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Be inspired A unique customer experience can be found at the RitzCarlton, Palm Beach, Florida

Editor’s letter

Businessexcellence ACHIE VING

Customer

driven

EDITORIAL

Editor In Chief Martin Ashcroft mashcroft@bus-ex.com Managing Editor Bud Sadler bsadler@bus-ex.com

DESIGN

Production/Creative Director Zachary Smith zsmith@bus-ex.com Production Designer Mallory Lindsley mlindsley@bus-ex.com

BUSINESS

Director of Editorial Research Scott Mason smason@bus-ex.com Director of Sales Sean Brett sbrett@bus-ex.com Administration & Operations Kathy Toomey ktoomey@bus-ex.com Chief Executive Andy Turner info@bus-ex.com Subscriptions info@bus-ex.com Infinity Media LLC 100 Cummings Center Suite 243C Beverly, MA 01915 Tel: 978 232 9284 • Fax: 978 560 0999

Satisfied customers are the best marketing tool. Not only are they likely to buy from you again, but they are also likely to tell their friends. They don’t cost you an advertising budget, or a third-party PR agency fee.

This is well understood at the five-star Ritz-Carlton Palm Beach resort, Florida. “Our guests come here for a thousand different reasons,” says hotel manager Donald Stamets. “Our challenge is to understand each and every one of those reasons if we are to enrich their lives with a unique and unforgettable experience.”

It’s not easy to differentiate at the elite end of the market, where other hotels offer luxurious facilities, too. The Ritz-Carlton refers to its workforce as ladies and gentlemen, however, which offers a clue as to how it’s done. “Our service model is based on ladies and gentlemen serving other ladies and gentlemen,” says Stamets. “It can be hard to differentiate, but I believe we have achieved it with an avant garde approach to service.”

Another business enjoying a special customer relationship is Honeywell Federal Manufacturing & Technologies (FM&T), which manages plants for the National Nuclear Security Administration (NNSA), on the customer’s own premises. “We’re very closely integrated with the NNSA,” says Barbara Rich, manager, operational excellence at Honeywell FM&T. “We share the same building with them, they park in the same parking lot, and they lunch with us. When your customer lives with you in this way, you build an extremely strong relationship with that customer.”

The Honeywell “Voice of the Customer” process has played a significant role in building and maintaining that relationship. “Voice of the Customer is effective if it’s living,” says Rich. “The more active it is, the better it is, and we’ve found that customers respond when they realize that we’re listening to them and not just putting a filter on.”

These examples may not be typical, but they are by no means unique.

What can you do for your customers today?

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CUSTOMER FOCUS Be inspired The Ritz-Carlton Hotel at Palm Beach, Florida, is a unique destination that promises to leave a lasting impression on its guests.

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SUPPLY CHAIN MANAGEMENT Upgrading distribution Thomas R. Cutler offers some advice on how to avoid failures when updating a distribution center.

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Labrador Iron Mines Holdings Ltd. A new approach to iron ore mining This mover of high-quality direct shipping ore envisions a growing production profile along the Quebec-Labrador border.

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Abacus Mining & Exploration Corp.

A partnership with global implications A recent joint venture will bring the Afton-Ajax property in British Columbia back into production without diluting shareholder value.

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Timberline Resources Backup plan An emerging gold producer and junior gold exploration company with a business model that includes a predictable cash flow.

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Sage Gold Inc. A Sage shift in strategy Undergoing a transition from exploration to production that will make the company more self-sustaining.

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Seahawk Drilling Seahawk rising A shallow-water drilling company aiming to expand into promising international markets in Africa, Asia and the Middle East.

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Turner Construction: Mills-Peninsula Hospital The finish line An experienced project team and some creative thinking combined to make things go right that may have gone wrong.

Austin Building Company Austin without limits This subsidiary of Austin Commercial is the general contractor for the new W Austin Hotel & Residences in downtown Austin.

Hamilton Construction: Willamette River Bridge Building bridges A multitude of regulatory environmental agencies get involved when you demolish one bridge and construct another in Oregon.

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Contents

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Brampton Brick Ltd. Building for growth Established in Canada for over 100 years, the company has recently opened its first manufacturing facility in the United States.

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SuKarne, S.A. de C.V. Lean meat Lean production techniques and an enviable animal health record are key to Mexico’s largest beef producer.

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Corby Distilleries Drink up This leading Canadian manufacturer and marketer of spirits and imported wines has the largest distillery in North America.

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Bristol Compressors International Compressed but expanding A leading manufacturer of reciprocating compressors for the HVAC industry, pursuing a program of continuous improvement.

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Bunting Bearings Getting your bearings Innovative new products continue to expand the already comprehensive portfolio of this Ohio-based manufacturer.

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National Nuclear Security Administration Aiming for perfection Honeywell FM&T has been manufacturing and supplying components for national defense systems for more than 60 years.

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Clatskanie People’s Utility District Power from swift running water Local control of energy is enjoyed in parts of Oregon thanks to this non-profit consumer-owned utility.

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ENMAX Corporation Canned heat A vertically integrated utility company owned by the City of Calgary, Alberta, pioneering combined heat and power.

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IMI Cornelius Innovation on tap Being a global business brings both benefits and challenges for this champion of innovation in beverage dispensing and cooling.

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Jay Do manage Hotel at a inspiring q of-a-kin

Customer focus: Ritz-Carlton Palm Beach

nspired

yne Flannery talks to onald Stamets, hotel er at the Ritz-Carlton Palm Beach, Florida, about the unique and qualities of this onend oceanfront resort

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onald Stamets, hotel manager of the AAA Five-Diamond, Forbes Five-Star Ritz-Carlton Palm Beach resort, is not given to the use of superlatives to describe the hotel he presides over. Words simply cannot do it justice. With an Ocean Boulevard address, in a legendary location, this very special hotel exudes all the charisma and mystique of Palm Beach.

The centerpiece of the Ritz-Carlton is a dramatic 3,000 foot oceanfront terrace— the only one of its kind in Palm Beach—which is set off by an equally dramatic 45 foot long water fountain wall. When the sun goes down, the terrace is transformed with a fire pit to provide a stunning backdrop for al fresco cocktails and dining.

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Customer focus: Ritz-Carlton Palm Beach

For those guests who cannot leave work totally behind, a series of five poolside resort cabanas provides a new dimension to combining business with pleasure. Opening onto private terraces, these air-conditioned cabanas offer a practical space for business professionals to conduct meetings and conference calls and the hotel also offers much larger meeting and conference rooms if these are required.

The focus, though, is on providing a haven to relax, reflect and reward oneself away from the stresses and cares of everyday life. “From a functional standpoint, our proximity to the beach is unparalleled,” says Stamets, explaining that the boom of the Atlantic Ocean resonates in each of the exquisitely appointed guestrooms and suites. “As well as our amazing range of facilities, something that really sets us apart is our multi-generational appeal,” he continues. “Whether our visitors are children or more mature people, whether they are single, in a couple or a group, whether they are with us for a special celebration, or as part of a corporate event, they will all find a unique experience that has been crafted with their needs in mind.”

His role as manager is complex and multifaceted, but two key elements of the task center on a requirement to create an ambience where guests can celebrate and feel inspired. “In order to achieve that end, we must become part of peoples’ lives. Our guests come here for a thousand different reasons.

Our challenge is to understand each and every one of those reasons if we are to enrich their lives with a unique and unforgettable experience,” he says.

“Our heart and soul and the core of our ability to provide this sort of experience is the service provided by our ladies and gentlemen,” he continues. In the rarefied world of Ritz-Carlton, there are no staff, no associates and no employees.

Rather, there is a 400-strong team of ladies and gentlemen, whom he is tasked with motivating, educating and nurturing. He sees this team as the Ritz-Carlton’s most critical asset.

“We look for natural talent matched with a fit for the ethos and philosophy of the Ritz-Carlton.

We then take a very individual approach towards growth and development with regular human capital reviews to help people make the most of their talent. It is our belief that this approach creates happier people who can engage on a deeper level with guests,” he says.

“Our service model is based on ladies and

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Customer focus: Ritz-Carlton Palm Beach

gentlemen serving other ladies and gentlemen.

This is how we always refer to and think of the people who work with us. It is this approach which really enables us to pull away from the competition and differentiate ourselves from the experience on offer at other resorts.”

Such is the Ritz-Carlton’s dedication to its guests that when a couple due to celebrate a romantic Italian wedding were unable to fly on account of the dust cloud from Iceland’s volcano obscuring Europe, the ladies and gentlemen decided to bring Italy to Palm Beach. “The whole room was decorated as a tribute to Italy and the Italian sense of style. The bride broke down and cried when she saw what had been achieved on her behalf.

“Of course, other hotels within our luxury segment have pools, beachfront positions, valet parking and so forth,” he says. “It can be very hard to differentiate but I believe we have achieved it with a very avant garde approach to service. Take the recent introduction of our pool divas for example, where we bring a concierge service direct to the poolside, in an informal and very innovative way.”

It is all part of the hotel’s determination to create a new sense of ease and accessibility. In so doing,

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it has created a new benchmark for service within the Ritz-Carlton group.

The hotel’s ladies and gentlemen are also seen as a vital link with the local community. When the hotel closed for refurbishment in 2006, everyone was retained on the payroll, but assigned to one of the charitable or not-for-profit organizations across the county. The hotel industry is renowned for its high turnover; and Stamets found it very gratifying that 85 percent opted to stay the course and return to the hotel when it re-opened in March 2007.

When it comes to more tangible elements of the Ritz-Carlton experience, Palm Beach has also broken new ground. Todd-Avery Lenahan, principal with interior design firm ABA Avery Brooks & Associates, was responsible for the new look and feel of the resort. The $130 million transformation and expansion project featured a host of original design elements that caused even the sophisticated clientele of the Ritz-Carlton to pause and take breath.

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Customer focus: Ritz-Carlton Palm Beach

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The grandeur of the new foyer and its adjoining terrace, with stunning clear views to the ocean, is a fitting first introduction to Palm Beach. Each of the hotel’s oceanfront suites were also renovated, at a cost of over $100,000 each. The suites now offer unparalleled luxury with two bathrooms featuring multi-jet oversized showers, two HDTV flat screens, woodlined custom closets and double-sized private balconies.

A series of restaurants is currently under the direction of executive chef Ryan Artim; and the hotel intends to add another evening dining experience to the portfolio later this year. “We want somewhere grown-up, sexy and casual to complement the restaurants we already have,” Stamets explains. Meanwhile, Breeze is already recognized as offering the best oceanside fare in the area—the restaurant is situated right on the water’s edge, with custom cocktails and gourmet burgers and has the best view for miles around.

The jewel in the crown, though, has to be the new Eau Spa

by Cornelia, which has no fewer than 19 treatment rooms and extends across 42,000 square feet. It is the first facility of its kind in south Florida and incorporates an unusual garden design, complete with rainbow-hued butterflies and numerous elegant water features as a continuation of this key aesthetic that unites the hotel with the surrounding natural environment.

The spa aims to offer adults a magical spa experience, but one with a twist. “Of course, everything is at hand for serious fitness followers, but the emphasis is on fun, indulgence and celebrating oneself and life. It is a place to visit with friends— somewhere to enjoy champagne and mini chocolate cupcakes, as well as soak up the serene environment,” Stamets adds.

Looking forward, investment in the hotel is ongoing. “Our ownership takes very seriously the need to invest in order to maintain our cutting edge. We want to be the first resort of choice whenever someone is coming here on holiday. In order to achieve that, we must evoke change in all its forms.

“I tell my staff that if you always do what you’ve always done, you will always get what you’ve always had.

Here, we dare to do things differently. But perhaps most importantly of all, we enjoy what we do. Life is about having fun and so is managing this hotel,” he concludes. www.ritzcarlton.com/en/Properties/PalmBeach/Default.htm

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Customer focus: Ritz-Carlton Palm Beach

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Upgrad

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Thomas R. Cutler discusses with Joel Bos of Integrated Systems Group how to avoid failu when updating a distribution center

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he most common areas of quality failure in a distribution center and manufacturing material handling process are communication, documentation and budget. Integrated Systems Group (ISG) utilizes a documented process, says engineering manager, Joel Bos. “It is imperative that the software requirement, as well as the deliverable, be documented thoroughly. This insures that the customer’s wants versus needs are identified and expectations met. The result is a clear picture for both parties to understand. It takes due diligence during the design cycle to ensure that all of the needs are documented upfront and a future growth plan is in place. If shortcuts are made quality problems will ensue.”

This is not ISO 9001, nor is it a six sigma project. The best documentation to ensure quality when updating a distribution center starts out with a thorough analysis of the client’s item master and existing operational processes; this is followed up with an equipment, software and process analysis. “Close attention is given to the operators and interviews are conducted to identify problems or short-comings in the existing processes,” says Bos. “It is critical to work with the client to determine future growth and other business rules.”

The entire warehouse process must be flowcharted and thoroughly documented. In most cases there is planned growth for the business.

Other factors can also include planned SKU growth, mergers and consolidations. “When these items are analyzed and plugged into the ISG software certain outcomes are derived,” Bos explains. “We can take a look at how processes can be improved and what the size of the projected building should be to conduct the level of business desired. ISG also compares the present-day operation to industry standards and draws conclusions for correction as well.”

A gap analysis A gap analysis of the software can be conducted once the information above is gathered. The gap analysis is a critical tool that helps a distribution center to compare its actual performance with its potential performance. At its core are two questions: “where are we?” and “where do we want to be?”

The specific benefit of a gap analysis in the

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distribution center environment is a visual comparison of present day software capabilities versus what is needed to drive the warehouse and operations designed and discussed above. This analysis is designed to look at streamlining the operations with a consolidated software package or automated pick system.

Bos has seen some remarkable impacts from the gap analysis. “In some cases we can suggest designs that reduce picking and packing staff by 60 percent and at the same time increase throughput 30 to 40 percent, simply by designing the right equipment into the warehouse and optimizing the layout and properly slotting the SKUs.” After extensive scenario planning, due diligence, and listening, a complete design is reviewed with a budget price and projected return on investment.

The companies must then determine if pricing is within their affordability range. If not, then the paring-down process begins and this is where “wants vs. needs” comes into play. In some cases a phased plan is suggested to incorporate the entire scope of work just over a multi-year span. Each distribution center has different business rules, growth plans, and levels of automation to consider.

Quick and temporary fixes cost more Too often there is a perception by some executives in the industrial sector that the warehouse gets the last look for budget and equipment improvements.

This narrow vision can lead to quality failures such as temporary fixes that do not fully address an issue and result in poor implementation.

Bos explained why ISG believes the warehouse should not be overlooked. “Not all firms look at things from a lean perspective. When the time comes for the department heads to submit their budgets, the typical things that get priority are sales and marketing and product development.

The warehouse tends to be way down on the list. Too often the warehouse is viewed as simply a means of filling and shipping orders, or an evil necessity to conduct business. However, the department head that recognizes the cost of mispicked items, the costs of short picks, or the cost of returned goods…or that there are better ways to accomplish things in the warehouse, is going to get upper management’s attention and appreciation.”

Quick fixes such as multiple software packages that may appear to solve some distribution center

Supply chain management

and warehouse problems usually require the users to toggle between many screens. In the future when the budget money is available, some or most of these packages will be obsolete and end up wasting company money.

Third-party shipping software that does not easily interface to the host software frequently results in data entry errors, poor quality, and increased time wasted by users on multiple systems. “Another example of a quick fix is adding a warehouse module (WM) that your host software provider recommends,” said Bos. “It is touted to be everything you need and is compatible with the host. The pitfall is that most host packages focus on inventory and accounting. They do not typically excel on warehouse functions and so the promise looks good but the deliverable is less than expected. Some of this software may be thrown away a year or two later when the inabilities are surfaced and the need for a warehouse control system (WCS) solution is realized. Most WCS packages include an integrated shipping screen/ solution, packing screens, quality screens, and are designed to deal with a myriad of warehouse functions and equipment.”

Another quick fix is to simply add more rack to a facility. This may gain more storage locations quickly but may increase actual pick times. A short time later the warehouse manager may find those same rack locations need to be torn down to make room for a multi-level pick module, which provides a means for more efficient picks.

Distribution centers: a quality contingency plan From the warehouse project inception there must be a quality contingency plan. Each critical point must be reviewed and a documented plan for unforeseen failures must be established.

While few failures occur, operators and management must be trained to properly respond in the event a quality problem ensues. Documentation for the quality process usually includes details from software procedures, picking and packing procedures, to wave release and staffing issues. It also covers conveyor, sortation and workstation issues.

“Backup or contingency plans are essential and can be as simple as installing a few host terminals

around the facility,” said Bos. “But it is always part of the design to make sure product gets shipped.”

The costs of poor quality in the warehouse distribution center There are real costs for poor quality in the warehouse distribution center, including: • Short picks cause multiple shipments. This in turn causes increased shipping charges and disappointed customers.

• Poor inventory control or inaccurate picking can result in late fees and/or penalties from customers. They can also lead to an increase in returned goods and related processing.

• Poor management of the software deliverable could cause additional site time and implementation time. If the software vendor is late in delivering the goods and exceeds the implementation window, it may result in a significant cost with idle workers and irate customers who were expecting delivery when promised.

• Warehouse managers and distribution center operations and quality professionals could find their jobs in jeopardy if company executives feel proper due diligence was not conducted.

Selecting the best material handling providers A lot of suppliers in the material handling world say that they can “do everything.” Select a provider that has a history of repeat customers where technical solutions were successfully implemented. Also be aware of providers that are promoting a solution with a large amount of their own product. In those cases there is an obvious bias. Avoid providers that design in a vacuum and don’t listen to the specific needs of that warehouse operation. Select a single provider or integrator that can provide all of the facets of the system you need to avoid finger pointing, resulting in a shorter implementation and a successful system.

Ensure that distribution center consultants have provided clients with improved quality solutions for replenishing, picking, packing and manifesting.

Those methods must be proven to make pickers and packers more efficient; reporting screens give important data to managers and supervisors to show which employees are efficient and which ones are making repeated mistakes.

Thomas R. Cutler is president & CEO of Fort Lauderdale, Florida-based TR Cutler, Inc., and founder of the Manufacturing Media Consortium of journalists and editors writing about trends in manufacturing. (www.trcutlerinc.com)

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By leveraging a region already rich in mineral assets and infrastructure, Labrador Iron Mines is reviving a historic iron ore camp that today hosts all of Canada’s iron ore production. Keith Regan learns how this first mover of high-quality DSO product envisions a growing production profile at its deposits along the Quebec-Labrador border

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abrador Iron Mines (LIM) set an enterprising target to become the premier direct shipping ore (DSO) producer in Canada and is demonstrating the ability to achieve that goal with help from the country’s rich iron ore mining and infrastructure-intense history.

LIM has enjoyed a low-CAPEX entry as one of the few new iron producers in the world, courtesy of a 570-kilometer rail line (the umbilical cord to the deep seaport of Sept-Îles and central to the main maritime routes between North America, Europe and Asia), as well as hydro-electric power from a nearby hydro plant, power lines crossing the early stage properties, and years of development work put in place by Iron Ore Company of Canada (IOC).

LIM has already shipped some 6,500 metric tons (tonnes) of iron ore lump and fines material to steel mills in Europe, where it proved to be very suitable feed for their blast furnaces. The low-risk mining approach, beginning with the smaller of a total of 20 deposits straddling the 100-km Knob Lake iron range and located closest to infrastructure, has brought the project to the threshold of a production start-up scheduled for late summer of 2010.

In total, LIM has acquired about two-thirds of IOC’s mineral inventory near Schefferville, Quebec, which was formerly classified as reserves and contains as much as 150 million tonnes of historic DSO resource identified by IOC more than a half century ago and confirmed by recent

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Labrador Iron Mines Holdings Ltd.

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Labrador Iron Mines Holdings Ltd.

exploration. From 1954 to 1982 IOC had outlined about 400 million tonnes of DSO resource and mined 250 million tonnes, the remaining inventory inactive until very recently.

Canada has a long history of iron mining that was essentially correlated to supplying the US steel mills. With the emphasis on global expansion and with rising iron ore spot pricing—which today is near all-time highs, even with the corrections that European debt crises can throw at it—significant historic mining districts such as the Labrador Trough have re-emerged, and Labrador Iron Mines is blazing the trail.

Given long-term global infrastructure expansion forecasts, iron ore has been at the forefront of the bulk commodities due to its importance in the steel industry, to which its demand is intimately linked.

Steel is, in very simple terms, a blend of iron ore and metallurgical coal as well as minor amounts of specialty elements. Steel consumption, being a proxy for global GDP expansion, has been driven by the “new consumer” economies of China and India, which are in the formative stages of economic growth. These two countries alone account for two-fifths of the world’s population.

LIM believes that we’re witnessing a historic transformation in benchmark pricing to one that is more closely correlated to spot. In fact, having what is essentially an oligopoly exerting considerable influence through supply discipline means that the fundamental material balance is held in check and pricing is less volatile, particularly on the downside, than it is for many other commodities.

Among the factors making LIM’s project particularly compelling is the relatively high iron content and low level of impurities in the hematite ore, with even higher iron content in the deposits that will be targeted in future phases. In addition, the simple processing that combines washing with basic crushing and screening enables LIM to boost the grade of its product by as much as 15 percent to about 65 percent iron. Given its low capital intensity, long life (20-plus years) and relatively low hurdles (being in a brownfield mining district with minimal construction required), LIM is ideally positioned to benefit from the current evolution of commodity pricing and global growth.

Clearly the most important factor, however, is the extensive infrastructure investment made by

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Labrador Iron Mines Holdings Ltd.

the original owner, IOC, over prior decades. This begs the question, could a 570-km rail line from the mine site near Schefferville to the deep-water port of Sept-Îles be built today given our modernday multi-level environmental and regulatory hurdles? The short answer is that it would be next to impossible, and the cost would be formidable.

The replacement cost of the infrastructure that LIM has inherited could easily run into the billions.

of interest in the high-quality lump and fines products have been pouring in, particularly from Asian steel companies. Still, LIM’s competitive edge vis-à-vis its Australian DSO counterparts remains its proximity to European markets, as it offers product diversity that otherwise is exclusive to Vale. Despite Europe being a natural target, the Asian appetite for quality ore is proving relentless.

Already shipments from the Labrador Trough

“The low-risk mining approach has brought the project to the threshold of a production start-up scheduled for late summer 2010” The low-CAPEX, simple and minimal processing requirements lower the project’s financial and technical risk. In contrast to most iron ore operations, which rely on economies of scale to justify large capital expenditures, LIM’s low-risk approach involves a modest-scale operation beginning with the deposits located closest to the infrastructure.

The James deposit, with an estimated 8.1 million tonnes of ore, is just three kilometers from the town of Schefferville and just one kilometer from the existing rail spur and marshaling area. Also in the first-stage mining plan are the Redmond and Houston deposits, which will come onstream sequentially to 2012, when production is estimated to increase to 3 million tonnes per year.

Later phases, potentially four in all, are estimated to build production to as much as 6 million tonnes per year; the more remote deposits, such as the Astray Lake and Sawyer Lake deposits in stage 2 and the Howse and Kivic deposits comprising stage 3, require additional infrastructure support but generally of much higher grade. Future development is expected to be funded from the growing stream of cash flow.

In advance of production start-up later this summer, LIM has been progressing toward completion of the 4.5-km railway spur line between the processing site at Silver Yard and the existing Tshiuetin rail line that continues to run to the port of Sept-Îles. The new spur line will initially be used to transport the main components of the processing plant and the accommodation camp to the site.

For its first production year, LIM plans to sell its ore into the spot market, though expressions

region are reaching such Far East destinations as Korea, Japan and China.

The major operators in the Labrador Trough today produce a highly capital-intense iron ore concentrate and pellet: IOC (58 percent Rio Tinto), which recently announced plans to increase its annual concentrate capacity by 4 million tonnes to 22 million tonnes by 2012; Arcelor Mittal Canada (Quebec Cartier), producing some 15 million tonnes of iron ore concentrate and over 9 million tonnes of iron oxide pellets annually; and Cliffs Natural Resources, producing 2.7 million tonnes out of its Wabush facility. What distinguishes LIM from the new-generation producers in the Labrador Trough is that it remains independent and so is considered to be more highly leveraged to the upside.

The company’s late-2007 initial public offering raised some C$53 million, which has since been supplemented by a more recent financing in March 2010 of C$35 million, securing the funds required to take the Schefferville area project through its first year of production toward cash flow generation.

Today LIM has a strong balance sheet with no debt and just 43 million shares outstanding.

Labrador Iron Mines has worked hard to create strong partnerships with the First Nations peoples in the area, with one Impact and Benefit Agreement (IBA) already in place with the Labrador Innu Nation and other similar agreements in progress.

The company plans to use contractors initially—a strategy that will further reduce capital costs— with extensive local hiring planned to benefit the economy of the region for years to come. www.labradorironmines.ca

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Abacus Mining & Exp mine copper and gold Afton-Ajax pr Keith Regan learns agreement will enabl back into production w value, with global impl

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Abacus Mining & Exploration Corp.

ership

obal mplications

ploration holds the rights to from the former producing roperty in British Columbia. s how a recent joint venture le Abacus to bring the mine without diluting shareholder lications well into the future

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hen the bottom fell out of the metals market in the mid-1980s, mining companies found themselves forced to mothball formerly productive and profitable mines around the world. One such was the Afton-Ajax property in British Columbia, which had been actively mined for copper and gold since the 1970s. In 2003, seeking opportunities to find mines that were easily accessible and could be brought into production relatively easily, Abacus Mining & Exploration acquired the Ajax property from Teck-Cominco and later also acquired all the shops, offices and related support facilities.

“The value was obvious,” says Abacus chief executive officer Douglas Fulcher. “It was logistically ideal, a copper and gold producer, which was a direction we felt we wanted to be heading in as the markets began to recover.”

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Abacus set out to conduct additional exploration on the 8,000-hectare (approximately 20,000-acre) property starting in 2006, and in summer 2009 it released a preliminary economic study that envisions a mine capable of producing 110 million pounds of copper and 100,000 ounces of gold in concentrate annually. Even with an estimated $500 million to $600 million needed to bring the mine into production, at current metal prices the project could have a payback time of as little as two years and, even using conservative pricing assumptions, displays robust economics.

With the scoping study in hand, Abacus began to explore options for moving the project forward and met with many potential joint venture partners, recalls Fulcher. One such company was one that the veteran explorationist had never heard of— Poland-based copper producer KGHM. “I’m discovering that KGHM isn’t exactly a household name here,” Fulcher says. The low profile belies KGHM’s role as one of Europe’s top copper producers and the largest such company in Poland.

On a world scale, KGHM is the ninth-largest copper producer and second-largest silver producer.

The company also has a mandate to grow from its current production of 500,000 metric tons (tonnes) a year to 700,000 tonnes by 2017 and has been actively searching for projects that can help contribute to that goal. “Abacus is KGHM’s first effort outside of Poland to help them move closer to that goal.”

KGHM moved quickly once talks began, touring the property soon after. “The ink had hardly dried on the Preliminary Economic Assessment [PEA],” says Fulcher. A month later a term sheet was presented, and a month after that a deal was hammered out after Abacus executives traveled to Poland.

Under the terms of the agreement, which Abacus shareholders were scheduled to vote on in late June, KGHM immediately invested $4.5 million in a private placement in Abacus.

Once the definitive agreement is finalized, the joint venture will receive another $37 million in cash, funds that will be used to take the project to the bankable feasibility study phase. Once that study is complete, the Polish company has the option of investing another $35 million in the joint venture, of which it would then own 80 percent to Abacus’s 20 percent. The joint venture would then provide all the funding for the mine’s construction

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Abacus Mining & Exploration Corp.

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Abacus Mining & Exploration Corp.

to start up, with KGHM using its $7 billion in annual sales, $1 billion in annual net profits and debt-free balance sheet to help make that possible.

“This deal removes all the risk to bring the mine to production,” Fulcher asserts, adding that the additional exploration work that will be done for the bankable study will likely reveal an even larger resource than currently contemplated in the PEA. Even if KGHM decides not to move forward, Abacus’s worst-case scenario would be that it holds a bankable feasibility study and would be in a position to buy out KGHM’s majority stake. The joint venture approach also enables funds for exploration work to be conducted without dilution of the Abacus share base. “It’s fairly unusual for a deal of this type to be struck based on a Preliminary Economic Assessment,” Fulcher notes, “but because the PEA is so advanced, it provides a level of detail that goes beyond the norm.”

The fact that a deal was struck speaks to not only the resource and its potential but also the team at Abacus. “KGHM made it clear they are looking for a long-term partner who can help them with exploration and assessment of projects around the world,” says Fulcher. “In order to achieve their target, they are going to have to put a number of new projects in the pipeline, and they feel our team has the expertise, experience and know-how to be valuable partners for them in the identification of targets. We know they’re a great partner for us moving forward as well.

The reality is, the speed with which they moved on the opportunity was very impressive. I have never seen a group that could pull together such a complex deal in such a short time.”

“It’s a partnership that every mining junior dreams of,” comments Donna Yoshimatsu, Abacus’s director of investor relations. “And it’s fairly unusual for a junior and a major to partner in this way.” Then again, there’s nothing really junior about Abacus Mining. In addition to Fulcher, who has been working with junior miners since an early age, the Abacus team consists of some of mining’s heavy hitters, in particular NY-listed Amax Inc. The Chairman of the Board is Tom McKeever, a CPA from New York who became president and CEO of Amax Coal Co. and executive vice president of Amax Inc., and later executive chairman of global metals trader RBS Sempra Metals until 2006. The COO is Andrew Pooler, also hailing from Amax Inc. and a former senior executive with Pan American Silver with almost a couple of dozen producers under his belt worldwide. Pooler surrounds himself with a top team of mining professionals extracted from leading consulting firms in North and South America. “KGHM recognized that we have the expertise and knowledge base to identify attractive situations, particularly in the Americas,” Yoshimatsu says.

The initial study shows a 23-year mine life for Afton-Ajax, with Fulcher optimistic that it can be expanded to 30 years or beyond, meaning the partnership could be one that lasts and builds significant shareholder value for both companies over time. “Before we had a good project and a good team,” comments McKeever. “Now we have a leading global producer as a partner with a fully funded project and the financing to build a mine—and what’s more, a chance to do it again.” www.amemining.com

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Timberline Resources

kupplan Timberline Resources is an emerging gold producer and a junior gold exploration company with a business model that includes a predictable cash flow, David Hendricks reports

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andy Hardy is leading his team as they position Timberline Resources as an emerging junior gold producer with an existing cash flow. “In 2005, Timberline was essentially a shell company,” he says. “The business model was to not have to go back to the markets all the time and dilute the shareholders, but to provide cash flow internally for exploration. That was the impetus for buying the contract core drilling company in Coeur d’Alene, Idaho, in the spring of 2006. We’ve grown it gradually and continuously since to be a cash generator for what we are

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Timberline Resources

now: a multi-faceted, vertically integrated company.”

Hardy is CEO, CFO and a director of Timberline, and he has industry credentials that emphasize managing the crucial financial side of the business.

The first facet of the company is ownership of a gold mine now in development and soon to be in production. The Butte Highlands Gold Project is a joint venture with Small Mine Development LLC (SMD) on an underground gold mine south of Butte, Montana, being developed for production a year from now. SMD is an underground mine contractor and developer that has done a lot of work, particularly in the western US, for mining giants like Newmont and Barrick, as well as smaller mining entities. Hardy says he’s confident of SMD’s ability, since it has done work in a similar area in Montana and is running the operation of the joint venture.

“Timberline’s chairman and vice president of exploration, geologist Paul Dircksen, worked on this property previously when he was with Orvana

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Timberline Resources

Minerals, so he’s very familiar with the geology and the mineralization,” says Hardy. “Paul has also discussed the Butte Highlands project for several years with mining engineer Ron Guill, the owner of SMD; they’ve been buddies since college and have a great deal of mutual respect.

Actually, in 2008 Timberline was quite a way down the road toward acquiring SMD. We had the financing identified, but then the global recession began and we decided it would be prudent to put the deal off. From Guill’s perspective, one of the major advantages of having his company acquired by Timberline was to get an interest in the potential of this Butte project.”

So they arranged an innovative way to finance the development of the mine, which was to have SMD pay for all development up to production, estimated at $15–17 million. For that, SMD will receive a 50 percent interest in the project, an accelerated payback of its investment once the mine begins

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generating cash flow until that investment has been repaid, then it will receive its 50 percent stake in the project as production continues. “It made sense since it was a difficult time in the market to try to finance the project, so it ended up being a good deal for all of us, including SMD and our Timberline shareholders,” Hardy explains.

Timberline is operating under an exploration permit that allows it to do an underground ramp about 6,700 feet long and about 60,000 feet of drilling, both core and reverse circulation; then to extract a 10,000-ton bulk sample. The site facilities are complete, including offices, shops, generators—everything needed to perform the exploration and just about all the infrastructure, equipment and facilities needed for mining. The company is currently driving a tunnel underground, and in a few months it will begin underground drilling to delineate the mineralization. It has submitted its application for a hard-rock operating permit, a process that normally takes up to a year, and it is expecting the mine’s development to be complete by then, so it will be ready to go into production in 2011. “With the exploration we’ve done there in the last few years,” Hardy says, “we’re confident in our internal estimates of about 750,000 ounces of high-grade gold in the mineralization that we’ve identified.”

Butte has some distinct advantages. One is that it’s located primarily on patented mining claims, so Timberline owns the property, there are no royalties, and permitting is an easier process, dealing only with state agencies. Another advantage is that instead of financing, building and permitting an onsite mill, Timberline intends to use the services of a nearby mill with a cyanide processing facility that has agreed in principle to buy Timberline’s ore. “It’s a toll milling operation,” Hardy explains, “and we plan to truck the ore directly to the mill.”

Another facet of Timberline’s business is its recent acquisition of Staccato Gold Resources, a Canadian company that was based in Toronto,

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Timberline Resources

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Timberline Resources

with offices in Vancouver, British Columbia, and Elko, Nevada. The main reason for the acquisition, Hardy says, was to take control of a Nevada property called South Eureka, which includes the Lookout Mountain project. “It has already had some drilling, a resource has been defined

by Staccato, and we’re looking at updating the resource model. We’re confident, however, that there’s a decent-size resource, and we’ll do more drilling to confirm and hopefully expand the mineralization. The resource was originally identified in a 43-101 report by Staccato as being over 800,000 ounces, a substantial resource with room for growth. We’ll drill it later this year with the intention of making a production decision about a year later. Our team includes some knowledgeable people who have worked on this property previously, and some metallurgical analysis has been done on the ore that indicates that it is amenable to cyanide heap leaching, a low-cost process. It’s a low-grade, high-tonnage, widely disseminated deposit, and we hope to be able to put that into production as well.”

The third facet of Timberline is its drilling services companies: Timberline Drilling, which works in the western US, and World Wide Exploration, which works in Mexico, mainly on silver and base metal mines. Both are wholly owned subsidiaries that provide mainly underground diamond drilling services to mining and exploration companies.

“We’ve done a good job recently of streamlining those operations,” says Hardy. “Our teams there have worked hard to keep costs under control, focusing on customer satisfaction, safety and profitability, and those efforts have paid off. The drilling companies are operations that provide us with a source of cash flow and revenue—last year it was just over $17 million, and we expect over $20 million this year—to use in exploration. Then, when our production at Butte Highlands provides us with additional cash flow, our business plan is to invest it in more exploration and make further discoveries, and we’ll continue to build shareholder value.”

Hardy concludes, “We understand we’re in a risky, costly industry, and we try to remove as much of that risk and cost as we can for our shareholders. We do prudent exploration, and by having backstops like our drilling services and producing properties, we reduce the risk of our exploration where it is common to explore multiple properties before making a viable discovery.” www.timberline-resources.com

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oronto-based Sage Gold Inc. is still a new company, having been established just six years ago. For the first five years of operation, the company was focused primarily on exploration in Canada and the US. But just within the past six months the company strategy shifted because of the opportunity to acquire compliant gold assets in the market at reasonable prices. “This strategy will assist us in developing and financing ongoing exploration projects as well as new mining opportunities,” says Nigel Lees, president and CEO. A gold exploration company up until just a few months ago, Sage Gold recently entered into a series of options to acquire properties with compliant resources. “Most of our exploration had been focused on the Beardmore-Geraldton Gold Camp (BGGC) near Thunder Bay, Ontario,” reports Lees. “This is a small and historically good gold camp that, in our view, had been underdeveloped and underexplored. We have had a fair amount of success in exploration here, including the discovery and development of a compliant resource in the Lynx Deposit, which is a polymetallic deposit containing copper, gold and silver. It has not been fully drilled out or explored, and there is the potential for a larger deposit.”

The surface contains about 500,000 metric tons (tonnes) of good-grade ore with about 2 percent copper. The underground resource has 1.9 million tonnes with 1.4 percent copper. “This mine is amenable to open-pit mining on the surface and is a deposit that can be expanded greatly through further drilling,” explains Lees. There is also 135,000 acres of exploration properties in the BGGC on which Sage Gold has already done extensive exploration, both in terms of geochemistry and geophysics.

But since the strategy change, the company is now eyeing production at two gold-producing properties, each with permits.

“These two projects really demonstrate our shift from exploration to production,” notes Lees. Through an option deal, Sage Gold will have a 60 percent interest in the Clavos gold mine near Timmins. “This is a major world-class gold camp that has historically produced about 85 million ounces of gold.” The agreement is to earn 60 percent interest in the property over a three-year period. Sage Gold will invest C$3 million on the property in order to earn that interest. There has been

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Sage Gold Inc.

age hift strategy in

Sage Gold is in transition from an exploration company to a production company. President and CEO Nigel Lees explains the significance of the change to April Terreri JULY 10 www.bus-ex.com

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Sage Gold Inc.

Ormston List Frawley LLP Ormston List Frawley LLP (www.olflaw.com) is pleased to have served as legal counsel to Sage Gold Inc. We excel in partnering with clients such as Sage – businesses with dedicated management teams that are able to continue to develop a business and achieve objectives in both good times and in more challenging times.

Like Sage, we are competitive, ambitious and versatile, and we know from experience that the key to a successful venture is to adapt to changing circumstances, and identify and seize upon the right opportunities. As a young firm, we understand the pressures of developing a new business, and we work hard to meet our clients’ needs by providing timely, cost-effective and practical advice.

C$72 million already spent on infrastructure at Clavos, with C$42 million on the underground.

“We believe this is an excellent deal. We have a great partner, and we’re confident we will not only be able to expand the resource but also utilize the processing capacity available in the area so that our capital costs will be relatively low to put this property into production.” Lees adds that a great benefit of the Timmins area is the availability of many processing mills with excess capacity, meaning that Sage Gold will not have to invest in building a cost-intensive mill.

The other property is the Borealis gold mine in Nevada, about two and a half hours from Reno.

It had been mined previously by Echo Bay, who ceased mining operations in the late 1980s. “Echo Bay had mined the surface oxides, which had produced about 600,000 ounces of gold before they closed it down. Because gold prices had been dropping steadily back then, it was no longer economical to mine the oxides. Now, with gold prices about three times the price as when they closed the mine, it’s economically feasible. We have an option agreement here with Gryphon Gold to acquire a 50 percent interest in this property.

We will make a $400,000 investment in shares of Gryphon, and after a feasibility study and before June 2011 we’ll invest $9 million in the property or in the Borealis mine, whichever we decide to do at that time.” Gryphon Gold is currently drilling the oxide cap. It has a resource of about 2.5 million

ounces of both oxide and sulphide. There is a new resource estimate and bankable study under way, and the oxide portion of the Borealis resource is scheduled for production in late 2011.

“The shift from exploration to production is very significant for our company, especially because of the current environment,” Lees says. “People are looking for hard assets, cash flow, near-term cash flow or existing cash flow. This is opposed to investments in companies that are exploring with a very long timeframe before they can begin to go into production. So within a year or two these two properties potentially will be in production, which will lead to a cash flow for us. So this is very much in line with what we think is an appropriate strategy in the kind of economic environment we’re in today, especially with current favorable gold prices.”

Going forward, Lees anticipates high valuation in these production projects. “Through a positive cash flow, we’ll be able to finance our own projects in the future. You see, one of the negatives relative to an exploration company is you constantly have to go to the marketplace to raise money in order to do more exploration. So by becoming more self-sustained, we can use our cash flow to help explorations, make other acquisitions of other properties, or further develop the exploration projects we’ve already invested in. Our current strategy will make our company far more selfsustaining than it is currently.”

Sage Gold operates with a very lean business plan. “We have few employees, with a strong staff of technical and financial professionals,” Lees explains.

“We use a lot of outside contractors for exploration development, drilling and mining development. We don’t ever plan to have a large staff because of the perceived and real cyclical nature of commodities in general. We don’t want to have too much fixed overhead, so by using outside consultants we can operate a more flexible company.”

Lees notes that Sage Gold is fortunate to have the Board of Directors that it has. “The board is composed of individuals who have extensive experience in the mining industry. With this kind of strength, we’re very comfortable with the risk factors we might face.

We’ve positioned ourselves to be in well-known and well-tried gold camps in areas that have historically been very productive and in communities that are favorable toward mining, which is very important to us.” www.sagegoldinc.com

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Seah

Seah internationa COO Kurt Hof about the sha

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Seahawk Drilling

rising

hawk

hawk Drilling plans to soar to al status within a few years. ffman talks with April Terreri allow-water drilling company

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ess than a year ago Seahawk Drilling spun off from Pride International, one of the largest international offshore drilling contractors. As a newly formed stand-alone, publicly traded company, Seahawk Drilling became one of the largest shallow-water drilling contractors in the Gulf of Mexico, with a fleet of 20 jackup rigs focused primarily on shallow-water operations for natural gas development. “Seahawk operates in depths of 200 to 300 feet on the Gulf of Mexico shelf, with natural gas drilling accounting for 80 percent of our drilling operations and the remaining 20 percent of our business involved in drilling for oil,� explains Kurt Hoffman, senior vice president and COO of the Houston-based company.

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Within the next two to three years, Seahawk Drilling will look different from the company it is today. With a clean balance sheet, Seahawk is ready to begin its flight to become an international drilling contractor. “We have a 100 percent presence in the Gulf,” Hoffman says, “but we want to become more than one-dimensional by searching for international drilling opportunities that historically have strong fundamentals for the shallow-water jackup business, such as in the Middle East, West Africa and India, to name a few.” He adds that the company is currently evaluating several options.

Hoffman notes the attraction in these international locales is that national oil companies are owned and operated by the governments of the respective countries. “National oil companies have a longer business view that relates to longerterm contracts for us, which creates additional value for our shareholders.”

Current drilling operations in the Gulf of Mexico have been adversely affected by the moratorium imposed by US Interior Department for contractors with rigs operating in water depths greater than 500 feet, as well as for shallow-water contractors

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MAD, Ltd. Rig Repair MAD, Ltd is a seasoned welding and fabrication contractor serving the requirements of offshore drilling companies. This also includes land based rigs, bulkheads and other service oriented needs.

MAD, Ltd was formed by Les Bird after he had worked for Marine Drilling for five years and three shipyards. Les recognized that in this industry the customer was at the mercy of the contractor or shipyard and wanted to create a customer oriented contracting company. In1997 MAD, Ltd was formed and has worked for most major drilling contractors.

Mad, Ltd is currently operating a dockside repair facility in Sabine Pass, Texas to service your needs.

This facility is known throughout the Gulf of Mexico as Gabby’s Dock. MAD, Ltd and Gabby’s Dock have joined forces to better serve our customers. This adds tremendous strength to our project team that is committed to supporting our customers throughout any project. MAD, Ltd has qualified subcontractors that share the same commitment to safety, quality, and on time delivery.

We offer a bulkhead frontage of 735’, dockside area of 735’ x 250’, shore power (600 amp and 400 amp services), office space, internet and telephone services, potable water, sewage, and ample parking. Crawler cranes, mobile all terrain cranes, crane barge, work barges, forklifts, 6,000 square feet of enclosed storage, and an additional 9,000 square feet of covered storage, and 24 hour security guard services.

MAD, Ltd also operates a fabrication facility at 1195 Gulf St., Beaumont, Texas. This facility consists of a 105,000 square foot secured yard and a 32,000 square foot shop with AutoCAD based plasma and oxy/fuel burn tables (12’ X 54’) multiple overhead cranes, forklifts, iron workers and certified welders.

MAD, Ltd’s commitment to safety is reflected in our experience modifier rate, which is well below the norm for this industry. MAD, Ltd. will supply all project management and trade labor to accomplish defined scope of work for any project. We have a staff of competent employees with years of experience to serve your requirements.

like Seahawk whose clients are now required to comply with tighter safety rules for shallow-water wells, as mandated by the Minerals Management Service (MMS), the US offshore oversight agency.

Hoffman admits that the number one challenge facing the company and the industry now is the BP blowout incident that is seriously affecting every company in the industry. “Although we’ve been told that shallow-water drilling—defined by the government as less than 500 feet—is excluded from the six-month deep-water drilling moratorium, we know that the government is forming new rules and regulations that will affect shallow-water drilling as well. All our customers who already had permits to drill in the Gulf of Mexico are now going to have to go through a re-permitting process under the new

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MMS guidelines and regulations. This could cause a 45-day to 60-day delay in our customer’s ability to receive a drilling permit.”

The rippling effect of this will have serious negative impacts on the overall economy. “This will impact not only the workers on the rigs but the boat and helicopter companies that supply the rigs and the shore-based infrastructure like restaurants, hotels and trucking,” warns Hoffman. Another concern of an extended moratorium is that drilling contractors and oilfield service companies would be forced to deploy their assets outside of the US Gulf of Mexico. “I cannot urge the government enough to get the new regulations in place as quickly as possible so we can all continue our operations and in the process save thousands of jobs and continue

Seahawk Drilling

expanding employment opportunities in the Gulf,” states Hoffman.

With today’s 24-hour news cycle focused relentlessly on the BP oil spill caused by an explosion more than two months ago, the question of safety is on everyone’s minds. “Our industry has never had a bigger spotlight on it than it does today,” says Hoffman. “Safe and efficient operations are the foundation upon which we operate. Safety of our people and our equipment— as well as environmental safety—are aspects of our business that we monitor on a daily basis.”

For example, he points out that the blowout preventers for deep-water rigs are submerged and rest on the ocean floor, whereas preventers for shallow-water operations are located on the rig in full view. “So you can see them, touch them, inspect

them and test them on a regular basis.” Monthly safety statistics are reported to the International Association of Drilling Contractors (IADC), the worldwide drilling organization whose mission is to foster responsible standards, practices, legislation and regulations that provide for safe and environmentally sound drilling operations. “I’m proud to say that Seahawk Drilling does a very good job in managing our safety culture.”

Customer service is a key fundamental toward the continued success of Seahawk’s growth, Hoffman explains. “We want to be able to differentiate our services by demonstrating that we operate safely and efficiently. We want clients to choose Seahawk because they believe that we bring them the best value to meet their objectives.” www.seahawkdrilling.com

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Thefin

As the Mil completion, E.J. Hendricks so right on t gone wron project team

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Turner Construction: Mills-Peninsula Hospital

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lls-Peninsula Hospital nears executive project manager J. Saucier shares with David ome of the things that went the project that might have ng if not for an experienced and some creative thinking

onstruction of the new $618 million Mills-Peninsula Medical Center in Burlingame, California, is nearly complete. The 450,000-square-foot hospital, adjacent 185,000-squarefoot medical office building and 800-stall four-story parking structure by New York–based general contractor Turner Construction, one of the largest builders of healthcare facilities in the US, have been the result of four years of intensive, often difficult work, involving up to 450 craft tradesmen on site. The base isolation system installed at the foundation of the hospital building should enable the hospital to survive an earthquake up to 8.0 in magnitude and remain operational with minimal or no damage or disruption. It was the first base-isolated hospital in Northern California.

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Turner Construction: Mills-Peninsula Hospital

Olson Steel Ten years ago, Olson Steel committed to self performing Tekla 3-D modeling and being actively

involved

in

OSHPOD

healthcare

construction. We have learned a lot in the last ten years. The concepts of BIM collaboration, design assist, and lean construction have seeped into our company culture. Today we are applying our experience to the dynamic, progressive world of healthcare construction.

“The biggest challenge with the base isolation,” says E.J. Saucier, executive project manager (based in Oakland), “was the moat, which requires us to have a 30-inch separation from the foundation to the building, and the positioning of exits, sidewalks and stairways in connection to the medical office building was challenging. It has meant about four years of fancy detailing of moat covers and portals, which transport people from the hospital to the office building, as well as weather coverage of seismic joints, all of which we solved with some creative thinking.”

Building hospitals in California, equipping them seismically and so on, is difficult, Saucier points out. “You have to be strong to want to work in this business, and it’s so easy to burn people out, it’s a major concern. In fact, one of the key successes of the project for us was the continuity of staff, working with mostly the same crew and the same managers on and off site. The client was always supportive, and the subcontractors have provided project managers and foremen with the same consistency. That influences the site progress, and it benefits the budget, so in terms of continuity, the overall management was intact.

We’re fortunate to be able to retain most of our team right to the finish line.”

Another reason for success is that Turner went with design-assist subcontractors for about 70 percent of the work, and achieving that selection of subs also carried throughout the construction part. The company was instrumental in providing what it called its A-team: experienced, skilled people that worked well together. “Having an A-team is critical,” Saucier says, “because there are so many moving parts in building a hospital,

it takes a lot of effort by smart people to put it all together. Every day we run into constraints; it’s the nature of the beast, and the challenge is to be creative and develop work-arounds. Our senior superintendent, Chuck Burda, has been a master in the field for work-arounds. There are many instances of constraints, and if we didn’t have the right attitude and cooperation from others in doing work-arounds to keep the flow going, we’d be stopped in our tracks and frustrated.”

Burda adds, “For example, we had a situation with the generator room, critical to the project.

We found that we were stopped because of some sound isolation details that needed redesigning, which prevented us from ordering the final flue section that gated the starting-up of the generator. When we learned that the particulate filter would be delayed two to three weeks, we built a mock-up of the filter, installed that and took our measurements from it so we could then order the flue section and not hold up the job until it was delivered.”

Senior project manager Saptarshi Desai set up a constraint log to identify and catalogue constraints, showing how they were tied to the schedule, and tried to prioritize the information flow. “After identifying the issues,” says Desai, “it was essential to stay in communication with everyone involved.

Every week we would meet with the owner, the architect, the subcontractors and Turner staff, and we’d begin by reviewing the most urgent items on the constraint log and arranging them in order of priority, which kept the whole team focused on them in order to maintain the project’s flow.”

On a hospital project the inspection process is extremely critical and timely, in order for work to progress on schedule. This one averaged up to 300 inspections weekly, more than 14,000 in total.

Critical inspections are next-day. Freight Train, a construction management software firm in Los Angeles, developed a system to monitor inspections.

Turner used BIM (building information modeling) software to create three-dimensional models of the structures in order to nail down as many coordination issues as possible before going to the job site. “BIM was new to us,” says Saucier, “and to most of the subs, so we all went through a huge learning curve and it paid off—in the accuracy and the productivity of the installation, and it minimized the waste of materials and helped

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Turner Construction: Mills-Peninsula Hospital

“There are so many moving parts in building a hospital that it takes a lot of effort by smart people to put it all together. Every day we run into constraints; it’s the nature of the beast, and the challenge is to be creative and develop work-arounds” us stay on schedule.” Adds Burda, “One thing that BIM’s 3-D modeling did for us was allow us to increase worker density, by getting a productive workload with a high density of workers. In a normal work environment on a job site like this, there are certain efficiencies in pre-fab and so on, but with BIM, since everything is predetermined and already in place in the model, it takes a lot of the stress out of the field situation when you’re in a hurry. It allows you to increase worker density, which puts more scope into place within a similar time and location.”

Burda further explains, “BIM allocates space and time in sequence. Before we used BIM, we’d

start with our biggest components, like ductwork, or the ones with the most difficulty to manage in their space, like gravity drain lines, which must slope at exactly one-quarter inch. You can’t move them up and down like electrical conduit or like pressure water systems. Once those components are in place, everyone else has to cram their work into the remaining space. With BIM, all the coordination of space is done prior to getting to the site, so now you can load the area with workers from the top down, and the work is sequenced, not by degree of difficulty, but by its relationship to the floor. Everything runs smoother and more efficiently.” www.tcco.com

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Austin Building Company, a subsidiary of Austin Commercial, is the general contractor for the new W Austin Hotel & Residences in downtown Austin, a 37-story tower combining hotel, condominiums, and retail and office space. Iris Seymour has the story

W

hat used to be a 1.8-acre parking lot is transforming into an attractive building set right in the middle of one of the hottest districts in Austin, Texas. A brand-new, state-of-the-art high-rise with over 1 million square feet of space will grace the skyline of the city, revitalizing the downtown district on Lavaca Street across from Austin City Hall.

The $300 million project is a joint venture between Stratus Properties and Canyon-Johnson Urban Fund (Earvin “Magic” Johnson’s investment company). Dallas-based Austin Building Company (a subsidiary of Austin Commercial) is the general contractor for the project, reports Alex Gregg, senior project manager. The new building will comprise three components: a 250-bed W Hotel, 170 condominium units, and a brand-new venue for the Austin City Limits television concert series.

Retail and office space are included in the project as well.

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Austin Building Company: W Austin Hotel & Residences

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“We have to bring in all the materials on a just-in-time basis because there’s no room to store them. Another challenge was keeping all the surrounding streets open to traffic as much as possible and not disturbing the residents of the two nearby residential towers” Construction on the site began in May 2008, and the W Hotel is scheduled to be delivered by December 2010 and the condominiums by May 2011. As of early May, about half the condominium residences were already under contract. The project is designed for LEED Gold certification. Three levels of underground parking will be available for the residents of the hotel and the condominiums.

Gregg reports that crews excavated about 35 feet below ground level from property line to property line and then installed a retention system of steel and timber to accomplish this.

The three levels of the garage will take up the entire 1.8 acres of the site’s space. The building, also taking up the full city block, will rise four levels above ground, after which the building will reduce its footprint to about one-third the size of the city block, rising to a height of 37 stories from the fifth story. The fourth level will have a pool and a lounge area for residents of the hotel and the condominiums. Floors 6 through 16 are devoted to hotel rooms, with the remainder of the floors accommodating condominiums that range from 650 square feet to 17,000 square feet, available in one-bedroom suites to four-bedroom penthouses.

Most of the exterior walls of the condominiums will carry floor-to-ceiling windows for spectacular views of the city.

Austin City Limits Studio will occupy portions of levels two through four, reports Gregg, featuring a 3,000-seat auditorium. “This will be the new home for Austin City Limits,” he says. “They will use this to broadcast their TV program and for a variety of concerts. This new auditorium will increase the seating capacity of their home by about tenfold from their old center of operation.”

Hotel lobby and retail space will occupy the ground level of the building, and the second floor will house hotel ballrooms, meeting rooms and a mix of office space for lease. “This fits in with the City of Austin’s philosophy to have residential, retail and office space integrated into downtown

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buildings,” explains Gregg.

The tower rises from the northwest quadrant of the structure. The main entrance to the W Hotel is on the east side of the building on Lavaca Street.

“The building is a sleek, contemporary design,” he says. “The skin is slick and in one plane. It’s a dark gray building with a lot of windows.” The composition of the lower portion of the building comprises cementitious Swisspearl panels, 4-foot by 10-foot rectangular panels placed on the building in a horizontal and vertical pattern. The tower skin is made from prefabricated aluminum panels and glass in a unitized system.

Because the project is located right in the middle of the downtown district, logistics have always been a challenge, says Gregg. “We have to bring in all the materials on a just-in-time basis because there is no room to store them. Another challenge we had was keeping all the surrounding streets open to traffic as much as possible and not disturbing the residents of the two nearby residential towers. Noise permits were obtained from the City of Austin for any after-hours work, and notices were given to neighbors to make them aware in advance of any such work.”

Gregg acknowledges that financing was a challenge in the beginning of the project. “We were in a tight financial market. The project had already received financing, but then the bank that was backing the project failed. We didn’t miss a beat because the owners were able to obtain alternate financing, which is a testament to the quality of this project and the strength of the developers despite the current state of the economy.”

Stratus is the manager of the project and has a 40 percent interest in it, with about $63.4 million in capital contributions. Canyon-Johnson has about a 60 percent interest in the venture, with about $85.5 million in capital contributions invested.

Additional financing came from Beal Bank Nevada, Hunter’s Glen/Ford Investments, Comerica Bank, and First American Asset Management.

Austin Building Company: W Austin Hotel & Residences

R. M. Rodgers, Inc. / SWISSPEARL R. M. Rodgers, Inc. and SWISSPEARL partner to provide aesthetic and energy saving façade solutions for high profile buildings. SWISSPEARL is a ventilated cement composite rain screen façade

which

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sustainable features, and provides thermal ROI efficiencies. RMR provides assistance to the architect/contractor team from design through final installation to ensure a successful project.

R. M. Rodgers’ and SWISSPEARL’s experience and care do make a quality difference.

Gregg says Austin Building Company has achieved a number of successes so far as this project progresses. “For instance, we just topped out the structure eight weeks ahead of schedule,

and we continue to be on schedule to open on time. Even with the down economy, sales for the condos continue to be brisk.”

The city is anticipating the completion of the project, as it will bring another level of revitalization to what is the Second Street/Warehouse District—a hot, active part of Austin that attracts a young clientele.

“The property value of this project will bring a huge boost to the area, which has lots of restaurants, bars and nightlife entertainment. The building is right across the street from City Hall, which presents free concerts every week. So it’s a real attraction for the residents of the city as well as for visitors.”

This kind of high-rise building is typical for the portfolio of Austin Building Company and Austin Commercial. “We’re well known for our management of construction for high-end hotels, office complexes, corporate campuses, manufacturing facilities and airports,” Gregg concludes. www.austin-ind.com

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Hamilton Construction: Willamette River Bridge

Building

ridges A large number of regulatory environmental agencies in Oregon get involved when you demolish one bridge and construct another, David Hendricks learns from Hamilton Construction’s Kevin Parrish

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ounded in Springfield, Oregon, in 1939, Hamilton Construction has grown from a small construction company building concrete roads and irrigation systems to a full-scale general contractor and AISC steel fabricator and erector specializing in bridges and railroad trestles in the US Northwest. Its portfolio includes projects in Alaska, Arizona, California, Colorado, Idaho, Montana, Nevada, Oregon, Utah, Washington and Wyoming.

Offering design-build services, the company has a mix of privateand public-sector clients, from the state transportation departments of Oregon, California and Washington to Weyerhaeuser, Georgia Pacific, Portland General Electric, Union Pacific Railroad and Burlington Northern Santa Fe Railway, as well as several short-line railroads.

Heavy highway and bridge construction is the core of Hamilton’s work.

One of its current projects is close to Hamilton’s home base— the $187 million Willamette River Bridge that will replace a decommissioned bridge connecting the municipalities of Eugene and Springfield. Hamilton is providing construction management and general contractor (CMGC) services for this new arch deck design bridge project, replacing the existing temporary bridge built there in

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Hamilton Construction: Willamette River Bridge

2004, which replaced the original bridge (built in 1961) that was discovered to contain shear cracks. Hamilton’s project manager Kevin Parrish says that a major concern and challenge for building bridges in the Pacific Northwest is the Endangered Species Act. “We in the construction business in this part of the world take measures to protect threatened and endangered wildlife, in this case the Chinook salmon in the Willamette River,” says Parrish.

“Since this river is home to the Chinook, it’s considered critical habitat, so we have to do a number of specific things to avoid impacting the habitat or the fish. Another major issue in building bridges here is maintaining a sequence in carefully staging the project, to enable a constant flow of traffic—in this case two lanes in each direction, Interstate 5 being a heavily traveled route in the area. We also have to maintain a single lane of traffic in each direction on Franklin Boulevard [also known as SR 99], a surface street that travels under the interstate highway. Oregon is a green state, and we also have the demands of the surrounding environs of the Eugene and Springfield areas, with the interstate being a boundary between the two cities.”

Parrish explains that Springfield is “gritty and industrial” compared to Eugene, home to the University of Oregon, with its activist student body and surrounding community very involved in environmental issues, “with a heightened awareness of what is going on in their area.”

The first step in the staging process was demolishing the decommissioned bridge, and environmental permits specified that no materials be allowed to fall into the water. It required the construction of containment platforms—as well as coordination of demolition operations over Franklin Boulevard—and platforms over wetlands and sensitive areas between Franklin and the Union Pacific Railroad mainline tracks, which required railroad-approved containment platforms over the tracks. There were coordinated efforts to maintain traffic flow on surface streets, as well as rail traffic, with appropriate timelines for when flaggers would stop train traffic in order for the demolition crew to remove debris without endangering rail cars.

Obtaining permits for the various aspects of the project was a lengthy process in itself,

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Hamilton Construction: Willamette River Bridge

Parrish says. Oregon has a special programmatic environmental permitting process that was developed in conjunction with the National Marine Fisheries Service (a division of the National Oceanic & Atmospheric Administration). Add to that the Army Corps of Engineers, the Bureau of Reclamation, the Oregon Department of Fish & Wildlife, the Oregon Department of Ecology, the Environmental Protection Agency and the Department of State Lands.

“Every regulatory agency involved with the environment is a party to these permits,” Parrish explains, “and the Oregon Department of Transportation [ODOT] implemented them because in 2002 they realized that since they had a number of bridges to replace, they needed a speedier way of permitting—I estimate that Hamilton has built at least one-quarter of the bridges in Oregon.

So ODOT worked with these regulatory agencies to produce a list of conditions of environmental performance standards that, if met, would provide approvals without lengthy public reviews. There’s another process for developing design exceptions or permit variances. The issue of being granted a permit involves the work to be performed under the normal high-water line. All the information for the permit process had to be provided in sufficient detail that the regulatory agencies could determine what kind of work we’d be doing and how we were going to perform the work in compliance with the environmental performance standards in the programmatic permits.”

There’s another wrinkle: the Hydro Acoustic Noise Attenuation Program, which scientifically monitors the effects of the noise created by driving steel piles for bridges with a diesel (actually vegetable oil, usually canola or peanut oil) impact pile hammer on fish—or more specifically, on fish

flotation bladders. It’s been found that in certain fish, the noise will cause bladders to vibrate, and in some species to burst. “The hydro-acoustic monitoring is a new program for Oregon,” says Parrish, “so it’s new for this bridge project, and the Willamette River is a shallow, fast-moving stream, with a substrate of pure bedrock. My concern was that when we drive steel piles into rock, it’s loud. We discovered that one of the best ways to attenuate the sound is by putting foam inside a steel pipe larger in diameter than the pile being driven, and then surrounding the pile with a curtain of air bubbles. The air bubbles are produced by pumping a huge volume of air through small orifices in pipes enclosing the piles. For our situation, since we have difficulty going very deep into the rock, we’ve developed templates and braces that hold the pile in place to support it. We had nearly 300 piles to drive.”

The work bridge and demolition containment structure under the existing demolition bridge was 850 feet long and 155 feet wide. Once the old bridge was removed, the next step was drilling the foundations for the southbound lanes of the new bridge; the drilling is now complete.

“Slayden Construction Group of Stayton, Oregon, is our largest subcontractor; they’ve done CMGC work before,” says Parrish. “OBEC Consulting Engineers of Eugene and T.Y. Lin International of Salem provided engineering services. The key to this project was pre-planning. Everything had to be integrated; it’s not efficient to design a work bridge, then remove it, then design, build and remove a falsework system, then re-install the work bridge— because the timeline was critical for coordinating all the elements. We started working on the proposal early in 2008, and the bridge should be complete by the fall of 2013.” www.hamil.com

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Buil

fo

Brampton Brick history in Canada a manufacturing facility Regan learns from the co of strategic planning how diversification along wi quality and service to pav

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Brampton Brick Ltd.

lding growth

or

has more than 100 years of and recently opened its first y in the United States. Keith ompany’s new vice president w the company plans to use ith a continued emphasis on ve the way for future growth

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century ago, Brampton Brick was producing bricks at its Ontario plant, a facility that today, thanks to repeated expansions and significant investment in automation, has the capacity to be the largest single brick-making facility in North America, capable of producing 300 million bricks and brick equivalents each year. In 2008 Brampton opened a second manufacturing facility in Farmersburg, Indiana, a fully automated plant capable of producing 100 million modular blocks annually.

The production capacity and experience is part of the foundation of a strategic growth plan for Brampton Brick, one that includes diversification into concrete-based products such as landscape pavers and architectural accent pieces as well as a continued focus on operational excellence that will allow it to maintain high standards for quality and customer service.

“Our strategy going forward is all focused on growth,” says Frank Buck, senior vice president of strategic planning at Brampton. Buck joined the company late in 2009 after a decade with a competitor.

“We’re looking at a diversification strategy to help us do that, and over time we’ll become more of a masonry products business that provides a full array of concrete-based products as well as clay brick products.

We want to grow our share of the wall out there.”

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Brampton Brick Ltd.

That wall includes a range of landscape and building settings, from residential and commercial to high-end institutional buildings—especially in the growing healthcare sector—where architects are increasingly embracing new products to add color and interest to buildings and also to help buildings earn LEED points as green buildings.

“If you look at the greening of North America and the greening of construction industry products,” says Buck, “everyone is very interested in being able to qualify for LEED points, and there is a lot happening around recycled and reclaimed products and also about how well exterior materials perform in terms of energy efficiency.”

Brampton Brick’s geographic footprint includes large swaths of both Canada and the US, where it serviced the construction market even before it opened a US manufacturing facility. The weight of its products and the high cost of transporting them limits its range somewhat, though on some higher-end products, the margins are robust enough to enable shipping to markets such as New York City.

The competitive marketplace, meanwhile, is crowded, and one of the challenges Brampton faces is to cut through the clutter. While there are fewer companies with the capabilities to make the range of specialty products Brampton offers, a typical distributor may carry bricks from as many as 20 different manufacturers. “Coming out of this recession, there will likely be fewer, but a lot of dealers carry many of the brick lines,” Buck says.

Brampton has long sought to distinguish itself on quality and service. “There’s no point in having great products if you don’t have the service to stand behind them,” Buck adds. “You have to back

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Brampton Brick Ltd.

Ceramic Color Serving top industry leaders with their color and metal oxide needs for over 75 years. Our products are competitively priced and globally used in a variety of applications, such as: ceramic body, engobe, glaze and enamel ware. If you are looking for ways of achieving better mixing with more consistent color values contact us for your personalized evaluation and recommendations.

In fact, Brampton’s Farmersburg facility is “as modern as any you’ll find in the world today,” Buck states. Up and running just over a year now, the plant is fully computerized and automated, with the facility capable of being run by as few as a dozen workers, a number that would likely only double even if output was boosted by adding additional shifts when the market warrants.

Brampton also invests heavily in quality assurance, continually taking products out of production and testing them to ensure they meet relevant North American standards, which in turns helps it meet

“We’re looking at a diversification strategy, and over time we’ll become more of a masonry products business that provides a full array of concrete-based products as well as clay brick products. We want to grow our share of the wall out there” up quality with service. That means delivering the right product on time and being innovative in terms of size, color and texture.” Innovations include through-body colors instead of paintedon surface color, for instance.

Brampton spends a lot of time and resources ensuring it is getting the most out of the costs it puts into its product and supply chain. “You have to be competitive on price, and at the end of the day that means being sharp on costs,” Buck says.

That means trying to reduce the two largest costs a brick-maker faces: labor and fuel. Clay brick-making, in particular, is a “very punishing process” that requires a lot of fuel to create very high temperatures in the kiln over a long time.

“We’ve done a lot of experimenting with using different types of gases to fuel our plants, be it methane or pet coke or propane,” Buck explains.

“You’ve got to manage your kiln properly, and that means a lot of maintenance to make sure there are no leaks and that your burners and valves are running as efficiently as possible.”

The industry has also embraced automation as a way of reducing labor costs. Traditionally, clay brickmaking has been a labor-intensive process, with bricks having to be bundled before they are placed in the kiln and again when they are done being fired.

“The old days of having 100-plus people working in a brick plant doesn’t work in this marketplace.”

code requirements when used in construction settings. The company also employs a ceramics engineer who works with a team of people who are dedicated to testing and checking the recipes and formulations used to make the finished product.

Managing the flow of production is another challenge, with Brampton making the 20 percent of its inventory that makes up 80 percent of its sales for inventory while also making other products to order. To help make that possible, Brampton relies on its field sales representatives to keep up to speed on the status of building projects for which it may be asked to bid on providing product. “It’s a dynamic process,” Buck says. “You need to have sales reps in place who can provide a lot of market intelligence and have great relationships with contractors to make sure we’re in the loop and have good advance knowledge of when a contract might be coming onto the market.”

The economic slowdown and the construction recession in particular have hit the brick business hard. Residential housing uses the vast majority of brick and related products, and that market may remain depressed for the foreseeable future. “We’re using this time to do the up-front missionary work and let people know that we’re on the ground in the US now with clay bricks and concrete masonry products ready to service that market.” www.bramptonbrick.com

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Lea

A presid impo technique producer g env

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SuKarne, S.A. de C.V.

anmeat

Andrew Pelis talks to a vice dent of SuKarne about the ortance of lean production es to Mexico’s largest beefr, and the export potential generated by the country’s viable animal health record

I

t seems that every week we learn of another food scare caused by disease or poor hygiene. When it comes to meat exports, Mexico appears to have a distinct advantage, given its excellent track record and the fact that it remains free from BSE (bovine spongiform encephalopathy, also known as “mad cow disease”) and foot-and-mouth disease.

“It’s true that other countries, such as in South America, have had export restrictions placed on them,” says Simon Stopol, vice president and general manager for exports at SuKarne, “and those restrictions have opened up a world of new opportunities for us.”

The company, headquartered in Culiacan, Sinaloa, is Mexico’s largest beef-producing company, commanding 19 percent of the market share. Now part of Grupo Viz, it was founded in 1969 in the same area on the west coast of Mexico as a small operation, and Stopol says its seminal moment came in 1983. “That was when the company produced its first production unit, integrating all processes on the same site.”

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SuKarne, S.A. de C.V.

Each production unit is self-contained, comprising areas dedicated to feedlots, the feed plant, the slaughterhouse, and the packaging and distribution operations. It’s a strategy that Stopol says gives SuKarne a significant advantage. “We operate a different model from elsewhere in the world. By operating fully integrated production units, SuKarne is able to implement tight controls in its feeding and packaging operations that result in a final product that meets very high quality and food safety standards.”

The demand for SuKarne beef in Mexico has expanded greatly in recent years. But since Mexico has a meat deficit in regard to demand, SuKarne imports beef, pork and chicken and sells these products—as well as the company’s own beef—directly to retailers such as Wal-Mart and HEB, or through the company’s own distribution network, which includes 386 points of sales.

However, 17 percent of SuKarne’s product now goes overseas, and with more than 280 loads (trucks or containers) being imported or exported each week, the company has built important trade links with transport companies.

International business has brought in significant revenue from various cuts of meat, as Stopol explains. “We currently export to the US, Japan, South Korea, and recently Russia. The US currently constitutes around two-thirds of our export market, with Japan making up most of the remainder.

Export is becoming a growing market for us; last year we sold $156 million of export product, and this year we’re aiming for $225 million.

“The cuts vary from country to country,” Stopol continues. “Our strategy is very much to maximize our pricing and income.”

Stopol says it was the introduction of NAFTA (the North American Free Trade Agreement) in the early ‘90s that opened the market up for SuKarne to import and export meat. “We made a pivotal decision to embrace free trade and quickly became one of Mexico’s largest marketers of imported meats. We started to export to the US in 1996, and the fact that Mexico had no BSE or foot-and-mouth was a reason for our success.

“The move to Japan came in 2004,” Stopol continues, “and one of the key factors in this was the economic partnership agreement between the two countries, which made for faster trade.

Our interest was exporting agricultural products

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to Japan on a quota basis.”

Another important factor was the Japanese preference for grain-fed beef—a demand mostly fulfilled by the US until restrictions were imposed in December 2003, following the outbreak of BSE. This, of course, created a gap in the market that SuKarne was quickly able to fill. “In Japan there was also the demand for ready-to-use meat where there are thousands of small restaurants, and our flexibility enables us to deliver an important value-added service,” says Stopol.

Today the company operates four production units across Mexico and employs approximately 5,200 workers.

Stopol says that labor productivity is high in Mexico and that staff turnover is minimal, resulting in workers building up a variety of skills, including cutting and trimming, over a number of years.

While manual skills are always going to be needed to meet the demands of the export market, Stopol says that automation and technology also have their places at SuKarne. Through automation, for example, he says that the company has been able to further improve food safety and production efficiency. “Because we export to the US and Japan, we are subject to their food safety rules and are audited by their food safety inspectors. We adhere to HACCP standards and constantly test instruments, conveyors and the product itself for bacteria on site, so we can identify any problems immediately. This is another benefit of consolidating everything on one site.”

The next stage of efficiency is now under way, with two individuals brought over from Japan earlier this year with extensive knowledge of lean techniques. Already Stopol has seen the introduction of controls and an improvement in quality thanks to the introduction of 5S and root-cause analysis. “The biggest challenge is going to be changing the culture, but we have already made significant strides in that direction,” he comments. “We have to be lean because the nature of the industry dictates that at times margins can be volatile and slim.

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SuKarne, S.A. de C.V.

Intervet Schering Plough Animal Health Intervet Schering Plough Animal Health, world animal health market leader, shares SuKarne’s joy in achieving the “Operational Business Excellence Award.”

This is a deserved recognition for its effort to provide the market with the best meat. It has always been important for us to support companies that seek to provide products of the highest quality standards.

What lean is helping us do is put processes into a systematic framework.”

Above and beyond the niche service offerings, Stopol says that these are exciting times for SuKarne. “The year 2008 was difficult for most meat producers, but we are now seeing a growing demand

in our current export markets and are aggressively penetrating markets such as South Korea, Russia, Vietnam and Hong Kong. We also see tremendous potential in China, where the per-capita demand for animal protein is growing very rapidly.

“We also expect to soon address the issue of full traceability of cattle,” Stopol continues, “which will permit us to trade with the European Union. At the moment we register each animal when it has arrived at our procurement centers or feedlots, and we then have a record of its history and health. This high level of integration gives us control over the product and is a big asset.

“Last year we processed more than 610,000 head of cattle,” Stopol adds, “and in 2010 that will increase to 730,000. We’ve grown by 26 percent over the past 11 years. Our current automation, lean initiatives, access to grain and lower labor costs will help us remain competitive as demand increases.” www.sukarneglobal.com

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Drink

u

David Hendricks talks to several execu learn the latest developments at Corby Limited, a leading Canadian manufactu marketer of spirits and imported wines 82

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utives to y Distilleries urer and s

Corby Distilleries Ltd.

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nglish emigrant Henry Corby set up a grain mill in 1840 in Bellville, Ontario, and began distilling whisky in 1857, incorporating as Corby Distillery in 1859. In 1890 his son took over the business, bottled whisky under the family name, and began importing scotch from the UK. A little more than a decade later, the family assets were bought out and the company evolved several times over the next century. In 2005 Corby Distilleries became affiliated with Paris-based Pernod Ricard SA, the second-largest spirits company in the world (Pernod Ricard owns 51 percent of Corby’s voting stock and 46 percent of its total equity).

In July 2009, Patrick O’Driscoll, with 25 years of experience in the spirits industry, became president and CEO of Corby Distilleries and Hiram Walker & Sons Ltd., a Pernod Ricard subsidiary that owns the largest distillery in North America, in Walkerville, Ontario (a district in the north end of Windsor founded in 1859 and developed by Hiram Walker, another historic Canadian distiller). Additionally, Corby operates a smaller bottling facility in Montreal and has headquarters in Toronto and sales offices across Canada (Vancouver, Edmonton, Regina, Montreal and Halifax).

Through its affiliation with Pernod Ricard, Corby distributes across Canada such leading international brands as Absolut vodka (the number two vodka in Canada), Chivas Regal and Ballantine’s Scotch whiskies, The Glenlivet Single Malt Whisky, Jameson Irish whiskey, Beefeater gin, Malibu rum, Kahlúa liqueur, Jacob’s Creek wines and Mumm Champagne. These brands, together with Corby’s portfolio of owned brands—which includes the Wiser’s family of Canadian whiskies (Canada’s number one whisky family), Polar Ice vodka, Lamb’s rum, McGuinness and Meaghers liqueurs, Seagram coolers and Royal Reserve whisky—provide a combined company brand portfolio that approaches 25 percent share of the Canadian spirits market.

A recent $15 million, three-year upgrade to the Walkerville facility has just been completed. “It’s an improvement project that helps us become significantly more competitive in Canada and in North America,” says Hiram Walker’s vice president of operations, Jim Stanski. “It was a broad-ranging plan that enveloped every corner of the company. In the distillery, we improved energy efficiency as well as environmental projects, which we’ve been pecking away at for a long time, but this investment from our parent company allowed us to complete those. It showed that they had confidence in the plant. We made significant changes in a relatively short period of time and achieved major improvements in the bottling area as well as ‘drain and fill,’ the area where we do our preparation for maturing Canadian whisky.”

That facility currently has three ISO certifications: 9001, the quality standard; 14000, the environmental standard; and 18000, the health and safety standard.

It’s now pursuing 22000, the food grade standard. “These certifications make us more competitive and underpin the quality of the products we produce,” Stanski adds. “Another major project has been the implementation of Oracle’s JD Edwards EnterpriseOne software system last August. It’s fair to say that if you look at our plant in terms of its level of technology and processes, in our industry it’s probably second to none in North America. It’s easily a world-class facility in many ways; we’re very proud of the Walkerville site.” As a result, Hiram Walker & Sons produces brands that are of the highest quality and able to compete not only in the Canadian market but internationally as well.

CEO O’Driscoll adds, “Of course, our Montreal plant is much smaller, but it gives

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Corby Distilleries Ltd.

us the flexibility to do a lot more of our boutique brands in smaller runs—the brands that need more manual work, specific bottle shapes and so on. So we don’t have to compromise the efficiency of our larger, volume-oriented plant in Walkerville with the smaller-volume items. The Montreal plant will also be certified in ISO 9001, 14000 and 18000 by the end of 2010. Corby has been doing a lot of upgrades in Montreal over the years and has upped the game substantially in recent times. Montreal is also a great vehicle for brand innovation, because it’s perfect for bringing out smaller runs of new brands, such as our recent launch of Lamb’s Black Sheep spiced rum.”

Vice president of human resources Paul Holub explains the link between a major employee

development program and the company’s portfolio of excellence. “We’ve spent a lot of effort improving the skill sets within our sales force, increasing the capability of our front-line sales people, especially in the area of key account management. The reality in Canada is that our customers are changing, their expectations are changing, and we have to make sure that our sales ability aligns with those expectations. On the marketing side, we’ve been fortunate that our majority shareholder, Pernod Ricard, has an excellent training center in Paris, with world-class marketing programs, so we’ve been sending our people there, to build the capabilities of our marketing department. They’re not only sharpening their marketing skills; they’re also getting a global perspective of the international brands that we market and distribute.”

“Of course, with these investments we also have to measure the improvement and see how employees are feeling about the business,” says O’Driscoll. “So we’ve invested a lot in employee engagement surveys—we’re on our third one now—to be able to really understand how engaged our teams are with the strategy of the company and to measure the areas we need to develop further. Then we’re able to put into place programs that facilitate continuous improvement.”

Holub adds, “In the survey itself, we’re focusing on major areas that encourage employees at all levels of the company to feel empowered to make decisions and take actions. Also, collaborative teamwork is encouraged across the company. We want employees to feel that they have opportunities to grow and develop. And we want to create an environment where they’re recognized for doing good work and are respected as individuals.”

O’Driscoll summarizes, “We have a very strong position in Canada. We have several brands on strong growth trends. The vision is to strive for market leadership in the product categories that we choose to compete in. This company has gone through a lot of change, especially in the last five years or so. Change has been fundamental; it’s all positive, and it will continue because as an organization we thrive on it anyway. We’re striving to build on the high product quality that we’ve always delivered, as well as the efficiencies and competitiveness of our manufacturing base.

It’s an exciting Canadian company, and I’m very proud of what we do.” www.corby.ca

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Compress but

expand

Bristol Compressors is recognized in the HVAC and refrigeration industry globally as one of the leading manufacturers of reciprocating compr officer Randy Jacoby tells John O’Hanlon why he wants to be the pe reciprocating option to the HVAC market b 86

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sed

ding

y in North America and essors. Chief operating erson who provides the better than anyone else

Bristol Compressors International

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ristol Compressors was founded in 1974 as an offshoot of Sundstrand in the days when that corporation was in growth mode, and it was purchased by York International in 1988. Johnson Controls acquired York in 2005 but spun off Bristol two years later when it passed into the hands of private equity group KPS Capital Partners.

Although he is too tactful to say so, the company was looking somewhat old-fashioned when Randy Jacoby joined it in 2007. He is a seasoned manufacturing manager with the advantage of knowing this industry—and Bristol’s major customers—like the back of his hand, having run production facilities for Carrier and Danfoss to name but two. To him the opportunity to bring modern manufacturing principles to Bristol, Virginia, was irresistible.

Over the last three years or so, Jacoby has had a lot of fun. The factory had been run along “batch and queue” principles, and the infrastructure designed to support this approach. “The plant reflected the traditional way of doing things, when materials were cheaper and everyone was holding too much working capital,” Jacoby says.

He enjoyed the opportunity to introduce lean principles to a company newly released from corporate control. It enabled him to develop site-

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specific programs, fast-track decision making, and measure the things that are significant to the operation without having a lot of paperwork and bureaucratic oversight. “We’ve developed our own template that is specific to what we do in this business,” Jacoby says.

Reciprocating compressor technology has a secure future in the HVAC value chain, Jacoby is convinced, and the most competitive suppliers will be the leanest. “The program was named the Bristol Business System [BBS] because we recognized that operational excellence must also include expediting the handling of information and support. We see it as all-inclusive.”

At the cornerstone of the BBS process was a covenant with the employees that improvements would not mean layoffs. “Our strategy is to husband our natural attrition, and we’ve been able to reduce headcount year on year without compulsion. We participate with the employees so they feel they are part of decision making,” says Jacoby.

The year 2008 was classed as the foundation year, training all employees from the top down; 2009 was the deployment year, when projects were introduced; and 2010 is focusing on the supply chain and standard working. Lean concepts like

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5S, TPM (total productive maintenance) and the “visual factory” were explained in ways that people could understand. “There’s not much point in using Japanese terms here in Virginia,” Jacoby says. “I explain 5S by telling the employees that it’s like what happens in a well-run kitchen: you organize your tools so the ones you use every day are ready at hand, and the ones you use on special occasions are packed away somewhere.

‘Standard work’ is no more than the recipes your mother uses, and kitchen cleaning is not for guests but for hygiene. We keep our areas clean because it helps us function better; looking good is just a byproduct.”

In the first year Jacoby encouraged all his managers to apply 5S in their offices. “We multi-task, so we change over a lot. If we’re organized then our changeovers are faster, and that’s really the essence of reducing cycle time and of successful manufacturing.” He didn’t want to hear managers saying they were behind the transformation, he adds. Like good military officers, he expected them to lead from the front.

IT was harnessed to drive the transformation.

An entire component line was changed from MRP planning to demand pull—a touchscreen virtual kanban system was devised so that when a location

Bristol Compressors International

became depleted, an icon would change from green to yellow or red and alert the machining line.

Another IT-supported project resulted in the process of closing the books coming down from five days to something close to a same-day operation.

But lean transformation means nothing unless you can measure the result. “We had to have deployable and scalable metrics,” says Jacoby.

The first metric he chose was safety. “The Overall Incident Rate is an OSHA quotient of recordable injuries [lost-time injuries or injuries requiring medical treatment] over increments of 10 manyears. We chose safety because I’ve always thought safety was a leading indicator and a good metric. If your processes are designed properly, your workplaces aren’t cluttered, your operators are trained and your machinery is running well, then you will be safe.”

Next came quality. The metric chosen here was First Pass Yield (FPY). “We defined that very strictly,” says Jacoby. “It has to go through first time, as designed, as advertised and with no stops. Again, it is deployable and scalable. I can look at FPY companywide or in a specific operation.” Quality was followed by productivity, where inventory turnover was put under scrutiny but adapted to the shop floor. “We used the ratio of the number of units

scheduled each day in a given area to how much inventory was available,” he explains. “We wanted to keep that as close to 1 to 1 as possible.”

Finally, Overall Equipment Effectiveness was measured. “OEE is really just productivity but with a little more detail. It looks at efficiency, and it starts to look at interruptions, even planned interruptions like changeovers and periodic maintenance or tool changing, and sets targets for these.”

The metrics were expected to show results, but the actual gains even took Jacoby and his team by surprise. “In the first quarter of this year our safety performance had improved by 54 percent, our FPY had improved 30 percent, and our OEE was up 36 percent. In the first quarter of this year we produced almost double what we did last year, and our working capital has remained essentially unchanged.”

Continuous improvement is just that, so when 2011 is called the year of perfection, it just means the year when the pursuit of perfection becomes possible. And that can’t be done in isolation. “My vision is that all the businesses in a value chain need to work together to reduce the aggregate working capital needed to produce a product,” says Jacoby. He is working at both ends of the supply chain to achieve this. www.bristolcompressors.com

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your bearing

Getting

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Bunting Bearings, LLC

A comprehensive product portfolio, market expansion and customization add up to make Bunting Bearings a leader in its field, David Hendricks reports

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ust over a century ago in Alliance, Ohio, Bunting Brass and Bronze was founded in 1907. After some mergers and acquisitions, the company became Bunting Bearings, LLC, with headquarters including a machine shop in Holland, Ohio, and two in-state casting facilities at Mansfield and Delta. It also has a powdered metal facility in Portage, Michigan, and two distribution centers, in Houston, Texas, and Cerritos, California.

The company’s general product categories include: cast bronze bearings; continuous-cast solid and cored bars and wearplate, and centrifugal-cast bronze bars; custom machined products; powdered metal bearings and thrust washers; powdered metal bars, discs and plates; powdered metal structural products; lube-align mounted bearings; engineered plastic bearings; and permanent mold products.

Vice president of sales and marketing Alistair Brixey has been with Bunting for less than two years but brings 30 years of industry experience, mainly in the UK and Europe. What attracted him, he says, was the company’s wide-ranging portfolio, its versatility in customization of products and its quality standards. “All our plants are ISO 9000:2008 certified,” says Brixey, “and we’re also starting six sigma training. We’re always looking at continuous improvement of our processes, and increasing our productivity is a natural result of that.” The company has invested heavily at its Portage facility, installing a variety of presses for manufacturing parts.

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“Among the reasons I wanted to join this company were its range of products and its vertical integration,” Brixey explains. “We actually have full control of the raw material, from the ingots coming in, making the bronze, then producing the bronze bearings from our own bronze bar and selling bronze bar materials. The materials we work with are mainly leaded tin bronzes and aluminum bronzes, but we also produce a whole range of ‘greener’ no-lead and low-lead bronzes. We have a large machine shop, so we can produce custommachined bronze bearings and complex-shaped bronze components. And if someone needs a standard bearing modified, we can do that too.”

Bunting manufactures a vast array of bearings from one-eighth of an inch to 20 inches, in materials from plastic to aluminum bronze, to market sectors including oil and gas pump manufacturers, agricultural and construction part makers, the military, aerospace, heavy machinery, material handling equipment, medical equipment, utilities and shipbuilding. It makes a lot of OEM parts, mainly for two of its largest customers, John Deere and Caterpillar. Bunting has all bases covered, in terms of sales: it sells directly to customers through its own sales reps, as well as through its distribution network, and it also has arrangements with sales rep companies.

Joining the company in 2008, the beginning of the global economic crisis, was a positive factor

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for Brixey. “The recession was a good time for us to look at how we were supplying customers and what extra value we could offer them, and also how to improve our portfolio. We introduced some new products that are variations of our standard products. For example, we have selflubricating bearings that are normally filled with standard oil, and we came up with bearings that are fully impregnated with synthetic oil and can be used in the food industry, which hasn’t been hit by the recession as hard as other industries.

We also saw a gap in the market where bearings are used in start/stop applications, and we introduced PTFE additives to bearing oils that vastly improved bearings in those high-stress situations. We also introduced two other full bearing ranges, one for high-load applications and one for high temperature.”

Bunting discovered that in a recession, its customers’ purchasing departments were looking to reduce their supply base, “and that suited us fine,” says Brixey. “We could offer them a onestop shop where they could buy bearings made of nylon to cast bronze and so on. Most of our customers have expressed to us that they wanted their supplies simplified to the point where they would have one company do it all for them if possible, and I love to hear that.”

One of Brixey’s intentions was to make it easier for customers to do business with Bunting 24/7, especially with customers in different time zones, so Bunting improved its company website. He wanted it to be more than just an online catalogue.

“I wanted an actual sales tool where we could provide customers with specifications and drawings that they could download and save their engineers time and effort; they could download our bearing and insert it into their product, or download a sales drawing and send it directly to their purchasing department. They could also easily send us a request for a quote.”

It’s working, and already Bunting is picking up inquiries from around the globe and supplying companies in the oil fields of Saudi Arabia, power station companies in China, and entities in the Middle East and other parts of the Far East. In fact, business has grown considerably this year, necessitating adding staff in the past few months and opening up distribution into Europe—France, Germany, Spain, Italy and the UK.

Bunting Bearings, LLC

Jade Engineered Plastics Congratulations to Bunting Bearings on their achievement. Jade Engineered Plastics corporate philosophy is: A dedication to continual process improvement and total product quality backed by consistent customer service.

We at Jade Engineered Plastics achieve these objectives by first understanding and then attempting to exceed the requirements of our customers, both internal and external.

One product that Bunting offers exclusively is the Dri-Plane range of powdered-metal bearings that can be used at high temperatures and in vacuums, because of a dry lubricant in the material.

“Some customers wanted a bearing that was self-

lubricating, but using a standard oil-impregnated bearing in a vacuum isn’t possible, since the oil would be sucked out and at too high a temperature the oil would burn off. So we solved their dilemma for them. We also have bearings made of exotic materials that are more expensive than some of our standard products, but these can work up to 900° Fahrenheit and have a very long life.”

Brixey feels that the company’s bearing portfolio is now about 90 percent of the way to the place he’d like it to be. “It took 103 years to accomplish that first 90 percent of the journey, so the final 10 percent is more of a challenge. At the moment we’re looking at all the bearings offered by our various competitors so that we can offer our OEM and distribution customers a complete portfolio of products. I want to be in the position where we can take any bearing or bronze bar order from any customer anywhere and offer them complete service.” www.buntingbearings.com

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Aiming

perfect for

I

nternational technology company Honeywell operates in some extremely tough and demanding marketplaces including safety, security and energy and has earned a global reputation for quality and reliability. These attributes, along with rigorous security and confidentiality procedures, have played a significant part in enabling Honeywell to design, manufacture and supply lowvolume electrical, mechanical and material components for the US national defense systems for more than 60 years.

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Honeywell FM&T has been m defense systems for more th Barbara Rich tells Gay Sutto

National Nuclear Security Administration: Kansas City Plant

tion

manufacturing and supplying components for national han 60 years. Operational excellence manager on how the company has achieved this enviable record

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Today, Honeywell Federal Manufacturing & Technologies (FM&T) runs and manages the National Nuclear Security Administration’s (NNSA) plants, designing and manufacturing a wide range of nonnuclear components for NNSA, the government-run organization that safeguards the security of the US national nuclear stockpile and responds to global radiological and nuclear emergencies. Through NNSA it also provides engineering and manufacturing services to other government organizations. The bulk of the work is undertaken at the Kansas City (Missouri) Plant, where 2,500 of the company’s 2,800 staff members are employed; the remainder is

of the surveys in a variety of ways. The data helps, for example, with setting and adjusting business goals, and it is also fed into the R&D and manufacturing processes.

A high level of integration is achieved across departments and management levels, and this was one of the factors that contributed to the Kansas City Plant’s success in winning the prestigious Malcolm Baldrige National Quality Award in 2009. “The examiners really enjoyed the fact there was such a high level of integration across the company. No process stands by itself, but everything is interrelated.”

“Like strategic planning, Voice of the Customer is effective if it’s living. The more active it is, the better it is, and we’ve found that customers respond significantly when they realize that we’re truly listening to them and not just putting a filter on” performed at Kirtland Operations in New Mexico.

“Here at the Kansas City Plant, we’re very closely integrated with the NNSA,” says Barbara Rich, manager, operational excellence at Honeywell FM&T. “We share the same building with them, they park in the same parking lot, and they lunch with us. When your customer lives with you in this way, you’re on your toes all the time. But at the same time you build an extremely strong relationship with that customer.”

Rich has found that the Honeywell “Voice of the Customer” process has played a surprisingly significant role in building and maintaining that relationship. “Our Voice of the Customer is very much an integrated process,” she explains. Like many companies, Honeywell FM&T asks a series of questions of the customer, both verbally and on paper. “But we also make a point of providing feedback on that survey,” she says. If anything needs attention, it is acted on as quickly as possible, and feedback is provided within 10 days, informing the customer of the changes that will be made.

“Like strategic planning, Voice of the Customer is effective if it’s living,” she continues. “The more active it is, the better it is, and we’ve found that customers respond significantly when they realize that we’re truly listening to them and not just putting a filter on.”

The company is also able to use the results

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That level of integration is created both by means of electronic systems such as ERP and through effective verbal and written communication. On a daily basis, for example, there are stand-up meetings on the factory floor, where requests and ideas can be voiced and information shared in real time between all levels of the organization.

If issues can’t be resolved in the meeting, they’re immediately elevated through management levels until the solution is found.

“Empowering is not a popular word at the moment,” Rich says, “but we involve people in decision making at the appropriate level. They have the power to stand up and say whether they believe something should or should not be done. They also have the power to stop production if something is not right.” This makes a considerable impact on operational efficiency and on staff performance.

There are a full range of best-practice processes established throughout the company. Continuous improvement is very much the way, and staff members are accustomed to change. But Rich stressed that this did not mean change just for the sake of it. “In some respects we don’t have to have the shiniest penny to do what needs to be done,” she explains. “Sometimes the tried-andtrue methods are the most effective.”

Decision making for the change process is

National Nuclear Security Administration: Kansas City Plant

considered and structured, and it is very closely related to the analytical methodologies of six sigma, which is also deeply ingrained in the company culture. Where the changes are simple, the decisions can be made quickly and easily.

In more complex cases, an in-depth analysis is performed, which creates a data trail calculating whether the change is warranted and what effect it is likely to have on the processes and products.

Operating as it does in a highly regulated environment, the plant has to comply with federal, state, Department of Energy and industry certification requirements, and therefore it performs to the highest level in each criterion. “We use the best of each,” Rich says. “That doesn’t mean we try to shortchange any of them. We select the combination that will deliver the very best products and services in the most efficient manner. At the end of the day our focus is on quality, and there is no compromise on that.”

Like all Honeywell operations, the Kansas City Plant gives back to its local community, and it manages these activities through the Honeywell Hometown Solutions initiative. Staff members donate to local causes, but they also give their time—volunteering to help with activities ranging from inspiring children to enjoy math and engineering to rebuilding or refurbishing local houses.

Last year, employees at the Kansas City Plant volunteered over 15,000 hours to support the local community, and it looks as though this figure will be even higher in 2010. “I think the amount of their own time they will volunteer is a major reflection on the engagement of our workforce,” Rich concludes.

“It’s one thing to write a check; it’s quite another to dedicate your entire Saturday to help another.” And at the end of the day, the company’s operational quality, its efficiency and cost-effectiveness all ultimately depend on the quality and engagement of its staff. www.honeywell.com/sites/kcp

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Powe running swift

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Iris Seymour talks t District to learn about new generation for the regio

Clatskanie People’s Utility District

er g

from

to Clatskanie People’s Utility w projects powering electric on’s industries and residents

C

latskanie is a small rural community in northwestern Oregon, about 60 miles from Portland along the Washington border next to the Clatskanie and Columbia Rivers. Clatskanie is an Indian word meaning “swift running water.” The region’s rich water resources make it an excellent area for locating hydroelectric plants to produce electricity from the power of those water resources. Clatskanie People’s Utility District (PUD) relies on those electricity-producing companies to purchase power for its industrial and residential customer base of about 4,600 customers.

Established in 1940 and operational in 1943, Clatskanie PUD provides electrical power to its designated service territory comprising about

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Clatskanie People’s Utility District

275 square miles. It’s a non-profit, consumerowned utility providing over 1 billion kilowatthours annually. “It’s clean, renewable energy that we provide to our customers in northwestern Oregon,” says Greg Booth, general manager.

“We’re strong proponents of renewable energy, and our customer-driven philosophy means we strive to offer the best possible value for our customers in terms of price and dependability of the electric supply.”

The utility purchases energy from regional producers and also acts as a wholesale power trader by selling excess energy for additional revenue. The utility also holds 157 megawatts of regional transmission rights and participates in a number of power projects producing renewable energy from hydro, steam, and gas generation.

A People’s Utility District is a body of local government providing essential utility services to communities within a designated area, but may also provide service outside of its boundary. This body is formed by a vote of the people residing in the district, and it is managed and operated locally.

Early in US history, people living in rural areas were not served with electrical power. In the early 1930s, not all Oregonian residents had access to electricity, as many electric companies were not motivated to build facilities to serve customers in outlying rural areas. So the State of Oregon passed a constitutional amendment authorizing the formation of People’s Utility Districts to give residents local control over the provision of electricity and other essential utility services.

Oregon currently has five additional PUDs providing electricity headquartered in Newport, Deer Island, Eugene, Tillamook and The Dalles.

PUDs are distinguished from investor-owned power companies in that there is local control and no profit motive.

PUDs in Oregon have first preference for the power generated by the Federal Columbia River Hydropower System, which is marketed and transmitted by the Bonneville Power Administration (BPA). Booth notes that the bulk of Clatskanie PUD’s purchased power supply comes from the Federal Columbia River power system. PUDs actively support their customers through a wide range of residential, commercial and industrial programs including low-income energy assistance, weatherization, lighting efficiency, energy audits

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Clatskanie People’s Utility District

NorthStar Utilities Solutions NorthStar

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innovative market leader in the utility industry for over 30 years. NorthStar provides enterprise software solutions with an integrated product suite for customer information, financial management, and meter data management. Clatskanie PUD utilizes the NorthStar product suite to manage revenues, deliver superior customer service, improve efficiencies and reduce costs. For more information visit www.northstarutilities.com.

and conservation. PUDs participate in local chambers of commerce and service organizations.

They also offer educational opportunities to local schools and provide information, training and other services to the communities they serve.

They participate in local fairs and home shows to promote efficient use of electricity.

Local communities receive a number of benefits from their PUDs. For instance, the PUDs are owned and operated by the people they serve, each being governed by a five-member board of directors that sets rates and policies for the PUD with the goal of providing the most benefit to its customers. Rates are based on the actual cost of providing service and are often lower than rates charged by investorowned utilities, which must include in their rates the cost to provide stockholder profits. In fact, Booth reports that Clatskanie PUD’s electricity rates are the third-lowest in the nation, mostly because the two lower utilities own and operate their own hydroelectric facilities.

“The advantage of a public organization such as ours is that we can apply for tax-exempt financing, and we also have access to federal power generation,” notes Booth. “But what really distinguishes us is how we handle business opportunities that arise.” One recent opportunity the organization took advantage of was entering a partnership with the January 2010 startup of the 18-megawatt Arrowrock Hydroelectric Project at the US Bureau of Reclamation Dam on the Boise River in Idaho.

“We began work with Arrowrock five years ago,” adds Joe Taffe, power manager. “The Arrowrock

Dam was built in 1912 but had never had a hydro project installed. We started discussions with the federal agencies that owned the dam and the five irrigation districts that owned the rights to the water behind the dam. Then we managed to develop a partnership with them, and we developed an innovative design for the project so it could be built.” Since February, the dam has been producing at its maximum capacity of 18 MW, reports Taffe. This amount of power accounts for about 10 percent of Clatskanie PUD’s current load.

Booth explains that there are five irrigation districts across Oregon and Idaho (in the Boise area) that use the water for agricultural requirements, both for livestock and crops. “The irrigation districts held the license, and they were looking for utility partners,” he says. “They have the rights to the water behind the dam, so they own the fuel—water—for this project. So it’s their water we’re using to generate the electricity we require for our customers’ needs.”

In addition to the Arrowrock project, Clatskanie has other projects generating electricity, such as the Wauna steam plant located on the Georgia Pacific paper mill site. “We purchase steam from Georgia Pacific, where the paper-making process produces a lot of energy,” he reports. “Partnering with Eugene Water & Electric Board, we installed a steam generator there that has about a 36-megawatt capacity.”

The challenge in the electric utility industry is that it involves a commodity that is instantaneous, says Taffe. “This means the electricity is either there or it’s not there. The short-term aspects involve our rates, our budget and the cost we pass along to our customers. But we’re also continuously anticipating long-term growth in terms of new homes being built and new industries coming into our district.

So we’re always prospecting for other projects and the latest technologies that will prove to be the best investments in efficiencies for improvement that equate to serving our customers better.”

A major feature of the Clatskanie utility is its proactive approach, Booth points out. “Our approach protects the value of the energy we deliver to our customers, rather than just passing on rates or costs to our customers,” he says.

“Putting ourselves in a position to be ready when an opportunity arises will continue to be a major focus for us going forward.” www.clatskaniepud.com

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ENMAX Corporation

ned heat Rob Harris reports on ENMAX Corporation, a Canadian utility company that envisions a future where nothing is wasted and everything is gained

E

NMAX Corporation is a vertically integrated utility company completely owned by the City of Calgary, Alberta. Providing Albertans with electricity for over 100 years, ENMAX has more than 640,000 customers and annual revenue of C$1.7 billion.

The company is in the midst of four major generation projects. The proposed Bonnybrook Energy Centre is a natural-gas-fired combined heat and power (CHP) facility slated to open in early 2013 that will generate 165 megawatts (MW) of power

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ENMAX Corporation

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and provide waste heat to neighboring businesses.

CHP is an idea that has been around for quite some time. It’s a process by which power facilities generate electricity and capture waste heat that otherwise would be lost to the environment. This waste heat is then used for heating and/or cooling and industrial processes.

The proposed Shepard Energy Centre is an 800MW natural-gas-fired CHP facility that is expected to provide more than half of Calgary’s electrical needs.

This facility will incorporate advanced combustion technology and produce less than half the carbon dioxide per megawatt than a conventional coalfired plant. This C$1 billion project should begin commercial operation sometime in 2014.

Then there’s the Downtown District Energy Centre, a unique heat-generating facility that will supply heat to nearby office buildings and residential customers. The Downtown District Energy Centre began supplying heat to the municipal hall in March and saved the City of Calgary from having to replace its aging boiler system. The new facility has the capacity to heat 10 million square feet of new and existing residential and commercial buildings. This C$31 million project is central to the City’s plan to rebuild the East Village into one of Calgary’s most sustainable communities.

The final generation project, which is already operating, comprises several wind farms that together generate more than 600,000 megawatthours of emission-free electricity per year, enough power to service 75,000 homes. ENMAX sees the future of the utility industry as an evolution toward a more localized distributed energy grid.

The company is extremely conscious of its relationship with the environment and is constantly looking for ways to improve and minimize its impact. Dave Rehn, executive vice president, generation and wholesale energy, states, “When you switch power generation from coal to natural gas, the estimated reduction in CO 2 gases traditionally is in the range of 50 percent.” Since the issue of greenhouse gases is becoming more urgent, ENMAX feels that it is also important to address the reduction of CO2 through the use of sustainable energy from solar, wind and traditional energy sources.

The Distributed Energy Generation model that ENMAX uses is not a new system, according to Rehn. “The European Community has been using this energy distribution system for quite some time. Belgium has been very successful with this model, especially in combination with its use of solar panels. We believe that this model will work very well on the North American continent.” Part of this new model involves what the company calls micro-generation. In a few select homes, ENMAX is currently testing a device called a WhisperGen. This is a micro co-generation plant for the home that recycles the waste heat to create hot water and electricity. Rehn explains, “The WhisperGen uses a Stirling engine to create its electricity.

So far in our tests we’ve been very pleased with the results, and almost every unit has created a surplus.” The unit is the size and shape of an average domestic dishwasher and can supplement or replace a central heating boiler system. The units traditionally generate 33 to 100 percent of an

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ENMAX Corporation

“You can take any carbon source and run it through a gasifier to produce what is called a syn-gas. Then you have a fuel that you can transport just like you do natural gas. In fact, syn-gas can replace natural gas in any of our natural-gas-fired power plants” average home’s electrical needs, with the potential to sell any surplus back to the electrical grid.

With the world’s concern about peak oil and the dwindling of our natural resources, all this conversion to natural gas brings up the question, how long will our supplies of natural gas last?

Rehn states that, according to the natural gas companies, “There will be a significant supply at a reasonable cost for the next 50 to 100 years. Let’s assume, though, that it’s 20 years and things begin to run out. The other technology that has been around for over 100 years is gasification. That is, you can take any carbon source and run it through a gasifier to produce what is called a syn-gas. Then you have a fuel that you can transport just like you

do natural gas. In fact, syn-gas can replace natural gas in any of our natural-gas-fired power plants.”

Although the technology for gasification has been around since World War II, long-term pricing on natural gas makes this technology more expensive than current price points.

ENMAX is a utility company that envisions a future with fewer power lines. Its philosophy of an energy infrastructure that brings electrical generation even into the home, while perhaps not new, is unique for the continent of North America.

By combining this with its sustainable energy projects and its new CHP facilities, ENMAX looks like a company that is well prepared for whatever the future may bring. www.enmax.com

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IMI Cornelius

ation ontap

Derik Davis tells Jane Bordenave how IMI Cornelius is a leading force for innovation in the beverage market, and how being a global business can benefit and challenge a company

F

ounded in 1931, IMI Cornelius is one of the leading manufacturers of beverage dispensing and cooling equipment in the world. With sales and distribution offices on every continent and a turnover in excess of $200 million per year, the company counts among its customers such food industry giants as Coca-Cola, PepsiCo and McDonalds. It is owned by the UK-based company IMI, which purchased Cornelius during the 1980s.

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“As a company, we offer a broad range of products such as fountains, juice dispensers and equipment for serving iced drinks,” says Derik Davis, vice president of product and business development. One of the effects of this is that the business needs a wide variety of materials to make its systems, ranging from basic commodities like sheet metal and plastic resin to specialized engineered components like compressors and motors. This results in a broad and varied supplier base that requires more than just a generic supply chain management approach. “We have a supplier scorecard system in place, with metrics around quality, performance and delivery,” says Davis.

The firm uses cross-functional teams covering commercial operations, engineering and supply chain to apply the costing elements of these

ethical standards behavior globally.”

The firm’s varied product range and global footprint mean that its competitor landscape is also very complex. “What is unique about us is the breadth of products that we offer all over the world,” explains Davis. “Consequently, for each product category we’re in, the competitor set is nearly always different. Because we’re in so many different areas geographically, we experience regional variation in our competition too. A good example of this is the beer and spirits market in the UK and Europe. Here there is quite a lot of local competition because of the size and history of the sector, whereas in North America the number of competitors in the same market is minimal.”

Innovation in research and development is also particularly important to the business

“One of our key areas for investigation and improvement at the moment is increasing the energy efficiency of our products. This is one of the major areas where we can deliver benefits to our clients from a green perspective, and it will deliver long-term cost savings too” metrics. “With regard to suppliers of strategic items, we try to build up a partnership approach with them,” he says, “whereas with providers of more basic items and commodities, we take a more market-led approach.”

These quality controls are global, so a client can be sure that no matter which branch of the company he is buying from or what location, the quality of product is universally high. This extends also to its corporate ethics. “IMI has in place a program called the ‘IMI Way,’ and our own formalized code of conduct is grounded in that,” says Davis. This code of conduct states that IMI Cornelius will pursue excellence and deliver to its customers, but that above all it will act with integrity. This ideal covers health and safety, sustainability and energy efficiency—things that the business can directly influence through its equipment. “While we operate in areas of the world that have varying attitudes toward these principles, we uphold

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in order to keep it at the leading edge of the field. “We do all our research and development in house, sometimes working with our sister companies in the IMI Group, such as Display Technologies,” says Davis. “One of our key areas for investigation and improvement at the moment is increasing the energy efficiency of our products. This is one of the major areas where we can deliver benefits to our clients from a green perspective, and it will deliver long-term cost savings too.” It’s also an area that falls naturally into the company’s corporate and social responsibility ethos.

However, even for a company as large and diverse as this one, there are still challenges, most notably the economy. “The economies of Western Europe are of particular concern to us at the moment, as it is still uncertain whether they are recovering or not, and how fast any recovery is taking place,” says Davis. “This is a strong

IMI Cornelius

example of the challenges of being a global business, and in order to overcome it we need to coordinate ourselves in a way that makes the most of our global capabilities.”

While things may still be shaky in Europe, one of the advantages of being an international company is that it can make the most of increasing confidence in other markets. “There are early signs in the Americas of businesses being more willing to make investments, which is a key positive for us,” says Davis. He also notes that three regions that were lagging behind America and Western Europe—namely, Asia-Pacific, Latin America and Eastern Europe—are growing more rapidly and showing greater economic strength than the rest of the world. “Demand is growing in these countries, and our customers are increasingly doing business there. Other emerging markets, such as India, are experiencing similar growth patterns and are also

expressing interest in these products.”

While for the future both innovation and new solutions are top of the agenda, as well as increasing its global presence, Davis sums up what it means to work for IMI Cornelius. “Food and beverage is something that we as humans all associate with, and as we enter retail spaces and retail dining areas, we come into contact with these big brands—Coke, Pepsi, McDonalds— and it becomes part of the environment space we’re living in. For us, the association has added meaning: our products are associated with these highly iconic labels, and as we drive or walk down the street, we see billboards or outlets we can associate with on a personal level. This creates a real energy and enthusiasm inside our business, and it produces a hard-working culture that is passionate about working for our customer and our product.” www.cornelius.com

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