Mining presents business opportunity for Aecon

Resource projects in northern Ontario, iron ore mining in Labrador and shale gas extraction all present opportunities for Aecon Group Inc. (TSX:ARE), according to its executives, which recently inked an $85-million deal to work on Vale Inco’s Atmospheric Emissions Reduction project at its Sudbury, Ont. nickel smelter.

Aecon currently has a “standing service agreement” with Vale Inco, said John Singleton, senior vice-president of Aecon Mining.

“We do a variety of things that come up in the operations of the mine,” he said during Aecon’s Investor Day, held last June at the King Edward Hotel in downtown Toronto.

“As important as the work we’re doing is the opportunity to build a relationship with Vale, they’re a major player and we’re hoping to do a lot more work for them.”

On Aug. 2, Aecon announced it was awarded an $85-million contract at the nickel smelter Vale SA inherited when it acquired Inco in 2006. The work will include construction of reinforced concrete foundations, pipe rack foundation and site preparation work for the process plant, plus detailed excavation and backfill for the structures. It’s part of Vale’s plan to reduce sulphur dioxide emissions by 70 per cent, which will cost up to $2 billion.

In addition to Vale, Aecon’s mining division also works for Suncor Energy Inc., Syncrude Canada Ltd., BHP Billiton and Xstrata.

During the Investor Day, Singleton said the mining group had $145 million in revenue in 2011, or five per cent of Aecon’s total sales. One future opportunity is in Labrador, where resource firms are mining iron ore.

“Folks are getting established in Labrador and the opportunities out east are big,” he said. “Iron ore has really taken off and it’s a good connection for the big business we have established in Fort McMurray” due to the employees from Newfoundland and Labrador who travel to Alberta to work in the oilsands.

“We have a lot of key people who would like to relocate back,” he said.

Another opportunity is in the Ring of Fire region, in Ontario’s James Bay lowlands, with its deposits of chromite, nickel, copper, platinum and palladium. The mines and necessary infrastructure would spur demand for a variety of general contracting services, said John Beck, Aecon’s president and chief executive officer.

“In an opportunity like the Ring of Fire, we would have the capacity internally to build the access roads, to bring in the utilities, the services, the electricity, the water, the infrastructure that is required, the raw materials that will be required to just get into that site,” Beck said in an interview after the Investor Day sessions.

“We would then be able to start removing the overburden to prepare the site for whatever the large installations would be. We might have to build a water treatment plant. We might have to build a co-generation facility so there could be power there.”

During the sessions, Aecon officials briefed investors on its One Aecon strategy, which involves integration of operations of the various firms Aecon has acquired.

Aecon “gained a strong mining presence in Eastern Canada” through its acquisition of Leo Alarie and Sons in late 2007, said chief operating officer Terri McKibbon.

The One Aecon initiative started after the 2010 acquisition of Cal Harbor, McKibbon said, noting the firm inherited a large fleet of mining equipment from Cal Harbour.

“What this integration initiative was designed to do was to break down silos and build bridges between our business units,” he said.

One of the business units is the Industrial Central division, which originated in the 1970s as mechanical-electrical contractor Nicholls-Radtke Ltd. of Cambridge, Ont.

Ian Turnbull, senior vice-president for Aecon Industrial Central, said in addition to oilsands clients, his division does work for Ontario Power Generation, Bruce Power and Union Gas. During the sessions, Turnbull told investors his unit works on pipelines, and one business opportunity lies in the discovery and production of shale gas across different parts of North America.