Since publicly announcing its plans to construct a slag reprocessing facility in Anaconda in January 2016, Premier Industries has played its cards very close to the chest. It makes the occasional grand pronouncement such as creating “700 new jobs," “paying $200 million-$225 million in taxes,” and, my favorite, saying it may build Deer Lodge County a “fairground” from its enormous profits. But, Premier has never publicly described the nature of the process it plans to use, has never described its emission control systems, or demonstrated that it has a viable business plan. Occasionally, Premier’s spokesman, Rick Tabish, divulges various statistics about the project and when you add them up, you quickly discover that -– well, they don’t add up.
In 2015 Tabish was part of an entity which filed a grant application with the Montana Department of Commerce seeking funds for additional metallurgical research into slag reprocessing. Commerce did not fund the project. The project application indicated the plant would have 10 furnaces processing 700 tons of slag per day yielding 51,100 tons of pig iron and 166,075 tons of a silica-based proppant per year. Based on those production levels, the application stated the project would conservatively sell $20 million of pig iron and $80 million of fracking proppant. Those numbers were entirely bogus. To reach that goal the project needed a pig iron price of $391 per ton during a year when the average price of pig iron was about $280. On the proppant side, the projected sale price was $481 per ton, an amount about 10 times greater than what other silica proppants were selling for at the time.
I tested the economics of that proposal with several models using the product prices Premier disclosed at a November 8th public meeting in Anaconda and came up with an income range between $65 million and $67 million or, 33 percent below the $100 million claimed. Instead of actually showing conservative numbers in line with a well thought out business plan, the numbers provided to the State were grossly exaggerated.
Premier’s products are commodities sold in highly competitive national and international markets where the individual producer has little control over the price of the product. When you sell commodities, business success is built around controlling operating costs and living with the market price. In this type of situation the prudent developer minimizes his expenses and bases his business plan on low commodity prices.
Tabish has done just exactly the opposite. He throws manpower levels around (700 employees) as if he was showering a new bride with rice and prices the products at the high end of the market, not the low.
Also, Premier is selling its products to industries (steel and oil/gas) which are also commodity producers. Their success is, likewise, based on cost control and they will use the cheapest product available that meets their needs. The successful business does not pay for “filet mignon” when all they need is hamburger.
On November 8th, Tabish also told the audience, the slag plant would reprocess 5,000 tons of material per day and gross $1.0 billion per year in sales.
In order for the plant to produce $1.0 billion of income, every ton of slag being processed needs to generate $548 in sales when Premier’s own economic model anticipates $300/ton prices for proppant and pig iron, two products which make up 96 percent of the total tons sold.
Again, I recalculated Premier’s gross income claim using its projected recovery rates and sale prices for pig iron and proppant. The highest number computed was $668 million, again about 33 percent below the $1.0 billion Tabish cited.
All of this has led me to conclude that Premier’s numbers are for show with little correspondence with reality, designed to overwhelm the audience and make the project “to good to be true.” It also suggests that Premier doesn’t have a reliable feasibility study for the project.
The sad thing is that Tabish and Premier have never needed to exaggerate. Anaconda is very open to industrial development. Why not tell the truth? Explain the process to the community, talk honestly about its environmental risks and the steps being taken to mitigate them, and keep the job creation numbers and tax payments in the realm of reality.
Instead of treating the people of Anaconda as if they were partners with Premier in improving the economy of the area, Premier has treated them as if they were just a bunch of suckers to be hustled and, unfortunately, has sown the seed for a legacy of distrust.
-- John S. Fitzpatrick, of Georgetown Lake and Helena, is an Anaconda native. He holds a bachelor's degree from the University of Montana, and a master's degree and doctorate degree from Ohio State University. He worked on the team that did permitting for Colstrip Units 3 and 4, and the 500KV transmission line. He was deputy budget director for state of Montana under Gov. Tom Judge, and then established a consulting business. He has worked in the mining industry, and also permitted coal mines, metal mines, electric transmission lines and subdivisions. He was responsible for permitting the David Gates Generating Station at Mill Creek, near Anaconda; Beal Mountain Mine near Fairmont; and Montana Tunnels and Basin Creek in Jefferson County. He also has extensive experience with legislation.