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Jacob Wolinsky
Jacob Wolinsky
Articles  | Author's Website |

Interview with NDAT, Regarding Seth Klarman's Lime Quarry in Melanchton, Ontario

April 28, 2011

I wrote an article several days ago about Seth Klarman’s investment in potato farms in Melanchton, Ontario. The story seemed very interesting since the land was bought for tens of millions of dollars, and contains billions of dollars’ worth of lime. I stated in the article, that the land was worth roughly $120 billion. According to estimates below provided by NDACT, which are also far from exact, it is closer to $48-$60 billion.

I reached out to Baupost, Highlands, and NDACT (an environmental group fighting the proposed quarry in Melanchton). Baupost stated that they have a policy of not discussing any investments. Highlands has not responded to my inquiry. However, Carl from NDACT Inc. was kind enough to answer some questions I had below. He also provided me some documents, which I am attaching in Scribd format on the bottom.

Can you tell me a bit about your organization?

The North Dufferin Agricultural and Community Taskforce (NDACT Inc.) was created at a community meeting in January 2009, shortly thereafter incorporated and has a board made up of local farmers, people who have weekend properties in the township east of Melanchton, retired folks and a cowboy.

What is the exact association between Baupost and Highlands?

As far as we know, the Highland Companies are associated with 3191574 NOVA SCOTIA COMPANY. Both those companies, as you will see if you follow the link below, have 1063 King Street West , Hamilton On Suite 234 as their headquarter address. When I went to visit John Lowndes, the signatory to the application and lead buyer of these properties up here I found this address to be a UPS store and Suite 234 is their mailbox. Obviously there were no chairs to have a meeting, nor a secretary. :-)

I can only assume that Baupost is the money behind 3191574 Nova Scotia Company



When did Highlands buy this land, and how did they know there was lime under it?

They bought the first properties in 2006. Their application cites a company named "Savanta" as the one identifying this deposit in 2007. We believe that they knew all along and have been planning this for more or less 8 or 9 years.

How much do you think the lime is worth, Highland claims to possess six billion tons of it?

I can only google those industry prices and those are quoted between $8 and $10 per tonne. The holding under the land that is subject to this application is estimated to be 1 (One) billion tonnes [note from interviewer: Highland claims to have 6 billion tons, whereas the application is to drill for one billion currently].

If the land seems worth so much more than the entity/individual sold it for, why would they have sold it?

The farms were originally bought under the label "Headwater Farm" by John Lowndes and his pitch was that he wanted to become Ontario's premier potato grower and processor. With big corporate money buying valuable farmland all over the world, to lock up what is becoming an important asset in the food business, it seemed legitimate. After all, another aggregate company (Strada) up here had applied for an under the water table extraction license and was not successful, so nobody thought anyone else would try. People sold because life changes and not everybody has the next generation stepping up, all kinds of reasons.

What are the main environmental concerns that you have?

Honeywood Silt Loam is a contiguous deposit of highly specialized “high land" horticultural soil. It has its own classification in the Canadian Soil Registry and is known as "Class 1 soil" simply the best there is. Farmers form Europe sought out this area because of its microclimate and soil conditions make it exceptional for growing potatoes, rhubarb, peas, beans, strawberries, corn and almost everything you eat. Their application states that they will re-establish this soil to "Class 1 soil" back on the floor of the open pit mine. That is simply not possible; the micro climate 238 ft below the top of the berms is considerably different. Ask any gardener you know if you can take their soil, bulldoze it, truck it, store it in a pile for years, take the draining/watering subsoil away, remove the app 170 ft of limestone and then truck it and doze it back into place, if you would have the same garden soil and growing ability back. Even the angle of the sun would be different, frost would come sooner, you name it, it is a problem. This will not be rehabilitated back to productive agriculture.

Never mind the 600 Million litres of water that they want to manage every day. That is the equivalent water consumption of 2.7 Million citizens here. See Doc. enclosed. Basal Ditches are to collect the water, store it for three day to allow particulet to settle out (They need 3 days storage 600 Million litres x 3 = 1.8 billion litres, truly staggering) then pump it up on average 175 ft to pump it into recharge wells (open pit mine floor recirculated water) which then becomes drinking water for 1 million Ontarians. Remember, Melanchton is the highest point in southern Ontario, everything is downhill from here. 15? pumps pumping 40 Million litres every day in perpetuity to keep the mine dry.

There are zero contingency plans for anything, power outages, natural disasters, manmade errors, accidents, fuel spills, or blowing a hole into an underground cavern/lake/river that will flood the mine immediately. They treat this land as if BP in the gulf, Exxon Valdez, Enron, world.com, Bernie Madoff, the 1985 tornado, the almost continent wide power outage, or the devastating ice storm has never happened. Have we humans not learned anything? What would happen if bacteria entered the water and kills people downstream, like in Walkerton, Ontario a few years ago?

I can go on with this forever it seems, I will stop now, if this is not clear enough, let’s talk.

Do you think the environmental ramifications will just affect the local township or have wider ramifications?

See above, 1 Million residents rely on this water so this is a provincial issue. Not only one river system, but this area is also a watershed, some running north and some running south. Can you imagine making a miscalculation and changing even one rivers direction? Once done, you could not fix that if you wanted too.

What actions have you been taking to try to stop the quarry?

Since we can now see what the real numbers are, from the application, all 3100 plus pages of it, we focus strictly on facts to bring full and honest/unbiased scrutiny to the application. There are so many inconsistencies; I give you one example “There will not be any impact on anyone immediately outside our property lines" Michael Daniher, Special Solutions inc. Toronto, their PR man. Yet the application states that the flow in one of the rivers, the Pine River, will be reduced by 10%.

We are holding open houses and information meetings, trying to engage the community on many levels. We attend lots of lower and upper tier municipal council meetings, write letters, engage provincial politicians, attend federal all candidates meetings etc. We just finished a "Walk" from Queens Park, Toronto, seat of the provincial government all the way to Melanchton and partied right beside the subject properties.(You still have to have some fun, right?) First Nations, farmers, ranchers, teachers, all walks of life walked the 119 km during the five days, great press coverage for sure. I took four horses down and they were a hit right downtown Toronto. Many radio interviews, delegations to other municipalities far and wide.

You can find" Stop the Quarry" on face book and our website www.NDACT.com You see links to videos of meetings, see Daniher in action, and see all the people that come out, look at their faces!!!

Have you had any personal contact with Seth Klarman in this regard? He seems to be a good person, for a while he was only accepting money from non-profits. He did the unheard of any hedge manager recently, by returning capital to investors because he is running out of ideas. Do you think he really has malicious intents?

We have not have had contact. When researching this I cannot believe that he knows the truth about this application and suspect that John Lowndes and Michael Daniher have not told him all he needs to know. The fund has great DNA in it, Harvard professors and environmental consciousness, and Seth and his wife seem to do all the right things. I would offer him this, Boston is not that far, come up for a day, no press, no fuss, just him and I and I show him the project and the lay of the land. If he still believes that this is a good project when he leaves, I will pay his flight ticket. (Please not first class) I have all kinds of well-known customers here www.Rawhide-Adventures.on.ca and know how to keep things private. Help me to get in touch and I will extend that offer for sure. I am not a rebel, nor abusive or offensive, know how to behave and would treat him right for sure.

Who is going to decide if the quarry is approved, and what is the date (if any)?

The Province of Ontario is the final authority. I would suspect, given history of much smaller applications who have taken up to 13 years to find their way through the process, that we are at least 10 years away from a final decision.

What do you think the odd are of approval, and after the decision is it final, or is there any way to appeal it?

The more I learn about the actual application the more I believe that it just can NOT be granted a license. I would think that the odds for approval are less than 25 %. There are numerous decisions to be made as part of this process, guaranteed to be appealed by whichever side loses the particular instance..

Any last comments you would like to make on this matter?

5 km wide, 1.5 times deeper than water falls at Niagara Falls, 3,600 loaded trucks (B-trains) a day, 3600 empty one back in, 7 days per week/ 24 hrs.per day, every day except on statutory holidays. 20 tonnes of explosives per day (no storage is part of the application so they will need to be trucked in daily), no mitigation plans of any kind, 600 Million litres of clean water to be allowed on the floor of Canada's largest open pit mine and then pumped back into our groundwater, no solutions for problems that might be detected by the monitoring wells (John Lowndes " we will have it looked after right away by supplying bottled water") 2400 acres of horticultural soils ruined within 100 km of Canada's largest population base, do I need to say more?

They tell everyone that this limestone is for the Greater Golden Horseshoe area, it is part of their promotional video released here, yet a subsidiary is trying to by the rail bed from Orangeville to Owen Sound, a Great Lakes harbour access. Plain dishonest is what that is, why not just say that it is planned for export.

It is difficult for me to express the feelings and facts via email Jacob; however, if you read the above with an open mind, you will understand why I say that Mr.Klarman has not been fully briefed. And they did not pay much of a premium; land here sells for about $10.000/acres because it is so productive. They do have options to sell this block to integrated food companies, develop wind energy (Ontario's Green Energy Act guarantees that you can make money) or sell it back to local farmers, or farmers from other continents. This is not hard land to sell and they are not overly engaged, Dollar wise!

Because this high land holds so much water, NDACT's position is that no below the watertable extraction should be permitted, no matter what size the quarry/mine would be!!

03j 10 of 12 Water Management baupost, seth klarman


Disclosure: None

About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

Visit Jacob Wolinsky's Website


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Textex
Textex - 7 years ago    Report SPAM
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