Thursday, March 31, 2016

Time to Buy CEMEX?

Aerial view of CEMEX McKelligon Canyon Quarry.
Photo by Scott Cutler

Not the stock - the McKelligon Canyon quarry. Here's why:

There is no way to close down the quarry. That was tried several years ago when Caballero was Mayor. The effort failed and it helped lead to the political demise of Ray Caballero and the election of Joe Wardy. 

There is one fact in Texas law that no one can get around unless there is a huge sea change in Texas politics leading to a re-writing of its Constitution. In Texas private property is sacrosanct. It trumps all other considerations. CEMEX owns the land at the quarry to the ridge of the mountain. Although at a certain point it may become logistically impossible to do any further quarrying, CEMEX can continue to scar the Franklin Mountains for the foreseeable future and there is nothing anyone can do about it.

Nor can the City easily boycott that quarry and not allow them to bid on city projects. It’s very hard to blacklist a vendor.  They have to have a really bad record with the city (or the state or the feds) such as an inability to perform. A construction industry insider said this to me: "I bet the city won’t even blacklist Basic IDIQ even after all the drama at San Jacinto.  It can be challenged legally too. You can’t blacklist CEMEX simply because they own a quarry and are destroying the mountain.  Won’t work."

The City can reduce the amount of rock and screenings used in landscaping. Although that may impact other quarry businesses, if the City ever gets serious about really fixing our streets and sidewalks, that should be a big plus for that industry that would easily offset any loss of landscaping business.

Finally, CEMEX as a corporation is in trouble. The Street, a financial media company, gives CEMEX a rating of D+. Their recommendation to stock traders:

"We rate CEMEX SAB DE CV (CX) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally disappointing historical performance in the stock itself and poor profit margins."

You can download the Street's full report and get more information about CEMEX by going HERE.

Simply put, CEMEX needs cash. Their selling the quarry would be advantageous to their corporate survival.

Who should buy? Certainly not the General Land Office of Texas that owns the mineral rights. That would make no sense. The GLO would simply want to find someone else to quarry the rock so that royalties can be paid to the Texas Permanent School Fund. 

The City of El Paso can't afford it, so . . .

That leaves the Texas Parks and Wildlife Department that runs the Franklin Mountains State Park. 

The deal could be structured over a period of three or four years. Once part of the TPWD, the face of the Franklins can be conserved. Now that El Paso is beginning to realize the huge economic value of eco-tourism, working in concert with others to buy and shut-down the quarry, and preserve the face of the Franklins from any further unsightly damage will only mean economic gain for the City. 

It's time to consider that option.


  1. This is an interesting idea. I would like to learn more. How about a city wide community meeting of the minds?

  2. On the face of it, yes, this is a canker sore in our common environmental mouth -- we're all carrying around! Economically, too, this appears but another example of the 70s' Sunbelt radical capitalism gone amuck! Desert landscaping, i.e., done intelligently, is a beauty to behold! But if not done that way? Get on Craig's List and see for yourself. Almost every day there's 2 or more people "giving" that stuff away! Markets declining?! Does that kind of government make sense? To "give" our resources away for 40-50 years to enrich budgets? Only to have the effect in some adverse way or another blown right back into our faces -- to deal with again? Seems silly to me. On the face, at least. Jim is absolutely right -- e.g., Texas Politics is out to squeeze money out of everything! Entrepreneurship, after all, is what made us! Tamed our frontier! But it's obvious, too, we've entered a new phase of it -- say, 'social' capitalism. Meaning, i.e., we're one of only a few cities in the nation with a "damn" mountain running down the middle of it! How do you use that to help a "social economy?" Good luck with building restaurants and hotels atop it and getting people to come up for the view and to "hide out" for a while! Won't happen for many years anyway. But looking over the horizon, those are the "common" things that industry and government alike, it seems, need to be working for. Rick's idea of a community meeting to "butt heads" would be a good first step. Tourism and conservation blended with industry entrepreneauship also would be more in line with "smart-growth" thinking and planning the city received an award for a few years back, too. But make no mistakes about it: This is going to be one "tough mountain" for the city/county/state/U.S. govt. to climb! In whatever manner!