ANLThe Glencoe Project The Glencoe project consists of constructing a cement manufacturing facility in Cape Breton, Nova Scotia. The project will utilize the extensive limestone reserves on the Glencoe property estimated at over 500 million tons. These reserves are more than sufficient for 100 years of operation of a 2 million ton per year cement plant. The reserves are located on 1,296 hectares of land just off highway 105 approximately 40 km (30 minutes drive) East of Port Hawkesbury. The site has good road access, a rail line runs south of the site and a high voltage power line is available as well. The clinkering plant could be built near the limestone quarry to optimize transportation costs. The clinkering plant could consist of a state of the art, precalciner kiln system, complete with vertical roller mills for raw material drying and preparation and solid fuel processing. A two-string, five stage preheater would be utilized for maximum fuel efficiency. All the raw materials are available locally, either on the site (limestone) or nearby (shale). The plant could be fired by a combination of solid fuels including coal, coke and wood wastes. The cement grinding plant could be collocated with the clinkering plant or located at the port. There are pros and cons to each location and the site selection will be finalized as the project develops. The cement grinding facility will utilize vertical cement mills for low power consumption and the best utilization of space. Gypsum (approximately 4% of the product) is available locally and will help to keep raw material costs down. The overall project is expected to cost some $800 million dollars for the Nova Scotia portion which includes a fully functional cement plant and shipping facilities. Straight operating costs are expected to be in the C$60/t range with a breakdown as follows: Variable Costs Subtotal Variable Costs Fixed Costs Labor Maintenance Other Subtotal Fixed Costs Total Operating Costs1 Raw Materials Power Fuel $7.00 / ton $10.00 / ton $12.00 / ton $29.00 / ton $12.00 / ton $12.00 / ton $7.00 / ton $31.00 / ton $60.00 / ton Page 12 of 15 Cement would be shipped by ocean going vessel to one or more import terminals along the New England sea coast and south. There will be a small local market in Nova Scotia that would be serviced by truck. Cement was selling for $111 a ton (US average) in 2016. Cement prices are expected to stabilize around $110 per ton as imports increase to absorb additional consumption. US cement manufacturing costs are increasing in the wake of the new environmental regulations. Cement companies usually operate with a gross margin in the 25% range when capacity is fully utilized. Summary and Conclusions The US cement consumption is climbing out of the worst recession in over 50 years. Cement consumption is expected to continue to grow year over year and possibly by double digits in future years. The delayed comeback has increased pent-up demand and should create an under supply situation in the coming years. Many older, less efficient cement plants have been closed during the recession, the majority of which are not expected to restart again. Some plants that have continued to operate through the recession may not be able to meet the new, much tighter environmental limits the last of which will come into effect in February 2018, possibly causing additional plant closures. The US EPA has imposed much stricter environmental regulations on the US cement industry. In addition, CO2 has now been classified as a pollutant in the US. Although the EPA has not taken action to date to control or reduce CO2 emissions, the ground work has been laid to do so. California has implemented a cap and trade system for CO2 management and reduction that could still be adapted by other states. It will be very costly to construct new cement plants in the US with these new regulations in place. For these reasons, the PCA is predicting a cap on domestic production of cement of between 100 and 110 million tons per year and a growing need for imports. The New England market is particularly attractive due to its high population density close to navigable water and the lack of existing cement production facilities. Including New York state and New Jersey, the combined population of over 40 million is greater than all of Canada with a total cement capacity of only around 3.5 million tons today. The northeastern US has been a major importer of cement in the past and appears to be positioned as such in the future as well. Canada has a favorable position in regards to US imports due to the countrys close trade ties, proximity, stable government, and ability to supply a consistently sourced, quality product. The Glencoe project is favorably positioned as the closest plant to the New England market with deep water access. The business model appears to be validated by the McInnis project. The Glencoe project will, however, be closer to market. Both of these projects will incorporate complete new Greenfield projects with all state of the art equipment and the best environmental performance. Many of the existing US cement plants are of older design with less efficient operation and larger carbon footprints. Undoubtedly there will be a need for vast quantities of imported cement in the US market. This need will become very clear in the years to come. The lead time required to build a cement plant requires early action to be taken to seize the market. The time to build the Glencoe plant is now. 1) Excludes SG&A, amortization, depreciation, and taxes Page 13 of 15 John Kline is a Chemical Engineer with over 40 years of experience in all aspects of the cement industry. John has lived and worked in the US, Peru, the Philippines, Jamaica, Canada, and France. John spent 21 years with Lafarge prior to his retirement in 2012. The last 18 years with Lafarge were in various executive positions, including; as Vice President of Engineering and Technology, based in Montreal and covering the 14 Lafarge cement plants in the US and Canada, and Vice President of Manufacturing for Lafarge in Western Canada, managing four cement plants.