An Intimate View of Augusta Industries, Inc.

Augusta Industries (TSX: AAO) incorporated in October 1999. Augusta operates two completely-owned subsidiaries, Marcon International Incorporated and FOX TEK Canada Incorporated, both of which are primarily focused on servicing the oil and gas industry but from different angles. Based in Oakville, Ontario Canada, Marcon International operates two subsidiaries, Marcon USA and Marcon UK, that help position Marcon International in America and Europe respectively.

Marcon International provides industrial supplies such as cranes, derricks, motors, transformers, batteries, pumps, compressors, tools and wiring to their clientele. They also offer general warehouse and health and safety items. Marcon International is well-established in the Middle East and South America, with a host of clients in Brazil, Bahrain, Iraq, Oman, and Qatar, including Saudi Arabia-Sabic Services, Bahrain National Gas Co, Bahrain Petroleum, Qatar Petroleum, Qatar Gas, Qatar Petrochemical, Gulf of Suez Petroleum, Agiba Petroleum and Burullus Gas Co. They have recently branched out into government services and have established relationships with the departments of Defense, Interior, Homeland Security and Agriculture.

Fox Tek has developed a series of monitoring sensor systems called Electric Field Mapping (EFM) that allows system operators to assess pipeline and refinery vessel wall thickness. The implications of undetected corrosion, erosion and buckling are of course serious and can have dramatic effects on product delivery schedules and the environment. The sensor systems, which utilize current fiber optic technology in conjunction with associated monitoring instruments and software help operators schedule maintenance, improve site safety and develop proper contingency plans.

Leadership

Allen Lone has been President and CEO for more than 20 years and added CFO responsibilities in April 2011. Formerly CEO and CFO of Ketchum Capital Corporation, Lone still maintains a directorship with the company. Lone has also been a Director of Ammonite Energy. He received a B.Sc in Business Administration and a Bachelor of General Studies from South East Missouri and obtained his MBA from Lindenwood University in Missouri in 1998.

Thierry Cherpillod is the Vice President of Operations. He is charged with operations and also oversees engineering, research and development and project planning. A founding member of Fox Tek, Cherpillod spent the previous 12 years at the University of Toronto’s Institute for Aerospace Studies, working in space dynamics, controls and robotics. With a focus on developing embedded control systems and sensors for space systems and robotics, Cherpillod is well positioned to lead Fox Tek’s sensor development projects.

Current Status

Between the two companies that make up Augusta Industries, it is Fox Tek that is developing novel systems while Marcon is seemingly satisfied with providing a stable inventory of supplies to a fairly homogenous customer base. Fox Tek offers their clientele a wide range of options as they consider utilizing Fox Tek systems. Clients may buy the systems and operate them outright, or they can partner with Fox Tek, who coordinates the reporting of information. As with any complex system Fox Tek also provides planning, training, installation and data interpretation services. Originally designed for refinery vessels and pipelines, the system’s uses have expanded to include facilities and additional structures.

Looking ahead

For the past couple of years, Marcon has gradually been shifting their attention to maintenance repair and operations and away from equipment sales. Reasoning that maintenance has higher profit margins than original sales, Marcon looks to significantly increase their bottom line from this move.

Fox Tek has seen several developments which they hope will generate significant revenue for the company. On August 2, 2011 Fox Tek entered into a partnership with the Alberta pipeline industry to develop corrosion monitoring systems for metal loss measurements that was also sponsored by the Province’s Ministry of Advanced Education and Technology, the Alberta Innovates Technology Futures, and GE Water and Process Technologies.

Fox Tek has increased their presence in Saudi Arabia by partnering with the Zamil group holding company. Cemented through the sale of 20 EFM systems, Zamil has become Fox Tek’s key Middle East Distributor for the product. Given Fox Tek’s Middle Eastern footprint specifically and Augusta’s overall, it only makes sense for both Fox Tek and Marcon to leverage this relationship to increased revenue in the coming years