Aggregate Potenial in British Columbia

AGGREGATE

A Look at the Aggregates Industry

The Aggregates Industry and the Swamp Point Project are compelling for the following reasons:

Essential Resource - Aggregates resources have played an integral role in global society for thousands of years and will continue to do so. Aggregates remain a necessary building material and are the principal component of concrete and asphalt.

• Concrete is 81-85% aggregates
• Asphalt pavement contains approximately 95% aggregates

Well-established and Stable Industry - The Canadian construction aggregates industry sector accounts for the largest proportion of the non-fuel minerals industry.

Quality of Product - BC is considered to have access to the best aggregates in the world. Preliminary sieve analyses of the Swamp Point Property aggregates have shown a high quality construction aggregates.

Correct Specifications - The specifications for concrete and asphalt pavement have become more rigorous in recent years as engineers seek to improve the durability of their products. As a result, not all bedrock or gravel can be used for concrete or asphalt. Individual rock fragments must be hard, tough, chemically stable, free of deleterious elements, and have the right shape, surface texture, porosity and density. Swamp Point aggregates comply with the required specifications.

Steady and Growing Demand - Aggregates demand mirrors population growth, which in turn demands new capital expenditures and the ongoing need for repair and replacement of infrastructures.

• US and Canada are the highest consumers and producers of aggregates in the world.
• Ontario and Quebec are Canada's largest producers and consumers of construction aggregates. British Columbia is a strong third in the sand and gravel category at 30 million tonnes per annum.

Supply Shortage - Traditionally, demand for aggregates is mainly local or regional and influenced by trends in domestic construction. Shortage of gravel exists in most urban areas in North America due to legislated sterilization. Today, as local supplies are mined out or closed down for sterilization and other higher land value uses, demand must be satisfied by alternate sources of product.

• In the Greater Vancouver Regional District (GVRD), old pits are running out and no new pits have opened during the last 7 years. Most potential sites have been developed for other purposes. For example, Westwood Plateau could have supplied the Lower Mainland with gravel for centuries if it were not covered with residences.
• GVRD's experience is common to all urban areas that have quarries near neighbourhoods and other commercial developments.

Acceptance of Alternate Sites - Aggregates operations are being displaced farther away from the market areas that they serve - society is willing to pay the extra cost of a farther site, in order to avoid unsightly quarries in their own backyard, i.e. the "NIMBY" syndrome. Studies show that trends toward urbanization and growing concerns associated with mineral extraction present opportunities for coastal Canadian aggregates producers already found in Port Alberni, Bella Coola and Sechelt.

Acceptance of Shipping as an Alternate Mode of Transportation - International bulk shipping of aggregates is no longer unthinkable and in fact has been practiced in many areas in Canada. In BC, large-volume ocean transportation facilities have been used for many years to supply high-quality aggregates or high-calcium limestone.

• The Texada Island operation produces and ships raw material to cement and lime producers on the Lower Mainland and to Washington State, USA.
• Another example of a coastal operation is in New Brunswick where granite aggregates are being shipped from a coastal quarry down the eastern seaboard to serve markets as far as South America.
• Canadian Steamships is increasing its fleet by 8 Panamax self-loading/unloading ships for specific use in the Canadian aggregates industry.

Export Opportunities - Canada is US's largest aggregates import partner (65% in construction sand, gravel and aggregates). Mexico is a distant second at 15% as its aggregates are considered soft and not long lasting.

California - California is experiencing major growth, is the lead user of aggregates in the US at 200 million tonnes per annum, and is currently accessing aggregates from Coastal B.C. by barges and ships. Demand for aggregates in California is driven by population growth, legislated sterilization, earthquake reinforcement programs and infrastructure projects. Four major infrastructure projects scheduled for this decade are San Francisco Airport expansion, Oakland Airport expansion, Oakland Harbour Redevelopment program, and Seismic Upgrade Program.

• Hanson Aggregates West illustrates the degree of aggregates activity in California. Its annual production of approximately 50 million tonnes per annum of crushed stone, sand and gravel makes it the second largest aggregates producer in California and the largest producer of cement in northern California.
• Lafarge West Coast claims that it is currently the largest Canadian supplier of imported aggregates material to the California market, including Los Angeles, San Diego, San Francisco and Seattle.

Washington - Washington state construction projects consume nearly 77 million tonnes of aggregates per annum. Over the past 10 years, Washington state has ranked 5th in the US in aggregates production. Current major infrastructure projects include the Seattle/Tacoma airport expansion and upgrade.

On November 28, 2002, The Victoria Times Colonist announced that Polaris Minerals has teamed with the Hupacasath and Ucluelet First Nations to form Eagle Rock Materials Ltd. to open a hard rock quarry at a 333-meter-high hill by Alberni Inlet for aggregates production. Major port infrastructure and outload facilities will be required. The partners plan to ship to California, where construction industry demand for crushed rock is high.

In November 2001, after 75 years of operation, Hanson Aggregates Mid Pacific Inc. closed down its Californian Radum aggregates operation, located in the Pleasanton area. The operation was the largest alluvial sand and gravel producer in northern California and produced approximately 25% of the aggregates used in the South San Francisco Bay area. Hansen made up a portion of the deficit by shipping aggregates almost 1,000 nautical miles from BC to San Francisco. Self-unloading bulk cargo deep-draft vessels hauling up to 64,000 metric tonnes of aggregates began delivering aggregates since late 2000 after the Port of San Francisco and Hansen entered into a 5-year contract to develop a bulk-cargo shipping terminal at the Port's Pier 94.

Lack of Substitute Products - The only substitute for newly mined aggregates is recycled aggregates from previous infrastructures. However, recycled aggregates has not gained complete acceptance. It is not perceived to be as strong since it is being replaced for a reason. In addition it does not meet the demand for new infrastructure.

Cost - Aggregates are relatively inexpensive at its source. Although aggregates may have to be crushed, screened, and/or washed to meet specifications for different uses, these processes are usually simple and inexpensive. Delivery often accounts for much of the cost of aggregates at a construction site, however proponents point to low-cost barging and shipping as an economical means of transportation. Once aggregates are loaded on an ocean-going barge or ship, it may be delivered to the highest bidder at little cost.

• Trends show that BC gravel prices have increased sharply since 1989. It is imperative that new aggregates supplies be managed effectively in order to maintain affordable pricing.
• Hanson PLC's 2002 Annual Report indicated that aggregates prices had increased by an average of almost 4%. Regionally, price increases in the West have been higher than other parts of the North American continent.

Economic Opportunities for Northwest BC - The Swamp Point Project represents an opportunity to support sustainable, innovative and broadly based renewed economic development activity for Northwest BC. For example, it could play a part in supporting the Stewart and Prince Rupert ports and rail facilities by using local infrastructure, support facilities and employment.

Vancouver 2010 – On July 2, 2003, Vancouver was selected by the International Olympic Committee to host the XXI Winter Games in 2010. This translates into significant infrastructure projects over the next several years such as arenas, dedicated sports facilities, residences, and extensive improvements and enhancements to the Sea-to-Sky highway and other roads. The Swamp Point project could become a valuable source of aggregates for all of these projects.

Example of Load Out Facility