SWARS 2017 Semi-Annual Meeting “Leader-Ship” – The Shipper Perspective Dale Diulus, P.E., Senior VP Salt River Materials Group October 5, 2017 SWARS Semi Annual Meeting “Leader-Ship” – The Shipper Perspective 1 “Leader – Ship” – The Shipper Perspective » Salt River Materials Group/ Phoenix Cement Company » SRMG’s Pozzolan Business » Importance of Rail, Truck & Logistics Partners » The Reward: Putting All of the Pieces Together SWARS Semi Annual Meeting 2 “Leader-Ship” – The Shipper Perspective Leadership SWARS Semi Annual Meeting 3 “Leader-Ship” – The Shipper Perspective Salt River Pima-Maricopa Indian Community • The Salt River Pima-Maricopa Indian Community (SRPMIC) is a sovereign tribe located in the metropolitan Phoenix area (Scottsdale) • The Community proudly owns and operates several successful businesses Entertainment Development Heavy Industry SWARS Semi Annual Meeting 4 “Leader-Ship” – The Shipper Perspective Evolution of SRMG: Salt River Materials Group Phoenix Cement Company (PCC) Salt River Sand & Rock (SRSR) • SRP-MIC founded SRSR in 1980 • SRP-MIC purchased PCC in May 1987 – 30 Years Ownership • In 2003 SRP-MIC merged PCC and SRSR into SRMG • SRP-MIC Culture: 7 Generations’ Vision SWARS Semi Annual Meeting 5 “Leader-Ship” – The Shipper Perspective SRMG Supplies Ingredients for Concrete Cement is the gray powder, that when mixed with Water, Aggregates & Fly Ash makes Concrete – Portland Cement –bulk & sack – Class F & C Fly Ashes & Natural Pozzolans – Aggregates (Sand and Gravel) Cement is to Concrete as Flour is to Bread SWARS Semi Annual Meeting 6 “Leader-Ship” – The Shipper Perspective Salt River Materials Group • SRMG is a leading supplier of: – Portland and Masonry Cements – Fly Ash Class F & C – Natural Pozzolans – Construction Aggregates in Metro Phoenix – Construction Landfills in Metro Phoenix – Light Weight Aggregates from Bottom Ash – Natural Gypsum Products • 325+ Employees; 25% Native American • Sales in 8 States SWARS Semi Annual Meeting 7 “Leader-Ship” – The Shipper Perspective Construction Aggregates (Sand & Gravel) Metro Phoenix Market • 7 strategic locations across the Phoenix Metro area • SRMG offers ready-mix concrete producers the opportunity and convenience to locate batching equipment on-site • Produces and sells over 3 million tons/year • Active mining at Dobson, Beeline, Higley, 67th Avenue and Glendale Plants • 4 Construction Landfill Operations Hanson Aggregates Batch Plant Arizona Materials Batch Plant Landfill Operations at Dobson Facility Glendale Aggregate Facility SWARS Semi Annual Meeting 8 “Leader-Ship” – The Shipper Perspective Phoenix Area Facilities 5 Cement/Fly Ash Terminals* + HQ + 7 Aggregate Mines *includes 4 Rail-served Terminals (2 BNSF/Open to UPRR; 1 BNSF; 1 UPRR) SWARS Semi Annual Meeting 9 “Leader-Ship” – The Shipper Perspective Cement Plant ---- Clarkdale, Arizona (just south of Sedona) SWARS Semi Annual Meeting 10 “Leader-Ship” – The Shipper Perspective Clarkdale Cement Plant • Clarkdale Cement Plant opened in 1959 • Developed to supply Cement for Glen Canyon Dam • $130 Million modernization and expansion in 2002 • Doubled Capacity to 1.2 Million Tons/Year • MSHA Safety Site – 1,000 Days No Lost Time Accidents • AZ Central RR serves with connection to BNSF at Drake • Cement Sales in Metro Phoenix & Northern Arizona Glen Canyon Dam, Page AZ Type IP, Clarkdale Clarkdale Cement Plant Clarkdale Cement Plant and Quarry Aerial Sacking Operations SWARS Semi Annual Meeting 11 “Leader-Ship” – The Shipper Perspective Clarkdale Cement Plant Coal Stockpile Coal & Pet Coke Railcar Bottom Ash Stockpile Gypsum Stockpile Clarkdale Cement Plant Clarkdale Cement Plant Clarkdale Cement Plant Clarkdale Cement Plant 3000 F Degrees Inside Kiln Kiln, Clarkdale Cement Plant Preheater Tower Clarkdale Cement Plant Clarkdale Cement Plant SWARS Semi Annual Meeting 12 “Leader-Ship” – The Shipper Perspective Safety is a CORE VALUE • Priorities can, and often do, change; SRMG’s commitment to Safety NEVER changes! • Safety Commitment from All levels of SRMG: – Ownership (SRP-MIC) – Board of Directors – Management – Operations – Employees • Compliance with MSHA, OSHA, Utilities’ Standards • Housekeeping is one SRMG key to Safety Success SAFETY is One area where EVERYONE can be a LEADER ! SWARS Semi Annual Meeting 13 “Leader-Ship” – The Shipper Perspective Origins of the word: “Pozzolan” SWARS Semi Annual Meeting 14 “Leader-Ship” – The Shipper Perspective Historical Overview Pantheon in Rome SWARS Semi Annual Meeting 15 “Leader-Ship” – The Shipper Perspective What is Natural Pozzolan? • Fly Ash is mostly Silica, Aluminum, Iron & Calcium (the impurities in coal that do not burn); ASTM C-618; Class F or Class C (C is from PRB coals) • Natural Pozzolan chemistry is similar to Fly Ash; ASTM C-618; Class N • Used as concrete additive before fly ash • Glen Canyon Dam had 200,000+ tons Natural Pozzolan • Mostly from volcanic origins, not “man made” • Mined, crushed, dried, & finely ground • Makes concrete more durable • “Green” product, naturally occurring • Natural Pozzolan, in a Secondary Reaction (similar to how Fly Ash reacts), also forms more “Glue” in Concrete, making it stronger SWARS Semi Annual Meeting 16 “Leader-Ship” – The Shipper Perspective Where Does Fly Ash Come From? (Note: Fly Ash is a Man-Made Pozzolan) • Fly ash is a very fine powder residue that is captured in bag houses and precipitators by the coal-burning power plant • Utilities sell fly ash to their contracted Marketers, who in turn recycle, then sell, the fly ash for use in concrete and other applications • Fly Ash reacts in concrete after the initial cement + water reaction; Fly Ash forms more “Glue” & makes concrete stronger, denser and more durable. SWARS Semi Annual Meeting 17 “Leader-Ship” – The Shipper Perspective This is Fly Ash SWARS Semi Annual Meeting 18 “Leader-Ship” – The Shipper Perspective Magnified Fly Ash Particles Are Spherical SWARS Semi Annual Meeting 19 “Leader-Ship” – The Shipper Perspective Fly Ash Production & Distribution SRMG has Fly Ash sources in Arizona, New Mexico & Utah SWARS Semi Annual Meeting 20 “Leader-Ship” – The Shipper Perspective Fly Ash Production & Distribution Facilities in 6 Southwestern US States Railcars (Small Cube PD) Silos to Trucks (Pneumatic Trailers) to Silos at Distribution Terminals to Customers SWARS Semi Annual Meeting 21 “Leader-Ship” – The Shipper Perspective Fly Ash Production & Distribution Rail Statistics • SRMG Leased Railcar Fleet: – 40 open-top, 263k pound, steel coal/coke cars – 513 small cube PD & covered hopper, 286k pound pozzolan cars • ARI developed new prototype 3,720 cubic foot small cube PD car for SRMG (successful; now 126 cars leased) • SRMG 2017 rail = ~7,000 carloads SWARS Semi Annual Meeting 22 “Leader-Ship” – The Shipper Perspective Pozzolan Sources & Distribution Network SWARS Semi Annual Meeting 23 “Leader-Ship” – The Shipper Perspective Arizona Public Service Cholla Power Plant SRMG Facility • Continuous Fly Ash contract since 1973 (44 Years) – VISION! • 24/7 operation / Classification System (1985) • Truck & Rail; BNSF at Joseph City, AZ • +11,000,000 (Eleven Million) Tons Fly Ash Recycled (and counting!!!!) Cholla Facility Bottom Ash Screening Facility at Cholla Power Plant Cholla Auto Sampler System SWARS Semi Annual Meeting 24 “Leader-Ship” – The Shipper Perspective APS Four Corners Power Plant SRMG Facility • 24/7 Fly Ash Operations / Classification System (1997) • Bottom Ash – Raw feed for cement manufacturing • Truck Only Loading at 4C Plant (no Rail) • ~5,000,000 (Five Million) Tons Fly Ash Recycled Four Corners Beneficiation Facility Cenospheres Thickening Tank at Four Corners Loading Bottom Ash Into Truck on Scale SWARS Semi Annual Meeting 25 “Leader-Ship” – The Shipper Perspective Gallup Truck-to-Rail Fly Ash Transload Facility • 400,000 Tons/Year (3,600 Railcars/Yr); 1998 • Co-located with Lhoist; lime railed in then trucked to 4C Power Plant; Fly ash trucked 110 miles back to Gallup – VISION! • Fly Ash loaded into Railcars on Rail Scale Gallup Truck/Rail Facility for Lime & Fly Ash SWARS Semi Annual Meeting 26 “Leader-Ship” – The Shipper Perspective Tri-State Generation Escalante Power Plant SRMG Facility • Contract since 2001 • Truck & Rail; BNSF at Prewit, NM • ~2,000,000 (Two Million) Tons Fly Ash Recycled • Provide switching services for McKinley Paper Co. Escalante Facility SRMG Office Trailer & Lab with Rail/Truck Scale SRMG Railcar Mover Switching McKinley Paper Co at Escalante SWARS Semi Annual Meeting 27 “Leader-Ship” – The Shipper Perspective PNM San Juan Power Plant SRMG Facility • 24/7 Fly Ash Operations / Classification System (2002) • Truck Only Loading at SJ Plant; Fly Ash trucked to Gallup Transload for Rail • ~2,000,000 (Two Million) Tons Fly Ash Recycled San Juan Facility SWARS Semi Annual Meeting 28 “Leader-Ship” – The Shipper Perspective Salt River Project Coronado Power Plant SRMG Facility • Acquired Contract in 2016 • Truck & Rail; BNSF at St. Johns, AZ • Selling 100% of Fly Ash produced (~100,000 tons/year of Class C) Coronado Facility Coronado Fly Ash Auto Sampling System SWARS Semi Annual Meeting 29 “Leader-Ship” – The Shipper Perspective May 2017 Concrete Construction Magazine Article SWARS Semi Annual Meeting 30 “Leader-Ship” – The Shipper Perspective New Blending Units at Phoenix 19th Avenue Terminal • Railcars from Gallup (Class F Fly Ash) and Coronado (Class C Fly Ash) • Precision blending to create Class F Fly Ash from F/C blend • Meets AZ Dept. of Transportation and ASTM C-618 specifications • Net