Businessexcellence ACHIEVING
SEPTEMBER 2010
O N L I N E
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Best practice
The top ten fundamentals affecting any best practice process
EXCELLENCE BUSINESSEXCELLENCE
Editor’s letter
Businessexcellence AC H I E V I N G
if. . . ?
What EDITORIAL
Editor In Chief Martin Ashcroft mashcroft@bus-ex.com Managing Editor Bud Sadler bsadler@bus-ex.com
There are two kinds of “what if” scenarios. One is a wistful, backwardlooking mental exercise much favored by romantics (“What if I’d married Ted?”), athletes (“What if I hadn’t broken my wrist that season?”) and historical novelists (“What if the South had won the Civil War?”).
But imagining what might have been is not very useful in the business world. What happened, happened, and you deal with the consequences, learn your lessons and move on.
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
There is, however, another type of “what if” scenario that forward-looking companies use to get a leg up in business. It asks, “What if we didn’t do things the way we’ve always done them and tried something new?” In this issue we have several examples of companies that have asked themselves “what if” and liked the answer that they got. For instance, WaterFurnace International wondered what would happen if it offered turnkey geothermal heating and cooling systems for homes and businesses, and the answer came in the form of significant growth for the company. Similarly, when faced with a global recession, Hitachi Construction Truck Manufacturing pondered the wisdom of laying off some of its highly skilled technical staff and decided against it. As business picked up, such specialists turned out to be hard to find. In another case, Foster Farms Dairy considered the implications of acquiring the assets and brand of a farmers’ coop specializing in organic dairy products and decided to go for it. The result has been increased profits and wider geographic market penetration. In our Strategy article, Andrew Kinder of business software solutions provider Infor reveals that what companies most want from their sales and operations planning is the ability to quickly and accurately explore “what if” scenarios across the entire business. What if you tried this approach at your business?
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OPERATIONS: BEST PRACTICE Top ten fundamentals Richard Ilsley of Synogis highlights the top ten fundamental issues affecting any best practice process.
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STRATEGY: S&OP What if? What businesses actually want from their sales and operations planning is the ability to explore “what if” scenarios.
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WaterFurnace International What lies beneath The race is on to find alternative energy sources that are economical and green, and one very natural source is fueling this company’s growth.
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Hitachi Construction Trucks Mega truck making With a global customer base in huge mining trucks, this manufacturer is raising its profile in the North American market
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Air Industries Machining Vertical takeoff Growth can come from expensive acquisitions, or it can come organically by making the business ready for new opportunities.
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Excelerate Energy Offshore assets With a sound reputation for bringing LNG projects to fruition, this energy company is expanding internationally.
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Algonquin Power & Utilities Corp. Getting greener and stronger This Canadian utility continues to acquire assets that generate long-term cash flow for the company and its investors.
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Yellow River Water Reclamation Facility Synergy in action On an infrastructure project in Gwinnett County, Georgia, an exceptional team has come together to achieve remarkable results.
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L.B. Foster Company Strong foundations The company’s lean journey began several years ago but is now paying dividends, even in the midst of an economic slowdown.
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Foster Farms Dairy Organic growth The largest privately owned dairy operation in California has made another strategic move into organic products.
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Andrews Air Force Base Fast-track communication Driven by base realignments and homeland security considerations, a large-scale courtroom project is on the fastest of fast tracks.
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Tutor Perini Civil Group A new construction model Federal stimulus funding is changing the construction industry as more public and private entities opt for design-builds.
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Rudolph and Sletten Lean on us With the economic recession affecting business all over the world, this construction firm has found a winning strategy.
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Hunt Construction Group New home for the Marlins Project leaders are using technology and teamwork to ensure the Florida Marlins can play ball in the spring of 2012.
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L.F. Driscoll Co. One for the kids The new children’s hospital being constructed on the Penn State Milton S. Hershey Medical Center campus has many child-friendly features.
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Shepard Development Corporation A spec of difference This developer’s philosophy is not to build on spec, but to have value-added tenants ready to occupy new office and commercial buildings.
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ICA Fluor Daniel, S. de R.L. de C.V. A marriage made on earth When a joint venture in the highly competitive construction business lasts for 17 years, it’s an achievement worth noting.
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GCI General Contractors Green at the highest levels San Francisco is the home of construction makeovers, and one contractor in particular has taken it to a fine art.
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Illinois River Energy, LLC Staying alive Favorable cost structure, profitability and supply chain management guarantee this ethanol producer won’t be going away soon.
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Aesculap, Inc. Looking past the milestone A provider of surgical kits and related medical equipment has achieved a first milestone on a long journey to excellence.
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Bee-Clean Building Maintenance Cleaning Canada A privately owned national contract cleaner that provides cleaning services to a wide range of clients across Canada.
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Calgary’s West LRT line Good listeners Engaging public opinion has helped the city to develop the latest stage in its light rail transit system.
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Sunterra Meats Elite meat This producer of pork and other meat products focuses on delivering quality from farm gate to dinner plate.
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MFC Group Forging ahead Using innovations in automation, lean and cellular manufacturing to increase market share and customer satisfaction.
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Kubota Metal Corporation, Fahramet Division Full metal jacket A specialist alloy enterprise has become a leader in developing and producing heat- and corrosion-resistant alloys.
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Consolidated Thompson Iron Mines Green shoots in Quebec Leveraging an experienced team, state-ofthe-art technology and the quality of its in-the-ground resource on the global market.
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HudBay Minerals Inc. Digging in Launching a mining academy to help develop the talents of new workers and allow current workers to upgrade their abilities.
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Kennecott Eagle Minerals The Eagle has landed A company that believes the tough mining legislation introduced in Michigan in 2004 will benefit the mining community.
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Osisko Mining Corp. Ahead of the game A bold plan to fast-track the development of a gold deposit by purchasing equipment ahead of the feasibility study.
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First Majestic Silver Corp. From the ground, up Committed to building a senior silverproducing mining company based on an aggressive development and acquisition plan.
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Sumitomo Metal Mining: Pogo Mine Golden tint to the Rising Sun As rising prices have brought a global surge in gold mining operations, Japanese experience has been applied to North American reserves.
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Agnico-Eagle Mines Ltd.: Meadowbank Cold gold Once reachable only 10 weeks a year, the Meadowbank project is now a major gold mining and refining facility.
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First Capital Realty More than just location Canada’s leading owner, developer and operator of community shopping centers uses a sustainable approach.
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Detour Gold Corporation Good timing The Detour Lake property is an excellent candidate for relatively inexpensive development, and the time is right.
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Wabush Mines Open communications Turning confrontation into collaboration brings union and salaried workers together for the common good.
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Top tenfund Many corporations like to think they have best practice processes already in place. Richard Ilsley of Synogis highlights the top 10 fundamental issues that must be considered with respect to any best practice process
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Operations: Best practice
damentals I
t is hard to find an organization that is not using the term ‘best practice’ somewhere within its sales operation. It seems that no matter where you go, someone is talking about it and everyone wants it. But what is it and how do we know when we have it? A recent survey by The Sales & Marketing Consulting Group suggests that some clarity is required. The survey involved senior managers from a number of different organizations and considered attitudes as well as processes. Here is the initial question, so please take a moment to answer it yourself. “Is your organization part of the upper quartile of best practice companies?” The response from the senior managers was that 65 percent of them agreed that their organization was in the top 25 percent of best practice companies. Clearly there is some need for clarity and objectivity. This article summarizes the main learning in the form of “the best practice top ten fundamentals.”
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1. Best practice must be defined If best practice is to have any meaning it cannot be a vague intangible concept. This means that the company needs to be able to define specifically what it means by ‘best practice’ so that everyone can understand what best practice looks like.
not guarantee success, but it can be shown to increase the chance of success. What tends to happen is that the best practice performers remain as the top performers at about the same level as before. The real gain to the organisation is that the average performance
In some cases awkward questions need to be asked. Questions that many people would like to ignore quietly. Questions like “What added value does the customer believe we offer beyond the product?” “What do we have to do to increase the volume while maintaining or reducing the cost of sale?” “What is success and what causes it to happen?” 2. Best practice must be measurable and measured It is fair to say that if you do not know how to measure best practice then you probably do not have it. Applying a measure forces the company to define exactly what is meant and to recognize that performance may not always live up to the definition. More than just having a measure is having a realistic view of the current situation along with an objective and plan for development. It is also critical that everyone believes that the objective is achievable. 3. Implementing best practice does not guarantee a performance increase Implementing the best practice process does
rises. If performance is plotted we tend to get some form of normal distribution. The best practice process will move the average towards better performance. 4. There is no single ‘best practice company’ Best practice is not vested in one company. The generic best practice model that we have developed as a result of this and other work has come about by looking at many corporations. What we find is that different companies are particularly effective at different things. Inevitably companies have stronger and weaker areas. We also find that companies are in a state of constant flux. People move on, markets evolve, new companies enter, focus shifts, attitudes change. The net result is that the most successful company of today is statistically unlikely to be the most successful company of tomorrow. This fundamental point is closely linked to fundamental five. 5. Success today does not guarantee success tomorrow The often-told story about the frog in the boiling
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Operations: Best practice
water is still applicable. The frog, thrown into the boiling water, jumps straight out but remains in the cool water that is steadily heated to boiling point. The frog is not able to detect the slow temperature rise. The market is constantly changing. The most vulnerable companies are those whose managers fail to notice the slow changes around them until it is too late. Yesterday’s best practice is unlikely to be effective today or tomorrow in the same way that today’s best practice must evolve to meet the demands of tomorrow. To support our view consider the 1982 book In Search of Excellence by Tom Peters and Robert H. Waterman, Jr. that cited 36 companies as “excellent.” Most of those firms subsequently went through very difficult times, failed completely or have under-performed the market. Today’s success does not automatically lead to tomorrow’s success. 6. Talking is not the same as doing Talking about best practice is not the same as doing it, just as thinking you have a best practice approach in place is very different from knowing you do. This takes us right back to the original question posed in the survey. Do you believe that your company lies within the top 25 percent of best practice companies? The point is of course that believing is not nearly as important as knowing. Knowing implies that best practice is defined and that we can all recognize it going on around us. Knowing involves having something tangible. 7. Having is not the same as using Similarly, having a best practice mode is very different from using a best practice model. A common problem that was identified was one of compliance. We found companies that had invested in revised processes and systems that had been designed with best practice in mind yet were not using the processes. There was a strong degree of comfort on the part of some members of the organization to continue with the original approach. In some cases the management team did not even regard the new method as being the “best practice.” The dilemma that this created was that the most senior management team could not understand why increased performance was not in evidence, unaware that the new processes were not being applied in full.
8. Best practice is not fixed The best practice model is not fixed but will change as circumstances change and as new learning is gained. This is similar to fundamental five but recognizes that best practice is a constantly evolving concept within the organization. In other words it is likely that individuals and groups will discover advances to the current defined best practice approach. There needs to be a mechanism in place to recognize these advances and to incorporate them into the overall model. 9. Best means best If everyone is doing it then it is no longer best practice—it is common practice! It is not best practice to make products that work that you can deliver on time in the same way that it is not best practice to arrive on time. That is just a basic expectation. Once again, having a clear best practice model will ensure that best practice is defined for everyone and that the definition really does reflect best. 10. Make it your own It is a truism that every company is unique. A best practice model cannot be introduced by copying from someone else without adapting it to your circumstances. On the other hand many corporations have accelerated the process significantly by starting with the generic learning or best practice model and adapting it to their specific needs. This ensures that the company does not have to start with a blank piece of paper. It also has the benefit of offering the company a template from which to start. Summary There are many companies that are claiming huge benefits from implementing a best practice model. The lessons from this survey are: • Make it clear for all • Measure it • Keep it simple • Expect it to change. In the words of Aristotle, “We do not act rightly because we have virtue or excellence, but rather we have those things because we acted rightly. We are what we repeatedly do. Excellence, then, is not an act but a habit.” Synogis is a global consulting firm of high performance independent consultants. Richard Ilsley is the author of Best Practice (Management Books 2000) and has led projects around the world for many corporations. www.synogis.com
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Strategy: Sales & operations planning
hat
if?
What businesses actually want from their sales and operational planning, says Andrew Kinder of Infor, is the ability to explore ‘what if’ scenarios across the business quickly and accurately
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s Europe moves out of recession, many business leaders are reflecting on the lessons they have learned. Thankfully the phrase: “if only we had known how the credit crunch was going to hit us” has been joined by “what can we do to make sure this never happens again?”. Businesses are now examining the systems and processes that offer not just growth but protection and resilience.
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At the top of this list of options is sales and operations planning (S&OP). In a recent Supply Chain Management survey for Infor conducted by AMR Research, 88 percent of respondents said they are already using or planning to deploy an S&OP solution in the next 12 months. The report also found that the number one area of S&OP businesses want more support in, is in its ability to provide “what if” simulation capability. However, the impact of the recession is not the sole driver. The concept of S&OP has been around long before the recession hit, but it is only recently that technology has reached a sufficient level of maturity to enable complete systems to be developed. This is because S&OP is not just a technology. It is a comprehensive process that spans many departments from finance to demand planning to design, production and even sales and marketing. Cutting across the business in such a fashion has traditionally been outside the realm of possibility for business applications. Most S&OP solutions today are still based on the use of spreadsheets; an Aberdeen Group survey reported that up to 85 percent were founded on spreadsheets. This led to an unhappy state of affairs where up to 60 percent of the time spent on S&OP was taken up by activities such as manually importing and exporting data, then validating and cleansing the information. This spreadsheet-based approach is long on effort and short on return. It does not offer proactive analysis, cannot integrate across the business, suffers from poor data integrity and consequently delivers weak reporting. All of this happens alongside the customary issue that spreadsheets are rarely easy to use. This stands in stark contrast to what businesses actually want from their sales and operational planning: the ability to quickly and accurately explore “what if” scenarios across the business. Now that the underlying systems have matured to offer an alternative to spreadsheets, what should you look for in technology terms to support your S&OP process? First, a business needs to collate information from different sources and then put it into a common hierarchy. This means all relevant departments can not only input information but also take out their own analysis in the format and in the language that they already use.
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This is actually two processes combined. The first is to pull together data from disparate departments. Different departments will use different systems and technologies; from ERP systems for production to CRM systems in marketing, SCM solutions in the demand management and financial software in accounting. Second, the imposition of a ‘common hierarchy’ simply means that the information is put together in a way that all departments talk the same language. This demands an open framework where data from one system can move into and be used by another, without creating a whole new headache of integration. Services Oriented Architectures (SOA) is the most promising of these technology frameworks as it offers the potential for open integration on common standards—not proprietary to an individual vendor’s technology stack. What does this situation look like? Imagine three different departments all feeding into the S&OP system. Demand planning talks in terms of quantities needed and sales values, while finance quotes revenues and costs, and production lists volumes and output. The common language that arises when these functions communicate is that of value. This is usually, but not always, expressed in terms of sales, costs, margins and services levels. However, the route to this improved bottom line can vary wildly. It is also important that the hierarchy works at levels of detail that is relevant to decisionmakers. Senior management is more likely to talk in terms of product groups, regional performance and horizons of 18 months. Functional managers will want to drill to the underlying details and see actual customers, products and orders. The inability to bridge strategy and operations has traditionally been one of the sources of frustration for S&OP practitioners. The second element of a successful S&OP implementation is enforcement. S&OP is a comprehensive process and it needs to be mandated throughout all departments. From a technological perspective, this means the use of a workflow engine that ensures the rules of the S&OP process are adhered to. Take the example where an S&OP process runs on a monthly cycle (this varies from customer to customer). The workflow engine (and indeed, the entire business) has an overall framework and
Strategy: Sales & operations planning
timetable. Specific actions need to be completed on a given day by an individual or department. For example, day 6 may see demand figures forwarded to production and flagged to finance. In the scheme of overall processes these may be a prerequisite of the production component order on day 8 and finance estimates due on day 20. This is done primarily by email to flag the action necessary to the relevant person in a timely fashion. This links directly to the tools and systems needed to complete the action—for example, the ERP system in place.
The last element of successful S&OP is its use to deliver “court sense” to the C-level executives. In basketball, “court sense” refers to a player’s ability to see everything going on around the court and his understanding of how it contributes to winning the game. Similarly, S&OP should yield the visibility of information that executives need to guide their decisions, right across the business. This usually refers to the ability to identify and exploit trends. This “bigger picture” is usually expressed in graphical forms such as pie charts or graphs. However, to support the decisions made
“S&OP is not just a technology. It is a comprehensive process that spans many departments from finance to demand planning to design, production and even sales and marketing” The management function of S&OP can then track when these actions have been completed. This does not just measure adherence to the processes but also quickly identifies delays and bottlenecks. To aid in the analysis, the workflow engine can also measure and report on changes to the plans. This then leads on to the third element of successful S&OP adoption: the use of the processes to explore alternative scenarios. This is the all-important “what if” capability that organizations prize above all else. By copying across data from the S&OP systems into a separate, distinct “sandbox,” business heads from all departments can adjust individual parameters. They can then see the outcomes of possible changes before committing to them in reality. For example, a production manager can assess what happens if they change manufacture patterns, or a supply chain planner can anticipate the likely impact of ramping up in response to seasonal changes in demand. Critically, the impact of these changes can be examined by other functions including finance and sales. Most important, the business can then compare and contrast a range of simulated outcomes to see how they can improve the business in terms of customer service, cost or profit. The impact of change (and the attendant risk) can be reduced. When changes are implemented, the business has a far better idea of what “should” happen.
S&OP must also enable a frictionless drilling down to the detail and back again. Across the aggregated information that is covered by S&OP this is quite a task, and it is often where current systems fall down. Up until recently, S&OP has either offered only the view on the ground or the view from 30,000 feet. Thankfully this has now begun to change. So what does such a successful implementation of S&OP actually deliver to the business? According to research from Aberdeen Group, S&OP leaders report healthier financial results in terms of customer service levels, forecast accuracy, profitability and cash-to-cash cycle times—key measures for any business. As the four tenets above show, S&OP helps organizations align strategic plans and operational execution. It also enables those plans to be enacted in the best possible method for the benefit of customers and the company. S&OP has become an essential business process in de-risking the supply chain. The reality is that in any operational planning process there are multiple ways to meet customer demand. But which is the “best” plan? Best for customers? Best for the business? S&OP, and the modern technologies that support it, delivers confidence that a business has explored the alternatives and hit upon that elusive “best plan.”
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What
lies beneath
The race is on to find alternative energy sources that are economical and green. WaterFurnace International vice president Bob Brown explains to Andrew Pelis how one very natural source is fueling the company’s growth
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WaterFurnace International
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ny way you look at it, the current climate, both economically and ecologically speaking, has put extra pressure on every household and business. Soaring energy bills and the need to be environmentally aware have changed the approach each of us takes to our everyday lifestyle.
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WaterFurnace International
Turbotec For over 25 years, Turbotec’s partnership with WaterFurnace has provided reliable and efficient products and made a significant difference in the water-source market. Turbotec Products, the inventor and original manufacturer of twisted tube (Tru-Twist) has been an OEM provider of heat transfer technology for over three decades. Turbotec’s Tru-Twist technology offers dramatic increases in heat transfer efficiency, providing up
The watershed for WaterFurnace came in 1985 when the company acquired a water-source heat pump product line that enabled it to become a manufacturer of the geothermal heat pump itself. The first WaterFurnace manufactured heat pump product, the WS Series, was introduced five months after the deal was signed. Today the company, headquartered in Fort Wayne, Indiana, specializes in the supply of geothermal heating and cooling systems for the residential and commercial markets. As a part of WaterFurnace Renewable Energy, Inc., it has traded on the Toronto Stock Exchange since 1993 and enjoyed
to four times the efficiency of smooth tubing. Turbotec remains at the forefront of high performance heat exchange technology.
Yet there is an alternative that lies beneath our feet, costs nothing and is renewable. It’s a source that was first utilized as long ago as 1945 but only now is beginning to realize its potential. Geothermal heating and cooling is extremely energy-efficient and generally provides the lowest utility bills of any residential system (saving typically between 40 and 70 percent on utility bills) by tapping into the renewable energy stored under the ground. More than a half million homes currently benefit from geothermal systems because of its growing popularity, driven by escalating energy prices and home and business owners looking to reduce their carbon footprints. WaterFurnace International first began to harness geothermal technology in 1983; it’s fifth-ever employee, Bob Brown, is today vice president of engineering and takes up the story. “Back then we were only involved in distribution and some accessories manufacturing, and it was a whole new technology that had really come together at the end of the 1970s, thanks to the development of polyethylene pipe for the gas distribution industry, which could create a continuous piece of pipe that was reliable and made geothermal heating and cooling viable. In 1983 WaterFurnace focused upon bundling these components into a turnkey geothermal system for the dealer to install, which resulted in a highperformance and high-quality installation. Several innovations were developed by WaterFurnace at the time that are staples of a typical system today.”
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WaterFurnace International
significant growth since then, hitting annual sales of $100 million for the first time in 2007. The resulting financial benefits of going public allowed the company to launch a series of successful products, including its Synergy3 system in 1999, the first geothermal unit designed for forced-air heating and cooling with hot water for radiant floors, while another first came with the 2001 launch of the Premier E-series, the industry’s first geothermal unit featuring dualcapacity compressors and R-410A refrigerant. Geothermal systems work by tapping into the consistent temperature of the earth. “The heart of the system is a heat pump that moves heat ‘uphill’,” states Brown. “It uses the ground as a temperate source of energy to move heat indoors during the winter or extract heat from the home and move it into the earth loop in the summer.” During the heating cycle, a geothermal system regularly circulates water through a ground loop to extract heat. The unit then transfers this heat from the loop to the home in the form of forced air (Brown’s “uphill” definition, moving heat from a diffuse 50 degrees Fahrenheit ground to a higher lever, heating air to 95–105°F) distributed through a conventional duct system, hot water for radiant floors, or domestic hot water heating. In the
cooling mode, a geothermal system reverses the process to extract heat from the home and return it back to the ground. Once the system extracts the heat from the air, it redistributes it throughout the home as cool, conditioned air. “Once the initial installation has taken place— which can cost more than traditional technologies, as it involves excavation work—the operating costs can be much lower for the customer. The good thing is the longevity of the pipes installed underground; we have warranties that last 55 years on our loop piping systems but expect loops to last a lot longer,” Brown continues. Today the company has two main areas of business: residential and commercial. Brown says that the technology can vary greatly from product to product, but that there are basic principles. “Our best-selling residential products are water-to-air heat pumps, but we also build water-to-water heat pumps, which are more common in northern climates where they operate radiant floor distribution of heat and the pipes are buried in concrete.” The water-to-water systems, he adds, are commonly used in commercial buildings, and the technology can be used in everything from ice skating rinks to space conditioning to conditioning tilapia fish tanks, and it was even utilized at the
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WaterFurnace International
Johnson Controls Building Efficiency Johnson Controls Building Efficiency is a leading provider of equipment, controls and services for heating, ventilating, air-conditioning, refrigeration and security systems for buildings. Operating from 500 branch offices in 150 countries, we deliver products, services and solutions that increase energy efficiency and lower operating costs for over one million customers. We are involved in more than 500 renewable energy
projects
including
solar,
wind
and
geothermal technologies. Our solutions have reduced carbon dioxide emissions by 13.6 million metric tons and generated savings of $7.5 billion since 2000. Many of the world’s largest companies rely on us to manage 1.5 billion square feet of their commercial real estate.
Beijing Olympics. “We can make products to a variety of sizes from three-quarter ton to 25 tons for water-to-air products, and from one ton to 50 tons for water-to-water,” Brown states. “At the moment we’re building more residential pumps, and the split is probably around 70 percent to 30 percent,” he continues. “There was a big upturn in the market in 2007. The commercial market was hit harder by the economic downturn, but we’ve seen this offset by continued increases in the residential business since then.” As WaterFurnace began to grow as an operation, green issues emerged as an important political topic in North America. Today, US homeowners who install geothermal heating and cooling systems are eligible for increased tax incentives under the American Recovery and Reinvestment Bill of 2009. Previous legislation had offered a one-time tax credit of 30 percent of the total investment for residential ground loop or ground water geothermal heat pump installations, with a maximum credit of $2,000 for a single residence. However, in recognition of the benefits of geothermal technology in a struggling economy, the new bill removes the $2,000 cap and offers homeowners the entire 30 percent tax credit
without limit. Commercial building systems installed after October 3, 2008, are also eligible for a credit of 10 percent of the total investment. The Fort Wayne manufacturing site is not set up for mass production, as Brown explains. “We’re proud that our product offers so many variations on a theme; there are potentially several million combinations, but that, of course, makes it difficult to design a manufacturing plant not focused upon building in mass quantity. We’re very lean, and our promise is that we can build and ship any residential product in three days. Our assembly line may have multiple products on it at any time, but our secret is our bar code scanning system, which identifies components on the line at several locations, and an MRP system that gives us a good handle on where we are.” The center received a major overhaul at the end of the 1990s when a number of measurements were introduced that Brown says had greatly enhanced efficiency. Of course, this required buy-in from the company’s 295-strong non-union workforce, and ongoing training ensures that staff are not only conversant with kanban or fork truck safety but also understand the principles behind WaterFurnace’s technology and products. The company stays true to its beliefs by aiming to make its operations as waste-free and environmentally friendly as possible. In addition to the pond loop located at the head office, another 41 of the company’s own geothermal units meet all heating and cooling requirements for the facility. This commitment extends to the workforce, who are encouraged to install geothermal heating and cooling units in their own homes. Those same employees are fully committed to the company’s enterprising drive to “Cut Out Waste” (COW), through a series of quarterly meetings at which they are rewarded for any operable ideas that can reduce waste. Brown suggests that there is an element of seasonality to WaterFurnace’s business, with the fall a typically busy period. “We pride ourselves on the approach of our employees, who work 10hour shifts from Monday to Thursday. Any Friday work is optionally scheduled depending upon the product load and is considered overtime, and of course during our peak season people will work the extra day. The measure of how well this works is the number of long-serving, experienced and knowledgeable employees we have here. This also
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WaterFurnace International
prevents the seasonal layoffs and hiring that many other plants experience, which can really affect a workforce and ultimately hurt the product quality.” Figures indicate that there are now over a million geothermal (or ground-source) heat pumps in use in American homes, commercial and government buildings, with an additional 50,000 households installing this technology annually. “This is an exciting time,” Brown comments. “We continue to invest in research and development, but the market has become much more competitive and innovative. That said, we’re very excited about our recently launched IntelliStart compressor starter, a single-phase soft starter that reduces by 67 percent the start-up current of a compressor motor. The immediate benefit from this reduced starting current is the reduction in voltage dips and resulting light flicker, but longterm it will mean more to the consumer. “This product already meets European current
draw measurements for compressor-start voltage surges,” he continues, “and those standards are coming to America. Sales are already ramping up since we launched last May, and you’ll see this become a popular item as we get closer to European ways of measuring power, in which the consumer is charged based upon the instantaneous current draw of large space-conditioning compressors.” The success of the IntelliStart is in keeping with the continued growth of WaterFurnace, but that’s something that Brown feels needs a degree of managing. “We’ll have to be nimble over the next few years. Government involvement, industry innovation and energy prices all contribute to what is a more excited and consumer-visible market than ever, and we’ll have to be diligent with managing our growth. I’m confident that we will go from a small manufacturer to a medium-sized one pretty quickly, and it can be tough to manage those changes.” www.waterfurnace.com
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Mega
Ontario-based Hitachi Construction Truck Manufac base in mega mining trucks around the world b recognition in Canada. Executive VP Bruce Murray ex company is preparing to raise its profile in 26
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Hitachi Construction Trucks
atruckmaking
cturing has a strong customer but receives surprisingly little xplains to Gay Sutton how the n the North American market
I
n 2000, when Japanese company Hitachi acquired sole ownership of construction equipment company VME— itself a joint venture between Clark Michigan and Volvo of Sweden—there was little hint that the newly formed Hitachi Construction Truck Manufacturing (HTM) would evolve to become a significant player in the global mining equipment industry. Today, HTM stands alongside Caterpillar and Komatsu as a manufacturer of mining trucks.
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Hitachi Construction Trucks
Significantly, the production site in Guelph, Ontario, is the sole manufacturing site for Hitachi mining trucks worldwide, and its role within parent company Hitachi Construction Machinery Co. Ltd. (HCM) is different. “The company underwent considerable reorganization in 2000 when we became a wholly owned subsidiary of Hitachi. Our headquarters were moved to Guelph while the engineering, sales and marketing responsibilities were assumed by our Japanese parent,” explains executive vice president Bruce Murray. “Since then we have acted primarily as a manufacturing facility, while John Deere has taken over the sales and marketing as North American dealers with HCM. Our focus, therefore, is on processes, quality and delivery, and our main customer is in fact our Japanese parent.” The Guelph plant has the capacity to produce some 300 units a year—a mix of construction, quarry and mining equipment models—and when operating to capacity it employs 500 staff. And though to the untrained eye the products appear to be part of a range of standard equipment, each is highly individual. “We customize pretty much everything we do. This may be adaptation for the type of mine it will operate in, or to comply with local regulations, or even to suit specific operating conditions. For example, in high altitudes we have to customize the machinery to enable it to run with less available oxygen. We therefore have a strong contingent of engineering staff at the plant,” Murray says. These enormous mining trucks can cost several million dollars each, and when a new mine is being equipped it will require not one but a fleet. “This is a significant investment for the mine,” Murray says. “The due diligence alone could take up to a year from the time we receive a request for information to the signing of the purchase order. Then once we receive that, the investment for us is also huge. A fleet of 10 mining trucks can require as much as $20 million in new working capital. Therefore, managing the financial side of the business is critical, and inventory is one of the key elements that we control.” Where possible, inventory is kept to a minimum, not only to keep costs down but also to prevent stock becoming obsolete as product designs are constantly evolving. “Although we don’t operate just-in-time to the same degree as the automotive
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industry,” says Murray, “we nevertheless follow those principles in many areas. Tires are a good example. We only need them during the last week of a 16-week assembly cycle, so that’s when they’re delivered.” Procurement, however, is complicated by the extremely long lead times on some critical components—12 months in some cases. To manage this, the company runs forecasts on each product model and calculates when to order critical components and in what quantity. Suppliers obviously play a significant role in HTM’s success, and in many cases work in close partnership. About 80 percent of the typical mining truck, by value, is sourced externally. “We procure the highly complex drive systems from Siemens, for example, who are then involved in significant customization,” Murray says. “Siemens also then provides us with on-site assistance to ensure the products perform as required.” In common with most businesses, HTM has felt the effects of the global recession, particularly in the construction equipment line. At its height, capacity at the plant fell from 250 units a year to just 60. However, the robust aftermarket parts side of the business along with sluggish investment in mining helped to ease the situation. “On the manufacturing side at that time, our only option was to adjust the workforce,” Murray says. “However, on the salary side we employ a number of highly skilled people, most of them specialists in their fields. And we made the conscious decision to hold on to these people, believing that the situation would be relatively short-term in nature.” It turned out to be a good decision. Business is now beginning to pick up, and the company is starting to recall some of its manufacturing workers. “We’re seeing that highly skilled technical staff are now in short supply across the industry.” The company is now focusing on a strategy for growth. “Our products are shipped around the world. We have major customers in the US, South Africa, Colombia, Australia, Singapore and Indonesia. But, strangely, we don’t do a huge amount of business in Canada,” Murray says. “There are enormous opportunities for expansion in North and South America. We have the quality of product; we just don’t have the history in the region yet.” To support this strategy, a new sister plant is
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Hitachi Construction Trucks
“A fleet of 10 mining trucks can require as much as $20 million in new working capital. Therefore, managing the financial side of the business is critical, and inventory is one of the key elements that we control” under construction in Japan to bring production for the Far East and Australia closer to the customer and to liberate capacity at Guelph for expansion. Meanwhile, the company is developing its own customer service offering, transferring the knowledge and experience gained through achieving a world-leading construction equipment industry and delivering this into the mining industry through its extensive dealer network. “For our mining customers, what really matters is equipment availability, and each of our competitors has a unique approach to this,” Murray explains. “What we’re offering is a
complete service package—an integrated system that includes the maintenance of the vehicles.” The global mining industry is certainly active at the moment, but Murray is realistic about the future. “Like many industries, it can be feast or famine,” he says. “As long as the demand is being created by China and India it will be robust, but it can quiet down as well.” However, with a strong portfolio of products that includes worldleading construction equipment and a robust aftermarket parts business, the company is well placed to adapt to fluctuations and changes in the marketplace. www.hitachiconstruction.com
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Vertic
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Air Industries Machining
cal
takeoff Growth can come from expensive acquisitions, or as with Air Industries Machining, it can come organically by making the business ready for new opportunities when they arise, Alan Swaby learns
I
t’s worth remembering on occasion just how fast and how far industry has changed in the last few decades. Dario Peragallo, for example, is far from being alone, but when he set up Air Industries Machining in 1969, to all intents and purposes computers didn’t exist. No Internet, no electronic transfer of data, no numerically controlled machines; just good old-fashioned blueprints and the coordinated skill of hand and eye.
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“The company’s history has been one of managing change. The aero industry has developed in tandem with the development of computers” The business started in a garage just outside the gates of Grumman Aerospace in Long Island, picking up whatever machining orders could be gleaned. Nevertheless, company president Peragallo and his partner Peter Rettaliata had the foresight to choose a name for their company that was far more grandiose than its humble beginnings suggested. These days, the company is a wholly owned subsidiary of the publicly listed Air Industries Group, which, together with its sister company Welded Metallurgy Inc., operates as a Tier 1 or 2 supplier to the likes of Sikorsky, Northrop Grumman, Boeing, Lockheed and Goodrich. “The company’s history has been one of managing change,” says CEO Rettaliata. “The aero industry has developed in tandem with the development of computers. In Dario, we were fortunate to have someone interested in computers and capable of building his own in order to be one of the first in the country to use the Internet when AOL first introduced the concept. The IT side of things has been the least of our worries.” In fact, in a poor man’s version of the supply chain management tools employed by aircraft manufacturers who instruct suppliers via an Internet portal on what and when components should be delivered to the production line, Peragallo has instigated his own home-grown package to control those parts that Air Industries Machining has subcontracted out. Staying one step ahead of developments has been an ongoing key to AIM’s success. Long before the concept of supply chain relationships had entered the industry’s vocabulary, AIM was using every opportunity offered to expand the scope and complexity of supply. Where once AIM was content with parts valued at hundreds of dollars, it’s now supplying complete subassemblies worth tens of thousands of dollars and involving both mechanical and electrical subassemblies alongside the core competency of precision machining. This opportunity of growing into a more vertically integrated business has been possible thanks to the trust and faith it has instilled within customers. “In the early days,” says Peragallo, “the aero industry was a bit rough and ready. All customers really wanted was a quality product delivered on
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time. Our business had the machines out back and a bookkeeper in the front office. But change came in the form of more complex airplanes and higher levels of accountability and traceability in everything produced. Suppliers unwilling to invest in greater engineering and purchasing infrastructure were left by the wayside. As manufacturers have reduced their vendor base, it’s been necessary to demonstrate a willingness to do more in order to make the next cut.” The common denominator in the factory’s output is that they tend to be flight, safety or fracture critical parts. AIM has carved something of a niche for itself in landing or arresting gear. Parts can vary in size and complexity from something as small as a brace assembly to the complete drag strut assembly—10 feet in length and 7 feet wide—that goes on Goodrich landing gear for the A380. AIM is often called in at the prototype stage, where it helps engineers finalize their designs with advice on how best parts can be made. Sikorsky awarded AIM the contract to build a new throttle quadrant to operate the S-76 engines before completion of the final design. Sikorsky also relied upon Air Industries to fabricate the prototype on an assembly containing over 200 details in the bill of materials, including electronic integration. In so doing, AIM was able to influence the final design with many suggestions on how it should be produced. Where initially the business started with two Bridgeport lathes, there are now over 50 principal machining centers (including 5-axis equipment), some much larger than the original garage where the business started. Currently the 76,000-squarefoot facility is home to around 175 employees, generating sales of around $40 million a year. “The Long Island location,” says Rettaliata, “is a double-edged blessing. We’re in the heart of the aerospace industry making us close to customers and surrounded by skilled engineers and tradesmen who understand the aviation business. But it’s an extremely expensive area, which means we have to be very careful about overhead and expenses.” AIM spends about $1 million a year on updating its inventory, but it often buys second-
Air Industries Machining
Lawrence Ripak Co. Inc. Lawrence Ripak Co. Inc. was started in November 1952 as a part-time sole proprietorship and provided
one
service,
magnetic
particle
inspection, to the aerospace industry. Over the last 58 years the company has grown to 130+ personnel and 64,000 square feet. We are a full service aerospace processing facility offering a full range of NDT services, chemical processing, plating and painting. We are NADCAP and Prime Contractor Approved.
hand machinery at auction and makes its own modifications to give it the customized capabilities needed to suit the work at hand. At the same time, working lean has been a priority within the organization for a decade or more, to the extent that in 2004 it was Northrop Grumman’s supplier of the year and gained United
Technologies’ MBE Excellence award. “But there’s a lesson to be learned,” admits Peragallo. “One of the 5S’s is sustainability, and we learned the hard way that you can’t rest on your laurels. After getting the business into its best shape in 2004, other demands meant that I took my eye off the ball and our performance subsequently suffered. We’ve now hired a permanent continuous improvement manager to take over responsibility, but the truth is, it’s something we ought to have done five years ago.” Peragallo and Rettaliata are already planning for the next anticipated shift in the way the business will operate. Despite having input on how the design develops, AIM currently works to supplied details. But they can see the day when responsibility for design will be handed over to suppliers, and they, once again, want to be ahead of the game. www.airindustriesgroup.com
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Excelerate Energy
Offshore assets Having earned a sound reputation for bringing liquid natural gas projects to fruition, Excelerate is now expanding internationally with projects in Europe, South America and Asia
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hen Excelerate Energy got its start in July 2003, company sponsor George Kaiser and his co-founders recognized a need for new ways of importing natural gas into the North American marketplace. At the time, demand was outstripping domestic supply, and the marketplace was not well equipped to import large quantities of the fuel, which is used for heating and cooling homes and businesses
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Excelerate Energy
Bureau Veritas For many years, Bureau Veritas has played a leading role in the field of ocean gas transportation, with significant innovative steps typified for instance by its classification of the 138,000 cubic metre “Excelsior,” the first LNG vessel, part of the Excelerate Energy fleet, to be built complete with regasification plant and turret for offshore unloading. Regasification of LNG cargoes has traditionally been carried out at onshore plants, and this revolutionary design of vessel brought significant implications for the shipping industry. When Excelerate Energy was looking for a global technology and verification partner, it chose Bureau Veritas. It wanted a global outlook, a company which was receptive to new ideas and technology, and which had global credibility in the LNG field to certify its new ideas. This new regasification technology (LNG-RV) required all the expertise and technological innovation of both the operator, the shipbuilder and Bureau Veritas to see the project through to its successful conclusion. As key challenges, the vessel, which has an onboard vaporization unit, had to be able to withstand the forces that can typically occur while operating offshore in a partially filled condition. To this end, Bureau Veritas conducted extensive studies into the behavior of liquid gas in partially filled tanks, resulting in reinforcement of the vessel’s containment system and its hull structure. Since then seven other LNG-RV vessels were delivered to Excelerate Energy, the last one in 2010. All are classified by Bureau Veritas and the result of a long-standing partnership between the two companies. On the strength of this relationship, Bureau Veritas continues to deliver other specific services to Excelerate Energy, especially risk analysis (Hazid, Hazop, deck lay-out safety analysis) as part of new offshore LNG projects. Bureau Veritas is today a leading international service provider, dedicated to quality assurance, environmental, health and safety (QEHS) management services across a wide range of economic activities, including marine, offshore, industry and facilities, government services, and consumer products. By far the largest classification and certification society, Bureau Veritas has over 46,000 employees and 900 offices in over 140 countries throughout the world.
“Even with new liquefaction coming on line and new suppliers in the market, you’re going to continue to see LNG flowing to those places where the demand exists” as well as powering electric generation plants and industrial facilities. America, as well as Asia. There is a lot of demand for LNG receiving capabilities, and our technology allows us to come in and— with a very minimal footprint compared to more traditional land-based facilities—do things more cost-effectively and often more rapidly.” Excelerate gained additional access to markets in Europe and elsewhere in February 2008, when Kaiser sold part of his stake in the operation to
Germany-based utility RWE. Although LNG is not particularly hazardous or dangerous cargo, siting onshore facilities can be a challenge because of safety concerns. “It tends to be a lightning rod for public concern, and being able to locate offshore facilities on a permanent or semi-permanent basis is a palatable alternative for a lot of people.” In addition to buying and selling LNG on the spot market and through longer-term supply
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Excelerate Energy
Emco Wheaton For the unloading of natural gas under high pressure, Emco Wheaton has developed a marine loading arm that is capable of meeting the specific requirements that are imposed to equipment that handles hazardous materials at elevated pressure ranges. Compressed natural gas will be discharged from a re-gasification vessel at pressures between 50 and 150 bar. The loading arm is featured with latest technology safety systems, and in addition to that carries a safe shutdown and disconnecting system that safeguards a release of the loading arm from the vessel in case of any emergency. With the development of the high pressure marine loading arm, Emco Wheaton has proven once again to be a reliable partner when highly customer specific solutions in the loading arm business are needed.
contracts, Excelerate also provides storage and regas services and also charters its own vessels to third parties. Doing so enables the company to keep its assets in use as much as possible, which in turn allows it to keep its costs lower. Excelerate is also one of several companies close to bringing to market technology that will equip ships with the ability to liquefy natural gas for transportation, which could create new markets for stranded gas reserves that could be sold to markets where demand is running higher. Excelerate continues to work with Exmar on such ship-based advances, with Exmar serving as technical managers and owners of the vessels and Excelerate operating them and owning an equity stake in partnership with Exmar. Even with the global economy in slowdown mode, the demand for LNG is continuing to grow, Cook says. Many newer power-generation facilities are capable of running on multiple fuels, and natural gas is considered cleaner and more environmentally friendly than some other alternative fuel sources, such as coal.
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Excelerate Energy
GAC Kuwait Established in 1956, GAC Kuwait is one of the leading logistics, shipping and marine service providers in Kuwait today. GAC has built an established track record in delivering project logistics solutions. Clients such as Excelerate Energy count on its expertise, resources and experience to handle even the most challenging and unique of project cargoes. GAC Kuwait is part of the GAC Group.
FMC Technologies FMC Technologies is the technology leader in providing LNG transfer solutions. FMC has designed and provided solutions that will enable connection availability in calm and the harshest offshore conditions, providing the vital link for LNG transfer. FMC Loading Systems has supported Excelerate Energy in the Kuwait project, providing the Chiksan LNG Loading Arms. Visit FMC’s website for information. www.fmctechnologies.com
“There are significant supplies that are dislocated from the markets where the demand exists,” says Cook, “and irrelevant of price, there is a need to move the gas from the supply source to the market. What we’ve been seeing is that even with gas prices in the US at historic lows, the market is so large that it can absorb more supply. Even with new liquefaction coming on line and new suppliers in the market, you’re going to continue to see LNG flowing to those places where the demand exists. The marketplace knows we have the technology and the experience with bringing projects from idea to reality in a way that makes more projects feasible and economical.” www.excelerateenergy.com
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Greener
strong
and
Algonquin Power & Utilities Corp. already owns or has interests in some 45 renewable energy generating facilities along with 14 traditional thermal energy plants and a growing cache of water and wastewater utility systems. Greg Andrews examines Algonquin’s rapid growth and its plans to continue to acquire assets that generate longterm cash flow for the company and its investors
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Algonquin Power & Utilities Corp.
A
lgonquin Power & Utilities Corp. was established in 1997 as an investment trust, and in the relatively short span of time since then it has amassed an impressive portfolio of assets that is heavily and increasingly focused on renewable energy and sustainability. Among Algonquin’s holdings are 41 hydroelectric generating facilities that turn river water into power; a 99-megawatt wind energy facility that is one of the largest in Canada; a waste-to-energy plant; two facilities that capture energy from naturally occurring landfill gases; three biomass-fired generating plants that run on wood and other waste products; and five natural gas co-generation plants that use process heat to enhance direct energy production. All told, the holding company controls 242 megawatts of installed capacity from renewable sources and 173 megawatts from thermal sources, for a total base of more than 400 megawatts of capacity. Its water resource portfolio, meanwhile, now includes 19 private utilities and more than 70,000 end-user customer connections, all of them located in the southeastern United States. For Algonquin, the focus has always been and remains on finding and acquiring assets that can quickly pay back the initial investment made to acquire and upgrade them and then begin to generate cash flow, money the company converts into monthly dividends for investors who own shares in the Oakville, Ontario–based company. Initially founded as an investment trust in 1997, the company converted to a corporation format in June 2009 and has paid quarterly cash dividends to shareholders since that time; its shares are traded on the Toronto Stock Exchange.
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Algonquin remains hungry for growth, clearly stating its guidelines and criteria for acquiring assets on its Web site and announcing its intentions to move into electricity distribution by acquiring a strategically placed utility at some point. The company states that its acquisition criteria include looking for opportunities that provide “long-term, statistically predictable future cash flows” consistent with and complementary to the existing portfolio. That could include more wind, hydro and thermal projects as well as water distribution, wastewater facilities, and electricity and natural gas distribution facilities. Algonquin’s most recently announced purchase, in the spring of 2010, was The Galveston System, a relatively small water distribution and wastewater treatment utility in coastal Texas that was acquired for $2 million. Like other water systems Algonquin has purchased, Galveston has significant potential for growth as well as longterm cash flow from its existing customer base. The company also continues to add to its renewable portfolio and looks for opportunities
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to use its access to capital and its expertise to jump-start languishing projects. For instance, Algonquin has taken over construction and eventually operation of the Red Lily wind farm project in southeastern Saskatchewan, a project owned by Concord Pacific and one that was initially being developed by Gaia Power, Inc. The 25-megawatt project already has an agreement in place to sell electricity generated to Saskatchewan Power, and Algonquin predicts annual revenues from the wind farm will quickly reach $8 million once the project is commissioned, which could happen early in 2011 after construction began in summer of 2010 with the acquisition of the 16 wind turbines to be installed on the site. Algonquin and Concord Pacific have already acquired additional land rights in the area that they hope to develop into a second phase that could result in as much as 106 megawatts of additional green generating capacity. Algonquin’s development division, which is spearheaded by five executives, is working on Red Lily and other projects that are being developed from the ground up.
Algonquin Power & Utilities Corp.
Once completed, the Red Lily project will take its place alongside the other existing Algonquincontrolled wind asset, the 99-megawatt St. Leon wind farm, located about 100 miles from Winnipeg. The first wind farm ever built in the province of Manitoba and one of the largest operating in Canada, the farm includes 63 turbines and uses an Arctic operational model to account for the lengthy northern winters and the strong, often dangerous winds they can bring. Algonquin’s asset portfolio has grown to cover a sprawling geographical region. Its hydroelectric holdings are heavily focused on the New England region and in southeastern Canada, while most of its water and wastewater holdings serve the dry southwestern region of the US, with properties in Missouri, Texas and Arizona. Water utilities currently make up about 20 percent of the company’s operating revenues but
are favored because they supply highly predictable cash flow along with the protection of regulation and what is essentially geographic monopolies. Algonquin will clearly continue to search for opportunities to make acquisitions or to form partnerships when that approach makes more sense. For instance, Algonquin is teaming with Emera Inc. to bid for the right to acquire the California utility holdings—primarily a distribution network—of NV Energy. As North America continues to gravitate to renewable and alternative energy sources, Algonquin has made it clear that it wants to be an increasingly major player in the ownership, operation and development of those assets. The company has a track record of reviving languishing properties, injecting new operational efficiencies and energy into them and turning them into profit sources for investors. www.algonquinpower.com
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W
hat do you get when you put a county government, an established construction company, major subcontractors and an engineering partnership all in the same room to plan, design and construct a major infrastructure project? Well, if you ask any of the team members of the Yellow River Water Reclamation Facility (WRF) project, the response is enthusiasm and an improved outcome for the overall project and project owner. In 2007, a group comprising Gwinnett County, Georgia; Jordan, Jones and Goulding, Inc. (a Jacobs Engineering Group Inc. company), in association with CH2M Hill and Precision Planning, Inc.; and Pizzagalli Construction Company got together to create, design and construct the county’s Yellow River WRF. There were no construction drawings at the time; the group had the county’s master plan, a budget, a clear set of policies, and a goal. “We decided that everybody had to be here on site,” says Adam Minchey, director of special projects for Gwinnett County. “We are truly an integrated team. Rather than sitting on opposite sides of the table, we’re all sitting on the same side, and this has worked out really well.”
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Sya in
Mark Twain describ things work togeth in Gwinnett Count together and achie
Yellow River Water Reclamation Facility
ynergy action
bed synergy as “the bonus that is achieved when her harmoniously.� Rob Harris reports on a project ty, Georgia, where an exceptional team has come eved some remarkable results
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The Yellow River WRF modernization project, when completed in 2012, will be a state-of-theart facility incorporating the latest technology to treat wastewater. Using a membrane bioreactor filtration system manufactured by Zenon, part of General Electric, the plant will have the capability to remove nutrients and filter items as small as bacteria and some viruses. The use of better technology will enable the county to decrease the footprint of the Yellow River plant while increasing the plant’s capacity and the buffer zone around the facility. The county’s plan to close some of its other aging waste water facilities and incorporate them into the Yellow River plant is well under way with only one of the aging facilities still remaining open. The capacity at the Yellow River plant will be increasing from 14.5 million gallons per day (MGD) to 22 MGD. This modernization will take place while at the same time maintaining the plant’s treatment capacity and with limited disruption to the surrounding neighborhood. “The obvious challenge for us in the beginning was learning about the existing facility and how the new construction would have to be performed,” says Bob Huie, project manager for Pizzagalli Construction. “This was done in order to perform the work efficiently and to keep the sequence of construction going, making sure everything was considered in the plan.” One of the first challenges was the installation of two 20-million-gallon water equalization tanks to handle the excess sewage while one half of the existing facility was literally torn out and rebuilt to the new specifications. As of today this $275 million project is ahead of schedule and under budget despite the fact that the team has faced many difficult challenges. It was able to handle problems as they occurred because the operations, engineering and construction decision-makers were all on-site. “We have a 14-trailer complex, and all of them are interconnected,” says Jim Grum of Jacobs Engineering. “When the understanding of each other’s goals became the common goal, very little got lost in translation.” One of the most unique aspects of the project is the ability for virtually anyone with access to pull up 3-D models of the complete project. Using Autodesk software to create the images, the entire site was scanned into the computer system using lasers for accuracy. Autodesk offers
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Yellow River Water Reclamation Facility
free viewing software called Navisworks Freedom; this enabled the 3-D models to be shared on any computer connected to the site’s intranet. “Virtually everybody connected with the project has the capability to pull up and view the models, then walk through them themselves,” adds Grum. Architects, construction employees, and even future maintenance technicians can walk through the facility and make suggestions or comments about the design. “We are a completely openbook project; everyone here has access to this model,” says Minchey. On completion of the project, the effect of the WRF on the environment will be greatly reduced. Consolidating three of the county’s aging wastewater treatment plants into one state-of-the-
art facility will improve overall system reliability and reduce environmental impact. The new technology incorporated into the plant allows for cleaner water being returned to the river and provides a greater level of odor and noise control. One of the benefits is that by becoming smaller and more efficient, the plant has less of an impact on the surrounding neighborhoods. Consolidating the county’s facilities is very cost-efficient and will reduce overall operation and maintenance costs of the system, and the improved reliability of the newer systems assures county residents of a continuing high level of service and environmental protection. When the construction of the new operations building is completed, it will also be a LEEDcertified facility. LEED (Leadership in Energy
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Yellow River Water Reclamation Facility
and Environmental Design) is an internationally recognized certification system developed by the US Green Building Council to provide verification that a building was designed and built using strategies intended to increase energy savings and water efficiencies, reduce CO2 emissions, and improve indoor environmental quality. Pizzagalli also incorporates the philosophy of environmental sustainability into its daily business practices, from incorporating the waste concrete, rock and asphalt back into the site, to recycling the waste steel, aluminum and copper. Henry Ford is quoted as saying, “Coming together is a beginning. Keeping together is progress. Working together is success.” Huie puts it another way. “The owner /engineer/contractor on-site approach has turned out to be a real asset to the whole project. In my opinion it has allowed the project to be as far along as it is today.” Minchey sums it up nicely too. “We truly are a team out here.” www.gwinnettcounty.com www.pizzagalli.com
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Strong foundations
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g
L.B. Foster Company
L.B. Foster Company has a long history as a key provider of materials to the rail, construction, energy and utility industries. Keith Regan learns how a lean journey that began several years ago is paying dividends even amid an economic slowdown
F
or over a century L.B. Foster Company has supplied the materials used for the core infrastructure that is the backbone of economies in North America and around the world. From concrete railroad ties and steel rails to bridge components and pilings, the company has had a hand in building key infrastructure for generations. Today’s L.B. Foster bears the imprint of that lengthy history but also a more recent internal push to become as lean and efficient as possible, something the company recognized it needed to do in order to match its internal operational excellence with the high level of customer service excellence it has always pursued, according to Don Foster, senior vice president for the company’s construction products group.
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L.B. Foster Company
Pittsburgh-based L.B. Foster now gets about 50 percent of its revenue from manufacturing and the other half from the distribution side of the business, Foster says. The company is organized into three main divisions selling rail, construction and tubular products with some eight distinct business units in all. “It’s a nice range of diversity in the product lines,” he says. “We strive to make it a great place to work, and we’ve got engaged employees and very high customer satisfaction ratings as well as a respectable balance sheet with our debts well under control.” That strong balance sheet means Foster is always looking for acquisition targets when they make sense. The company is currently close to closing on a deal to acquire a firm in the rail products arena and recently acquired a smaller firm in the bridge steel arena that will help it gain work on high-profile projects such as Stimulus Act–funded work on the Brooklyn Bridge. The company also has plans to expand its already far-reaching overseas footprint. Foster credits the company’s strong profit profile to a large-scale lean effort that began in 2003, when senior vice president of manufacturing operations John Kasel joined the company. Previously there had been some attempts to overhaul processes, but “nothing really stuck,” says Kasel. “There was very good customer focus and service, but they were not managing the income statement very well. Scrap, waste, safety, quality—it was all moving in the wrong direction.” Kasel says a difficult year in 2003 provided the “burning platform” needed for more abrupt change to be embraced. “We trained the entire workforce and found out quickly that we had the right people on the bus, but they weren’t in the right seats,” he adds. Safety was one glaring symptom of the operational malaise. “It wasn’t a core competency, and it showed,” Kasel says. In 2002 the company had a recordable incident rate of 20. In 2009, the level was 3. The company’s DART rate (days away, restrictions and transfers) was 9, while today it is well under 2. The changes were made by targeting individual facilities and picking specific projects. While investments were being made in systems to support the changes, plants and distribution centers were told they had to think their way out of the problems, not spend their way out. After a couple days of workshops and kaizen events, changes would be implemented, with the results tracked closely using the balanced scorecard approach to give more accurate readings on progress. “Financial
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L.B. Foster Company
performance is a lagging indicator,” Kasel says. “We wanted to focus on leading indicators. That’s what keeps us honest in the lean journey—setting aggressive targets for where you want to be and then measuring relentlessly.” With all changes, the company encouraged employees to think in small steps. “We asked them to be safe for a minute, then an hour, then a day and so on,” Kasel adds. Reducing scrap and waste and creating cleaner work environments helped, as did the fun aspects of the campaign. For instance, facilities would conduct safety bingo games, in which a number would be drawn for every day that passed without an incident, and employees who filled their cards would win prizes. “It not only tells the employee to be engaged but gets them to watch out for others as well.” The bridge group alone went from having safety incident rates that were higher than the industry average to winning the Pennsylvania Governor’s Safety Award in just two years. “That was a great early win for us, and we just built on it from there,” says Foster. The lean and six sigma push was extended beyond Foster’s own walls to include major suppliers. One steel supplier, for instance, participated in programs focused on safety as well as inventory management. “If we are an extension of our customer, then our suppliers are an extension
of us, so you have to take it back through the chain to get the most benefits,” Kasel says. Looking forward, L.B. Foster will continue to ride the ups and downs of the economy, with a lot of the company’s top-line growth depending on the amount of infrastructure investment being made at the federal government level in the US. “A lot of the stimulus money that was put in place is already spoken for or being spent now,” Foster says. To help reduce its reliance on those funding sources, Foster continues to expand overseas. Work the company did in New Orleans with contractors such as Fluor and Bechtel has helped it qualify to bid on work on the Panama Canal expansion, a platform it hopes to use to expand into South American markets such as Brazil, Paraguay and Colombia. The rail side of the business remains active in Australia as well as across Europe, where a project-focused orientation is now being shifted into a more sustainable business model. All the changes come with a strict customer focus and rely on a constant feedback loop, with an outside company recently hired to conduct customer satisfaction surveys in addition to the feedback already being received. “We know we need to be as lean internally as we can be so we can serve those customers how, when and exactly the way they want,” Foster adds. www.lbfoster.com
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Orgag Foster Farms Dairy, the largest privately owned dairy operation in California, has made another strategic move into organic products, as Alan Swaby learns
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hen the nation is feeling flush, many marginal businesses survive thanks to there being enough consumers around who are prepared to pay a hefty premium for goods they perceive as being more luxurious or of higher quality. But when belts are tightened as they were a couple of years ago, convincing those consumers to continue paying that premium, particularly for discretionary products, becomes a whole different matter. For some companies, such as Fernbridge-based Humboldt Creamery—a farmers’ cooperative selling organic dairy products in Northern California at prices as much as 100 percent higher than the conventional equivalent—business becomes unsustainable.
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Foster Farms Dairy
Crystal Vision Packaging Crystal Vision Packaging produces every type of flexible & rigid plastic packaging for most products. Printed shrink labels are being used by Foster Farms for their own “Crystal Cool Cow” line of milk products and orange juice plus their private labeled dairy products for McDonald’s. Crystal Vision Packaging’s other product lines include printed or clear shrink films, shrink bags, shrink sleeves, tamper evident shrink bands, clear & colored round or shaped preformed shrink bands, retail polypropylene bags, food barrier bags, vacuum bags and dry cleaner bags. Crystal Vision Packaging also offers machinery and sealers for applying flexible plastic packaging including heat shrink tunnels, skin packaging and blister packaging, and vacuum packaging.
But when Humboldt filed for bankruptcy in 2009, Foster Farms Dairy, another California operation, saw the benefit of the Humboldt brand name and the capital assets that went with it. “Humboldt was a much smaller operation than ours,” explains Foster Farms’ operations vice president Jeff Fowler, “but the ice-cream-making side of their business was three times the size of ours. Together with Dairy Farmers of America, we put in an offer for Humboldt and took control in August last year.” In the process, very little collateral damage has been suffered. Northern California’s organic diary farmers still have an outlet for their milk through Dairy Farmers of America, and the 100-strong workforce at Humboldt is largely unchanged. At the same time, greater coverage has been achieved for Humboldt products thanks to Foster’s more developed distribution network. On top of the $20-plus million price tag Foster had to pay, another couple of million has been invested in plant improvements at Fernbridge. But the purchase has given Foster the opportunity to rationalize a good number of production lines with ice cream largely moving north and some of the smaller-volume Humboldt products now being made in Modesto or Fresno.
A couple of years ago Foster had already made a major marketing decision to phase out the Foster name at the consumer level in favor of the more widely known Crystal brand, which it had previously acquired. Now the Humboldt deal has given Foster even more scope for simplifying its marketing. “We’ve decided that the Humboldt brand will be our brand for premium products, while Crystal will remain the label for everyday products,” Fowler explains.
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“As soon as the economy recovers, we believe sales of Humboldt’s organic products will bounce back, and we want to be ready to take the best advantage of that rebound” For the last few years, in parallel with its marketing initiatives, Foster has been on a lean mission, and this philosophy is currently being extended into the Humboldt factory. In certain performance parameters, there is precious little room for improvement at Modesto and Fresno. Deliveries on time and correctness of deliveries are already an amazing 99.8 and 99.7 percent, respectively, and it’s this type of performance that Fowler is trying to achieve at Fernbridge. “Considering the nature of the Humboldt business,” he says, “the workforce has adapted to the new ownership and new ideas remarkably well. There wasn’t much lean thinking around there in the previous regime, but both management and factory floor workers have been quick to see that working more efficiently is part of the process of giving customers the best possible service.” Foster uses four key factors to measure
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performance: safety, quality, delivery and cost. Each day, production teams go into a huddle and discuss the previous day’s performance. By closely analyzing what has happened in the short term and historically, bottlenecks can be identified and then resolved with kaizen campaigns. “We’ve been doing this long enough now,” says Fowler, “to have a structured problemsolving process. But the process depends on accurate and up-to-the-minute information. We keep scorecards all around the plant that show everyone what has been achieved. It brings out the competitive nature of humans. People automatically strive to do better. It’s our job as managers to give them the tools.” Foster has identified 200 different areas that it rates on a scale of 1 (poor) to 4 (excellent). Each quarter these are measured and the movement in performance tracked. But thanks to this work, the
Foster Farms Dairy
business saved $5 million in costs during 2009. Shaving cents off the price per gallon to process milk is a painstaking business. As well as the small incremental steps that kaizen brings, Foster is also prepared to invest in capital improvements. Just a couple of weeks ago a new $5 million solar energy system came on stream after installing carports at the Modesto plant covered in solar panels. “It’s only going to contribute 1 percent of the energy we use here,” says Fowler, “but thanks to rebates and federal grants, this investment will pay for itself in just four years.” Other small steps taken include a new dissolved air filtration system designed to take solids out of the waste produced by the dairy and make disposal both easier and cheaper. At the same time, the plant is working under new low-energy lights that have replaced the more expensive incandescent lighting.
The Humboldt acquisition has added around $80 million to Foster’s $500 million turnover and opened new geographical areas previously not served. The company is now considering how it can tackle Southern California, and after that, the feasibility of taking ice cream and some of the longer-life products national. Foster now has some co-packing products with eastern producers, and it’s working on how the arrangements can be reciprocated. In the meantime, directors of the company are strengthening the middle and upper management with the best people they can find—making several new professional appointments as well as identifying and promoting talent from within. “As soon as the economy recovers,” says Fowler, “we believe sales of Humboldt’s organic products will bounce back, and we want to be ready to take the best advantage of that rebound.” www.fosterdairyfarms.com
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Driven by base realignments, lease considerations and homeland security concerns, a large-scale courtroom and office project at Andrews Air Force Base was placed on the fastest of fast tracks. Keith Regan learns how the project team uses a design-build approach and constant communication to keep the project on its aggressive schedule
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hen it is completed early next year, the Administrative Facility known as the William A. Jones III Building at Joint Base Andrews in Maryland will house the United States Air Force’s only Appeals Court, the base trial court, many legal offices, numerous HQ Air Force staff offices as well as the Air Force District of Washington and 316th Wing staff. The building was named after William Atkinson Jones III (May 31, 1922 – November 15, 1969), a United States Air Force officer and a recipient of the United States military’s highest decoration—the Medal of Honor—for his singularly distinctive action in the Vietnam War.
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Andrews Air Force Base
The 380,000-square-foot building consists of two five-story wings connected with common conference areas on each floor and features a host of green design and construction techniques. The project is planned to earn at least Silver certification from the US Green Building Council’s Leadership in Energy and Environmental Design (LEED) program, as well as enjoying a host of communications and security upgrades for the inhabitants of the Jones Building. “It’s all about security,” says Susan Bench-Snow, Basing Division Chief, noting that the project is actually three in one, with Base Realignment and Closure Commission Report 2005 driving one aspect and Air Force space needs the others. “It’s all about bringing people into an environment that is secure so they’re not out in leased space that might not be up to the same military standards that those on the base benefit from already.” Because it stems from BRAC 2005, the construction of the facility and the movement of personnel into the facility are mandated by Congress to be completed by mid-September of 2011. However, as a number of key leases expire during this same timeframe, the project schedule has been accelerated to allow for a February 2011 completion of significant construction work, enabling workers to move into the building beginning in March 2011. The organizational moves into the facility will take several months. Behind organizational moves will be lease space remediation, where necessary, so that the Air Force is free and clear of the leases by the September 2011 timeframe. “We were fast-tracking the project right from the start,” says Bench-Snow. In order to facilitate the fast-track arrangement, Joint Base Andrews allowed the fencing off of the worksite, allowing all the workers and delivery vehicles direct access to the site, thus reducing delivery times. This meant embracing a fast-track designbuild model for delivery of the work. According to Jeff Pitchford, a project manager with designbuild contractor CDM/CAPE (a joint venture of Cambridge MA-based CDM and Atlanta-based CAPE) the project was split into a number of design-build packages, starting with site work and foundation, then moving to structural components, building envelope, and eventually to finishes and interior systems. Furniture layout, communications
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Andrews Air Force Base
system support and electronic security systems became separate packages as well. The first package, the foundation and site utilities for the project, incurred a slight delay as state permits were obtained, but ground was broken by the summer of 2009, less than six months after the design-build team was put in place. The commitment and approach taken by CDM/CAPE enabled the project to get ahead of
suburban office space. “The basic core of what we have is an office building,” Pitchford explains. There will also be features that go beyond what is found in a normal office park. In addition to an enhanced security package, fitting for a military administrative facility and court, the entire building is being constructed with flooring that will cover and provide easy access and easy reconfiguration of the electrical, HVAC and
“We have a couple of very basic management principles, and the most important one is to talk and talk and talk. We are constantly engaging all our partners to go over everything that is necessary for the next day, week, month and longer. We are constantly trying to stay out in front of everything” schedule once again by the summer of 2010. “We’re ahead of a schedule that was already very aggressive,” says Pitchford. The construction schedule called for one wing to be enclosed first so that interior work could be shifted into that space while the other wing was still being constructed. By the end of June 2010, some 400 workers were on the project on any given day—a number that was expected to peak at over 500 by late summer, when the project was slated to be brought to weather-tight status so that work could continue throughout the winter. Coordinating this volume of work in a short time and small space requires the design-build team to keep close tabs on progress, including problems being encountered and any changes that might be necessary as a result. “We have a couple of very basic management principles, and the most important one is to talk and talk and talk,” says Pitchford. “We are constantly engaging all our partners to go over everything that is necessary for the next day, week, month and longer. We are constantly trying to stay out in front of everything.” Team cooperation is an essential element in addressing the daunting schedule. Key members of the team include engineers and designers from AECOM’s Northeast Washington DC office as well as Coakley & Williams Construction, a local contractor hired for its experience with building
communications systems. The space will also be wired with a passive optical network (PON) that brings fiber right to the desktop and requires much less power (generating less heat and reducing the requirement for even more power for cooling) than a traditional network made up of powerful routers and switches. The PON network installed throughout the facility will be the first of its kind for the Air Force and will be outfitted with Voice over Internet Protocol (VoIP) phones and secure networking functionality to allow workers to remain connected even if they are off-site. “We’re working on standards that will be based on this project and that will make it the norm to build this type of network,” says Charles Elmore, deputy director of communications for the Air Force District of Washington. This network is just one of numerous sustainable features on the project. More than 60 percent of the roof area will be covered in a green roof and storm-water runoff collection system. A host of other construction-phase green techniques, such as using low VOC-emitting finishes and recycling construction waste, will be employed as well. “Those things are becoming standard in how we approach every project now,” says Pitchford. “Our goal on this project is to exceed LEED Silver and go for Gold. We want to and believe we can do that.” www.afncr.af.mil
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Federal stimulus funding for infrastructure is changing the construction industry as more public and private entities opt for design-builds, David Hendricks learns from Tutor Perini Civil Group’s CEO, Jack Frost
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ack Frost is CEO of Tutor Perini Civil Group, one of the three divisions of Tutor Perini Corporation, a major general contractor in the US founded in 1894, with current headquarters in Sylmar, California, just outside Los Angeles. All civil operations of Perini report to Frost, including TutorSaliba Corporation, Perini Civil Construction, Cherry Hill Construction and Black Construction. He is a director of Black Construction, head of the company’s operations in Guam, and executive vice president for the parent company. He’s also head of its industrial power division. Frost joined Tutor-Saliba in 1988 and today is very much a hands-on executive, preferring to personally travel to the many job sites for which he has responsibility, which entails logging more hours in the air than he cares to reflect on.
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On the subject of air travel, Tutor Perini Civil recently completed the difficult job of removing and replacing the longest runway at New York’s JFK Airport, with a short window of four months that included several days of rain and snow. The company previously performed a runway relocation and center taxiway improvement at Los Angeles International Airport and built the majority of San Francisco International Airport. “We enjoy our airport work,” says Frost. “The JFK project was a tremendous amount of work in a brief period of time and is a great accomplishment in the New York market.” Even more difficult is the ongoing Greenwich Street corridor at New York’s World Trade Center reconstruction site; it’s a reinforcement seismic rebuild of the 1 and 9 subway train line, which goes right down the middle of the WTC between the towers. “We had to excavate 150,000 cubic yards
of a combination of common soil and rock, all of this accomplished among 600 mini-piles, going down anywhere from 40 to 60 feet. It’s a confined worksite and the train continues to run throughout, but work is proceeding well,” says Frost. Two major tunnel projects in California are starting up in the west: the Caldecott Fourth Bore Project, a two-lane tunnel north of the existing three Caldecott tunnels, located on busy State Route 24 between Oakland and Orinda, and the New Irvington Tunnel in Fremont in a joint venture with Southland Contracting, Inc. The Shasta County Interstate 5 Bridge across Shasta Lake in Northern California is also an interesting project; it involves the demolition of existing concrete and structural steel bridges that will be replaced with twin two-lane balanced cantilever cast-inplace concrete segmental bridges with five spans totaling 1,942 feet.
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“The jobs that tend to be publicly listed, then funded by the owners, are being design-built by public-private partnerships much more than in the past, and I believe it’s in the interest of acquiring federal stimulus and other assisted funding to put them out faster” Although large projects have been in the planning stage for years, and most take at least a few years to build, Frost says, Tutor Perini has been affected by the economic downturn in that a lot of the smaller jobs, “the ones that tend to be publicly listed, then funded by the owners, are being design-built by public-private partnerships [P3s] much more than in the past, and I believe it’s in the interest of acquiring federal stimulus and other assisted funding to put them out faster. So even though a lot of these projects have been in planning for several years, I think the owners are looking to share a little risk there, and we’ve been actively pursuing those kinds of projects.”
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Frost considers it a huge change in the industry. “It used to be rip and read; you were the low bid and got the job, it was funded by the owner, and it had been through design and planning. But now many of these projects are being put out as mostly design-build, and a lot of them are public-private partnerships. They’re looking for contractors to come up with the funding, the concessionaires, so you’ve really opened it up to allow a theater for an international consortium and foreign companies to come in, because they have more experience at P3s than US companies do, because it hasn’t been a model that was necessary here; the economy’s been good, so the owners didn’t pursue it as
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much. Now we’re seeing it everywhere.” Frost considers P3s less interesting to work on, “because you have to share the management and the work with a partner that’s not really performing the work. In the other model, when we administrate a job, the owner pays us, and there’s nobody else. Every time you add a partner to a relationship, it complicates it. And it makes the administrative or management cost much higher for us. We prefer a scenario where the owner has a project designed and we estimate it, bid it and perform it. We’ve been successful with that model for many years. Previously there just weren’t that many designbuilds, even though we’ve built quite a few.” But today Frost sees that the large projects, even the military ones, are almost exclusively design-build. And he figures the one sector in the construction industry that has really benefited from at least the early part of the stimulus funding
is architects and engineers, because they’re now a lot busier. “We don’t own or manage an architect and engineering firm because of the conflicts it would cause, but those guys have to be busier, the way we’re seeing these projects roll out.” With all his responsibilities and the number of executive hats he wears, Frost still prefers to maintain a hands-on approach in terms of choosing equipment, supplies and vendors. “We’re kind of different here; those decisions are handled by one of two people—Ron Tutor or me. We know equipment—it’s an area of our expertise—and we believe that job setup is as critical an element on the last day of a job as the first. Executing and delivering the job is how you equip it and man it. Here, those decisions are not easily passed down. We haven’t learned to delegate that yet, but I believe it’s also part of our success.” www.perini.com/civil/index.html
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n January 17, 1994, at 4:31 am Pacific Standard Time, the city of Los Angeles was hit by a major earthquake that lasted about 45 seconds. It was recorded as magnitude 6.7, wreaked over $20 billion in damage, caused 72 deaths, and significantly changed the way building construction was approached in the state of California. On February 25, 1994, California Senate Bill 1953 was introduced, and it was signed into law on September 21, 1994. This bill was an amendment to the Alquist Act of 1973 and specified that if a hospital were to remain an acute care facility, the owner must conduct seismic evaluations and prepare both a comprehensive evaluation and a compliance plan to the specifications mandated by the California Office of Statewide Health Planning and Development (OSHPD).
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Rudolph and Sletten General and Engineering Contractors
With today’s economy affecting corporations all over the world, most firms are trying to use their resources wisely. Rob Harris investigates one company that has incorporated a strategy that has taken it to the next level
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Rudolph and Sletten General and Engineering Contractors
Childrens Hospital Los Angeles was one of approximately 470 general acute care facilities affected by this legislation. Childrens Hospital Los Angeles knew that this project was going to be difficult, long and complicated. In 2003 the hospital hired Rudolph and Sletten. Onslow H. Rudolph started as a general contractor in 1959 based out of his family garage in Los Altos, California. He began with a small amount of savings, a pickup truck and two employees. The business grew quickly and became well known for its ability to delivery high-quality work on time and within budget. In 1962 Kenneth G. Sletten joined as a business partner and the company was renamed Rudolph and Sletten. In 2005, Rudolph and Sletten was acquired by Tutor Perini Corporation, one of the largest construction services companies in the US. Today, Rudolph and Sletten is one of the largest contractors on the West Coast. With 38 percent of its staff already LEED accredited, the company has the highest percentage of LEED Accredited Professionals in the US and has set a goal to have 100 percent of its managers accredited. Incorporating Building Information Modeling (BIM), Integrated Product Delivery (IPD) and lean construction methods, Rudolph and Sletten continues the company’s legacy of fine craftsmanship and superior customer service in every job it does. In 2006 construction began on the new 317room, 480,000-square-foot hospital building of Childrens Hospital Los Angeles. This facility, when completed, will not only feature mostly private rooms but also incorporate new inpatient and surgical suites, new neonatal and pediatric intensive care units, a new cancer center, a new family education center and a new conference center. The original project design started in 2003. Full-scale mock-ups of the PICU, NICU and acute
patient rooms were built using a variety of proposed finishes, such as floors, paneling, counters and bathrooms. A group consisting of patients, parents and caregivers provided valuable feedback, improving functionality and increasing comfort. Matt Bennett, senior project manager, states, “We spent three years in pre-construction. We constructed a building to house the patient room mock-ups near the hospital so the different user groups could walk through and see what the rooms were going to look like and how they would operate. The client allowed us the opportunity to incorporate early involvement from the key subcontractors throughout the planning and design phase, which assisted in meeting the schedule dates and the budget.” As with any project of this size, there were many challenges that had to be overcome. The State of California regulations related to the planning, design and construction of hospitals, as administered by the OSHPD, require rigorous attention to detail and construction execution. As Bennett explains, “OSHPD has very specific requirements for building a hospital. Continuous inspections including seismic and fire life safety requirements, adherence to applicable codes and standards while maintaining an efficient and productive jobsite were the most challenging aspect of constructing a hospital of this magnitude.” To meet these requirements, Childrens Hospital Los Angeles’ management, Rudolph and Sletten, and the owner’s representative, CLEO Construction Management, partnered with OSHPD early and throughout in the project by communicating the project’s plan for obtaining the necessary design approvals, agency reviews, construction inspection and acceptance and ultimately occupancy. Not only did the project face regulatory challenges; it also faced economic ones. “The project team
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through a collaborative effort overcame market conditions with double-digit escalation, delayed state funding, shortage of skilled tradesmen as well as furloughs from OSHPD. Bennett says, “This project was a total team effort. We all supported each other to ensure a win-win for everyone.” Proper planning can make the difference in the success or failure of any project. Rudolph and Sletten has incorporated into its business management style the philosophy of lean construction, a production management-based approach to project delivery, and it changes the way work is traditionally done through the delivery process. Lean construction takes the objectives of a lean production system—the application of processes to maximize value while minimizing waste—and applies them in the project delivery process. Lean construction began with the insight that regular project-type planning systems did not have the ability to produce a predictable work flow and that the project needed to be designed and managed by those responsible for getting the job done.
Bennett explains how lean construction was incorporated in this project. “We did a lot of prefabrication of systems. All the overhead plumbing was detailed and cut to fit in the shop and then brought out in a kit. All the seismic braces, pipe runs, custom headwalls and a lot of the electrical were prefabricated off-site. We worked very closely with the major contractors when we built the schedule.” The value of lean construction shows in the fact that the project is set to be finished this September, on time and on budget. Thomas A. Edison said, “Waste is worse than loss. The time is coming when every person who lays claim to ability will keep the question of waste before him constantly. The scope of thrift is limitless.” Good companies know that waste is worse than loss, and those companies try to incorporate plans and philosophies into their missions that facilitate responsible management and planning. Rudolph and Sletten is one of those companies that, by using innovation and trying new techniques, is keeping its business model the same: delivering the highestquality work, on schedule and within budget.
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Hunt Construction Group brings extensive ballpark and to the joint venture formed to oversee constructio Major League Baseball stadium. Keith Regan learns h technology and teamwork to ensure the team can p 86
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Hunt Construction Group: Florida Marlins Ballpark
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ver the past 66 years, Hunt Construction Group has gained experience bringing a variety of building projects to fruition. From casinos and correctional facilities to corporate offices and performing arts centers, Hunt’s experience is broad and varied. Among the specialties of the 675-employee firm—which ranks as the 26th-largest contractor in the country with $2.14 billion in annual revenue, according to Engineering News-Record—is building ballparks.
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Hunt Construction Group: Florida Marlins Ballpark
In fact, Hunt ranks as the number one contractor in the sports facilities field, with projects in its portfolio that include AT&T Park in San Francisco, Busch Stadium in St. Louis and Citizens Bank Ballpark in Philadelphia, along with stadiums for the National Football League and college teams. Hunt has helped build some 60 stadium projects since 1980. That experience is now being leveraged to help get the new Florida Marlins ballpark built in time for opening day of the 2012 Major League Baseball season. Even before bidding to win the role of construction manager on the $515 million project, Hunt forged a joint venture with Moss & Associates. “We always try to find a local partner in a city that knows the local flavor of the community, the best subs to seek bids from and the like,” says Pat Delano, construction manager with Hunt. “Whether it’s knowing the landscape or dealing with the different municipalities and jurisdictions, it’s always good to have someone with local knowledge. And in this case we found a partner that has the same philosophy, culture and mentality as our company.” Hunt not only brought stadium-building experience but also a past relationship with architects Populous Inc.—formerly known as HOK Sports. That has helped form the nucleus of what has become a strong team that works extremely well together, according to Delano. That teamwork has been especially important because the Marlins project is almost two projects in one, he adds. The ballpark will feature a retractable roof—designed to make it possible for games to be played through the monsoon-like rains that often come up out of nowhere on summer afternoons in southern Florida—and the supports and structure for that roof are actually being built and installed first. Now that this work is complete, Hunt can concentrate on the ballpark structure. “We basically have two critical paths that we’re following at once,” Delano says. “We’re going to be building the ballpark now that the retractable beams are up in the air, so sequencing to keep it all on schedule is critical. We’re constantly going over the schedule with the project owners and other representatives to ensure everyone’s on the same page as we go forward.” Technology helps keep things running smoothly, with three-dimensional building information modeling (BIM) systems used to design the project from start to finish. With a scheduling program
overlaid, the team can see the project as it will come together in the field and can spot conflicts and issues before they actually arise on the ground. “It helps minimize what has to be re-fabricated and redone, and that obviously helps with the scheduling aspect as well as with the budget.” In addition to embracing technology, the joint venture partners also share the same philosophy on safety and recently earned a South Florida Sunshine Safety Award from the University of South Florida. “It was great to get that early in the project, and it gives us a high standard to live up to for the rest of the work,” says Delano. When finished, the new ballpark—yet to be formally named—will feature 37,000 seats, making it one of the smaller ballparks in the league, including 50 suites, six of which will be set aside as party suites for daily rental. The west side of the stadium will feature a concourse area with restaurants and other amenities, and when opened, the roof will retract over that plaza to create shade from the subtropical sun. In addition to the three-panel retractable roof, the stadium will feature a sliding glass offering stunning views of the Miami skyline. The ballpark, which is going up on the site of the former Orange Bowl, will also feature a Marlins home run feature in the centerfield bleachers area and will be almost surrounded by parking garages—construction of which will begin before the ballpark is completed. The project is striving for Silver certification from the US Green Building Council’s LEED program. “The design team has submitted to USGBC, and we’ll do our part as the construction team,” says Delano. The construction team remains confident it can meet its schedule and have the Marlins playing on their new diamond in 2012. “Right now if you go to a game, you can expect it to be very hot and you can expect a rain delay,” Delano says, noting that the retractable roof will enable the park to be air conditioned against the scorching heat. In the meantime, work continues to move forward on a number of fronts, and when issues arise, all the team has to do is ask around to find the right answer. “Among all the people on the team, we probably have experience on about 50 different stadium projects,” Delano notes. “Chances are that someone here has already encountered whatever situation we might run into along the way.” www. huntconstructiongroup.com
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L.F. Driscoll Co., LLC: Penn State Hershey Children’s Hospital
A new, child-friendly children’s hospital is being constructed by L.F. Driscoll Co. on the Penn State Milton S. Hershey Medical Center campus, David Hendricks learns
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hen Pennsylvania State University decided to build a new children’s hospital at its medical campus in Hershey, they chose L.F. Driscoll Co., LLC, the largest construction company in the Philadelphia region, based in the suburb of Bala Cynwyd. Founded by Leon F. Driscoll in 1929, the company built its reputation through hard work and prospered in the years after the Second World War, when Driscoll was joined by his son Edward, who had returned from service in the US Navy. During the 1950s and 1960s, the company landed several large-scale projects in the Philadelphia area and beyond, acting as both general contractor and construction manager. It wasn’t long before L.F. Driscoll was also taking on projects in New Jersey, Delaware and Maryland. Today L.F. Driscoll offers its clients pre-construction services, which normally entail acting as a consultant early on, at the beginning of the design stage of a project, advising the owner and architect on construction issues such as the availability of experienced construction labor, the ability of the local construction industry to handle particular construction techniques, and the cost and availability of building materials. Cost estimates are prepared at several phases of the design process, and advice is offered on alternative design approaches and building systems. A delivery schedule is prepared, working with the owner and architect to provide detailed schedules of the design, procurement, construction and move-in phases of the project. Then as the project progresses, the schedule is monitored, looking ahead for potential roadblocks that might delay project completion and developing solutions to any problems that may arise. The work is packaged in order to eliminate overlaps between trade contracts. When the project nears the procurement stage, L.F. Driscoll management advises on the list of acceptable bidders, then it markets the project to the local construction trades, receiving and evaluating the bids from subcontractors, then recommending contract awards to the owner. L.F. Driscoll also offers construction management-at-risk services for the healthcare, higher education, hotel, cultural and sports, commercial and residential markets. Essentially, construction management-at-risk is a delivery method that entails a commitment by the construction manager to deliver the project for a guaranteed maximum price. The construction manager acts as consultant to the owner in the pre-construction phase but behaves as a general contractor during the construction phase.
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L.F. Driscoll Co., LLC: Penn State Hershey Children’s Hospital
“While the care provided within the current building has earned national recognition, the facilities were originally designed for adult patients rather than children and their families” In 2009 L.F. Driscoll merged with the Structure Tone organization, a New York–based firm that develops commercial, industrial and institutional properties for clients. Established in 1971 and active today in the US, the UK and Asia, Structure Tone provides pre-construction, general contracting, construction management and project management services for building construction, interior fit-outs and renovations, and infrastructure upgrades. Besides L.F. Driscoll, affiliates include construction management and services firms Constructors & Associates in Texas, Pavarini Construction in Florida and Connecticut, and New York’s Pavarini McGovern. In the Philadelphia area, some of L.F. Driscoll’s major projects include the Comcast Center, Liberty One, Thomas Jefferson University Hospital, the Children’s Hospital of Philadelphia, the Residences at the Ritz-Carlton, the Wachovia Center, Citizens Bank Park, and the Kimmel Center for the Performing Arts. Currently under construction are projects for the Academy of Music, the Hospital of the University of Pennsylvania, Marriott’s Fairway Villas at Seaview, the Philadelphia Museum of Art, and of course Penn State Hershey Children’s Hospital. Up to now, what’s known as the Children’s Hospital has been occupying the seventh floor of the Penn State Hershey Medical Center. While the care provided within the current building has earned national recognition, the facilities were originally designed for adult patients rather than children and their families. Unfortunately, many of the existing patient rooms do not accommodate parents who wish to stay overnight with their children. Areas such as the Pediatric Intensive Care Unit have become cramped, offering minimal privacy and no room for growth of services. The Children’s Hospital will be a $207 million, 252,000-square-foot structure, consisting of five levels above ground (floors one through five) and one level below grade (called “ground floor”). There will also be three additional floors on top for future expansion. The new building will be located to the east of the main medical center, adjacent to the center’s main entrance, and south of the cancer facility.
L.F. Driscoll is performing the construction management role for the project, and Payette and Associates, the Boston-based architectural firm that designed the new Penn State Hershey Cancer Institute facility, created the designs for the new Children’s Hospital with a meditation room, an outdoor roof terrace, a performance space in the atrium, secret gardens, teen lounges and play spaces on each floor, and an interactive learning wall. The design is child-friendly, with a look and feel appropriate for young patients and their families. The ground floor of the new facility will include a new pediatric radiology unit as well as a blood bank and pharmacy. The first floor will include an outpatient pediatric cancer pavilion with 11 infusion rooms and eight exam rooms to support bone marrow transplants and other therapies vital to treating children with cancer. The first floor also contains educational resource centers for families, including a “safety store” and areas for families to learn about childhood illnesses, health and wellness. The second floor will include five operating suites designed for surgical care of children and adolescents, an eight-bed surgical recovery area, a cardiac catheterization lab for pediatric heart patients, and expanded space for pediatric intensive care—vital infrastructure to support the region’s only Level 1 pediatric trauma center. All inpatient rooms, which are located on the third and fourth floors, will be private rooms and include space for parents to spend the night with their children. The construction scope of the project includes new and relocated site utilities, excavation, piles and foundations, structural steel framing, exterior envelope and interior finishes, elevators, plus mechanical, electrical, plumbing, fire protection and low-voltage systems. It includes expanding the nearby parking garage to provide 935 spaces through a four-level addition to the existing garage. Key subcontractors working on this project include Rado Enterprises, Inc. (mechanical); Macri Concrete, Inc. (concrete); Howard Organization, Inc. (electrical); Cives Corporation (structural steel); and Component Assembly Systems (sheet rock). Construction of the new hospital is expected to be completed in 2012. www.lfdriscoll.com
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Adifferen specof
April Terreri learns a few s Shepard Development Corporat not to build on spec, but to have to occupy new offi 94
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secrets about the success of tion, including its philosophy e value-added tenants ready fice and commercial buildings
Shepard Development Corporation
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or Shepard Development Corporation, slow and steady is how the company is winning against the threatening economy. The company is currently involved in three major development and construction projects in Calgary—despite the downturn. “Our growth is very carefully planned, so the buildings we develop and construct are never left with space that hasn’t been leased,” explains Christie Simpson, vice president of the Calgary-based company. The reason for this is that Shepard will build nothing on spec; its business philosophy is to have valueadded tenants ready to occupy buildings ready for occupancy. “We believe in strong covenant tenants who will bring value to the properties we develop.” For over 67 years the Simpson family has been providing development and construction services to businesses in the province of Alberta through the CANA Group of Companies, comprising Shepard Development Corporation, CANA Construction and ACE Construction Company Ltd. Over the past 46 years the Simpson family has owned and managed CANA. One major project Shepard is currently developing is the Shepard Regional Centre at the intersection of Deerfoot Trail and 130th Avenue in Calgary. “This is a retail power center of over 1 million square feet of retail development,” reports Simpson. The project sits on a parcel of 280 acres, which Shepard had owned for quite some time. “We began developing this center in 1996, so it has taken us over 15 years to build, but it has been done in a way that made sense for the area and for the retailers in Calgary, as it grew along with the population of the trade area.” The center opened incrementally since 1996, and Simpson expects it to be fully completed by Christmas 2011. “We approached this project recognizing that this was going to be a long-term development plan and knowing that you cannot build over 1 million square feet of retail space in just a matter of a few years,” explains Simpson. “This project has been a major success for us because the space continued to be occupied immediately upon completion.” It’s an outdoor mall with big-box powerhouse tenants like SuperStore, Canadian Tire, Safeway, Home Depot and Lowe’s. “We received land-use approval for this project in the late 1980s because of its importance to the area as a major
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Shepard Development Corporation
Falco Electrical Systems At Falco Electrical Systems we have not focused our efforts on any one facet of the electrical construction industry, but have concentrated on our strengths which include design build and construction management projects. This, together with competitive open market tendering to keep up to date with industry trends, means our clients receive the very best value possible in this ever-evolving market.
commercial and employment node for southeast Calgary,” reports Simpson. “This is now the primary shopping area for the region.” One of the challenges was laying out the development so that it interfaces seamlessly with the city, notes Simpson. “We worked with the city on a number of things including extending 130th Avenue, which is a major thoroughfare in Calgary. We did this to help build a relationship with the city and to ensure traffic in the area was able to move smoothly. We also worked with the city in the late 1970s to plan for an interchange at Deerfoot Trail that would provide direct access into the center. This access has been a huge factor in the success of the center.” Another success relative to this project is the fact that Lowe’s Canada will open one of its first stores in western Canada at the center. “Lowe’s is currently under construction now on a 14-acre parcel of land,” Simpson says. “This was a huge accomplishment for us in getting such a notable retailer with no presence in western Canada prior to this.” The second of Shepard’s major projects is a 30acre suburban office campus located within the Shepard Regional Centre. “This campus will have direct access to a light rail transit station,” notes Simpson. The project will offer 850,000 square feet of office space once completed. Construction is pending, awaiting a major tenant to finalize contracts. “We’re ready to begin construction once we have a tenant.” Plans call for about nine office buildings and a hotel. Jacksonport Industrial Park is Shepard’s third major project. Construction is expected to begin sometime this year. “This industrial park is located in the northeast part of the city adjacent to the Calgary International Airport,” reports Simpson, who hopes that the proximity to the airport will help
draw light industries related to the aviation industry. The project sits on a 160-acre parcel, with 100 acres of developable land for light industrial companies and 10 acres of retail development opportunities for establishments like restaurants and coffee shops to serve the employees within the industrial park. “We’re in the initial phases of servicing the parcel with infrastructure facilities like water and sewer,” says Simpson. She adds that Calgary’s location lends itself to attract many distribution companies and warehousing facilities to locate there. “Calgary has grown to become a large distribution center for western Canada because of its proximity to major consumer markets.” The first tenants are expected to take occupancy in 2012. Simpson notes that Shepard has been active in providing commercial, retail and industrial construction to the surrounding region for decades. “As a very small Calgary firm, we’ve been able to successfully deliver one of the largest power centers in Shepard Regional Centre,” she says. “We’ve been able to kickstart this project from the ground up, despite being a small firm. This is primarily because of our values of not pushing the development past its capabilities. One of our biggest assets is our in-house construction capability through CANA Construction. This allows us to have the ability to control construction costs while building this many buildings, which are typically not built by a developer’s contractor. It also comes from our upfront dealing with our vendors and purchasers.” CANA Group has been recognized for its reliability for eight consecutive years and is one of Canada’s 50 Best-Managed Companies. CANA’s versatility allows its companies to provide services under stipulated lump-sum contracts, fixed-fee contracts, design-build services and project management services. Since 1969 it has completed over $2 billion of construction management projects. “Our firm-but-fair approach has earned numerous repeat clients and has helped build strong relationships with our design partners and sub-trade partners,” Simpson says. She reports that the majority of CANA’s senior management team has over 30 years’ experience in the construction industry. The group’s Canadian Construction Association Gold Seal certification recognizes the team’s experience and educational achievements in construction. www.cana.ca
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f it had waited long enough, the US construction giant Fluor would have been able to do the business it wanted to do directly with Pemex ((Petróleos Mexicanos), the national oil and gas company of Mexico. Since the introduction of the North American Free Trade Agreement (NAFTA) the market has been opened, but 17 years ago that wasn’t the case. Any company wishing to do business with Pemex had to have a Mexican base. It’s not clear whether the joint venture that Fluor entered into with the leading Mexican construction company ICA (pronounced Ee-ka) was intended to be purely for the duration of the first construction project or not, but 17 years later it’s still going strong. By the same token, Pemex remains the single largest client that ICA Fluor services. At the latest count, 80 percent of the order book was from Pemex. In March of this year the joint venture was awarded a half share of a $622 million engineering, procurement and construction (EPC) contract for two low-sulfur gasoline projects as part of Pemex’s clean fuel program. ICA Fluor will erect and commission catalytic gasoline desulfurization plants and amine regeneration units as well as the associated utilities and offsite facilities, and then integrate them with the existing Gral. Lázaro Cárdenas del Rio Refinery in Minatitlan, Veracruz, and the Antonio Dovali Jaime Refinery located in
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It’s difficult enough for any business to stay intact in the hig competitive construction busines so when a joint venture lasts for years, it’s an achievement worth noting, as Jeff Daniel reports
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ICA Fluor Daniel, S. de R.L. de C.V.
Salina Cruz, Oaxaca. Both refinery projects are rated at 25,000 barrels per day, and the work is scheduled for completion in mid-2013. Of course, the danger of becoming too reliant on one source of work is that you are at the vagaries of both the economy and politics. Not surprisingly, then, things have been somewhat slow in the petroleum business, but there are now signs that Pemex is returning to higher levels of
activity. As well as increasing local production and refinery capacity, there is an acknowledgment that fuels need to be cleaner—hence the investments mentioned above. But there is a wider problem of declining oil reserves and how best to boost domestic oil production. Whether or not BP’s troubles in the Gulf of Mexico will cause some rethinking remains to be seen, but Mexico has started to
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ICA Fluor Daniel, S. de R.L. de C.V.
Cooper Crouse-Hinds Cooper Crouse-Hinds integrates a comprehensive line of electrical and instrumentation products with expert support, industry insights and local availability to improve safety and productivity in the most demanding industrial and commercial environments worldwide. Cooper Crouse-Hinds manufactures over 100,000 products, including conduit and cable fittings; enclosures; plugs and receptacles; industrial lighting fixtures; signals and alarms; controls and electrical apparatus; commercial outlet boxes; and protection equipment for process control branded MTL Instruments Group.
EagleBurgmann Mexico EagleBurgmann Mexico has partnered with ICA to provide mechanical seals and supply systems for oil & gas extraction and related water projects, with the petrochemical industry on cryogenic plant projects and on clean fuel projects for refineries. EagleBurgmann provides a range of sealing solutions for the chemical, power, mining, food & beverage, and pulp & paper industries including dry gas seals, expansion joints, packings and gaskets.
and load-out of the wellhead recovery structures. The new offshore platforms are connected to the existing Akal production platforms. In the meantime, there are plenty of other Pemex projects in development to keep engineers and estimators busy. A cryogenic gas treatment plant is expected to be announced soon, and it is believed that extra refinery capacity is being planned through either upgrades or extensions. The work will attract plenty of overseas competition, but alongside ICA Fluor’s long track record in Mexico, the feeling is that its local base ought to ensure lower costs than any of the Spanish or US firms in the mix. Although the ICA Fluor joint venture was created with oil & gas in mind, it hasn’t felt restricted in searching out other types of construction projects. In fact, bearing in mind the cyclic nature of government contracts, such a move is little short of essential. A year or so ago, as much as 60 percent of sales were outside the oil & gas sector. When Thomson Multimedia—one of the world’s largest suppliers of large televisions—wanted to open a plant in Mexico, the $79 million contract to build the 4,000-units-per-day plant went to ICA Fluor. At the other end of the construction spectrum, the Canadian-listed Baja Mining Corp. engaged ICA Fluor to carry out capital cost estimates and a project construction schedule for a new copper-cobalt-zinc-manganese mining project located near Santa Rosalia, Baja California Sur. At the time, Baja president John Greenslade stated, “With the combined knowledge and
“ICA has forged permanent relationships with a number of French and Spanish firms with expertise in specialist areas with a view to carving a permanent niche in the market” look at deep-sea drilling. Should this proceed as anticipated, it will require expertise that is not locally available, but it could be a rich source of work for ICA Fluor. In fact, the joint venture is already involved in offshore drilling, having constructed two lightweight platforms for Pemex to drill in the Cantarell production field in the Gulf. In this instance, work was carried out in conjunction with its subsidiary Industria del Hierro and included procurement, construction, testing
efforts of this team, the project will continue to be developed in a responsible, sustainable and economic manner, ensuring that the best interests of all stakeholders and the community of Santa Rosalia continue to be served.” As commodity prices continue to improve, more and more mining activities in Mexico and neighboring countries are being taken out of mothballs and revitalized, creating EPC opportunities for ICA Fluor. In fact, it was Fluor’s in-house expertise in
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ICA Fluor Daniel, S. de R.L. de C.V.
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engineering, procurement and construction that ICA knew would complement its own construction capabilities. ICA is Mexico’s largest construction company, with interests in civil and industrial construction as well as infrastructure and housing. Since its establishment in 1947, it has contributed to much of Mexico’s fabric, with clients in both the private and public sectors. In the last financial year, ICA had sales of Ps30 billion and an operating income of Ps2.4 billion— both up by a third on the previous year. Over its history, ICA has been involved with some of the major projects its neighbors have carried out. One of the most recent is a contract worth approximately US$270 million, awarded to a consortium of which ICA is part, to construct a three-kilometer section of the new Pacific Access Channel on the Panama Canal. This work, which began in 2007, is part of the overall project to widen the waterway in order to increase the capacity of the canal by adding a third set of locks, thus enabling larger vessels into what is one of the world’s most important shipping conduits. The consortium has to excavate approximately 25 million cubic meters of material, construct a 2.8km dam between the existing channel and the new channel, as well as a 1.8-km cellular cofferdam. To make the work more interesting, it will have to clear unexploded ordnance areas, as well as the more routine work of soil injections and treatments. The arrangement ICA has with Fluor has been so positive that it has become a model copied several times over. ICA has forged permanent relationships with a number of French and Spanish firms with expertise in specialist areas—geotechnical and
environmental services, for example—with a view to carving a permanent niche in the market. On other occasions, ICA has readily entered projectbased partnerships where the degree of specialist knowledge was beyond its scope. The partnership between Fluor and ICA gave Fluor a Mexican base while providing its Mexican host with valuable engineering capabilities. In an era when marriages of all kinds are under strain, the joint venture has not only lasted but expanded and strengthened. It has worked hard to transfer skills to local employees. By providing training and continuous personal improvement, the operation functions well, with practically all of the 1,600 employees being Mexican citizens, and expatriates only being brought in on very rare occasions. During the economic downturn, ICA Fluor has put a lot of effort into not only reducing costs but remaining an attractive partner to clients by increasing its value-added contributions. By taking on extra roles it has been able to weather the storm while maintaining the core of the business intact. Apart from the obvious economic advantage of helping to stave off competitive activity by having a lower cost structure, there are other side benefits. ICA Fluor has gained a reputation among the engineering community as an employer of choice, ensuring a ready supply of recruits when the need arises. Even those employees who came and went have taken enhanvced skills to the wider national arena. The care it takes with employees is demonstrated in the safety record it has. In an industry in which accidents happen all too easily even under wellmanaged conditions, ICA’s incident rate is well
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ICA Fluor Daniel, S. de R.L. de C.V.
below the US average in both civil and industrial construction (virtually zero in the latter). In fact, in 2007 the cryogenic plants under its control amassed 1.2 million man-hours without disabling accidents. The durability of the ICA Fluor partnership has acquired a particular status all its own, and at cocktail parties it is often joked that ICA Fluor has lasted longer than many marriages. But the lessons learned and trust between all parties have served the joint venture well and put it in a strong position to continue successfully for many more years. www.ica.com.mx
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San Francisco is the home of construction makeovers, and one contrac particular, GCI General Contractors, has taken it to a fine art, as Alan S 108
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GCI General Contractors
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nyone familiar with the geography of San Francisco will know that with water on three sides, there is precious little opportunity for new buildings to be erected. As such, the construction industry in the city itself is focused on renovation and refurbishment. In good times the process can be savage, with buildings being stripped to the bone and new exteriors and interiors built onto the core. But these are not good times, and building owners and tenants are keen to spend as little as possible while still giving their surroundings a face-lift.
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GCI General Contractors
In a sense, this suits the local firm of GCI General Contractors down to the ground. Almost by accident, it has carved a niche and a name for itself through the extent of its recycling and its ability to maximize the re-use of existing building elements and materials. “As long ago as 1999,” says company president James Jenkins, “GCI was recycling much of the material that was being taken out of redevelopment projects—long before the industry took notice of it in the quest to get LEED certification. These days we’re often hitting the 85-90 percent mark in recycling ceilings, doors, carpet, misc. metals and even sheetrock.” Back then, this emphasis on reusing material could have been influenced by the economics of the work the business was doing. Set up by Pete Goldsmith in 1992 with the support of his
wife, the couple worked for the first few years out of their home after Goldsmith left Dinwiddie Construction to go it alone. On one level, GCI was doing well with just a handful of staff overseeing $15-20 million of business. But Goldsmith knew that he needed help to move to the next stage just about the time that Jenkins was looking for a new opportunity. Jenkins had 15 years of experience working in commercial construction in San Francisco after returning to the US following a short career overseas with the oil company Schlumberger, and he was ready for a change. “We were introduced by a mutual associate,” says Jenkins, “and initially I thought that GCI was just too small to give me what I was looking for. But Pete is a very likeable and persuasive guy.” The persuasion was well justified. Since joining in 2001, the business was doubling in size every
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GCI General Contractors
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four years until the recession hit in 2008. Not surprisingly, the numbers have slipped back, but GCI is now an established force in San Francisco and the Bay Area. “It’s interesting how unexpected factors play into your hands,” says Jenkins. “First it was recycling and then the 2001 anthrax attacks occurred and caused panic when any white powder or residue was discovered. As you can imagine, there is plenty of white powder associated with construction work, but in that climate, project sites were being shut down regularly.” As it happens, GCI was using a HEPA filter-based air cleaning system to give workers a dust-free environment in which to work and to eliminate paint and glue smells for their clients prior to move-in. Not only did this keep its projects going, but when LEED brought the need for indoor air quality to the fore, once again GCI was already ahead of the pack. In fact, it’s now something of the go-to contractor for LEED certification projects—particularly when Gold or Platinum levels are being sought. When clients such as the Natural Resources Defense Council, the Environmental Defense Fund, The Wilderness Society and ClimateWorks Foundation are coming to you to manage their building construction, others take notice. Jenkins estimates that GCI is responsible for one-fifth of all LEED-CI interior projects in San Francisco. “LEED has become very trendy,” says Jenkins, “and there’s a lot of green-wash spoken by firms wanting to jump on the bandwagon. But knowledgeable clients are aware of this and hire GCI to help them reach their sustainability goals.” These days, Jenkins reckons that there is no price penalty to be paid for building to the basic LEED standards. “We do this automatically,” he says. “It’s only for the higher levels where
there is a premium, but even then the premium will eventually be paid for in improved building efficiency, lower operating costs, and improved employee productivity.” GCI recently renovated its own offices at a cost less than a standard tenant improvement budget and its offices were certified LEED-CI Gold in early 2010. In fact, GCI is often called in to act as consultants, helping architects and clients to achieve extra points toward certification without major cost impacts. GCI recently completed the local law offices of O’Melveny & Myers which is currently the largest law office in the country to achieve LEED-CI Gold certification. The ClimateWorks Foundation project was certified LEED-CI Platinum and received the highest LEED point total ever in California and the third highest in the world. Other pre-construction services include pre-lease feasibility studies, building surveys, and finding suitable premises based on criteria that potential tenants have set. With precious little hands-on work—and definitely no self-performance—GCI remains lean, with just project managers and field superintendents on the payroll. Even at its height, the company never had more than 55 staff members. Instead, it employs working principals who still roll their sleeves up and manage projects, project managers and assistants at the top of their game, and site superintendents who know what they want from subcontractors and how best to get it. By insisting on their own personal levels of satisfaction during construction, they can be pretty sure that during the handover walkthrough the possibility of defects that need attention is zero or mighty close to it. With this attention to detail, GCI has recently delivered over 250,000 square feet of office space with zero defects.
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Young Electric Company & Young Communications Young Electric Company provides the greater San Fran¬cisco Bay Area with professional service, partnering solutions, high safety standards, and competitive bids. Our resume includes educational facilities, bio-pharmaceutical plants, retail, office tenants, hospitals, theaters, high-tech, clean rooms, and high-end residential projects. Young Communications is a growing division of Young Electric that delivers first-rate professional services such as voice/data, a/v, security, nurse call and other low-voltage systems.
GCI is currently investing heavily in new building
information modeling (BIM) technology but Jenkins thinks it will be money well spent. “BIM has proved itself in designing and constructing new buildings, but there is nobody we know using this technology in the tenant improvement and interiors market. We see this as a way to continue to give us the edge we seek over the competition. The technology could lead us to find new ways to use materials more efficiently and to further minimize waste. In today’s climate, that could make all the difference.” GCI’s reputation is ensuring it gets opportunities to pitch for new work, but it’s still sometimes a battle getting clients to think beyond commodity to value added. “We try to convince them to go back to basics and put money into durable and reusable items and features rather than frivolities. It’s not always the message they want to hear, but we think it’s still the right one.” www.gci-sf.com
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Illinois River Energy yields, profitability chain and commodities the company won’t be
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Illinois River Energy, LLC
aying alive
y’s favorable cost structure, and management of supply s combine to guarantee that e going away anytime soon, Pam Derringer learns
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global investment firm focused on alternative energy has teamed up with a consortium of Illinois corn farmers seeking to expand demand for their crops. Together, London-based GTL Resources plc and the farmers have built an ethanol plant that is charting steady growth and earning a profit despite the widely fluctuating, notoriously fickle commodity corn market. After doubling plant capacity with an expansion in November 2008, five-year-old Illinois River Energy, LLC (IRE) boosted its ethanol and DDGS (dried distillers grains with solubles) production by more than 60 percent last year and its annual revenues by more than 50 percent, swapping last year’s $19 million loss for a $14.5 million profit on annual revenues of $216 million. Its fiscal year ended March 31. The plant expansion was a significant factor—but not the only one— contributing to the turnaround, according to general manager Neal Jakel. IRE’s success is no accident. True, the Rochelle, Illinois, plant sits on 81 acres in the heart of the best corn-growing region in the world, with an ample corn supply (300 million bushels annually) within 50 miles and a great trucking network, minimizing transportation costs.
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Illinois River Energy, LLC
But those advantages are shared by a lot of other ethanol plants, many of which closed in the last market downturn. What sets IRE apart, Jakel explains, is the deep industry knowledge base of its people, its astute risk management and operational excellence, a positive workplace culture, and its exploration of new technologies and opportunities. And, of course, a focus on both frugality and safety. “Dale Jackson, our commodity manager, has been buying and selling corn and animal feed products for more than 30 years and positioned us to weather the storm,” Jakel says. Jackson’s expertise and IRE’s risk management guidelines are key factors in helping the company optimize its corn supply levels and avoid getting overextended with longterm purchase contracts during a downturn. “We could be more aggressive, but we’d rather pocket a smaller profit than take a larger risk beyond our investors’ comfort level,” Jakel explains. IRE’s deep knowledge base also comes into play when it comes to production. The fermentation of corn sugars and starches is part art and part science, so the company’s veteran engineers meticulously document each step in its processes to maximize consistency, Jakel adds. Another critical driver is operational excellence, paying attention to a lot of little things to improve efficiency and yields, he says. The company is undergoing a unit-by-unit debugging effort with lots of little projects to address bottlenecks and boost yield and throughput. All those small savings add up. “It’s the quarter-cents savings that Illinois River Energy thrives on,” he says. Those quarter cents of increased efficiency or higher-value products each add to the bottom line. For example, IRE achieves higher yields, averaging 2.78 gallons of undenatured ethanol per bushel of corn compared with the industry average of 2.72 gallons per bushel. And it sells 20 percent of its product as distillers grains, which are exported to Asia and fetch a higher price than ethanol, Jakel says. By comparison, the industry average is 15 percent. Running a $200 million, highly mechanized plant 24/7, 350-plus days a year also requires a proactive maintenance program to minimize breakage and stoppages, which is another key priority at IRE. In addition, IRE’s 65-employee workforce receives extensive training, which
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empowers operators by teaching them problemsolving and decision-making skills, and showing them how key pieces of equipment work to deepen their understanding. The company is two months into a year-long program on skill development, all of which matters because a workforce of highly trained, motivated employees positions Illinois River Energy for growth, Jakel explains. A well-trained, proactive workforce also is critical because ethanol is just the beginning of IRE’s foray into alternative energy. “We don’t want to be a standard ethanol plant,” Jakel says. “We want to be making additional biomass products, with less emphasis on ethanol in the long term.” IRE already is working on several pilot projects with the University of Illinois and Prairie Gold Inc., including the extraction of zein protein from corn and corn oil from the kernel. These projects potentially have very high value and could substantially boost growth and revenues in the future, Jakel says. Safety is another key priority that is reinforced from the top down, Jakel says. If a manager sees a piece of trash, he picks it up as an example to others. IRE also reinforces safety and cleanliness with award dinners and cookouts, all of which drive home the message that safety depends on the actions of each employee and that safety matters, he adds. Logistically, IRE couldn’t have chosen a better location, with the corn that represents up to 75 percent of its costs coming from the surrounding four counties and all shipped in by truck, which
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Illinois River Energy, LLC Charm Sciences, Inc. Charm Sciences, Inc. congratulates Illinois River Energy, LLC., for being acknowledged as a business and technology leader in Business Excellence magazine. Charm Sciences is proud to be an integral partner to a bio-refining industry leader by providing reliable, state-of-the art diagnostics to monitor grain quality in the production of valueadded distillers grain products. We wish Illinois River Energy continued success!
is cheaper than rail. All the ethanol is trucked an hour east to Chicago, and the distillers grains are trucked to a facility three miles away, which loads them in containers and ships them to the West Coast for transport to Asia, Jakel says. Several challenges remain, however. First of all, rising ethanol prices have resulted in the reactivation of shuttered plants, increasing supply and decreasing profit margins. In addition, Jakel says, the EPA is working at cross-purposes on ethanol. On the one hand, the EPA caps ethanol
at 10 percent of US fuel supplies, but on the other hand, the EPA’s Renewable Fuel Standard (RFS) mandates the addition of 12.6 billion gallons of ethanol into the US fuel market this year. The problem is that 12.6 billion gallons is more than 10 percent of the fuel market. The way to solve this is for the EPA to increase the maximum ethanol percentage to 15 percent, Jakel explains. Whatever the EPA decides, the resulting political uncertainty won’t be a show-stopper for Illinois River Energy. “Some plants that are less profitable, less efficient and not as focused on operational efficiency won’t be able to compete at lower margins,” Jakel says. “But our cost structure, yields, profitability and management of supply chain and commodities is a huge differentiator for us and sharply lowers our costs. We will survive.” www.illinoisriverenergy.com
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Aesculap, Inc.
stmilestone the
With the principles of lean manufacturing guiding the way, Aesculap, Inc. has dramatically improved its ability to see how its business operations are performing in real time, with an eye toward reducing its reliance on costly and inefficient inventory stockpiles. Keith Regan learns how the provider of surgical kits and related medical equipment has achieved a first milestone on a long journey to excellence
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ny business has to deliver on its promises in order to thrive and survive. For Aesculap, Inc., the quality and on-time promises carry even higher stakes: they can often be a matter of life and death. Aesculap provides a range of services and products related to surgical procedures and other aspects of healthcare. It specializes in preparing surgical kits that are often used in conjunction with specialized equipment that hospitals, clinics and doctors offices rent from the company.
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In the past, Aesculap’s approach to ensuring it always had what was needed when it was needed was to overstock inventory, an approach that created inefficiencies and drove up costs for the Center Valley, Pennsylvania–based firm, according to vice president of operations Steve Burdorf.
the principles of lean to get buy-in and ownership from everyone so that this is a long-term win,” he adds. “We have made some gains in the short term, but the real prize is those long-term wins.” One of the challenges Aesculap faces is in its use of the national loaner pool of high-end medical
“Change can be the scariest thing in the world if you aren’t involved or don’t feel part of the process, or it can be one of the greatest things and very exciting when you feel you have control or a say in what is happening” “One of thing that stands out when we talk to Aesculap customers is the quality of product and quality of service delivery, and that can’t be compromised,” he says. “If you can’t provide that on the rapid movement of material, the only option is to stock more than you’ll need, to buy inventory and put it in locations so it doesn’t have to be moved around. That becomes a very expensive model when you’re dealing with medical equipment.” The approach not only had cost drawbacks but threatened quality over the long term as well. For instance, surgical kits begin to lose efficacy if they sit too long. To get to a point where the company is able to meet its customer demands in a real-time environment, Burdorf used the tools of lean and six sigma. In 2009 he brought a lean champion on board to help with the effort, which he says had to begin with the company gaining better visibility into its marketplace. Of course, the improvements had to come without any loss of service or quality. “We always had a commitment to never missing a surgery,” Burdorf says. “We’ve gone through a major internal change of moving from a push system to a pull system, and as we made those changes our commitment was to not miss a single surgery. Now we’re in a position where we can execute on having material flow much more quickly through the system.” Aesculap has made a conscious decision not to create a centralized lean department but to use its lean champion to instill the knowledge and principles in existing employees. “We’re using
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devices and specialty surgical or diagnostic equipment. That equipment needs not only to be moved around as needed but also to have time built in to have it checked by technicians to ensure it’s operating properly. “Being on time and complete is paramount to us maintaining the national competitive advantage we have built for ourselves,” Burdorf states. Aesculap is currently relying on its ERP system to give it the visibility into performance and customer demands it needs to move products in a timely manner. Investments in an automated sales reporting system are being considered to reduce reliance on manual tracking of machinery and materials. As with other aspects of the lean push, the company has been careful to make it clear to employees what the final goal is. “Most people think lean means cutting people and staff, and we emphasized from day one that lean is all about cutting the waste. The waste in our case is the wait time, and that’s been our focus all along. Change can be the scariest thing in the world if you aren’t involved or don’t feel part of the process, or it can be one of the greatest things and very exciting when you feel you have control or a say in what is happening. We definitely went through an ebb and flow and highs and lows like any company, but we established trust and focused on small wins along the way, and employees are seeing the results of their own efforts.” The first major milestone was reached when Aesculap achieved improved flow of equipment in the field, dramatically improved visibility into where equipment is and when and where it will
Aesculap, Inc.
ARCO ARCO’s unique design/build process allows clients to understand total project cost long before any dollars are spent. Specializing in the design and construction of office buildings, warehouse/distribution centers, cold storage facilities, data centers, bio-science laboratories and research facilities, retail centers, multi-family buildings, and healthcare facilities on a local and national basis, ARCO aims to meet and exceed client expectations.
be needed next; this boosted confidence in the sales force and among customers that the new just-in-time approach could work. “We have really
worked hard to make this work cross-functionally. It’s not just operations; it’s sales and marketing and getting everyone very involved. We’ve had to change the mindset that the equipment is not your friend if you hold onto it—it’s your friend if you get rid of it so that others can use it. We can’t yet say we’re best in class—that’s a long-term goal—but we’re definitely at the point where we can say that’s where we’re headed and where will be when we hit all our targets.” The new approach will lay the groundwork for growth the company is expecting to see in coming years as demographic trends and other factors increase demand for its products and services. “With the growth we potentially see, the old model would have become cost-prohibitive to maintain.” Burdorf concludes, “This really is only a milestone at this point. We have a long way to go in our journey.” www.aesculapusa.com
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C
Can
David Hendricks dons h to the EVP of Bee-Clea contract cleaner that to a wide rang
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Bee-Clean Building Maintenance
Cleaning
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his cleanest overalls to talk an Building Maintenance, a provides cleaning services ge of clients across Canada
M
ark Andrews, executive vice president of BeeClean Building Maintenance, is talking about the company, begun in Canada’s centennial year (1967) by Jose Correia and Brian Gingras, and today with 21 locations in seven provinces. “We’re likely the largest privately owned national contract cleaner in Canada with over 9,000 employees, and obviously we’re successful for a lot of reasons, but I have to give the most credit to our company-wide commitment to excellence for driving customer satisfaction, and that satisfaction has in turn directly fueled our growth,” he says. The company services office tower properties, healthcare facilities, shopping malls, entertainment venues, high-security complexes, educational facilities, heavy industry, hospitality and transportation. “We also work for all levels of government, including federal corrections facilities and law enforcement.” The company cleans more than 200 million square feet daily.
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Bee-Clean Building Maintenance
Busy-Bee Sanitary Supplies
Wesclean
Busy-Bee Sanitary Supplies has been a proud
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able to meet their distribution needs with unique
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Every Bee-Clean branch office is fully equipped to handle any of those market segments. “That’s one of the many big and small elements that set us apart from our competitors,” Andrews says. “We maintain infrastructure in support of our accounts, so where some contract cleaners might use the customer’s facility as the base of its operation and not have any resources other than those on that site, we’ll have a nearby fully equipped branch that supports the routine service with things like truck-mounted steam cleaners, pressure-washing units, spares for auto scrubbers and floor-care equipment; you name it. As you can imagine, this corporate focus on capability and capacity is critical to being able to guarantee meeting unplanned contingency needs and provide uninterrupted routine services.” Andrews says that disaster services are an essential aspect of the business. “Things like
flood and fire service are common offerings in our industry, but maybe the most notable example of how far our people go in their commitment to service was the outstanding work our staff at Ottawa International Airport did in providing service to travelers affected by the Air France crash in 2007, resulting in the Pinnacle Exceptional Service award from the Building Owners and Managers Association [BOMA] being presented to our Ottawa branch. Our people shifted from cleaning to caring for stranded passengers and their personal needs seamlessly, and that kind of effective front-line action comes from staff who have years of service and are empowered to confidently act in the best interests of BeeClean’s customers.” There’s a priority commitment at the branch operations level to training staff in performance and customer service along with the job-specific
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Bee-Clean Building Maintenance
“Our simple and successful approach has been to concentrate on being a great cleaning company and not let distractions cause us to dilute our offering by trying to compete too far outside our customers’ needs” technical skills a cleaner needs. “This week we have six people training on one of our supplier’s lines, Tennant equipment, and we’re doing that so we can maintain our equipment professionally,” Andrews says. “Beyond our internal need for equipment maintenance capability, we have some accounts where we deliver these services for customer-owned equipment on a fee basis. For the majority of our accounts, though, where we own the machinery, we believe that professionally trained maintenance personnel add value to the provision of cleaning labor services, by ensuring that equipment maintenance failures don’t cause gaps in service. Another of the many distinctions between us and other service providers is how effectively we manage this and all other aspects of our supply chain to ensure that shortages don’t occur, and that the right products for each job are in place.” The vast proportion of what the company does, though, is people-centered, and it’s the people who make up Bee-Clean who have built and continue to foster the highest level of customer loyalty in the industry. The whole staff, from the top down, is supported and encouraged with professional development opportunities, training, processes and systems in an organized approach to quality improvement, not just quality assurance. “People try to turn contract cleaning into a commodity,” Andrews explains, “but we learned a long time ago that cleaning is the opposite of that. It’s unique for each facility because our clients are inviting our cleaners into their personal
space; they’re entrusting us with the keys. They’re depending on the janitor to answer the challenge of routine cleaning along with many unpredictable issues. Last year infection control took center stage, with the H1N1 pandemic causing concern and a need to reassure public facilities that effective cross-contamination protocols and disaster plans were in place.” Andrews says that the best people in the cleaning industry come to Bee-Clean and stay for the long term. “Being known for how well we treat our employees and how consistently low our turnover is has been a key reason we’ve retained our clients as we grow. Our staff is very much valued in the facilities they’re assigned to, in large part because the faces aren’t changing all the time. Customers feel comfortable and secure with us in their space because they know we have up-to-date security clearances for all our workers and that we pay our people well, treat them well and retain them more effectively than our competitors.” Bee-Clean also provides many added-value services, such as snow removal and landscaping. “We’ll try to help with anything our customer asks us to do,” says Andrews, “either directly self-performed or by assisting with service sourcing. But what we’re known for is delivering high-quality cleaning services. Our simple and successful approach has been to concentrate on being a great cleaning company and not let distractions cause us to dilute our offering by trying to compete too far outside our customers’
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needs or, even worse, accidentally compete with our customers for facility management service contracts. This is essentially why our growth strategy is to leverage our core competencies and allow our customers to take a hand in defining our evolution rather than aggressively play the acquisition game and move in the direction of an integrated service model, for example. “Having said that, though,” he continues, “we have recently ventured into the accommodations service space by providing housekeeping laundry and building maintenance to the 2,500-member security force deployed to the 2010 Olympics in Whistler. We were chosen because of our reputation for being able to deliver highsecurity cleared staff in a challenging, tightly scheduled environment where thorough and accurate communications were essential. Our customers have been our most effective business development driver, so who knows what the future holds? If they ask, we’ll deliver.” Andrews believes that Bee-Clean’s culture is different. “It starts with the people at the top living it and consistently demonstrating it. From the beginning, the people who pay the bills for all of us have maintained an attitude of being approachable. I can’t give them enough credit for establishing such a positive work environment and supporting it by recognizing the people that treat their customers the way they want to be treated. They go the extra mile for long-serving employees and sincerely enjoy celebrating employee long-service milestones. They’re called on for employee-recognition events a lot because we have the highest ratio in our industry of folks who have served between five and 30 years, which speaks volumes about what kind of family business they’ve built.” Andrews says that Bee-Clean hasn’t bought growth as much as it has earned it. “Our new business often comes from our existing customers; they’re our greatest resource. Whether by their expanding needs or their word-of-mouth reference, they consistently generate or help us capture opportunity. Every year we’re looking at expansion, but our technique for developing regional infrastructure is a bit of a moving target. It’s based largely on how much business volume we have in an area and what expense we have in servicing that territory, with these two being the most important influences on the decision
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Bee-Clean Building Maintenance
“Where some contract cleaners might use the customer’s facility as the base of its operation, we’ll have a nearby fully equipped branch with truck-mounted steam cleaners, pressurewashing units, spares for auto scrubbers and floor-care equipment; you name it” to establish a bricks-and-mortar branch. That’s another differentiator: our ability to assess and make sense of regional business performance when we’re building organically.” What keeps Andrews engaged is how much commitment his workers show in the pursuit of personal success with Bee-Clean as their chosen vehicle. “I feel honored to call so many
my friends,” he says, “especially the ones I’ve worked with longest over my 18 years with the company, as well as those who know me well, who constantly challenge me to make sure that they and all the front-liners are being considered in all the important decisions that hopefully bring success and stability for all of us long into the future.” www.bee-clean.com
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Goo
listen T
he western Canadian city of Calgary, Alberta, has long recognized the value of extending its growing light rail transit (LRT) system to the west side of the metropolis, which in the past decade has grown by leaps and bounds as nearby oil sands projects have helped boost the economy. An initial functional study of the idea of extending light rail to the western fringe of the city was completed some 27 years ago, only to sit on a shelf for some time.
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Calgary’s West LRT pro major milestones for th of Alberta. Keith Regan through an extensive p to make for a smoothe
Calgary’s West LRT line
od
ners
oject represents a number of firsts and other he western Canadian city and the province n learns how the project’s intentional detour public interaction and feedback process is helping er ride now that construction is well under way
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Calgary’s West LRT line
Stuart Olson Dominion The Stuart Olson Dominion difference is simple... it all comes down to people. Employing the most talented people in the industry, our focus on every project is relationships. Through construction management, we provide optimal project time lines and maximum value on every project, earning us an industry-wide reputation for excellence. To us, success is founded on a holistic, teambased approach to construction that brings clients, contractors and consultants together as collaborative partners. The result? Successful, community driven projects like the West Calgary High School and the West LRT Parkade - both integral parts of the West LRT expansion.
But in 2006 the project was revived as part of a larger effort to engage the Calgary community on issues of land use. What ensued was a large-scale effort to gather public input around station design and urban design. By mid-2008 the City Council had approved a revised alignment incorporating citizens’ suggestions. At the same time, the Council adopted the public engagement plan, a first for the city, according to Christian Cormier, communications coordinator for the project. “We had more than 120 public meetings with the community,” Cormier says. “This is a line that is being built for the communities it will serve, so we wanted those communities to take ownership and have a say in how the stations and the line itself integrated with the community.” As a result of the public feedback, the 8-kilometer extension was designed to feature the city’s first elevated LRT guideway and station, Sunalta Station, which will have the added benefit of knitting back together two neighborhoods cut off by a major road with the connection to a pedestrian bridge. “That’s a perfect example of how the public engagement process enabled us to make a better project,” says Cormier. Another project highlight includes the first underground station. The project is also the first new LRT line in Calgary in more than two decades and the largest infrastructure project in the city’s history.
The line’s six new stations will feature a common architectural language, which Cormier described as Chinook arch, though each station will also feature a unique design reflecting the input of the community it will serve. “Our mission was to strike that balance,” he says. “We wanted to get that local input because citizens know their communities best. But we also needed to have a consistency along the line, and we worked hard to bring everyone together on the final station and urban designs.” Beyond the LRT line itself, the public had a major hand in helping to shape the future development of the catchment area. For instance, in the area near the Westbrook station, where an existing mall and extensive prime land sits, the public helped shape a planned transit-oriented development (TOD) that will include a mix of residential and retail uses. “We’ve always been a forward-looking city in terms of land use and development issues, and these are more examples of how we can stay on that cutting edge,” Cormier says. The LRT line will be used mainly by commuters into the booming downtown business district from the fast-growing suburbs to the west, as well as by a recreational center, a community college and a new high school that is also being built. The public engagement process helped create a foundation for the ongoing communication that is necessary to make the project run smoothly. Traffic disruptions are unavoidable, particularly as two major access roads to downtown Calgary are within the construction zone. The project team uses an interactive website, email alerts and the local media to keep commuters and residents updated on changes and progress. “There is a lot of coordination that has to happen on the ground to make sure things run smoothly, and the team we have in place is going a great job of making sure that stakeholders are kept informed in a timely manner,” Cormier says. The project was put out to bid at a favorable time, in mid-2009. Some of the budget savings reaped so far have been plowed back into the project. For instance, a third wing that was not in the original budget has been added to the new high school being built to replace an existing school that needed to be moved to make way for the TOD site at Westbrook. Work is progressing on schedule as well. The City of Calgary embraced a design-build approach to
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help move the project forward more quickly, with a joint venture consortium led by SNC-Lavalin along with Graham Infrastructure, CANA and ENMAX securing the design-build contract. Major utility relocation and roadworks construction will likely be wrapped up next year, and current plans call for the line to begin revenue service in December 2012. “When you look at the project from start to finish, including the engagement process, we will have finished the project within five years, and that includes more than a full year of public engagement,” says Cormier. Once it is up and running, the LRT line will get its power from wind—all of the Calgary LRT’s power comes from that source. “That’s just one of our green initiatives that help the City of Calgary reduce its carbon footprint,” says Cormier. “Calgary has seen substantial growth on its west side,” he adds. “In the next decade or so there will be more and more people on that fringe of the city. And the West LRT line will offer them a safe, reliable, fast and clean transportation option.”
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Calgary’s West LRT line
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Sunterra Meats
Sunterra Meats produces pork and other meat products for markets as far flung as Australia and Japan, where standards for quality and food safety are as demanding as anywhere in the world. Keith Regan learns how the company focuses on delivering quality from farm gate to dinner plate
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he family behind Sunterra Meats has three generations of experience in the food industry and leverages all that history as well as the latest technological advances in livestock genetics, care and handling to produce top-quality pork and other products for demanding customers around the world from two facilities in Canada’s province of Alberta. “Whether it’s our own product or product we take in from contract finishers, we know we have a product that is second to none in terms of genetics, feed programs, herd health and our overall method for sourcing and production,” says Richard Johnson, general manager at the Trochu, Sunterra plant, where as many as 3,000 head of pork are processed weekly. Livestock are treated as humanely as possible, with the plant using a CO2 gas stunning method that renders the animals unconscious instantly. This method causes animals the least amount of stress possible, which results in a better finished product, with better moisture, better meat color and better shelf life.
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Sunterra Meats
Hawk Custom Sheet Metal Ltd We can and do provide our customers, like Sunterra, a wide range of fabrication capabilities and on-site installation. With our precision CNC punch, laser and 8-axis press brakes we produce high quality parts with fast turnaround times. We are also specialists in TIG and MIG welding of stainless steel, aluminum and mild steel.
The plant also uses a skinless processing approach rather than the more common scalding process. “Using the skinless method aids us in the shelf life we are able to offer,” Johnson notes. Customers in Japan receive a shelf life of at least 30 days on fresh-chilled, never-frozen pork, which is shipped by truck from the plant to Vancouver and then taken by ship to Japan. Some 70 percent of Sunterra pork ends up on store shelves or in restaurants in Japan, a reflection of some longstanding relationships the company put in place some 18 years ago. “Those customers have grown along with us in that market,” Johnson says. “We’ve been able to keep them with us, and they’ve grown with us and we with them.” With close to 40 years in the meat processing business and a stint as an educator, Johnson says he has always maintained high personal standards for meat quality, safety and cleanliness. “I thought of myself as a very fussy, discerning type of consumer, and that’s the way I taught others it should be,” he says. “But when I came on board with Sunterra I found a whole new level of demanding and discerning, particularly in relation to the Japanese clients. They are definitely the most discerning in the world, and to be able to earn their trust and their business and maintain it over the long run is a process that never stops.” That process of maintaining excellence starts with keeping operations at a manageable size. The plant turns out as much finished pork in a week as some large-scale facilities produce in a morning. Producing a higher-end product means “our attention to detail just has to be there at every step along the way, and for the most part we’ve been able to do that, but we also know that gaps are always closing, and competition continues to be a driving force to push us to do better,” says Johnson. Sunterra employs about 100 people at each of its two facilities and has been forced to deal with local labor shortage issues in the past, particularly during the peak years of western
Canada’s oil sands boom. While the economy has cooled recently, the plant has also expanded its labor base, developing a robust program to bring foreign workers into the country. Many stay long-term and bring families to live in the rural prairie town of Trochu—giving it the distinction of being one of the few such rural towns with positive population growth. “Both the federal and provincial governments have strict rules for what workers can be brought in, and we have standards that exceed those,” Johnson says. “We have a very successful system in place for bringing in foreign workers,” with some bringing meat-industry experience along with them. As those workers and others are trained, a heavy emphasis is placed on safety, with the company having experienced a complete turnaround in that area. Using an outside coordinator to operate an ongoing program of awareness and recognition of the importance of safety, Sunterra has also found financial gain. “There was a time when safety was not top of mind,” Johnson says. “Over the past few years we’ve gone from having our safety record be a drag on the company to being in an industry leadership position. We came from where we were paying the highest insurance premiums and surcharges we could pay to now, where we’re in a rebate situation with our insurer thanks to our safety program.” Looking ahead, Johnson says that even though Sunterra’s sister company, Sunterra Meats Innisfail, produces specialty meats such as beef, bison and lamb under the “Canada’s Freshest” brand, pork will continue to be the bread and butter at the Trochu plant. A growing niche is being enjoyed in wild boar, which is in demand in specialty meat shops in Canada and the US. New opportunities may also open up in overseas markets, such as Australia and New Zealand. Sunterra Trochu will also pursue EU certification, something the Innisfail plant—Canada’s largest federally inspected lamb processing plant and part of the Sunterra family since 2003—already has in place. “The mission for us is to continue to focus on our core values of honesty and integrity and the highest possible quality and best service,” Johnson says. “We have to keep doing what we’ve been doing to keep our customers happy while always striving to do a little more and stay a step ahead of our competitors.” www.sunterrameats.ca
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Forging
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MFC Group
ahead Rob Harris investigates how MFC Group is using new innovations in automation, cellular manufacturing and lean manufacturing to increase market share and customer satisfaction
H
ephaestus was the ancient Greek god of craftsmen, artisans, sculptors, fire, blacksmiths and metallurgy. He served as the blacksmith for the gods of Olympus and was always working at his forge, which was under the volcano Etna in Sicily. His symbol was the hammer and anvil, which eventually became synonymous with the craft of blacksmithing. Throughout the ages mankind has identified technological and historical advances by the ability to form, finish and manipulate metals. The Bronze Age, the Iron Age, and the Industrial Age all have similarities in that men fabricating metal helped move each generation’s evolution forward. The art of metalworking has gone from religion to a science, but it is still a skill that is invaluable to society. Meadville Forging Company is a firm that has mastered that skill and uses today’s technology to partner with its stakeholders to the fullest.
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MFC Group
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Meadville Forging Company is a third-generation, family-owned business; the Keller Group has its offices in Chicago. The original company and corporate offices are located at the firm’s Meadville facility in northwestern Pennsylvania. The company opened in 1940 as a small hammer shop and was originally named Palmer Tool. The name was changed to Meadville Forging Company in 1955, and the Keller family bought the company in the late 1960s. Today the parent company, MFC Group, consists of four plants: there are two Meadville Forging Company plants in northwestern Pennsylvania (forging operations in Meadville and the CNC machining operations in Cambridge Springs), a Virginia Forge Company plant in Buchanan, Virginia, and a Carolina Forge Company plant in Wilson, North Carolina. Jim Toy, vice president of operations, talks about the historical development of the Meadville facility. “The first conventional forge presses like we have today were installed in the early 1960s. Before that time all they had were hammer-type forge presses. Today, Meadville operates 14 manual forging presses, Virginia Forge operates two automated Eumoco transfer presses, and Carolina Forge operates two automated Hatebur transfer presses and one automated Sakamura transfer press.” The MFC Group specializes in impression (closed) die forging. Closed die forging presses the metal between two dies (also called tooling) that contain a precut design of a particular part. As the dies close together around the forging stock, the desired part is formed. The advantages of this method are the ability to yield a much more complex shape and having closer control
tolerances than with hammer-type forges. This process is further enhanced by MFC’s use of many innovative processes such as 3-D solid modeling and flow simulation. MFC also has the capability to manufacture all the dies and tooling in-house to control the quality of the parts. One of the main parts that MFC produces is the hub and spindle components used in front and rear wheel bearing assemblies in cars and trucks. The company also makes ring gears, which are used in differential assemblies and internal transmission components. MFC’s customers include General Motors, Ford, Chrysler, Honda, Toyota and Nissan. Currently, 98 percent of the company’s sales come from forged and machined bearing and power train components for automotive and light truck assembly. Last year’s poor performance in the auto industry was stressful to carmakers as well as their suppliers, but MFC took the opportunity to evaluate its systems and invest in the future. Toy says, “The Auto Show this year was great—it was exciting again. The new products coming out from the car manufacturers are amazing. Right now we’re extremely busy—a complete turnaround from a year ago.” MFC is continually evaluating its manufacturing processes. Incorporating six sigma strategies, such as DMAIC (define, measure, analyze, improve and control) and lean manufacturing methodology, into its everyday work systems, MFC is continually striving to improve productivity and quality. The company is using such lean processes as single-piece flow and cellular manufacturing with automation. Toy explains, “We just finished an automated line for one of the major Japanese automakers where we’re
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“The Auto Show this year was great—it was exciting again. The new products coming out from the car manufacturers are amazing. Right now we’re extremely busy—a complete turnaround from a year ago” installing robotics. We believe in automation and the efficiencies and repeatability that automation brings. That’s why we invest in automation, to keep us competitive in the world market.” MFC has also adopted value-added value engineering (VAVE). By using VAVE, engineering teams from the customer and Meadville Forging join forces to look for ways to improve product performance and customer service. Management at MFC also places a great emphasis on the importance of the supply chain. Toy continues, “Supply chain management is taking on a much greater role than it ever has. The importance of that process in integrating from the raw material suppliers to the customer is becoming a huge undertaking, and it’s vital to the success of any company.” The process of making various metals stronger is
called tempering. The metal is softened by heating it to the point where it is malleable and can be hammered into the desired shape, then cooled and reheated again. Businesses are also tempered and forged. Managers are the blacksmiths, and the processes they use are the hammer by which a company is forged. Time and events can give strength and add resiliency to a firm, but without the proper foundation this tempering can also make it brittle and cause cracks to appear. Toy says, “We treat our suppliers as partners, and we treat our customers as partners, because we all know we’re dependent on each other. We’re not just a forging business; we’re a people business.” At MFC, the foundation is fairly simple: the firm’s best assets are its stakeholders, customers, employees and suppliers. www.meadforge.com
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Kubota Metal Corporation, Fahramet Division
metal jacket Ruari McCallion takes a look at specialist alloy enterprise Kubota Metal Corporation, Fahramet Division, a leader in the development and production of heat- and corrosion-resistant alloys for the steel and petrochemical industries
O
rillia, Ontario, is about 100 kilometers north of Toronto and dates its incorporation as a recognized settlement back to 1867, the same year that Canada achieved confederation and formed the Dominion of Canada. Its location on Lake Simcoe, between Lake Ontario to the south and Georgian Bay to the north, attracted Huron and Iroquois people as far back as 4,000 years ago. More recently, mineral riches and
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“Kubota has worked to develop and produce a variety of special alloys that are designed to withstand high temperatures and to resist carburization” ready sources of hydroelectric power made southern Ontario a magnet to the steel industry. While the big furnaces of Burlington and Hamilton were established closer to Niagara Falls, Orillia has attracted a range of specialist operations, including Smiths Aerospace Components, TI Group Automotive Systems and Kubota Metal Corporation, Fahramet Division. Kubota started life in 1935 as a supplier of castings to the mining industry in Ontario and beyond. It has grown a lot since then and now exports between 50 and 60 percent of its output. While mining remains an important customer base, the company has diversified and is recognized as a leader in the development and production of heat- and corrosion-resistant alloys for the steel and petrochemical industries. The petrochemical industry’s largest product by volume is ethylene, which is used as a base material for a range of plastics and other products and is produced in the hottest furnaces that use metal castings. The materials deployed in the furnaces are subjected not only to very high temperatures—and heating and cooling stresses— but also have to be able to withstand a process known as carburization, which is diffusion of carbon into the metal matrix. Kubota has worked to develop and produce a variety of special alloys that are designed to withstand high temperatures and to resist carburization. The company’s tubes and fittings, made with high nickel-chromium content, are able to satisfy the twin demands of resisting carburization and maintaining strength at high temperatures and through numerous heating and cooling cycles. Also in the chemical area, vinyl chloride remains a widely used material in plastics, being the main constituent of PVC; it is also known as vinyl chloride monomer, or VCM. In its basic state and at ambient pressure and temperature, it’s a colorless gas with a sickly sweet odor, and it’s highly toxic, flammable and carcinogenic—not something to be messed around with. Kubota makes coils for process-fired heaters for VCM and for styrene. The coils are fabricated with gas shielded arc welding, using orbital or rotated hotwire machine welding.
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The production of hydrogen from steam and natural gas makes use of Kubota catalyst reformer tubes. Reformers operate at higher temperatures (above 500 degrees Celsius or 932 degrees Fahrenheit) and at lower pressures than pyrolysis coils, which utilize a near-anaerobic thermochemical process. As the gases do not reduce in reformers, the need is for strong alloys that resist “creep” more than carburization. Kubota’s tubes, specially made for reformers, are designed to maximize their physical properties at high temperatures. Quality control is clearly essential. The company has deployed an SPC (statistical process control) program covering every aspect of the casting process. Multiple pouring processes, used by some other foundries, can result in the loss of reactive elements within the alloy, which can compromise ultimate strength performance. Kubota microalloyed tubes are made from a single heating cycle, and their chemistry is certified. Hydrogen produced by Kubota’s customers can be used directly or be converted into methanol, ammonia or town gas. Whatever the manufacturing process and ultimate application, whether in chemicals, petrochemicals, mining or metals, Kubota controls all aspects of it, from inspection of raw materials onward. The company works closely with its suppliers in order to effectively manage orders and fulfill customer needs. Prior to the economic downturn, demand had necessarily led to a degree of outsourcing. In some respects, the downturn has actually helped with quality control, as more is now undertaken in-house. Casting of metal, machining, welding, inspection and preparation for shipment are all done under one roof. Shifts operate around the clock to ensure a continuous flow of material. Kubota Metal Corporation, Fahramet Division, was formerly a division of Indusmin Ltd., which was part of the Falconbridge Group. In 1990 it was acquired by the Kubota Corporation, which is based in Osaka, Japan, and operates as part of the parent company’s Materials Consolidated Division. Other companies within that part of the corporation operate independently in
Kubota Metal Corporation, Fahramet Division
manufacturing iron, steel and plastics products for industrial customers around the world. With a Japanese parent company, it’s not a big surprise to learn that continuous improvement is integral and embedded in Kubota’s culture. The drive for operational excellence is led from the most senior levels of the corporation, but structured improvement processes were in place even before the acquisition. In 1986 Kubota in Canada implemented a program of continuous quality improvement based on SPC methods, first to sand processing in the foundry. It made a major contribution to improvements in the surface quality of static castings as well as to higher yield, reduced scrap and reduced sand costs. The ideas were rolled out to the rest of the business through employee training and led to changes in the corporate infrastructure, in order to better SPC across all manufacturing processes.
The company says that SPC has enabled it to achieve consistent and above-average cast tube quality. Any variations in composition and microstructure and any other influences on mechanical properties are kept within clearly defined limits. It means that Kubota and its customers can assess the state and quality of an order at any stage during production. The drive for improvement is ongoing, as the term kaizen implies. About six years ago, a program called Total Productivity Innovation (TPI) was introduced, and Kubota is implementing a new computer system within the TPI structure. Ongoing in-house training ensures that the company has the skills, resources, expertise and dedication to quality and customer satisfaction required to meet both current challenges and the needs of the post-downturn economy. www.kubotametal.com
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Green shoots in Quebe
Consolidated Thompson Mines is leveraging an experienced team, technology and the quality of its in-the-ground resource on the gl hopes of engineering significant growth in the near future, as Keit
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n E ec
, state-of-the-art lobal market with th Regan finds out
conomic optimists search constantly for so-called green shoots—subtle signs that the global economy is preparing to roar back to life. In northern Quebec, Consolidated Thompson Iron Mines (CLM) is at work on a project that suggests there may be reasons to be bullish about the prospects for solid growth in at least some parts of the world. There is little that is subtle, however, about the Bloom Lake Iron Ore Project or about Consolidated Thompson’s approach to ensuring its financial success. It acquired the Bloom Lake property in 2005 from a prospector who had done little work on the site, around the time that original investors brought aboard current president, CEO and director Richard Quesnel, who had just finished helping to bring Taseko’s Gibraltar copper mine into production.
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BBA CLM’s Bloom Lake Project BBA
is
a
private
Canadian
consulting
engineering firm providing specialized leading edge services to the mining, metallurgical, and energy industries. BBA offers multidisciplinary engineering services, ranging from conceptual studies and NI 43-101 technical reports to complete EPCM projects in gold, iron, industrial minerals and base metals. BBA is proud to contribute to the development and realization of Consolidated Thompson’s Bloom Lake Project.
The Bloom Lake resource was especially attractive as an investment and future production site for several reasons, Quesnel says, including the fact that it sits in the midst of a larger active mining area, with extensive infrastructure such as rail lines, trucking roads, water and electricity already nearby. Unlike other nearby mines, however, which are utilizing technology from the 1960s and ‘70s to produce ore, Bloom Lake has been outfitted with the most modern mining equipment available and, thanks to a downturn in mining in general across Canada, with a solid team from the ground up, Quesnel adds. “We were able to choose from the cream of the crop, and having that great team has helped us make the fast-track nature of the project possible,”
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CIMA+ Partners in excellence CIMA+ is one of Quebec’s largest engineering firms. We have been active in the field of heavy industry for more than 50 years. Our teams consist of engineers and technicians most of whom have worked directly in industry. We adopt a partnership approach with our clients for the realization of our projects.
important to consider that a machine like this is at the heart of the mine when you look at processing,” Quesnel says. “It’s generating about $1 million a day of profit at today’s current prices, so you obviously don’t want the thing stopped more than it should be. With a resource as valuable as we have, you want to have the best recovery process in place so that you’re gaining the most efficient operation as far as cost per unit produced. It’s important for us to have the most qualified personnel and brand-new equipment.” Consolidated Thompson Iron Mines—which also owns an interest in two other iron ore properties in
“We’ve been able to attract the right people at the management level, at the senior level, at the board level and at the operational level” says Quesnel, a 30-year veteran of the mining industry with companies such as Barrick Gold, Arcelor Mittal and Gibraltar Mines. “There was no better time to build a mine than in that part of the cycle, and we were able to take advantage of that and attract some of the best guys in the market. Those of us on the management and executive team have been in the market as engineers and finance people for most of our lives. We have a good idea of who to hire and who not to hire. We’ve been able to attract the right people at the management level, at the senior level, at the board level and at the operational level,” says Quesnel. The foundation of the mine’s success is also built on a philosophy of investing in top-of-theline modern equipment capable of large-scale production. From 240-ton trucks to a crusher capable of handling up to 6,000 tonnes (metric tons) of raw ore an hour, the mine is outfitted with state-of-the-art machinery and technology. The 15,000-horsepower mill used to prepare material for gravity separation processing is the secondlargest of its type in the world, capable of doing the work of six smaller mills such as those at nearby iron ore mines. That approach even extends to the mill’s maintenance, with a robotic arm system in place to inspect, maintain and change the liners, an approach that reduces costly down time. “It’s
Quebec that are still in the exploration and feasibility stages—also has a specific strategic thrust for selling the iron ore it will produce at Bloom Lake. From the outset, the company has targeted customers in the Far East. That decision insulates it somewhat from the recessionary conditions in North America and gives it access to growing markets that remain hungry for steel, and especially for high-grade iron ore to feed their mills. “Our business model has focused on off-take contracts and partnerships with some of the best steel mills in the world with a focus on Asia, and that has helped us as mills in North America really slowed down,” Quesnel notes. “The long-term contracts give us access to favorable pricing and also long-term demand stability that our investors appreciate. And because we’re selling to developing economies, we’re more likely to be in a growth trajectory.” One such key agreement calls for China’s Wuhan Iron and Steel Corp. (WISCO) to accept as much as 50 percent of the mine’s output at fair market value based on current pricing. That deal also involved a $240 million investment from WISCO that helped Consolidated Thompson keep work moving forward on the mine as it was being built. Likewise, CLM has inked an agreement with SK Networks Co., Ltd., part of Korea’s third-largest industrial conglomerate, to ship a million tonnes
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L. Nardella Associates Ltd. (LNA) LNA, a proud participant in the construction of the Consolidated Thompson Bloom Lake Project, provides project & construction management services to engineering consultants and owners of primary resource & diverse secondary manufacturing industries in mining/metallurgy; pulp/paper/tissue; forest products; oil/gas; chemical/ petrochemical; energy; and alternative energy. LNA has experience with greenfield projects, plant shutdowns/turnarounds, plant repairs/ modifications,
temporary/permanent
plant
closures involving decommissioning and asset sales/recovery. LNA provides multidisciplinary teams of personnel/ services,
such
construction
as,
constructability
managers,
trade
analysis,
supervisors,
coordinators, safety/labour relations, planners/ schedulers, cost control/accounting, document/ material
control,
contracts
administration,
and post construction assistance for start-up/ commissioning and resolution of construction legal claims. www.nardellagroup.com
of iron ore concentrate to Korea for each of the next ten years. “Those are growing markets,” Quesnel points out. “That’s indicative of what’s happening in that part of the world.” The Bloom Lake mine’s favorable cost profile and ore quality combine to make the material especially competitive in Asia. Some underground Chinese mines with high production costs have been idled as prices have dropped in recent years, and the Canadian ore will be of higher quality by several key measures than material being shipped into Asia from places such as Australia. Quesnel says that some Australian ore used in China mills is typically around 58 percent iron content, while ore from North America is 66.5 percent. That translates into productivity gains for steel mills, which can use less ore to produce the same amount of steel. Likewise, the Canadian ore will be lower in impurities and contaminants such as phosphorus and aluminum oxide—a key
consideration for mills that produce high-end stainless steel and related products for end users such as automakers back in the United States. “We have some of the lowest phosphorus and sulfur rates in the world, and that translates into less process and less waste for the producers.” The Asian market strategy and the long-term contracts have helped Consolidated Thompson succeed in lining up financing for its mine as well, as it has invested some $875 million into the infrastructure construction, permitting and commissioning. The firm’s initial public offering in 2006 brought in $40 million, and the rest of the funds have come through strategic partnerships and follow-on offerings. In January 2010 CLM announced that it had secured $100 million in private placement financing that will be used to operate the mine and to further efforts to expand output to the maximum level of 16 million tonnes. Because it acquired the property outright, Consolidated Thompson owes no royalty payments on the mine’s output, helping to keep its per-tonne cost low by industry standards. “To date, we’ve built this major mine with zero debt,” Quesnel says. “We had the tremendous team, the financials all fit with quite a bit of margin to spare, and even though it all exists and is there, when you’re dealing with a bulk commodity such as iron ore, where you have large volumes of material produced and major infrastructure requirements, you still need those off-take agreements to be able to raise the equity. It’s kind of a vicious cycle. We’ve done this on a fast pace compared to any business model of building a mine of this size, with about three and a half years by the time we begin production. We were able to take it up in stages and show investors the accretive value of moving forward from a 5-million- to an 8-million-tonneper-year mine, and we’ve done so in a way that all the pieces are now in place to double the output.” Even if production were doubled, the mine’s output would be spoken for by customers for at least the next decade, says Quesnel. The mine’s commissioning process was well under way as the calendar turned to 2010, with the operators planning to stockpile material early on to ensure steady production flow over time. Looking ahead, Consolidated Thompson will continue to work with customers as partners and to develop supply chain partnerships, especially on the freight
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and logistics side. One existing partner is also part owner in a port project that could give the firm access to docks capable of handling China Max–size ships—those capable of carrying loads of 320,000 tonnes at once. The Bloom Lake ore is already competitive on shipping costs with ore from Brazil and Australia, which typically have higher rates. “We’re dealing with the right partners to keep both our land-based and overseas freight costs as low as possible.” CLM is also investing in the Port of Sept-Îles in Quebec, signing a longterm lease that will give it access to move as much as 16 million tonnes per year through the port. Eventually, CLM will turn its attention to other properties it controls, including the 5,434-acre Peppler Lake iron ore deposit, which it acquired in 2008 when it purchased Quinto Mining Corp., and the nearby Lamalee iron ore deposit. CLM also holds a 100 percent interest in the 5,500-acre Mont Gueret North Graphite Project thanks to the Quinto
acquisition. That deposit is regarded as extremely high quality, with assays showing up to 40 percent graphite, compared to typical levels of below 10 percent in graphite mines around the world. For now, however, the focus remains squarely on Bloom Lake and the transformation of the mining company itself. CLM now has a market value of approximately $1.7 billion. “We have kept the focus on de-risking the project at every step along the way,” says Quesnel. “We keep looking to add value and attract new shareholders, and in the process we’ve created an incubator that has taken a junior mining company into the league of a high-profile operating mine. I think we’ve been able to do that in a way that investors supported us and saw that our strategy would carry us forward. It’s exciting to be at this point where production is about to get under way, but we know a lot of work and a lot of exciting opportunities still lie ahead.” www.consolidatedthompson.com
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H
udBay Minerals Inc. is a Canadian integrated mining company, headquartered in Toronto, and principally focused on the discovery, metallurgical processing and refining of base metals, with assets in Canada, the United States and Central America. HudBay owns zinc and copper mines, concentrators and metal production facilities in northern Manitoba and Saskatchewan; its exploration properties include approximately 400,000 hectares (almost a million acres) in the same area, the Flin Flon Greenstone Belt of those two provinces. More specifically, the company considers its main production platform to be in northern Manitoba, including its flagship 777 mine, as well as the Trout Lake mine, a concentrator, copper smelter and zinc plant at Flin Flon, near Snow Lake, where the company operates the Chisel North mine and a concentrator. HudBay’s Manitoba operations have benefited from a $435 million capital expenditure in early 2005 to bring the 777 and Chisel North mines into operation, and it’s expanding and modernizing its metallurgical plants. HudBay also owns a zinc oxide production facility called Zochem in Brampton, Ontario, plus a copper refinery that produces copper cathode at its White Pine refinery in Michigan and a nickel project in Guatemala. It owns the Balmat zinc mine and concentrator in New York State, which are currently offline for maintenance. In addition to its primary products of zinc, zinc oxide, and copper, HudBay also produces gold and silver. The 777 mine at Flin Flon produced its first ore in 2004. It produced more than 1.5 million tonnes (metric tons) of ore in 2009, with the ore body extending under the town of Flin Flon. Six kilometers northeast of Flin Flon is the Trout Lake mine, which began producing in 1982 and yielded 827,000 tonnes of ore in 2008. Both those mines ship their ore to the Flin Flon concentrator, which took in 2.3 million tonnes of ore that year and produced zinc and copper concentrates. The copper concentrates are taken by conveyor to the smelter, and the zinc goes to the zinc plant at the complex, which uses leading-edge technology, including the world’s first two-stage pressure leaching system and stateof-the-art electrolysis. In 2008 it produced 110,500 tonnes of zinc. The 777 mine has 4.4 million tonnes of proven reserves, grading 3.1 percent copper and 4.0 percent zinc. It also included 2.4 grams per ton gold and 25.7 grams per ton silver. Probable reserves at 777 total 11.2 million tonnes, grading 2.1 percent copper and 5.0 percent zinc, with similar amounts of precious metals as the proven reserves. Trout Lake has 1.5 million tonnes of proven reserves, grading 2.0 percent copper and 4.1 percent zinc, with somewhat less precious metals than 777. Probable reserves are 0.8 million tonnes, grading 2.1 percent copper and 4.7 percent zinc.
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Di
David Hendrick effort to launch labor force—as
HudBay Minerals Inc.
iggingin
ks looks into the latest venture at HudBay Minerals: a collaborative h a mining academy to help develop the talents of new entrants to the well as allowing current workers to upgrade their abilities SEPTEMBER 10 www.bus-ex.com 165
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Cementation Canada Since 1975 Cementation and Aurora Quarrying have provided underground mine contracting services to HudBay’s many mine operations in Northern Manitoba. Working closely with HudBay personnel, our crews have carried out shaft sinking, ramp and lateral development, raising
and
underground
construction.
We
are committed to working safely, setting and maintaining high performance standards, and making decisions that are “best for project.”
Cubex In-The-Hole (ITH) Drills Cubex has partnered with HudBay Minerals Inc. (formerly H.B.M&S) since 1985 when we jointly developed the technology required to drill long straight holes through tough drilling conditions for production drilling. Cubex’s drilling technology has also been introduced at the Flin Flon Trout Lake mine for the past 10 years.
HudBay recently announced plans to expand its 777 Mine to the north, which involves constructing a ramp from the surface to the 440-meter level, in order to access mineral resources of 550,000 tonnes, grading 1.5 grams per ton gold, 22.5 grams per ton silver, 1.0 percent copper, and 3.6 percent zinc. These zones are connected to the underground workings of the 777 mine. Total capital costs for the expansion are estimated at $20 million. Production is expected to begin in 2012 at a rate of 330 tonnes per day, producing approximately 5,500 tonnes of copper metal and 20,000 tonnes of zinc metal over the six-year life of the project. The 777 north expansion will provide an additional emergence for the mine and will supply additional ore feed to the Flin Flon concentrator and zinc plant. It will also help to sustain employment in Flin Flon as the Trout Lake mine reaches the end of its mine life, and it facilitates the development of an underground exploration platform to evaluate additional exploration opportunities near the 777 mine.
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Industrial Fluid Consultants Inc. Industrial Fluid Consultants Inc. has averaged growth of 32.21 percent year over year since 1995 due to market thirst for operational excellence. A direct result of partnering with great companies like HBM&S to increase reliability and efficiency of equipment while moving in precisely this direction of operational excellence.
Mueller Flow Control Mueller Flow Control has serviced the mining industry in Manitoba and Saskatchewan from 1958 to present day. From grooved piping systems underground to corrosive and abrasive resistant surface installations, Mueller Flow Control has in the past and will continue into the future to deliver quality products and support to this strong industrial sector.
In July 2010 HudBay entered into a joint venture agreement and four option agreements with Vancouver-based VMS Ventures regarding properties in the Flin Flon Greenstone Belt; HudBay holds the copper-rich Reed Lake property, and VMS has a series of adjacent mineral properties. In the joint venture agreement, HudBay has a 70 percent interest and VMS has a 30 percent interest in the Reed Lake property and the two claims immediately to the south. HudBay will be the operator of the joint venture, with exclusive rights to purchase and market the ore produced from the property. HudBay will also provide full financing for VMS’s share of the costs to develop the property, which will be repayable from VMS’s share of cash flow generated by the project. HudBay will also pay VMS $2.6 million for the southern claims to the joint venture. The option agreements give HudBay the right to earn 70 percent interest on four adjacent claim parcels held by VMS, and at that time a new joint venture will be formed between HudBay and VMS, which will have essentially the same terms as the Reed Lake joint venture. The copper ore will be fed to
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Manitoba Hydro Hudson Bay Mining & Smelting in Flin Flon, Manitoba improved the energy efficiency of its operations after recommendations by Manitoba Hydro’s
energy
efficiency
experts.
HBM&S
upgraded its compressed air, cooling, pumping, drying, hoisting, and lighting systems. Combined, the projects saved over 85 million kilowatt hours and lowered the mine’s annual electricity bills by approximately three million dollars.
“HudBay is participating in a consortium, a collaborative venture to launch the Northern Manitoba Mining Academy” the Flin Flon concentrator. In the same area is HudBay’s next mine project, called Lalor, which has been in the exploration stage for the last few years. Recently the company made a commitment to develop a mine there at an estimated cost of $560 million, which includes $21.5 million already spent on the ramp access and the completion of the ramp, plus site preparation and equipment purchases, and an average 13 percent for contingency. The approved expenditure is intended to fully fund project development, including the extension of power and water facilities to the site, a 300-person work camp, surface and underground construction, including a production shaft and a ventilation shaft, plus an upgrade to the existing tailings facility and a comprehensive upgrade of the company’s Snow Lake concentrator. Construction at the concentrator will include replacing copper and zinc flotation cells and concentrate dewatering equipment, and construction of a new gold leach plant, which is intended to improve gold recovery. Production from Lalor is expected to occur in two phases. The first will use the ramp from Chisel North to produce up to 1,200 tonnes per day of ore from the base metal zones only and will replace production from the Chisel North mine, expected to reach the end of its mine life in 2012. On completion of the upgrades, the concentrator
will be capable of processing 3,500 tonnes of ore material per day and will mainly produce zinc and copper concentrates and gold dore bars. In fact, the company estimates that the Lalor mine will add significant value to HudBay by nearly doubling gold and copper-gold production and increasing zinc production by at least 50 percent. Combining being a good corporate citizen with the practicality of having a well-trained workforce that includes the participation of aboriginal members from the local communities, HudBay is participating in a consortium, a collaborative venture to launch the Northern Manitoba Mining Academy, together with the University College of the North, the Northern Manitoba Sector Council, the Province of Manitoba, the City of Flin Flon, and the University of Manitoba. The academy’s mandate is to implement strategic, mining-related training initiatives and skills enhancement— important for developing the talents of new entrants to the labor force—as well as allowing current workers to upgrade their abilities, with the ultimate objective of creating a knowledgeable, skilled and sustainable workforce, as well as providing essential training for the next generation of mining professionals in the mining districts within the Flin Flon Greenstone Belt. As part of its commitment to this initiative, HudBay has already donated $200,000 and approximately a half acre
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“The academy’s mandate is to implement strategic, miningrelated training initiatives and skills enhancement, with the ultimate objective of creating a knowledgeable, skilled and sustainable workforce, as well as providing essential training for the next generation of mining professionals” of land in a prime location for training purposes. The consortium is working to ensure initial staffing and programming to be in place for the academy’s official opening, expected to be April 2011. Meanwhile, in the second quarter of 2010, HudBay’s net earnings declined to $13.3 million, or 9 cents per share. That compared with a profit of $89.4 million (58 cents per share) a year earlier, when it had an after-tax gain of $99.9 million on the sale of its 16.7 percent stake in Lundin Mining. Excluding that gain, earnings improved as metal prices rose and foreign exchange conversions turned favorable.
The company’s quarterly operating results rose, driven by stronger metal prices, and the company’s board of directors decided to establish a dividend policy based on its strong business fundamentals and growth potential, saying it would start paying a semi-annual dividend of 10 cents per share. Later this year it will submit its application to list its shares on the New York Stock Exchange, in order to enable the company to broaden its appeal to a larger group of investors, and to help increase its overall trading liquidity. www.hudbayminerals.com
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Eagle
The
Kennecott Eagle Minerals has been feeling new mining law and regulations enacted in the General manager Jon Cherry talks to Gay Sutt the process and why the new law will ben 174
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Kennecott Eagle Minerals
e
has landed
g its way through the tough State of Michigan in 2004. ton about the challenges of nefit the mining community
M
ining in the United States today is light-years from the popular image of the old miner with a mule, a cart and a pickaxe. High-tech and comprehensively regulated, the industry uses the latest science, technology and mining practices to safeguard health and wellbeing, to improve the efficiency of the mining and extraction processes, and to prevent contamination from the mine jeopardizing the natural environment. Interestingly, it’s the State of Michigan—which has been in deep economic recession for the past 10 years—that is pioneering even more stringent mining environmental legislation. Intuitively, you would expect this to stifle mining, which would be a disastrous consequence for the traditionally strong mining communities, not to mention the Michigan economy. Shockingly, more than half the private-sector job losses across the whole of the US in the past 10 years have occurred in Michigan. However, the reverse looks likely to be true, according to Jon Cherry, general manager of Kennecott Eagle Minerals, a Rio Tinto company that has been the first to pick its way through the legislation and is now investing an additional $469 million in the construction of a new nickel and copper mine in Michigan’s Upper Peninsula.
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Kennecott Eagle Minerals
Foth Founded in 1938, Foth offers a tradition of personalized service and smart solutions to industrial, commercial and government clients. Our firm provides expertise in environmental, industrial and infrastructure consulting and engineering. As part of Foth Infrastructure & Environment, LLC, Foth’s Environmental Division focuses its efforts on the following areas: • Mining • Water resources • Environmental program management and compliance • Solid waste management • Land based remediation. Foth
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Kennecott has been engaged in exploration for many years in this mineral-rich area, and Cherry has represented the mining community during the early formation of the new legislation—working with environmental groups, state regulators and elected federal, state and local government officials and state legislators to design laws that everyone could buy into. “Some people believe that you have to choose between mining and protecting the environment. But mining and environmental care are not mutually exclusive. You can design a mine in such a way as to protect the environment,” explains Cherry. “That’s what these laws aim to do, and that’s how our company has always operated.” There are several unique points to the legislation. First, requirements for dedicating funds to cover end-of-life closure costs are stringent. The bonds must be signed over to the State rather than held by the company, and the State has the authority to demand increases annually as may be necessary to reflect changes in the operations and to cover costs projected to cover reclamation needs, should unforeseen circumstances require the State to be
engaged in reclamation. The law requires that environmental issues must be addressed and not left lingering, so as to perpetual care. The most interesting aspects of the law, however, cover how mines are designed and how the permitting is managed. Two years of environmental baseline data must be collected before mine design begins. The potential impact of the mine design on that baseline data is then assessed. “This then becomes an iterative process to reach the final design.” Perhaps most significantly, there are proscribed timelines for the entire permitting process, giving local communities extensive opportunities to engage in the process through multiple public hearings. “This, however, provides business certainty,” Cherry says, “as it occurs over a 220day period, and businesses can plan for that.” The new law certainly sets the environmental bar very high, and Cherry has no doubt about its importance. “Not only is the statute good for the environment, it’s good for business. And mining companies that are not able to achieve that high standard probably shouldn’t be mining.” The regulations also resonate with Kennecott’s standard business procedures. “We design our mines backward,” Cherry explains. “Before we begin designing a mine, we work with the local communities to determine the best post-mine use of the land. Once we have that vision, we put together a design that addresses the various environmental issues and allows us to reach that desired endpoint. We then take the plans through the permitting process.” In the case of Kennecott Eagle, the mine and surface facilities are located in a timbered area used by local communities for leisure activities. The plan, developed in partnership with community groups, is to return the land to outdoor recreational use after closure. The mill facilities, meanwhile, are being located on a brownfield site some 25 miles south of the mine at Humboldt, which has several benefits. It will minimize disturbance to the timbered mine site, regenerate an old disused mill site, and bring a significant number of jobs to a depressed area. “At the end of the mine’s life, the community here is interested in seeing it reused by future businesses. There are two opportunities: it can be turned into a regional milling center and
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used by other mines in the area, or, because the infrastructure is in place, it can be used by other industries moving into the area.” One of the critical design factors for both the mine and the mill is water management. Although the top of the ore body is just 200 feet below the surface, the mine has been designed as an underground operation rather than an open pit in order to reduce environmental disturbance on the surface. Rock will be brought to the surface and placed on a double-lined highly impermeable pad. “We have about 300 inches of snow a year at the site. Any water that comes into contact with the rock on the surface will be collected, analyzed and treated,” Cherry says. The site is to be equipped with water capture and holding facilities and a large water treatment plant. “The discharge from this plant will be cleaner than drinking water.” At the mill site there is little waste other than tailings, and as part of the sustainable development plan these will be placed in an old iron ore pit adjacent to the mill. Water plays a key role in moving the crushed ore through the flotation process (where nickel and copper concentrates are extracted) and then to the tailings pit, and this is managed in a closed loop. The water is removed from the tailings reservoir and recycled through the process. “Studies from previous mining operations have shown that any water that could discharge into the local environment from the pit is clean,” Cherry says. “Nevertheless, as a contingency we’re building a water treatment plant here that is capable of treating all the water in the pit if it’s ever needed, and it will always be on standby.” The biggest challenge facing Kennecott with the Eagle mine project is that it was the first to have to satisfy the new mining law. “So we—the regulators and the public—were all feeling our way through the process with this first application, and I’m glad it was our company that was the first to go through it,” Cherry says. “There have been many lessons learned along the way, including how absolutely important it is to reach out to the community and the regulators ahead of the more formal permitting process.” Over a long period of time, Kennecott, as part of Rio Tinto, has developed a number of vehicles for communicating with the public and incorporating their needs into a mine plan, and these have proven their worth. “One of these is an advisory
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Kennecott Eagle Minerals
group that includes elected officials, environmental groups, businesses, universities and community representatives. And it’s a two-way dialogue,” Cherry explains. “We use it to inform the community about what we’re doing. But just as important from my perspective is that we get feedback from them in terms of what they want to know, what they’re hearing, and their suggestions for changing the mine design and making improvements.” The advisory group is not required under the new law. “However, it enables us to take extensive community baseline data, to examine the impacts and the benefits of our project to the community.” The Eagle project is in the midst of this assessment right now, “and this will help us identify how the public perceives the project, where we’ve excelled and where we simply need to do more.” The most obvious benefit to the community is that it’s an additional $469 million investment in the local community. During the three-year construction
period some 500 contractors will be employed on the two sites. Once up and running, the operations will require over 200 full-time employees over the seven-year life of the mine. In the long term, having worked through the requirements of the legislation and proved that it can be done, Cherry believes the business certainty created by the new law will encourage other mining companies to invest in exploration and mine development in Michigan Kennecott, meanwhile, is wholly committed to the region. It currently holds roughly 450,000 acres of mineral rights in the area and has an extensive ongoing program of exploration, not only with a view to extending the life of the Eagle Mine but also looking for additional nickel ore bodies in the region. Having successfully navigated the new legislation and demonstrated that it can work very well, the company is in a great position to follow through on this exploration. www.eagle-project.com
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Osisko Mining Corp.
ead
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game Gay Sutton talks to Osisko Mining Corporation’s general manager, Denis Cimon, about the company’s plan to fast-track the development of the Malartic gold deposit in northern Quebec and take the risk out of the project by beginning town relocation work and purchasing equipment ahead of the feasibility study
T
he Malartic gold mine in the highly productive Abitibi Gold Belt of northwest Quebec is very different from those around it. Most mines are deep, exploiting high-grade gold deposits. However, the Osisko Mining Corporation, a junior mining company, is in the process of developing an open-pit mine to exploit what it believes will become a truly world-class gold resource.
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Osisko Mining Corp.
BBA BBA is a private Canadian consulting engineering firm providing multidisciplinary and specialized leading edge services to the mining, metallurgical, and energy industries. BBA is proud to have successfully completed the Canadian Malartic Project for Osisko Mining Corporation. This major project comprised conducting the preliminary assessment and the bankable feasibility study, both NI 43-101 compliant. We also performed the
complete
detailed
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project process plant facilities including the main substation of the Canadian Malartic Project.
“When we realized that we had the acceptance of the town council and over 85 percent of the population, we started a program of drilling to define the area of the deposit,” explains general manager Denis Cimon. The drilling covered the entire area in a grid pattern every 25 meters. “In the town, people had drills in their backyards and in their driveways.” This yielded more precise data on the size and value of the deposit. Based on these encouraging calculations, the company embarked on the prefeasibility, environmental and feasibility studies. At the same time, however, confident that the discoveries would yield a highly lucrative mine, the company began to ramp up its operations. Staff members were appointed to run the operation, one of whom was Cimon. A construction company
“We made a commitment that once we started the relocation we would complete it, regardless of the results of the feasibility study” The 230-square-kilometer property, 100 percent owned by Osisko, has been worked in the past. Between 1935 and 1983, deep mining of the high-grade Malartic and Barnat veins yielded over 5 million ounces of gold. But subsequent exploration efforts continued to search—fruitlessly—for further deep high-grade gold resources. Convinced that there was another way to do things, Osisko acquired the property and began looking for lower-grade deposits close to the surface. Combining its own exploration data with that of previous explorations, the company found what it was looking for: a large area with the potential to become an extensive and highly profitable surface mine. Part of the gold resource, however, was believed to stretch under the town of Malartic (population 3,600), about 550 kilometers northwest of Montreal. So the first thing the company did was to initiate an outreach to the local community, communicating with the town council and the citizens, building relationships, exchanging information and forming a community consulting group.
and mining contractors were brought on board, and a $110 million relocation project got under way to move around 13 percent of the town to a new location on the northern side of town. “One of the big local concerns was that we would start the relocation process, find the project was not as strong as we believed, and stop it. And they would end up with half the population relocated,” Cimon says. “We therefore made a commitment that once we started the relocation we would complete it, regardless of the results of the feasibility study.” The project entailed moving 205 homes and five institutions. In all, 140 new houses were built and more than 60 purchased. The southern boundary of the town is to be shielded from the open-cast mining operation by what the company calls a green wall: a wall of earth planted with trees and flowers, not only cutting out much of the noise and dust but also providing a leisure facility. Cimon says, “We’re working with the town’s mining museum to build a viewing center so that people can some to the pit and see the operations.” In parallel with the relocation work, the company
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Osisko Mining Corp.
began procurement of the heavy equipment it would need. “For us, it was a way of de-risking the project,” Cimon points out. By June 2009, most of the equipment had been purchased and 75 percent of it had been delivered to the site, while the parts that needed special warehouse conditions, such as the motors, were stored in Toronto and Montreal. Since beginning the relocation work and procurement, the company has successfully completed the feasibility studies and public hearings. “The process was very informative,” he admits. “Sometimes they were rough on us. But it’s a good democratic process, and it has been beneficial to both parties.” The construction permits were received in August 2009, and work immediately began preparing the foundations for the mine buildings. These include an administration building and truck shop that would accommodate twelve 240-ton trucks, a warehouse, and a massive $400 million mill that will house a 55,000-ton SAG (semi-autogenous grinding) mill with a 26,000-horsepower motor and three further 16,000-hp ball mills. The town of Malartic has benefited in many ways. The mine has created a large number of jobs and will continue to do so. Most of the contractors currently on site are local, and this has helped to cement good relationships, ensure quality and speed up the construction work. If everything continues to go according to schedule, milling should commence in the first quarter of 2011. www.osisko.com
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u
Fromthe ground,
First Majestic Silver Corp. is committed to building a senior silver-pro based on an aggressive development and acquisition plan with a focus Davila takes David Hendricks on a virtual tour of the company’s three
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oducing mining company s on Mexico. COO Ramon e producing silver mines
First Majestic Silver Corp.
F
irst Majestic Silver Corp. was established in Vancouver, British Columbia, in 2002 as a silver mining company focused on Mexico. The company currently has three underground mines in production and is nurturing two other projects for future production. Ramon Davila, First Majestic’s chief operating officer in Mexico, is based in Durango. He has an engineering degree in mining and metallurgy and a master’s degree in minerals economics. He worked for Industrias Penoles, the largest silver producer in Mexico from 1978 to 1987 and then became vice president of mining operations for Luismin until 1993. Five years later Davila became president of Plata Panamericana SA de CV, a wholly owned subsidiary of Pan American Silver Corp., where he was in charge of exploration and production of its Mexican operations. He’s a past president of the Association of Mining Engineers, Metallurgists and Geologists of Mexico, and he is currently a director of the board of Mexico’s Chamber of Mines and a member of the Society for Mining, Metallurgy and Exploration.
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Davila says the La Encantada Silver Mine— located in the Sierra Madre Oriental mountain range in the state of Coahuila in the northern part of central Mexico, fairly close to the US border— is First Majestic’s main operating asset at the moment. It’s in an isolated area, so it’s important to the local communities as a source of jobs. The infrastructure includes an airstrip, housing, offices, ancillary buildings, a laboratory, restaurant, general store, school and recreation facility. The mine is situated within First Majestic’s land package of approximately 4,000 hectares (about 10,000 acres). “Last November we completed a major construction project there,” Davila says, “a cyanidation [a metallurgical technique for extracting precious metals from oxide ore] mill upgraded from 800 to 3,500 tons per day capacity. The plan there is to reprocess all tailings left behind, because the previous companies operating that mine over the past 30 years didn’t perform the correct process for the type of ore. There are plenty of valuable tailings, so threequarters of our current production is coming from those, and one-quarter is coming from fresh ore, from the mine.” The mineralogy of the deposits is predominantly iron oxides, carbonates and lead sulphates, with high concentrations of silver (argentite and native silver) values, as the result of an oxidation process and enrichment in a known vertical range of more than 400 meters. The full production capacity of the La Encantada mine is more than 4 million ounces of silver in the form of dore bars. First Majestic currently has nearly 500 people working full time, and a further 1,500 are employed in indirect jobs. “In the next four years we’re going to increase the capacity of this mine and reduce the amount of tailings that we feed to the plant. Our strategy from the start of this project was to construct the most up-to-date facility using the latest technologies. Currently over 80 percent of all water used is recycled, including a large portion of the cyanide. The result is one of the cleanest operations in Mexico.” The silver dore bars are shipped to Toreon in Mexico and will also be shipped to the US and Europe eventually. La Parrilla Silver Mine and mill sit within First Majestic’s land package of more than 53,000 hectares located in the state of Durago, about 75 kilometers from the city of Durango, in the western
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First Majestic Silver Corp.
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part of the Mexican Altiplano, an extensive volcanic plateau characterized by narrow, northwesttrending, fault-controlled ranges separated by wide, flat-floored basins. The town of San Jose de La Parrilla is just north of the property, and Vicente Guerrero is 16 km to the southeast. The La Parrilla mine is currently producing about 1.8 million ounces of silver equivalent per year. The current mill runs with twin circuits, each 425 tons per day: one to handle oxide ore, and the other to handle sulphide ore. “In the flotation circuit we produce zinc and lead concentrate, which also contains silver,” says Davila. “In the cyanidation circuit we produce oxide ore and silver dore bars. The mine is close to a community called La Parrilla, and we’ve been working closely with the community and the local government to maintain a good relationship with them. We’ve been doing projects with them like paving the road and other
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public works. And despite being a mine, we are also certified as a clean industry in Mexico.” The San Martín Silver Mine is located 250 km north of Guadalajara in the northern part of Jalisco State. “It produces about 1.2 million ounces of silver equivalent per year with a cyanidation process. It’s been a mine operated by other companies for the last 20 years, and we are now exploring it in order to try to increase the reserves and the capacity. We have a good relationship with the local community.” The San Martín mine suffered from a lack of reinvestment for several years. First Majestic identified an opportunity to make investments in development, exploration and mill improvements, and it took control of operations of the mine in June 2006 by purchasing a majority stake in First Silver Reserve Inc. In September 2006 First Majestic purchased the remaining shares of First Silver, resulting in 100 percent ownership.
First Majestic Silver Corp.
Proveedora de Suplementos y Servicios Established in 1997, Proveedora de Suplementos y Servicios (PROSSESA) has dedicated most of its time to servicing underground and open-pit mines. Our customers’ satisfaction is guaranteed thanks to the courage and dedication that enable us to supply the best parts for your mining equipment. Our goal is to satisfy the needs of the mining industry to keep equipment and machines working at their best, by supplying the most popular trademarked parts. We provide special attention to each and every customer, through excellent service and by meeting their parts quality and duration requirements. PROSSESA has been working hand-in-hand with First Majestic to cover all their equipment and mining needs.
First Majestic also has two projects in consideration of development. One is Del Toro Silver Mine, which consists of numerous areas of interest for mineral exploration within the Chalchihuites mining district in Zacatecas State, including the San Juan and the Perseverancia mines. Both were historic mines; the Perseverancia was mined for high-grade silverrich sulphide ore, and the San Juan is believed to be the oldest mine in the district, dating back possibly 500 years. “Del Toro could become our next mine,” Davila says. “The other is Real de Catorce, a relatively new mine that we acquired in November 2009 as a result of the purchase of all the issued and outstanding shares of Montreal-based Normabec Mining. The property consists of 22 mining concessions covering 6,327 hectares. It’s still somewhere in the future for us.” www.firstmajestic.com
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tin Risin
Gold
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Rising gold prices have see mining operations. Todd Ro Pogo LLC tells Andrew Pelis has been applied to North
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en a global surge in gold oth at Sumitomo Metal Mining s how Japanese experience American reserves
Sumitomo Metal Mining: Pogo Mine
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laska’s remote wilderness may seem an unlikely setting for Japanese prosperity, yet beneath the hills and valleys lies that most precious of commodities: gold. The birth of Sumitomo Metal Mining (SMM) can be traced back to the 16th century, when Soga Riemon, founder of the Sumitomo Group, developed a copper smelting technique known as Nanban-buki in the Keicho period (1596–1614). In succession of the founder’s business, the Sumitomo family has developed itself through the ensuing centuries by creating businesses such as copper smelting and mining. Today the Tokyo-based company has interests in mining, smelting and refining precious ores including copper, gold, nickel and zinc, and it manufactures semiconductor and advanced materials. With its prestigious background, it was little surprise when SMM decided to enter the North American gold market roughly a decade ago. Its interest was piqued by the initial gold vein discovery in 1994 that would later become the Pogo Mine in Alaska’s interior. Initially set up as a joint venture between Sumitomo Metal Mining, Sumitomo Corporation, and Teck Resources, Pogo became a twoparty joint venture when Teck Resources sold its interests in July 2009. A transition management team was then recruited, with Todd Roth joining the business in April 2010 as general manager. “The ore body was discovered in the mid-1990s, and the project then went through several years obtaining its required permits,” Roth explains. Production began in 2005, and the first gold was poured on February 12, 2006. “We are now producing 385,000 ounces [12 metric tons] each year, and last October saw us produce our one-millionth ounce of gold at Pogo.” While production has been markedly ramped up since 2005, the location of Pogo led to initial operational challenges, as Roth describes. “The site is located about 130 miles southeast of Fairbanks in a very remote and hilly area. One of the many tasks to overcome our remote location was to build a 50-mile access road into the site along with power lines. Today we are producing above design rates and look to gain on efficiencies around the entire operation. “Environmental issues are always a concern,” he continues, “and Pogo is an underground drift mine, so we aim to create as small an environmental footprint as possible by utilizing only what space is required above ground.”
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Sumitomo Metal Mining: Pogo Mine
Outotec Like our client’s at the Pogo mine, Outotec’s filter customers with technology previously marketed as Larox, Ceramec, Hoesch, Pannevis, Scanmec and Scheibler can expect the same unrivalled combination of process expertise and service. Outotec delivers complete filtration solutions that exceed customer expectations in terms of product quality, safety, value and consistency— all in an energy-efficient and environmentally friendly manner.
up to another 100 hired as subcontractors for conducting underground development work along with other projects at the mine. “We have a very good mixture of people, with around 60 percent of our workforce coming from Alaska,” he comments. “We aim to hire people with relevant mining skills, and many of our workers live in the state.” Training is, of course, an important focus for SMM, and Roth says that the company has many opportunities to send workers to various training sessions, which have included Tennessee, where a maintenance training course focuses on the development of its new Reliability Center of Maintenance. He expects the investment to start
“We’re fortunate to have excellent workers, mining and equipment resources, which will help to ensure we produce a very good revenue stream for the two joint venture partners” Roth’s arrival has been one of several changes in management, a result of the Teck sale that saw a number of existing superintendents leave Pogo; he sees his responsibility very clearly. “Six of our seven current senior managers are new in the job,” he admits. “My main priorities are having a smooth leadership transition and team building with our new folks, but we also want to build on what has already been accomplished in the past and take Pogo to the next stage.” That next phase may involve further exploration aimed at extending the mine’s lifespan, as Roth describes. “We are SMM’s first sole operator of an overseas mine. We will continue to explore the claim area for its potential resources. “Pogo Mine currently has known reserves lasting into the first quarter of 2017,” he goes on to say. “The summer of 2009 we were able to add another year onto the reserves following a multimilliondollar investment in exploration. We will undertake further work to define the outer boundaries of the existing ore body, and we also have claims on a considerable amount of surrounding land that we will explore for further opportunities.” Roth is adamant that one of the key attributes to the Pogo Mine has been its people. At present the company employs some 300 staff, with
seeing a full return by its third year. Roth adds that in-house training also is key to serving the wider employment community. “We run a Mine Rescue Team that incorporates safety and first aid training and supports other mining facilities as far down as Washington State and Idaho. Our safety standards demand the provision of such a service, and our team is affiliated with the Central Mine Rescue organization that provides emergency services underground.” With 33 miners currently trapped 700 meters underground in Chile, safety is a particularly relevant topic. Roth says that as mining operations progress, gold reserves are located deeper underground, which, aside from those safety issues, also adds complexity to operations, requiring machinery capable of safely bringing ores back to the surface. “Our plan is to keep production levels constant, and that requires equipment replacement and maintenance to ensure we operate efficiently. We have invested approximately $10 million a year in trucks, drills and other machinery over the last few years, and it’s essential that we have very good planning in place for our maintenance and supply chain,” he comments. “We’re operating in a remote region that gets
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Sumitomo Metal Mining: Pogo Mine
very cold, and when it’s 50 degrees below zero, things often don’t operate the way they do in warmer climates. Because of the specialist nature of our equipment and our location, we can’t always get a spare part overnight, and some parts can have lead times of up to a year.” Roth’s role is to drive efficiency and cost reduction, and he believes that supply chain plays an important part in that future—a future that could see the Japanese company expand its American interests. “SMM is certainly looking to grow, and the potential is there for both greenfield and brownfield developments. Our focus here at Pogo is to develop what is already in place, and we’re currently working toward gaining ISO 14001 accreditation—something we are not obliged to do but want to, as we wish to be seen as good neighbors. We’re fortunate to have excellent workers, mining and equipment resources, which will help to ensure we produce a very good revenue stream for the two joint venture partners.” www.smmpogo.com www.smm.co.jp
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Co g
Agnico-Eagle Mines Ltd. achiev at its Meadowbank gold project Regan finds out how the re reachable only by plane and by year—became a gold mining expected to becom
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Agnico-Eagle Mines Ltd.: Meadowbank Project
old gold
ved commercial production earlier this year, and Keith emote Arctic site—originally boat for just 10 weeks per and refining facility that is me one of Canada’s largest
T
here are few parts of continental North America more remote than the area near Baker Lake in the Nunavut Territory of Canada where Agnico-Eagle Mines Ltd. established the Meadowbank gold mining and refining project. Located near the western shore of Hudson Bay, the area is locked in the grip of Arctic ice for all but 10 weeks out of every year. Until AgnicoEagle built a 110-kilometer roadway from the hamlet of Baker Lake, the area was not reachable by truck either. Yet in less than three years’ time since acquiring 100 percent ownership of the property, which had first been explored with confirmed gold deposits in the 1980s, Agnico-Eagle has established an extensive gold mining and treatment facility on site, overcoming significant logistical hurdles along the way. The mine is expected to produce an average of 350,000 ounces per year, a production level the company expects to sustain for at least nine years. The Meadowbank area is believed to have gold reserves of almost 3.7 million ounces and an extensive gold resource.
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Agnico-Eagle Mines Ltd.: Meadowbank Project
Nolinor Aviation Nolinor Aviation is a private charter airline operating Convair 580 Turboprop and two Boeing 737-200 Combi jets under a 705 large carrier operation certificate in Canada and also certified to do maintenance by Transport Canada. We are known for serving Canadian major cities as well as the northern regions with passenger and cargo services. We provide service transportation solutions anywhere in the world. Our international line services include destinations in the USA, Caribbean, Mexico and Africa. Nolinor has the flexibility to adapt to our customer needs at all times. Nolinor is committed to the highest safety standards in the industry.
“We had to start right from scratch,” says Denis Gourde, general manager of the mine. “The only thing that was here was a 50-person explorer’s camp.” Now the Meadowbank site, which comprises three open-pit mining areas and good potential for an underground operation, is a fully autonomous mining operation with a 360-room camp, all the equipment needed to conduct openpit mining and gold processing operations, and a camp airstrip—all run by a power plant consisting of six 4.4-megawatt diesel generators. “The logistics have definitely been the biggest challenge,” Gourde adds. “Having an airstrip gave us autonomy in terms of air freight and workers traveling, but that still is a very expensive alternative. Creating road access from the hamlet of Baker Lake allowed us to get larger equipment to the site, and we’ve been able to overcome the remoteness of the area with careful planning and investment.” Heavy equipment traveled to the site via sea barge over Hudson Bay and then over the all-season roadway that took more than a year to complete. Despite those challenges, mine commissioning and first gold production began in March 2010. Gold ore will be mined and refined into gold bars on the site, giving the mine’s owners more flexibility in terms of shipping the offtake from the mines. To enable mining of the deposits of the two known as Goose Island and Portage, Agnico-
Eagle was forced to build a series of earthen dikes, an extensive construction project in itself. Current plans call for those dikes to be finished by 2012, with active mining on Goose Island starting in 2013. Farther into the future, another deposit called Vault, five kilometers from the site, will be put into production. The process plant and related equipment that have been assembled and covered with buildings on the site are capable of processing 8,500 tonnes (metric tons) of material a day, Gourde says. A study has been commissioned to examine the feasibility of increasing production to 10,000 tonnes of material daily. Some 475 mine workers are scheduled to work in two shifts of two weeks each, with the company’s charter flights flying four times weekly to and from Montreal and the mine property to bring in perishable goods, light supplies and workers as needed. Once ramped up, Meadowbank will be one of the largest gold mines in Canada and the largest gold asset in the portfolio of Agnico-Eagle, which also operates gold mines in Quebec and Finland as well as exploration and mine development activities in Mexico and the United States. Gourde, who has more than 20 years of experience in various types of mining environments, says the mine’s owners have managed to successfully blend multiple cultures in its workforce, with Agnico-Eagle employees from across Quebec working alongside natives of the Nunavut province and workers from all over Canada. “Everybody speaks English as a common language, but we translate all the key documents as well in Inuktitut,” Gourde notes. The company has had success communicating the need for attention to safety on the site. “Workers understand that medical services are pretty far from the site. We have a complete medic station here with personnel, but if it’s something serious, we’re far from the nearest hospital.” Including local contractors working on the mine construction, Meadowbank logged 2.1 million working hours during 2009 with no serious accidents and 13 lost-time incidents. Safety is often complicated by brutal Arctic winters, with temperatures occasionally dropping low enough to impact the trucks and other heavy equipment. “We take a lot of pride in what we’ve done on safety on this site, and we’re working
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Agnico-Eagle Mines Ltd.: Meadowbank Project
hard to continue that success for the duration of the operation stage.” Attention is now turning to ramping up production, and the timing couldn’t be better for Agnico-Eagle, with gold prices hovering near alltime high levels and many forecasts calling for them to remain in that vicinity thanks to ongoing global economic turmoil. “We had a target and we hit it, and the timing has worked out pretty well,” Gourde says. “We’re certainly hoping that continues for a while.” www.agnico-eagle.com
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First Capital Realty
First Capital Realty, Canada’s leading owner, developer and operator of supermarket and drugstore-anchored community shopping centers, aims to become a better neighbor by building a culture of sustainability. The chief operating officer of FCR Management Services, the firm’s property management arm, talks to Keith Regan about the quest
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t its 2006 annual general meeting, First Capital Realty made a formal commitment to become a greener, more sustainable company, in particular with its development activities. It pledged to become the first company of its type in Canada to build all its new neighborhood-based shopping centers to the LEED standard for green design and energy efficiency. It was a bold move given that no shopping centers have been built to LEED standards in Canada. Moreover, at the time the pledge was made, design on the company’s new Morningside Crossing project in Toronto was already well under way. A public community meeting attended by 600 people had already been held to determine what kind of project local residents sought, and soon thereafter demolition and reconstruction were poised to begin. Building LEED into the Morningside project, which involved redeveloping a three-story mall without interrupting service to existing tenants, posed significant challenges. Before long, the designs were updated with a white reflective roof and a system for collecting rainwater to irrigate the grass and plants on the site. Highly efficient water and energy fixtures were installed, and 95 percent of the waste from the demolished structure was reused or recycled to the extent possible.
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Opresnik Engineering Consultants Inc. (OECI) Opresnik Engineering Consultants Inc. (OECI) can guide their clients through the entire LEED process, from design and conceptualization to completion and execution. The firm takes an integrated approach in creating a project, provides a summary of applicable LEED credits and itemizes them based on estimated cost. Owners and builders shouldn’t be intimidated if they or their trades haven’t built green before— the transition can be a relatively painless one with the help of experienced consultants like OECI. While the final acceptance of any credit is subject to the CaGBC review committee, using experienced consultants can all but guarantee a positive outcome.
The project is now just one of many in the First Capital portfolio of some 20 million square feet of space across Canada. Seven centers already have received LEED certification, and another 35 are in the development or certification process. In 2008 alone, First Capital has invested $180 million in sustainable construction and renovation projects, according to FCR Management Services head Peter Papagiannis. “Building and operating to recognized environmental standards is only part of our sustainability strategy. We view ourselves as being a neighbor in our communities, a key part of the fabric of those communities,” Papagiannis says. “And we want to be a good citizen in that neighborhood. It was important to us that we start with this mindset.” Sustainability has become a key core value at First Capital, and the company’s recent integration of its property operating business has laid the foundation for it to become ingrained in everything it does, he adds. As part of that effort, the 130-person company instantly grew to more than 300. That integration enabled shifts in thinking and alignment in delivery that have supported the drive toward increasing sustainability. “We view it as table stakes from now on,”
Papagiannis says. Sustainability flows naturally from First Capital Realty, president and CEO Dori J. Segal’s philosophy that the company takes a long-term view of its business, including development projects. “We take a 100-year approach. We’re in it for the long haul, and when you start from that point of view, it changes how you look at the entire business of real estate.” The company sees sustainability as a continuous improvement process, with new opportunities always presenting themselves. In 2008 First Capital formed a Sustainability Council from across its business functions to help identify ways to better use resources and to more closely integrate concepts of sustainability into everyday business practices. That council helped shape the company’s sustainability vision statement, which reads: “Enhance the longterm value of First Capital Realty by minimizing our impact on the natural environment and positively affecting our people and the communities in which we live and work.” Looking ahead, First Capital is exploring international standards for operational metrics to help it extend the sustainability from the development stage over the life of a project, Papagiannis says. “Our primary focus is on implementing operating standards that are right for our centers, something that our tenants can take part in that also support their own efforts toward sustainability.” The company continues to explore options for energy solutions for its centers and most recently is examining installing a geothermal system, which is typically not found in retail shopping centers. This proactive approach can be seen in its development activity as it is also looking to achieve the Silver LEED certification level in some of its upcoming developments. While there are still additional upfront costs associated with the green efforts, they are not as stark as they were just a few years ago, a trend Papagiannis expects will continue as more architects, builders and trades become more accustomed to green building techniques. First Capital believes that LEED and other sustainable practices will eventually become standard operating practices for all businesses. “We are fortunate in that we can draw on leaders within the industry to assist us in achieving our sustainability objectives, including our design, architectural trades and tenant partners. You are already seeing that shift where it’s
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more noticeable if a company isn’t progressing on this front. And it’s generational as well. The coming workforce and our future employees are more and more aware of what a business is doing from a community and an environmental perspective, as they’ve grown up with that mindset. “We have a number of very progressive tenant partners leading the charge, and we’re working to get more tenants into the mindset that building and operating in a way that is different from the norm is a benefit to them,” Papagiannis continues, “not only because of the benefits to the environment and the lower long-term operating costs, but because it enables our centers to become a potential source for them to achieve their own sustainability targets and goals.” One such tenant is TD Bank Financial Group. “We’re the sixth-largest bank in North America, with locations from Halifax to Vancouver and Maine to Florida, and we have a responsibility to manage our business in a way that protects and enhances the environment,” says John De Benedictis, senior manager, facilities management at TD. “Our operations in Canada, the US and international locations—our entire footprint—are now carbon neutral, making TD one of only a few banks in the world to reach this goal. One of the ways we’re continuing to reduce our carbon footprint is through our ability to employ sustainable design and building practices while using energy resources wisely. By jointly participating with First Capital in the redevelopment of the Morningside site and constructing a TD branch to meet a LEED standard, we’re able to leverage common requirements such as site preparation, erosion control and waste management while also mutually aligning our environmental goals and objectives.” Papagiannis cites a shopping center where First Capital put an aggressive recycling program in place as part of its waste diversion and recycling strategy that was quickly embraced by the tenants of the center. “We want to make it clear that as partners, together we can contribute to the community—the local community where we operate, but also the broader definition as well. Real estate is still all about location, location, location. But we’re trying to show that you can have not only the right location but also the right development at that location.” www.firstcapitalrealty.ca
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Detour Gold Corporation
Keith Regan learns how the location of Detour Gold Corporation’s Detour Lake property makes it an excellent candidate for relatively inexpensive development and why this is a great time to be constructing the mine
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etour Gold Corporation’s president and CEO, Gerald Panneton, has been a geologist in the mining industry for more than two decades, much of that time spent working with major precious metal companies such as Barrick Gold in Canada, but with experience in finding and developing mines as far afield as China and Tanzania also under his belt. So when he had the opportunity to pursue the exploration and development of a gold asset at Detour Lake, Panneton was instantly intrigued. After two hectic months of due diligence, Panneton and his team signed a purchase agreement with Pelangio Mines Inc. in August 2006 to acquire a 100 percent interest in Detour Lake. Within six months Detour Gold Corporation was staging an initial public offering that raised C$35 million. Four years later the company had a market capitalization of approximately C$1.2 billion. “It’s all about the quality of the asset,” Panneton says. “When we first looked at it, we saw that the potential was there to find a lot more than the existing 1 million ounces near the surface. I personally thought we could easily define 5 million ounces with bulk mining open-pit potential.”
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After 330,000 meters of drilling by the company, the size of the deposit at Detour Lake has exceeded even the company’s own initial expectations. The site had been previously mined from 1983 to 1999, mainly by Placer Dome, producing 1.8 million ounces of gold, and it was shut down when it was no longer economical under then-depressed gold prices. Now Detour Lake has an open-pit mineral reserve of 11.4 million ounces of gold. With the largest undeveloped gold reserve in Canada, the company is poised to begin construction on the mine late in 2010. A recently completed feasibility study showed the potential for 16 years of mine life, and average gold production is expected to be about 649,000 ounces annually at a total cash operating cost of US$437 per ounce. Once construction is completed, the company believes it can operate the mine at a costeffective level, thanks in part to the open-pit approach it plans to utilize, the proximity to existing infrastructure, and other factors. The fact
that hydroelectric power is close by and available is a major plus for the project in terms of cost savings. The low-cost hydroelectric power will be used as an energy source for the SAG [semiautogenous grinding] and ball mills and other mine machinery. The mine site is within 180 kilometers of a hydroelectric dam, Panneton notes, which not only boosts the mine’s profile but also aids in its sustainability. “If you put this same project in Nevada [i.e., if the project were operating with diesel generators], the operating costs would go up dramatically just because of the power costs.” Construction of the mine, meanwhile, could not come at a better time. With much of Canada’s major mine-building boom of recent years— fueled by widespread development in the oil sands region—having cooled considerably, the slowdown has helped put a strong supply of mining talent and heavy equipment on the market. “When you combine all that with the current rise in gold prices, if you ask me when was the best
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time in my career to build a gold mine, I would say that right now is the best time,” Panneton says. “There is skilled labor and available equipment out there, and the price of gold is at an all-time high.” According to the current schedule, Detour Gold anticipates starting construction of the mine by late 2010. The main construction period is estimated at 27 months followed by plant commissioning estimated to commence in the first quarter of 2013—extremely fast by industry standards, notes Panneton. “A lot of projects don’t progress nearly that quickly, and certainly projects of this scope almost never come on line that fast.” The project will require a number of permits from both the provincial and federal governments. Subject to obtaining certain permits and completing Impact Benefit Agreements with the Aboriginal communities, the company will make the construction decision. It doesn’t foresee any issues with the permitting process, as the site has a “brownfield” status (it has
been previously disturbed by mining). Most of the planned infrastructure, along with the proposed open pit, is located on a mining lease, which will save time in getting the permits. An existing tailings facility is permitted and can be used in the first year of the operation prior to expansion. The mine is expected to create over 1,000 indirect jobs, which is highly significant for the economy of northern Ontario. There are only a handful of deposits in the world capable of producing 600,000 ounces of gold annually with investments of approximately C$1 billion, and Detour Lake is one of them. “Gold remains a precious and valuable metal, and the supply is decreasing worldwide,” Panneton says. “I personally believe that gold prices could continue to escalate over the next year or two. The timing is right for us, and we hope to be able to say a year from now that we are well under way on construction of one of the largest gold mines in Canada.” www.detourgold.com
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Gino Levesque, vice president of Wabush Mines, tells April Terreri about his methods for improving relationships within a workforce containing both union and salaried employees
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ot so long ago, going to work at Wabush Mines in Labrador was not a very pleasant experience. The relationship between union and salaried workers had long been tense and distrustful. But all that is changing since Gino Levesque took over as vice president and general manager of Wabush. “We’re trying to find ways to turn the business around by changing the culture so we can usher in new momentum to be more flexible and more competitive in the market,” says Levesque. Wabush mines iron ore and then processes it into concentrates in its extensive facilities. It then transports the concentrate by rail on its company-owned and -managed Arnaud Railway to SeptÎles in Quebec, where the concentrate is manufactured into pellets. Wabush has the capacity to produce 6 million tonnes (metric tons) of iron ore pellets annually. Levesque reports that the company’s annual revenues are $500 million and that Wabush employs about 800 people. One of the striking characteristics of the employees that Levesque noticed when he took the helm was the tense and troubled relationship between union and salaried workers. He recognized that reconciling this situation should be the first area of focus, and he set to work with enthusiasm and diligence. “We’ve been working on having more open communication between the two parties and more transparency,” he explains. “This meant that managers would spend time being on the floor with workers. We also wanted to make sure that every one of our employees understood what our company vision is going forward, because you really can’t change the culture and bring people together if they don’t know that the reason they need to get along better is so the company can continue to prosper and be competitive.” To bring about the culture change, Levesque realized he needed to establish a sense of urgency to make employees understand that change was required or the company could face ongoing trouble. Once this sense of urgency was established, he was able to implement new key performance indicators (KPIs) and improve communication between all parties. “I pointed out to them that the company was operating under a high cost structure, and that this required bold moves so we could all achieve a common goal,” he says. One of the points of the new philosophy Levesque made certain to drive home was that he didn’t expect everyone to always be in agreement with any issue under discussion. “If someone disagrees, we want them to feel free to state that and to also explain why they disagree. Because if you’re not sharing with others the reason why you disagree, we’re stuck in a difficult communication mode,” he says. And the lack of communication between the parties was one of the major obstacles to progress. Levesque reports that initial reactions to this new open communications approach were positive. “The employees found it interesting to have access to people who have an influence on them and the future of the company. Although they like this approach, it works for a short period of time before they want to see some results relative to the new conversation that was going on.”
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It was difficult at first, admits Levesque, because at the time he took the helm the international economic downturn had just begun to take hold. “This meant we had to make some very tough decisions initially that involved slowing down our operations and laying people off. We had several meetings at which we shared with salaried and union workers why we were making these tough decisions—and we were willing to be challenged by them. Of course, the decisions were not popular with them at the time. But they’re beginning to believe in what we’re trying to do for the company, because they see that we’re delivering in line with what we were telling them.” Part of that delivery involved rehiring about 95 percent of the people laid off the previous year. This decision was a major factor in beginning to instill trust. “It’s very difficult to build a relationship of trust, which is very fragile,” reports Levesque. “But today that relationship is stronger than it was before.” He recognized how imperative it was to have every employee—the journeymen, mechanical and electrical personnel, operators and managers—understand that each employee has an important role to play within the organization. In addition to training programs for managers, Wabush has instituted new KPIs so that every employee knows where the company is and where it needs to be. Levesque notes, “We reward our people when we beat production and cost numbers relative to the KPIs—even if we struggled through a tough year,” he says. “So all these initiatives together help us demonstrate to our people that we’re delivering the results.” Levesque assures that employees know the impact of their contributions so they know their decisions are also important to the progress of the company. Another situation facing Levesque early in his tenure was dealing with renegotiating the union contract. “During that time, we were at the end of the union labor agreement and were beginning negotiations. I realized there were many things that
needed to be improved, and if we were all going to be able to work together to change the confrontational mode to one of collaboration, I needed to use the negotiations as an opportunity to help everyone understand the reasons we had been inefficient, and how important it was for everyone to bring new ideas to the table that could improve our business approach. I recognized that we needed to be open with the union demands while trying to produce a win-win deal that could result when people realized we were not taking advantage of the tough times. We finally have an agreement with the union, after 10 months of negotiations, which will give me more tools to improve the efficiency of the company. The union employees feel they got a good deal from the company, and this is probably our best asset for the coming years.” With a strong and united workforce to back it now, Wabush is engaged in developing an additional customer base in North America and overseas, pursuing new opportunities in China, Europe and Japan. It is also busy working on innovative ways to leverage its extensive holdings, such as its railway and material handling equipment at the Port of Sept-Îles. For instance, the company has signed a contract with Consolidated Thompson—a mining company in northern Quebec—to transport 8 million tonnes of that company’s concentrate on Wabush’s Arnaud Railway to the port. “We’re also working with other companies to develop business to handle their railway transportation to the port, where we will prepare their ocean shipments using our material handling equipment.” The future looks bright for the company, says Levesque. “We plan to operate this mine right into 2030. A capital investment project worth $40 million will allow that to happen because we’ll be able to utilize more of the iron ore in the mine by reducing the manganese with the new manganese-reduction equipment we’re installing that will help extend the life of the mine.” www.cliffsnaturalresources.com
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