land. While Cemex owns the land, the state claims the rights to minerals in the land. Cemex bought the quarry in 2005. Through the lawsuit, the company argued that “dirt, caliche, sand, gravel, limestone, and other materials at issue are not ‘minerals’ reserved to the state and therefore belong to Cemex.” It also argued it could not be held responsible for any royalties before 2005 when it purchased the land. The case will be returned to the trial court to determine how much the company owes.

Texas

At the end of August, the Texas Commission on Environmental Quality held a public hearing concerning EOG Resources, Inc.’s proposed 1,400-acre frac sand mine in Muenster. According to the Gainesville Daily Register, both neighbors of the proposed site and EOG staff members made statements. Some neighbors addressed concerns that the site would destroy the bucolic nature of the area, while others were concerned about environmental impact. Employees noted the economic benefits of the site and pointed to the company’s efforts to aid Montague County during recent wildfires as a representation of what kind of neighbor the company would be.

Washington

The Washington Department of Ecology announced that it has modified the state’s Sand and Gravel General Permit. The new permit reduces the level of turbidity and solids that facilities may discharge into the state’s waters, and it requires portable operations to provide public notice prior to their activities. The action settles an appeal of the permit by the Puget Soundkeeper Alliance. The Washington Aggregates and Concrete Association intervened in the appeal, supporting the department’s original permit. The permit regulates water discharges from sand and gravel operations, quarries, and similar mining operations as well as hot-mix asphalt plants, concrete batch plants, and stockpile yards. It covers about 950 facilities in the state. Changes are effective Oct. 1. For more information, visit www.ecy.wa.gov/programs/wq/sand/.

Wisconsin

EOG Resources’ new sand plant in Chippewa Falls is scheduled to open by the end of the month, nearly a year after work on the facility began. The Leader-Telegram reports that, in early September, the plant was 90 percent complete and 300 people were working on the site. Approximately 40 sand mines are either currently operating or proposed in this part of the state, where the sand is particularly hard, round, and porous, making it ideal for use in extracting petroleum and natural gas from the ground. The EOG plant was originally expected to cost between $45 and $50 million, but that figure has grown to approximately $60 million with the addition of an indoor sand storage building.

Province News

Athabasca Minerals Inc. received approval from the government of Alberta for metallic and industrial mineral leases totaling approximately 31,630 acres at the Firebag Frac Sand Project located in the Wood Buffalo region of northern Alberta. The company says it intends to continue development of the project by initiating a National Instrument 43-101 technical report and pilot scale production of frac sand. “We are extremely pleased at the continued progress of the Firebag Frac Sand Project and look forward to additional positive developments, which will confirm the economic viability of frac sand production,” Dom Kriangkum, president of Athabasca Minerals, said in a press release. “This potential revenue stream further complements our existing revenues generated from the Susan Lake Aggregate Operation and Camp Operations. In addition to this, we continue to investigate industrial minerals, which benefit from the heightened activity in the oil and gas and oil sands industries.”

By George H. Reddin

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

August was an interesting month, with many economic and political issues adding to the uncertainty surrounding the outlook for the construction materials sector. During the last month, we saw the debt ceiling debate; a significant drop in the stock market; unrest in Libya, Syria, and other countries; and the official beginning of the 2012 presidential campaign that provided a well-publicized podium for Republican candidates to point out the problems facing our country. Job growth continued to disappoint, setting the stage for what will most likely be the issue on center stage for the 2012 presidential campaign. August also saw a major hurricane on the East Coast, as well as continued talk about sovereign debt concerns with a number of countries in the European Union.

All of these factors and events added to the already high level of uncertainty, and people, once again, are talking about a global slowdown and even a double-dip recession. Stock prices in the construction materials sectors were down 30 percent or more during the month from their 52-week highs, which is a far greater drop than the market as a whole.

This uncertainty has many of the traditional buyers on the sidelines, with a number of deals recently postponed or cancelled altogether. The United States will continue to struggle to attract capital in merger and acquisition transactions, as the multinational firms will continue to emphasize deals in emerging markets.

Recent transactions

Cemex finalized its deal with Ready Mix USA and fulfilled a year-old acquisition plan. The purchase price for Ready Mix USA was roughly $350 million and in line with the price announced last October. Cemex and Ready Mix began their partnership in 2005 and had shared assets in the Southeast. When the deal was first announced, Cemex already owned two U.S. cement plants under the joint venture and agreed to buy sand and gravel pits and concrete plants from Ready Mix USA, increasing its operations in Arkansas, Mississippi, Tennessee, Alabama, Georgia, and Florida.

Winn Materials, LLC, owned by VantaCore Partners LP, has acquired the Cherry Grove limestone quarry from North American Limestone Corp. This operation, located in Todd County, Ky., has an estimated 39 million tons of limestone reserves and serves the southwestern Kentucky and northwestern Tennessee markets. This represents VantaCore’s fifth acquisition, expanding its operational presence to four states in the southeastern United States. The company will be renamed Winn Materials of Kentucky. This purchase follows the April 2011 announcement that Winn Marine intends to undertake a major expansion of its Clarksville port operations, positioning Montgomery County to become the largest commercial water port on the Cumberland River.

California

Santa Clarita and Cemex officials have agreed to keep working toward a legislative solution as federal politicians approached their summer break. The Signal reports that city officials are ramping up their fall campaign to generate support for a federal bill proposed by Sen. Barbara Boxer, who asked the Energy and Natural Resources Committee for a hearing on her bill, S. 759. Under that legislation, the Bureau of Land Management would sell three parcels of land and use the proceeds to pay Cemex the value of canceling mining contracts on two leases it executed with the company to allow extraction of 56 million tons of sand and gravel during a 10-year window. Cemex has said it is interested in trying to reach a legislative solution. If legislation does not pass, the company is expected to obtain the necessary mining permits to begin operations in 2012.

Georgia

Coweta County students attending the third annual “Back to School Bash” received enough school supplies to last a semester, as well as a book bag to carry them to class. According to the Times-Herald, the program is designed to provide students from underprivileged families, or those whose parents are financially strapped due to illness, disabilities, or unemployment, have the necessary supplies. Vulcan Materials and Walmart donated the school supplies and gifts.

Illinois

The state of Illinois, through the Illinois Department of Mines and Minerals, received $219,948 in funding from the U.S. Department of Labor’s Mine Safety and Health Administration for health and safety training for fiscal year 2011. The funds will be used to provide federally mandated training. “These funds will assist the state in carrying out critical training for miners in our area, enhancing safety conditions,” said U.S. Rep. Jerry Costello (D-Ill.) in a press release. “I will continue to support these efforts.”

Maine

Mining opponents may fight recent changes to Michigan’s Zoning and Enabling Act, according to a report in the Traverse City Record-Eagle. The update, passed in mid-July, restores the “very serious consequences” standard that had been enforced in the state for years. It allows local governments to consider factors such as impact on surrounding property values, existing land uses in the vicinity, and pedestrian and vehicle traffic safety before approving an aggregate mine. It also allows regulation of operating hours, blasting hours, noise levels, and dust control. That standard was lost when the state Supreme Court overruled a circuit court decision in Kyser vs. Kasson. In that case, the township refused to allow the property owner’s (Kyser) agricultural property — which was adjacent to the gravel district — to be rezoned for mining. The state Supreme Court deemed that the “very serious consequences” standard improperly usurped local authority to zone and plan. Shortly after that decision, officials in Portage Township used the decision to halt mining at a rural sand and gravel pit in a rural-residential zoning district there. State Rep. Matt Huuki then introduced a bill to restore the standard, and it sailed through the House and Senate before being approved by Gov. Rick Snyder. Gerald Fisher, the attorney who argued Kasson’s case before the Supreme Court, called the new statute unconstitutional and offered to challenge it himself for free.

Missouri

Missouri transportation officials have approved a new five-year construction plan that cuts project spending in half, kspr.com reports. The new plan, approved by the Missouri Highways and Transportation Commission, closes several offices and lays off hundreds of workers. Spending levels of about $600 million a year on roads are approximately half of the $1.2 billion average spent on projects in recent years. DOT officials say they’ll concentrate on maintaining the state’s major highways, improving smaller state roads, and repairing and maintaining bridges, but any new construction projects are unlikely.

Nebraska

The York County Commissioners took no action on a tort claim filed by a Doniphan couple who say their vehicle was damaged by gravel flying from one of the county’s trucks in Grand Island. The York News-Times reports that a York County truck driving in front of the wife’s car had a loose tarp and sprayed gravel over her car. The couple asked for reimbursement for replacing their windshield “which was chipped, pitted, and looked like it had been sandblasted.” The interim highway superintendent told the county board that people at the gravel pit told him the York County truck was completely tarped down and said that the truck driver was not operating in a reckless manner. The claim was directed to the county’s insurance carrier.

North Carolina

The Dog Park at Tanglewood, in Clemmons, received an $11,000 donation of construction materials from Vulcan Materials Co. The materials will be used in building the new parking lot for the dog park. “We are proud to help kick start the new Dog Park at Tanglewood project,” Tom Carroll, Vulcan’s director of business development, said in a press release. “This park will be a valuable addition to the community, which is why we are glad to see our materials will be used to contribute to its success.”

Oregon

Oregon officials gave Ross Island a clean bill of health. According to the Daily Astorian, efforts have been underway to clean up the island since 1999. Contaminated sediment was found in the Ross Island lagoon and other areas during the 1990s, and, since then, Ross Island Sand and Gravel has spent millions on the cleanup. The company will continue monitoring the project and maintain the sediment caps, as well as continue some other cleanup efforts. The city of Portland obtained an uncontaminated portion of Ross Island several years ago, and a long-term planning effort should be rolled out soon.

Pennsylvania

The state Department of Environmental Protection (DEP) approved plans for New Hope Crushed Stone Co. to excavate 50 feet deeper in a Bucks County Quarry. The Philadelphia Inquirer reports that one of the conditions attached to the approval provides that, if mining results in any adverse impact to Primrose Creek’s water quality, mining must stop and can only resume if the DEP is satisfied that the problem is permanently mitigated. Other conditions address the area’s geologic terrain and relate to the operation’s impact on the area’s geology. Residents blamed the quarry for causing sinkholes and lowering the water table.

South Dakota

In July, Kolberg-Pioneer, Inc. hosted visits from Gov. Dennis Daugaard and members of his administration, as well as Suzanne Veenis, southeast area director to U.S. Rep. Kristi Noem, at its Yankton factory location. Joe Vig, president of Kolberg-Pioneer, said the governor’s visit included an overview of the company, its parent company, and its development and growth. The importance of supporting necessary federal and state funding for highways and bridges was stressed as key in contributing to the growth. The importance of highway funding and fuel tax issues were also stressed during Veenis’ visit.

Tennessee

Nashville-based Ingram Industries Inc. and Pine Bluff Sand and Gravel Co., of Pine Bluff, Ark., announced they have entered into an agreement for Ingram to sell its Ingram Materials LLC subsidiary to Pine Bluff. Ingram Materials produces aggregate in middle Tennessee, western Kentucky, and northern Alabama, and has three sand dredges on the Ohio River, in addition to distribution facilities. As part of the agreement between the two family-owned businesses, Pine Bluff and Ingram Barge Co. will enter into a long-term towage agreement under which Ingram Barge and Pine Bluff will tow Pine Bluff’s sand and gravel barges on the Cumberland and Tennessee Rivers. Pine Bluff is expected to hire all existing Ingram Materials associates and continue operations without substantial changes.

Texas

Dallas-based Texas Industries acquired three ready-mixed concrete plants and one aggregate operation through an asset swap with Cemex, the Statesman reports. Terms of the deal were not released. “We see in this region there is going to be a significant upside potential over the long-term — and by long-term, meaning more than five years, up to 10, 15, or 20 years,” company spokesman David Perkins told the newspaper. “It’s going to experience some pretty significant growth, and we want to be part of that.”

Texas

U.S. Concrete, Inc. announced that its board of directors would appoint William J. Sandbrook as its president and CEO, as well as director. He joins the company from Oldcastle Products and Distribution, where he served as CEO and was responsible for three product groups. Sandbrook was named AggMan of the Year in 2001. “We are extremely pleased to have someone of Bill’s caliber joining our management team. His extensive experience in the building products sector and impressive track record for growth will be great additions to the company,” Eugene Davis, chairman of the board, said in a press release. “Bill’s proven vision and leadership skills should result in a smooth and successful transition.” Sandbrook succeeds Michael Harlan, one of the founders of the company.

Washington

A Lewis County judge sided with the new owners of Maytown Sand & Gravel LLC and the Port of Tacoma in granting a summary judgment allowing gravel mining to begin there. The Olympian reports that the ruling reverses the Thurston County Board of Commissioners’ decision to require new environmental studies on the site. It also reinstates findings that the sand and gravel company holds a valid, special use permit for mining the site. An environmental group vowed to challenge the decision.

Province News

The Saint John (New Brunswick) Council rejected an application for a new gravel pit in the Lattimore Lake area. According to CBC News, councilman Bruce Court recommended the denial based on reports from the city staff that it reviews gravel pits one or two times a year. That would not provide enough control or policy, Court said. Steven Langille, of Fundy Bay Sand and Gravel, unsuccessfully argued that the proposed pit would be too far from homes for dust to be a problem, and the pit would only operate on weekdays until 6 p.m.

Analysts and investors were busy recently with the U.S. debt ceiling crisis and a steady stream of disappointing economic indicators. The result was a continued drop in stock prices for construction materials producers. This, together with poor quarterly earnings reports, could pose a threat to the pace of merger and acquisition activity as additional uncertainty creeps into the equation. These developments seem unlikely to change the desire of buyers and sellers to buy and sell, but there is concern that the increased uncertainty and absence of a clear recovery will affect deal pricing and the deal approval process.

Recent transactions

Texas Industries, Inc. (TXI) has acquired the aggregate and ready-mix operations from Cemex serving the Austin market and the ready-mix operations serving the Houston market. TXI continues to operate aggregate, cement, and packaged materials facilities in the Houston market.

George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

Oldcastle Materials, Inc. has acquired the assets of Everett Quarries. Everett Quarries operates five quarries serving northwest Missouri. The Everett Quarries will become part of Oldcastle’s Central West Division.

Rockydale Quarries Corporation, headquartered in Roanoke, Va., has acquired two quarry locations from C.S. Mundy Quarries Inc. The new locations will operate as the Rockydale-Flatrock Quarry located in Shenandoah County, Va., and the Rockydale-Broadway Quarry located outside of Harrisonburg, Va. Rockydale now operates seven quarry locations as well as a lime processing facility.

Pine Bluff Sand and Gravel Co., based in Pine Bluff, Ark., has acquired Ingram Materials LLC, based in Nashville, Tenn., from Ingram Industries Inc. As part of this transaction, Pine Bluff and Ingram Barge Company will enter into a long-term towage agreement under which Ingram Barge and Pine Bluff will tow Pine Bluff’s sand and gravel barges on the Cumberland and Tennessee Rivers. Pine Bluff Sand and Gravel Company provides marine contract and construction services, and manufactures and delivers sand and gravel, ready-mixed concrete, and asphalt. In addition, it owns and operates barges and towboats on the Arkansas, Missouri, Mississippi, Red, Ouachita, Black, and Pearl rivers and on the Gulf Intracoastal Waterway.

By Therese Dunphy

Last month, our neighbors to the north brought the concept of green aggregates one step closer to the United States. Holcim (Canada) Inc. and Environmental Defence jointly established Socially and Environmentally Responsible Aggregates (SERA), a not-for-profit organization charged with developing rigorous, but voluntary, certification standards for responsibly sourced sand, stone, and gravel.

“We see this as shifting away from the combative nature of where the industry is with various stakeholders,” Bill Galloway, senior vice president at Holcim (Canada) Inc., told The Globe and Mail. By locating aggregate operations in areas that minimize environmental harm and using operating practices that avoid impacting neighbors, Galloway says that aggregate production can be green.

Along with announcing the formation of SERA, the two groups released draft standards for green certification. These include items such as the selection of greenfield sites that don’t include environmentally sensitive lands, creation of wildlife habitats, reduction of greenhouse gas emissions, greater use of recycled materials, attention to water quality issues, and involvement of local communities.

The draft standards are the result of two years of discussions between Holcim and Environmental Defence. Rick Smith, the activist group’s executive director, told the newspaper that operators receiving such a green stamp of approval would face less opposition from groups such as his own when seeking new permits. Typically, his organization is involved in three to six fights against aggregates operation at any given time. “A great amount of that sting would be taken out of this issue if this standard were broadly adopted by the industry,” Smith asserts.

To get the venture off to a strong start, SERA secured the services of BRE Global, the same group that helped develop the BES 6001 Framework Standard for the Responsible Sourcing of Construction Products in the United Kingdom. That certification was the first of its kind to offer third-party certification of a wide range of construction materials and products. Many U.K. operators — including Aggregate Industries, Cemex, Hanson, Lafarge, and Tarmac — have had their operations certified through BES 6001.

The idea is similar to one successfully pioneered by the lumber industry. Certainly, the fact that traditionally combative parties were able to collaborate on this process is a positive sign. Perhaps, it’s an idea that should cross the border, eh?

3 things I learned from this issue:

1. Loader scales can be used at the face to track blast yield, page 17.

2. A crusher liner can wear thin — or through — in some areas before hitting the halfway point of its predicted lifecycle, page 22.

3. Coyotes near a mine site can trigger an imminent danger order (I’m not kidding), page 30.

TOP 25 Construction Aggregates Producers in the United States

Rankings are based on 2009 production data provided to the U.S. Geological Survey. Information courtesy of Jason Christopher Willett, construction aggregates commodity specialist, and Wally Bolen, construction sand and gravel commodity specialist.

1 Vulcan Materials Co.

2 Martin Marietta Aggregates

3 Oldcastle Materials, Inc.

4 Lehigh Hanson, Inc.

5 Cemex S.A.B. de C.V.

6 Lafarge North America Inc.

7 Holcim Group/Aggregate Industries Management, Inc.

8 Rogers Group, Inc.

9 MDU Resources Group, Inc.

10 Carmeuse Lime & Stone

11 New Enterprise Stone & Lime Co., Inc.

12 Mitsubishi Materials Corp.

13 Chemical Lime Co.

14 Ash Grove Cement Co.

15 Dolese Bros. Co.

16 Texas Industries, Inc.

17 Mulzer Crushed Stone, Inc.

18 CalPortland Co.

19 Granite Construction, Inc.

20 Luck Stone Corp.

21 Colas Inc.

22 Ready Mix USA Holding Co.

23 Fred Weber, Inc.

24 Eucon Corp.

25 Fisher Industries

Top Crushed Stone and Sand & Gravel Operations

The 10 leading quarries and the owner companies, in descending order of total output of crushed stone, were the following:

1. Martin Marietta Aggregates, Beckmann Quarry, Bexar County, Texas;

2. Lehigh Hanson, Inc., Bridgeport Plant, Wise County, Texas;

3. Tower Rock Stone Co., Ste. Genevieve Quarry, Ste. Genevieve County, Mo.;

4. Cemex S.A.B. de C.V., Balcones Quarry, Comal County, Texas;

5. Vecellio & Grogan, Inc., White Rock, Miami-Dade County, Fla.;

6. Texas Crushed Stone Co., Inc., Georgetown, Williamson County, Texas;

7. Vulcan Materials Co., McCook 378, Cook County, Ill.;

8. Martin Marietta Aggregates, Three Rivers Quarry, Livingston County, Ky.;

9. Cemex S.A.B. de C.V., F.E.C. Quarry, Miami-Dade County, Fla.; and

10. Mississippi Lime Co., Peerless Mine Underground, Ste. Genevieve County, Mo.

The 10 leading pits/yards and the owner companies, in descending order of total output of sand and gravel, were the following:

1. Las Vegas Paving Corp., Lone Mountain Pit, Clark County, Nev.;

2. CalPortland Co., Dupont Pit, Pierce County, Wash.;

3. CalPortland Co., Santosh Aggregate Plant, Columbia County, Ore.;

4. Trinity Industries, Inc., Wills Point, Kaufman County, Texas;

5. All American Asphalt, Corona Plant, Riverside, Calif.;

6. Gila River Indian Community, Maricopa Pit, Pinal County, Ariz.;

7. Southern Aggregates, LLC, Plant 1, St. Helena Parish, La.;

8. A. Teichert & Son, Inc., Perkins Plant, Sacramento County, Calif.;

9. Mitsubishi Materials Corp., Lone Mountain Pit, Clark County, Nev.; and

10. Mitsubishi Materials Corp., Rialto, San Bernardino County, Calif.

The Top 50 Crushed Stone Producers in the United States

2009      2008

1           1 Vulcan Materials Co.

2           2 Martin Marietta Aggregates

3           3 Lehigh Hanson, Inc.

4           4 Oldcastle Materials, Inc.

5           5 Cemex S.A.B. de C.V.

6           6 Lafarge North America Inc.

7           7 Rogers Group, Inc.

8           8 Holcim Group/Aggregate Industries Management, Inc.

9           9 Carmeuse Lime & Stone

10         10 New Enterprise Stone & Lime Co., Inc.

11         11 Chemical Lime Co.

12          12 Luck Stone Corp.

13          13 Dolese Bros. Co.

14           52 U.S. Forest Service

15          15 Ash Grove Cement Co.

16          16 Ready Mix USA Holding Co.

17          22 Mulzer Crushed Stone, Inc.

18          18 Buzzi Unicem USA Inc.

19           20 Fred Weber, Inc.

20           14 Texas Industries, Inc.

21           24 Eucon Corp.

22           25 National Lime & Stone Co.

23           17 MDU Resources Group, Inc.

24           23 The H&K Group

25           19 Graymont Ltd.

26           21 Vecellio & Grogan, Inc.

27           27 Mississippi Lime Co.

28           33 Titan America LLC

29           29 Tower Rock Stone Co.

30           38 Bureau of Land Management

31           28 Eagle Materials Inc.

32           26 Texas Crushed Stone Co., Inc.

33           30 Boxley Materials Co.

34           44 Colas Inc.

35           36 Franklin Industries, Inc.

36           59 Capitol Aggregates, Ltd.

37           35 3M Co.

38           82 Mitsubishi Cement Corp.

39          39 Omya Inc.

40          37 ESSROC Cement Corp.

41          40 Wake Stone Corp.

42          50 Glenn O. Hawbaker, Inc.

43          31 Hunter Industries, Inc.

44          32 CalPortland Co.

45          42 Schildberg Construction Co., Inc.

46          46 Hoover, Inc.

47           41 American Infrastructure

48           45 Great Lakes Aggregates, Inc.

49           57 Hinkle Contracting Corp.

50             43 Irving Materials, Inc.