Erdene management believes that significant value and stability can be added to the company through investment in select industrial minerals projects.
Management has considerable experience in both the construction aggregate and kaolin industries. We believe both of these commodities have strong long-term market fundamentals and offer opportunities with significant upside potential by generating future cash-flow for the company.
| Construction Aggregate Operations | Kaolin operations |
Industrial Minerals like construction aggregate are mainly used by the construction, manufacturing and agriculture industries. Construction aggregates are the backbone of all modern infrastructures making up 80% of concrete and greater than 90% of asphalt. Historically residential construction consumed 25% of all aggregates used, commercial building accounted for 30-35% and highway construction another 25%; the balance is used in water control material such as rip rap and cement production.
Data from the U.S. Geological Survey (USGS) indicates that aggregate used in the U.S. in 2010 was equivalent to 6.6 tonnes per person per year. This equates to 2.0 billion tonnes sold nationwide valued at US$17.5 billion with the average price per ton falling 1.0% from 2009 and averaging $8.75/tonne. At the production peak in 2006, aggregate consumption in the U.S. hit an all-time high of 10.4 tonnes per person with overall sales exceeding 3 billion tonnes. Aggregates remain the highest valued non-fuel mineral in the U.S. General economic recovery will lead back to 2006 levels and normal 3% annual growth beyond that will result in demand of 4 billion tonnes by 2028 and 5 billion tonnes by 2036; much of which will be in the Sunbelt states.
Erdene is focused on market opportunities in the southeastern U.S. where population growth has increased demand for construction aggregate materials. There was a 75% increase in U.S. aggregate imports into the southeastern states from 2002 to 2006. Compounding the gap in demand and supply, local zoning regulations and land-development alternatives are making permitting of new aggregate operations increasingly more difficult. Because of this, there is a significant opportunity to bring new high quality construction aggregate projects with logistical advantage online, including projects outside the U.S. located on tidewater for bulk carrier shipping into U.S markets.
Erdene is also the owner of a 350-acre property in central Georgia located on the CSX railroad and currently being developed by Aggregates USA. The granite aggregate produced from this quarry will serve coastal Georgia and much of the Florida market.
Erdene is in the process of permitting a tidewater granite quarry located on deep, sheltered, ice-free water in Guysborough County, Nova Scotia. In time, this operation could produce up to 6 million tonnes of granite to be shipped from our deep, ice-free marine location, to southeastern and Gulf state ports and the Caribbean.
Kaolin is a white clay commonly referred to as china clay. The greatest demand for kaolin-based pigments (65%) comes from the paper industry but it is also used in paints, plastic, rubber and ceramics where it provides brightness, colour and particle shape properties.
The ceramic clay market provides an emerging opportunity in North America due to high logistical and exchange costs, and as clays typically supplying this market from Europe are being depleted. High quality kaolin from Europe has been used extensively in North America for the production of high quality porcelain ceramics and more recently in the industrial grade dinnerware, sanitary ware, tile and glazing clay applications.
Erdene’s interest in kaolin is through its majority interest in Advanced Primary Minerals (APM; TSXV:APD). APM is working with industry leaders on the development of a new line of products from APM’s primary kaolin resources for the ceramics industry. Testing to date has been very positive and initial production from the company’s new processing facility in Dearing, Georgia, has focused on casting clays and glazes.
AIF Kaolin Document click here to view.
