Digging Deep: Rocky Mountain Industrials' Rocky Financial Future
Since its inception in 2015, Rocky Mountain Industrials, or RMI, has lost tens of millions of dollars. What that means for the company remains unclear as the Bureau of Land Management continues to navigate the permitting process to approve RMI’s proposal to expand the limestone mine just north of Glenwood Spring.
As part of our series “Digging Deep: What Does RMI Mean For Glenwood Springs?” Aspen Public Radio is looking at the origins of the company, its leaders, how its current financial path may be a familiar one and what one expert has to say about the company’s financial fate.
From Yearbooks to Limestone
Gregory Dangler and Chad Brownstein began what was originally called Rocky Mountain Resources in 2015 after co-opting another company named Online Yearbook that had existed for a few years already, according to Rocky Mountain Industrials’ 10-K SEC filing. That company was set up to develop and market digital yearbooks for schools, companies and government agencies. But not only did Dangler and Brownstein change the name from Online Yearbook to RMR Industrials, Inc., they also transformed the original company’s business plan into what RMI is today.
According to Rocky Mountain Resources’ website, when they first opened for business in 2015, the company was created to acquire and develop natural resource assets through aggregating small to medium mining operations. In 2016, they did just that by purchasing the 15-acre Mid-Continent Quarry just north of Glenwood Springs from CalX Minerals, LLC. As stated in Rocky Mountain Industrials’ latest 10-K SEC filing, Rocky Mountain Resources acquired all of the company’s assets associated with the quarry and the 41 Bureau of Land Management mining claims for the site through the purchase of the Mid-Continent Quarry.
According to RMI’s plan of operation modification document to the BLM, the company has been mining roughly 40,000-60,0000 pounds of Leadville Limestone per year to sell and distribute to the construction, agricultural and manufacturing sectors to be used for industrial applications, mine safety and chemical grade uses.
In 2019, Rocky Mountain Industrials proposed to expand its mining operations from 15.7 acres to a 321 acre mine on a permitting area of 447 acres. The company has since begun developing the Rocky Mountain Rail Park on the front range and recently sold a 620-acre plot for $10 million.
Despite the urge to grow and explore expansions within the company, Rocky Mountain Industrials has not seen any profits since its doors opened for business six years ago.
Rocky Mountain Industrials has lost more than $44 million since 2015, according to their latest 10-Q SEC filing.
Jesse Prentice-Dunn, a policy director with the nonpartisan conservation and advocacy organization Center for Western Priorities, said that amount of debt is typically not seen in the books of a successful company.
“In terms of their business practices, Rocky Mountain Industrials is very shaky. I mean, their books are atrocious,” Prentice-Dunn said. “When we’ve looked into them, it seems shocking that they’ve been able to survive this long and that they’re still around, frankly.”
According to Prentice-Dunn, many young companies sell stock as a way to accrue the necessary capital needed to start their business. He said Rocky Mountain Industrials is still using that method six years into the business as a way to keep from going under, but RMI should already be at a profitable point from selling their products and services.
Prentice-Dunn said Rocky Mountain Industrials’ cash flow is also a concern. Numbers show in the company’s latest 10-Q SEC filing that RMI only has $251,000 of cash on hand, yet spent nearly $9 million in the last nine months of 2019. RMI’s financial auditors expressed “substantial doubt” as to the company’s ability to continue due to its “limited liquidity” and “lack of revenue,” according to the most recent 10-K SEC filing.
Prentice-Dunn said as a public company, federal regulations require RMI to be transparent about every risk and potential downfall, but the numbers show that the auditor’s concerns are valid.
“That kind of burn rate is unsustainable,” Prentice-Dunn said. “Maybe they think there is really gold at the end of the rainbow and the risk is worth the reward.”
A Familiar Path
Rocky Mountain Industrials is not Chad Brownstein and Gregory Dangler’s first mining company.
In 2008, the two created Prospect Global Resources, a company designed to mine high-quality potash deposits in the Holbrook Basin of eastern Arizona. According to Prospect Global Resources’ latest 10-K SEC filing, they held potash exploration permits and owned and leased mineral rights covering 90,000 acres through a wholly owned subsidiary of American West Potash, LLC. They began conducting studies to determine the “potash resource potential,” but lost nearly $80 million and never began mining, according to Prospect Global Resources' latest 10-K filing.
Prentice-Dunn said the failure of Prospect Global Resources may help understand the potential fate of Rocky Mountain Industrials.
“I would say they have been down this road before. This isn’t their first failed company,” he said. “It's kind of a dark past, and so when you have that as the background, it makes Rocky Mountain Industrials seem all the more doomed to failure.”
“Some Items To Overcome”
But Rocky Mountain Industrials’ CEO Brian Fallin said he is confident that the company will be to a profitable point soon.
“So, it's important to note that Rocky Mountain Industrials is a growth and development company. So we have yet to really turn the corner on monetizing several of our assets,” Fallin said during a 12-minute phone call with Aspen Public Radio. “Our shareholders understand that, our board of directors understand that, everybody that's associated with RMI understands that knowing that this mine and this expansion process is exactly that, it's a process.”
He said it is hard to determine the point when Rocky Mountain Industrials can start chipping away at its debt because it depends on when the Bureau of Land Management makes a decision to approve or deny their expansion proposal at the Mid-Continent Quarry.
“Operationally speaking, the quarry is profitable. When you insert on top of it all of the other permitting and expansion concepts, that's where we have some, some items to overcome,” Fallin said.
But he noted that Rocky Mountain Industrials is more than its quarry near Glenwood Springs. The Rocky Mountain Rail Park on the Front Range recently sold a 620-acre plot for $10 million in January. He said that should help supplement the losses from the expansion proposal as there is no timeline set when the final decision will come from the Bureau of Land Management.
“We have to exercise patience. Not only with the local community and everything that's going on, but with the process itself, the BLM process, all of the different studies and surveys that have to be done, it takes time,” Fallin said. “So we are willing and we're up to taking the time and energy to do it the right way, legally and otherwise.”
The Environment Foundation, funded by the employees of Aspen Skiing Company, made the series "Digging Deep: What Does RMI Mean For Glenwood Springs?" possible through a grant to Aspen Public Radio.
Pueden encontrar la versión en español aqui.
Editor's note: In a previous version of the story, it was reported Rocky Mountain Industrials accrued tens of millions of dollars in debt, but it was net losses. It was also reported Prospect Global Resources went bankrupt, but the company never filed.