Peterson Development Makes Rock Solid Investment

Thu April 03, 2008 - Northeast Edition
CEG



“There is money in rock,” said Bob Peterson, president of Peterson Development LLC in Pelham, N.H.

Peterson Development is a homebuilder in southern New Hampshire, where it builds upscale homes. The homes start at six figure prices and go up with no end in sight.

There are people in the area with the means and desire to have their homes custom-built with large indoor living spaces and many amenities.

Location, location, location is what real estate is all about, and Peterson’s latest building location — in Windham, N.H. — is very special. It is approximately 18 mi. south of Manchester and 50 mi. north of Boston, Mass., and has easy access to both cities via I-93.

Designated the Highlands of Windham, the development is on 150 acres of forested hills. Many of the homes will have a view of distant hills and valleys that have brilliant colored leaves in autumn. It will resemble the spectacular autumns experienced in neighboring Vermont.

There will be 57 custom homes that will start at $1.2 million. Peterson believes they will all be built within the next six years.

“I do not foresee a significant slowdown in building the homes because of the subprime mortgage problems,” Peterson explained.

That’s because people in very high income brackets are not seriously affected by periodic downturns in the economy, according to Peterson.

So what does all this have to do with portable crushing plants? Plenty. If there ever were an area where rock reigns king, it is in upper New England and more specifically in New Hampshire. New Hampshire is not the place for scrapers and pull-pans. There is very little use for such excavating equipment.

DTH, track drills, blasting powder and portable crushing and screening plants are more useful in New Hampshire. Excavators are used to feed rock to the crushers and screens.

Rock-crushing specialists often come onsite to operate the crushers and screens. Crushing onsite minimizes the need to haul rock and aggregates, because contractors can use the material onsite as soon as it has been crushed.

Exporting rock and importing aggregates is more and more costly, because the dump trucks that haul the material use a lot of fuel — and fuel gets more expensive every day.

Also, imported quarry-produced aggregates are very costly compared to crushing the rock onsite and using it as fill.

Peterson has one more cost-saving trick up his sleeve. For several years, he has been renting portable crushers and using his own staff to operate them instead of hiring a third party. He began doing this because he already had the ancillary equipment, such as hydraulic excavators, articulated dump trucks and front-end loaders, to support the crushing process, so he reasoned that he could save money by simply renting a crusher.

For five years, Peterson rented different makes and models of portable jaw crushers. All the rock that was drilled, blasted and excavated for constructing home basements, underground utilities trenches and the roads/streets built onsite was crushed for use at the site. During this time, there were 40 custom homes constructed.

According to Peterson, crushing contractors charge approximately $5 per ton to come onsite and operate crushers. For every 100,000 tons of rock crushed, the cost is $500,000.

For Peterson’s company to crush the same 100,000 tons by renting a portable jaw crusher, it costs only $100,000.

Peterson calculated this by examining the average monthly throughput for rock, based on a 5-day workweek. It averages 28,000 tons per week (assuming seven hours per day and a throughput of 200 tph). Depending on what brand of portable jaw crusher his staff is using, the monthly rate for in-house crushing is $25,000 to $30,000, or $1 per ton.

The portable power plant, an excavator and a front-end loader are used for this process, and the cost of their fuel must be added to the rental cost for the equipment. There also are maintenance costs on the rolling stock and an ownership cost. The labor involved in the crushing process includes the two equipment operators with the excavator operator also in control of the jaw crusher and a third person as the assistant crusher operator. In total, Peterson said he can conduct all the crushing in-house for $2 per ton, a savings of $300,000 per 100,000 tons.

This is a vast improvement over the cost of hauling the material off-site and purchasing stone and fill from a quarry. Peterson said that using his own dump trucks to haul the excavated rock would cost $3 dollars per ton. Buying and hauling fill materials would cost another $12 to $13 per ton.

Good Economics

Crushing the rock on the building site by bringing in a crushing specialist is good compared to the export-import method. He said it is good economics.

Crushing the rock onsite by renting the portable plant to do the crushing in-house is better, he said. It is even better economics. However, it does require that the ancillary equipment be on hand.

After several years of renting equipment, Peterson decided to invest in his own portable crusher, saying that that makes the most economic sense with the conditions Peterson will be operating under for the next six years.

“There is money in the rock I have on the Highlands [of Windham] project because there is a lot of it to be excavated and crushed. We can use it here on the site for road base and fill. With the conditions we will be working under on this project, I decided to purchase a new Extec C12+ portable jaw crusher.”

Peterson projects building nine to 10 homes each year and the building sites for the 10 homes must be prepped. Also, the streets and shoulders must be paved.

The rock is blue granite, which has a Total Hardness (Ht) equal to many types of basalt. These basalt rocks are considered the hardest rocks to be found in the United States in significant quantities. Granite is igneous with its Ht values (the higher the number the harder the rock) ranging from 100 to 160. By comparison, most limestone types have Ht values that range from 40 to 60.

The overburden that covers the in situ rock ranges from 3 to 4 ft. deep (0.9 to 1.2 m). Utility trenches and basements need to be excavated in an area that is 60 to 80 percent solid rock with the balance as overburden.

Considerable quantities of rock also must be excavated to construct the streets and bring them to the specified grade. The excavation for the streets is 28-ft. wide (8.5 m) to include the curbs.

The storm sewer system also is a big undertaking with deep, wide trenching involved; again, it calls for drilling, blasting and excavating large quantities of rock.

Most rock fed to the Extec jaw crusher is 24-in. (61 cm) minus and the final product ranges from 3- to 5-in. (7.6 to 12.7 cm) minus, depending on what the crushed rock will be used for. A throughput rate ranges from 250 to 300 tph (227 to 272 t) depending on how wide the closed side of the jaw opening is.

“We can readjust the opening of the jaws within a few minutes because it is done by the operator using a remote control hydraulics system. In the past, we rented some jaw crushers that required manual adjustment and the use of shims. There is simply too much labor involved making jaw-opening adjustments manually and that means too much lost production time,” said Peterson.

Peterson projects as much as 400,000 tons (362,874 t) of rock to be crushed on this project over the next six years. By crushing the rock with a company-owned Extec portable jaw crusher, he is saving approximately $1.2 million.

The argument could be made that renting, instead of buying, would be a good idea if there were not enough work to keep the jaw crusher busy the entire year. However, Peterson’s crusher will be active an average of eight to 10 months each year.

There is another factor to reinforce Peterson’s decision that purchasing is his best option. If, in six years, the jaw crusher technology has changed substantially to make it more cost effective or Peterson no longer has a need for the existing crusher after the project has ended, he can recapture much of his investment by either trading or selling it.

One factor in Peterson’s decision to buy an Extec was that he likes the local dealer, Extec Machinery.

“They have very good service and they are reasonable in their pricing. The plant has been a solid investment.”