Aggregates Manager Digital Magazine
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AGGREGATES MANAGER / July 2016 29 ton. Figure 4 also illustrates Quarry E has an average sales price that is twice that of the other two quarries, but much of this ad- vantage is offset due to significantly greater mining costs. Why? Because this quarry produces a high-value product that is both capital and labor intensive. Figure 4: Financial Performance Overview of 600,000-Ton Quarries The reason why Quarry E is not valued at twice that of Quarry D is two-fold. Most significantly, Quarry E's reserves will be depleted in approximately 10 years. A second contrib- uting factor is the fact that there is a new competitor capa- ble of producing the high-value product that will negatively impact the ability to maintain current sales volumes and raise sales prices to meet inflation. Conclusions The fair market value of a profitable quarry or mine is deter- mined by future cash flow. To the extent that forecast future cash flow is greater, the quarry's fair market value should be higher. What should be evident is using comps to estimate the fair market value of a quarry or mine based upon their annual sales volume is not a reliable method. Rather, there are numer- ous factors that need to be considered in developing an esti- mate of fair market value because value is about the amount of future cash flows. And, always remember, cash is king. AM Mike Nowobilski is president of O'Fallon, Ill.-based Mid-American Energy and Mining Services, a company specializing in mergers and acquisitions. $0.00 $1.50 $3.00 $4.50 $6.00 Quarry A Quarry B Quarry C Financial Performance ($/Ton) 0. 4. 8. 12. 16. Quarry D Quarry E Quarry F Financial Performance ($/Ton) Avg. Sales Price Cash Ops Costs Cash Margin EBITDA Avg. Sales Price Cash Ops Costs Cash Margin EBITDA LaPlant-Choate: No Job Too Tough! AEM Inducts 2014 Class into Hall of Fame Insley Manufacturing Corporation An Unsung Hero: The Dry Batch Paver Double Dude…Out Front Again! SPRIN 3 READ ALL ABOUT IT! It's only $35 US in the USA and Canada, $45 US all others. To join, call us at 419-352-5616, or mail a check or money order to HCEA, 16623 Liberty Hi Road, Bowling Green, Ohio 43402. Join online and learn more about us at www.hcea.net. Thank you for your interest and support! That's not all we do! We also feature: International Convention & Old Equipment Exposition Held annually and featuring working demonstrations and static displays. National Construction Equipment Museum and Archives A world-renowned collection, open to the public, of everything from fully restored antique machinery to 1800s literature and photographs. Join the Historical Construction Equipment Association (a non-prot organization) and receive its quarterly magazine, Equipment Echoes. Read fascinating articles about all types of old construction equipment, illustrated by beautiful historic photos. ABOUT IT! That's not all we do! We also feature: International Convention & Old Equipment Exposition Held annually and featuring working demonstrations and static displays. National Construction Equipment Museum and Archives A world-renowned collection, open to the public, of everything from fully restored antique machinery to 1800s literature and photographs. Join the Historical Construction Equipment Association (a non-prot organization) and receive its quarterly magazine, Read fascinating articles about all types of old construction equipment, illustrated by beautiful historic photos. JOIN HCEA TODAY! READ ALL ABOUT IT! Untitled-38 1 10/22/15 1:27 PM