Hammerstone Corporation

CALGARY AGGREGATE PRODUCER IS HELPING CUSTOMERS DISCOVER
“THE LIMESTONE ADVANTAGE”

Jun 21, 2010

Komatsu productive equipment and committed dealer support

In most of the world, limestone is the preferred aggregate for construction purposes such as road subgrade, building pads and bulk fill, as well as for making concrete and asphalt. But in the Athabasca oil sands region of Alberta, limestone is the new kid on the block when it comes to construction aggregate.

That’s something that Hammerstone Corporation, a Calgary company that owns a unique limestone quarry in the heart of the oil sands, is trying to change. Hammerstone, which was formed about a year ago to take over the former Birch Mountain Resources, has a 3,600-acre quarry just north of Fort McMurray. It has about one billion tonnes of limestone (estimated to be a 50-year reserve) at or near the surface. It also has permits and leases for an additional 700,000 acres in and around the oil sands region.

“Due to geological formations, the sources of aggregates at the surface in northeastern Alberta are primarily alluvial gravels,” said Hammerstone President and CEO Terry Owen. “As the oil sands region began to boom, it was natural for oil companies and contractors to turn to such readily available material for construction aggregate.

“However, we believe limestone is a superior product and a cost-effective alternative to alluvial gravel for most construction-related projects,” he explained. “Limestone does cost more because of the added expense to drill and blast, but the long-term costs are significantly lower because it lasts longer and needs less attention. Right now, we’re working to demonstrate this ‘limestone advantage’ to customers throughout the oil sands area.”

Making it the “go-to” aggregate in the oil sands

One of the prime differences between limestone and alluvial gravel is the shape of the aggregate. Alluvial gravel has been rounded over time by water, whereas limestone starts out as a mass of hard rock.

“To get limestone aggregate, you have to drill, blast and crush it, so you end up with a product that has 100-percent fractured faces,” explained Owen. “Compare that to alluvial gravel, which starts out rounded, so even after crushing, the aggregate still has some rounded faces. Fractured faces are superior because they bind and interlock together more effectively, especially when coupled with limestone fines, a byproduct of limestone crushing that has cement-like properties, which further aid strength.”

As a result, Owen says a limestone-based road has a nearly impermeable surface that sheds rainwater and snowmelt, resists rutting and potholing, and remains smooth for a long time. On the other hand, he says an alluvial gravel road requires frequent maintenance to control ruts and potholes that develop quickly when water permeates through the less-dense roadway

“The benefits of a smoother, longer-lasting road are obvious. The roads themselves don’t require as much maintenance, which is a cost-savings in itself. But even more important, trucks can run faster, which increases productivity. The trucks also take less of a beating, so the frame and tires last longer and fuel efficiency is improved, all of which contribute to lower ownership and operating costs.”

Owen says getting contractors to consider changing to a limestone-based aggregate has been a marketing challenge and has required customers to change their specifications (for example, allowing fines, which are a good thing in limestone, whereas a lot of sand in gravel is not a good thing), but he says more and more are now turning to limestone.

“We recently got a new, major customer at the Kearl Oils project to switch to limestone aggregate. Now that we’ve broken through, we’re confident that additional customers will come to recognize the superior performance characteristics of limestone. We believe we’re on the verge of becoming the ‘go-to’ aggregate product in the oil sands region.”

Beyond construction aggregates

Roads and other building projects where a solid base is preferred are not the only uses that Owen foresees for limestone in the oil sands region. “Roads and building pads, that’s where we offer what we call ‘construction aggregate’ and improving that market is Phase One of our business plan. Phase Two will be installation of a lime-production facility. Phase Three will be building a landfill associated with the quarry.”

Today, Hammerstone can produce up to about 5 million tonnes of limestone a year from its quarry. Its plan is to increase that to about 20 million tonnes per year to meet what they expect will be future demand. The company currently has about 70 employees, all but seven of whom work at the quarry near Fort McMurray, which is a round-the-clock operation.

“Different layers of our quarry have different limestone characteristics that lend themselves to different markets,” Owen explained. “For example, one layer has a deposit high in calcium carbonate which is excellent for flue gas desulfurization (removing sulfur dioxide from the exhaust flue gases of power plants). Another has limestone with an ultra low permeability factor that would make it ideal as a liner for tailing ponds, which is another market we hope to enter in a big way in coming years. We’ve also done a lot of testing on a third layer of our rock and we’ve found that it’s ideal for making concrete and asphalt, another market we’ll explore.”

Owen says there is about an 80- to 100-kilometre distance within which hauling aggregate is economically feasible. With its location in the heart of the oil sands region, the Hammerstone quarry is ideally located to serve most of the oil producers in the region.

A team that works together

Before joining Hammerstone when it started up a year ago, Owen was a partner in a large law firm and then served as President of Trimac Transportation Services from which he retired in 2007. “After a little more than a year of ‘retirement,’ ‘semi-retirement’ or ‘mid-life sabbatical,’ whatever you want to call it — my wife one day asked me if I was going to get a job ‘today.’ It was her way of saying she was tired of having me around the house. That’s when I got the call about Hammerstone, so here I am.”

In addition to Owen, other key employees at Hammerstone’s Calgary headquarters include Engineering/Sales Manager Russ Gerish; Sales Consultant Allan Jones; Director of Development and Field Services Scott Rose; Chief Financial Officer Shankar Nandiwada; Office Administrator Liz Lade and Assistant Ana Caraus; Geologist Gerald Kozdial and Contract Geologist Glen Depaoli. Leading the quarry operations in Fort McMurray are Quarry Manager Randy Snow and Aggregates Manager Vince Martinello.

“Everybody says this to the point that it’s a cliché, but we believe we’re really a team and that we all work well together,” said Owen. “That extends beyond the managers. Randy and Vince have created an incredibly positive environment at the quarry. They walk the walk and lead by example. If that means driving a truck or crawling under a screen deck to make a repair, that’s what they do. We’re really proud of our quarry crew because the guys work together; they work safely and they work productively.”

Hammerstone’s quarry work force has grown from nine to almost 60 in a little more than a year, and according to Quarry Manager Randy Snow, there’s no end in sight.

“Demand for aggregate material is very high throughout the oil sands region. Right now, we have the quarry and a billion-ton reserve at the surface. Up next, we’re going to start what we call ‘The Hammerstone Project’ which will expand our pit by five kilometres. It’s a massive expansion that will give us the space to build the lime plant.”

To reward and provide additional incentive for a topnotch work force, Hammerstone instituted a profit-sharing program ensuring that quarry workers participate in the company’s financial successes.

Equipment and dealer support

Komatsu equipment from SMS constitutes the lion’s share of the Hammerstone quarry’s mobile equipment fleet. That fleet consists of seven 40-ton HM400 articulated trucks, a PC800 hydraulic excavator, two WA500 wheel loaders, a WA450 wheel loader and a D155 dozer.

“The trucks have worked very well for us,” reported Snow. “Eventually, as our production increases, we intend to go to larger, rigid-frame trucks, but for now, the HM400s have done a great job.

“All our Komatsu units have performed well,” he added. “The PC800 does an excellent job of loading the trucks. The WA500 is a universal machine for us and has been very versatile and reliable. As for the D155, there’s nothing not to like — it’s a strong pusher, you can set the pitch to ensure a full blade, and it’s an outstanding ripper. All in all, our operators and mechanics are happy with our Komatsus, and because productivity is up, management is happy too.”

As good as the equipment has been — and Snow says it’s been very good — both he and Owen say the service that Hammerstone gets from SMS has been even better.

“We basically started from scratch to determine what equipment and what supplier we wanted to work with,” said Snow. “Why did we choose Komatsu and SMS? The commitment we got from our SMS Sales Rep, Ivan Magdic, is definitely one reason. No question or concern went unanswered. Since then, we’ve found SMS’ service to be second to none, and service is everything to us. We’re in a productive operation. We can’t afford downtime. SMS understands that and acts accordingly.”

“I can say unequivocally that SMS has met and exceeded all of our expectations,” agreed Owen. “For example, they recently instituted a consignment parts operation for us to ensure that we always have common wear parts and filters onsite at the quarry. We’ve found the combination of equipment and service to be superior to other dealers we have worked with. It’s definitely a relationship that we value and look forward to continuing.”

Past and future

Hammerstone works closely with First Nation and aboriginal groups throughout the oil sands region to ensure a balance between development and maintaining native lands. They’ve set aside more than a fourth of their quarry to be a “Quarry of the Ancestors,” which recognizes an archeological find where aboriginal people made arrows and tools thousands of years ago.

“It’s an important part of the heritage of all Canadians and we’re pleased to be able to work with various aboriginal groups to preserve our past as much as possible,” said Owen.

As for the future, Owen says the sky’s the limit.

“Five years down the road, we hope to be working with all the major oil sands companies and be the established leading supplier of construction aggregates in the region. We also plan to be producing quicklime by then, and we expect to have other associated operations, such as a landfill. Our goal is to grow significantly, yet maintain our culture of being a place where all employees are highly valued and individuals can still make a difference.

“Every business wants to be successful by helping its customers be successful,” he added. “At Hammerstone, we’re absolutely convinced that we can do that. All we want is the opportunity to prove the superiority of our product to customers throughout the territory. Once they try limestone aggregate, we believe the advantages and cost-savings will be obvious.”