Last week’s sale of Colorado Springs-based Transit Mix Concrete to Aggregate Industries, a subsidiary of Swiss-based LaFargeHolcim, raises a lot of interesting questions.
Why did Continental Materials, TM’s former parent company, spin off TM’s ready-mix concrete operations and an associated sand pit while retaining the Pikeview quarry and the “potential quarry“ at the Hitch Rack Ranch?
Judging from the performance of Continental Materials stock, the deal made sense. After trending downward for several months, the stock bottomed at $10.35 on Jan. 15. It recovered to around $15 by the end of the month, and shot up to over $20 on Feb. 1, when the deal was announced, reaching $22.45 earlier this week.
Describing the sale as including “substantially all of the assets of Transit Mix,” Continental Materials CEO Jim Gidwitz put a happy face on the $27 million transaction.
“We are pleased to find a supportive new partner for Transit Mix, who will invest and grow the ready-mix and sand operations in Southern Colorado and retain over 180 skilled and experienced employees. Since Continental Materials acquired Transit Mix in 1955, it has overseen steady growth through long term investment, from a single operation to the current business with $60 [million] revenue and several locations along the Southern Front Range,” said Gidwitz in a Continental Materials news release.
So here are some questions, and some speculations.
Why didn’t CM dump Pikeview?
The ancient quarry is a potentially enormous liability. The total cost of full reclamation (which must be completed within five years of the quarry’s closure) was estimated several years ago at more than $23 million. CM has posted a surety bond with the Colorado Division of Reclamation and Mine Safety of $4.2 million, written by XL Specialty Insurance, an A-rated company.
That’s fine, but what about the other $19 million? Shouldn’t the DRMS be concerned about that, since Castle Concrete Aggregates will essentially be a shell company, with few assets? Couldn’t they just walk away? Asked that very question recently, the Division’s reply was succinct:
“The current financial warranty for this permit is $4,226,000, to refer to it as only a small bond is not accurate,” the Division responded on Jan. 25. “The amount held is in the middle range of similar type operations. DRMS has no reason at this time to question Transit Mix’s commitments to future mining and reclamation… DRMS does not have the jurisdiction through statute or rule to review business and financial issues of permittees or applicants.”
Castle Concrete could continue small-scale operations at Pikeview indefinitely, or get rid of the whole mess by simply refusing to renew the surety bond when it expires later this year. The state could sue, drive Castle into bankruptcy and seize its negligible assets — including Pikeview.
What about the proposed quarry at the Hitch Rack Ranch, which has twice been rejected by the Mined Land Reclamation Board?
That’s complicated. In Annex C of the lengthy sales agreements between Continental Materials and Aggregate Industries, the Hitch Rack Ranch is in a list of “excluded real properties.” It’s described as a “potential quarry” with an address listed only as city of Colorado Springs (never mind that it’s in the unincorporated county).
It’s highly unlikely that the quarry plan will be resurrected. Continental wrote off $6.9 million after the plan was rejected for the second time, and Aggregate has quarries of its own. The pristine landscape of the ranch might conceivably be joined to the Nature Conservancy’s adjoining Aiken Canyon Preserve and the Ingersoll Ranch to create a nearly 4,000-acre nature and wildlife preserve.
Harold Ingersoll’s 2015 will deeded his ranch to El Pomar Foundation and required that it be preserved as undeveloped land. Consequently, both Bill Hybl and Thayer Tutt forcefully and publicly opposed the Hitch Rack quarry. And according to another senior El Pomar executive, the foundation is interested in finding a way forward.
Will El Pomar help fund a deal to acquire the ranch? Will Castle Concrete figure out a way to withdraw amicably from Pikeview, perhaps by helping fund a mountain bike park and partial reclamation? Can’t all of us — quarry operators, environmentalists, cyclists, Hitch Rack neighbors and owners, El Pomar and DRMS bureaucrats — just get along?