Oil-Dri Corp of America 10-K

ITEM 2 – PROPERTIES Real Property Holdings and Mineral Reserves Land Owned Land Leased Land Unpatented Claims Total Estimated Proven Reserves Estimated Probable Reserves Total (acres) (thousands of tons) California 795 — 1,030 1,825 3,700 11,226 14,926 Georgia 3,851 1,593 — 5,444 33,874 23,123 56,997 Illinois 105 508 — 613 2,557 1,596 4,153 Mississippi 2,219 1,331 — 3,550 37,180 135,128 172,308 Nevada 535 — — 535 23,316 2,976 26,292 Oregon 340 — — 340 — 25 25 Tennessee 178 — — 178 3,000 3,000 6,000 8,023 3,432 1,030 12,485 103,627 177,074 280,701 The Mississippi, Georgia, Tennessee, Nevada, California and Illinois properties are primarily mineral in nature, except our research and development facility which is included in the Illinois owned land. We mine sorbent minerals primarily consisting of calcium bentonite, attapulgite and diatomaceous shale. We use geologists and mineral specialists who prepared the estimated reserves of these minerals in the table above. See also Item 1 “Business” above for further information about our reserves. The properties in Mississippi, Georgia, California and Illinois are currently in active production and collectively produced approximately 756,000 tons of finished product in both fiscal years 2020 and 2019 . Parcels of such land are also sites of manufacturing facilities operated by us. We own approximately one acre of land in Laval, Quebec, Canada, which is the site of the processing, packaging and distribution facility for our Canadian subsidiary . M INING P ROPERTIES Our mining operations are conducted on land that we own or lease. The Georgia, Illinois and Mississippi mining leases generally require that we pay a minimum monthly rent to continue the lease term. The rental payments are typically applied against a stated royalty related to the number of unprocessed, or in some cases processed, tons of minerals extracted from the leased property. Many of our mining leases have no stated expiration dates. Some of our leases, however, do have expiration dates ranging from 2026 to 2097. We would not experience a material adverse effect from the expiration or termination of any of these leases. We have a variety of access arrangements, some of which are styled as leases, for manufacturing at facilities that are not contiguous with the related mines. We would not experience a material adverse effect from the expiration or termination of any of these arrangements. Certain of our land holdings in California are represented by unpatented mining claims we lease from the Bureau of Land Management. These leases generally give us the contractual right to conduct mining or processing activities on the land covered by the claims. The validity of title to unpatented claims, however, is dependent upon numerous factual matters. We believe the unpatented claims we lease are in compliance with all applicable federal, state and local mining laws, rules and regulations. Future amendments to existing federal mining laws, however, could have a prospective effect on mining operations on federal lands and include, among other changes, the imposition of royalty fees on the mining of unpatented claims, the elimination or restructuring of the patent system and an increase in fees for the maintenance of unpatented claims. To the extent that future proposals may result in the imposition of royalty fees on unpatented lands, the mining of our unpatented claims may become economically unfavorable. We cannot predict the form that any such amendments might take or whether or when such amendments might be adopted. In addition, the construction and operation of processing facilities on these sites would require the approval of federal, state and local regulatory authorities. See Item 1A “Risk Factors” above for a discussion of other risks to our business related to our mining properties. 20 M INING AND M ANUFACTURING M ETHODS Mining and Hauling We mine clay in open-pit mines in Georgia, Mississippi, Illinois and California. The mining and hauling operations are similar throughout the Oil-Dri locations, with the exception of California. The land to be mined is first stripped. The stripping process involves removing the overburden and preparing the site to allow the excavators to reach the desired clay. When stripping is completed, the excavators dig out and load the clay onto dump trucks. The trucks haul the clay directly to our processing plants where it is dumped in a clay yard and segregated by clay type if necessary. Generally, the mine sites are in close proximity to the processing plants; however, the maximum distance the clay is currently hauled to a plant is approximately 13 miles. At our California mines the clay is excavated and hauled to a hopper. An initial crushing and screening operation is performed at the mine site before the trucks are loaded for delivery to the processing plant. Processing The processing of our clay varies depending on the level of moisture desired in the clay after the drying process. The moisture level is referred to as regular volatile moisture (“RVM”) or low volatile moisture (“LVM”). RVM Clay: A front end loader is used to load the clay from the clay yard into the primary crusher. The primary crusher reduces the clay chunks to 2.0 inches in diameter or smaller. From the crusher, the clay is transported via a belt conveyor into the clay shed. A clay shed loader feeds the clay into a disintegrator which reduces the clay to particles 0.5 inches in diameter or smaller. The clay then feeds directly into the RVM kiln. The RVM kiln reduces the clay’s moisture content. From the RVM kiln, the clay moves through a series of mills and screens which further size and separate the clay into the desired particle sizes. The sized clay is then conveyed into storage tanks. The RVM processed clay can then be packaged or processed into LVM material. LVM Clay: RVM clay is fed from storage tanks into the LVM kiln where the moisture content is further reduced. The clay then proceeds into a rotary cooler, then on to a screening circuit which separates the clay into the desired particle sizes. In addition, certain other products may go through further processing or the application of fragrances and additives. For example, certain fluid purification and animal health products are processed into a powder form. We also use a proprietary process for our engineered granules to create spherical, uniform-sized granules. Packaging Once the clay has been dried to the desired level it will be sized and packaged. Our products have various package sizes and types ranging from bags, boxes and jugs of cat litter to railcars of agricultural products. We also package some of our products into bulk (approximately one ton) bags or into bulk trucks. The size and delivery configuration of our finished products is determined by customer requirements. 21 F ACILITIES We operate clay manufacturing and non-clay production facilities on property owned or leased by us as shown on the map below: Oil-Dri Plant Site Locations Location Owned/Leased Function Alpharetta, Georgia Leased Non-clay manufacturing and packaging, sales, customer service Blue Mountain, Mississippi Owned Manufacturing and packaging Chicago, Illinois Leased Principal executive office Coppet, Switzerland Leased Customer service office Jakarta, Indonesia Leased Office Jalisco, Mexico Leased Warehouse and office Laval, Quebec, Canada Owned Non-clay manufacturing and clay and non-clay packaging, sales Mounds, Illinois Owned Manufacturing and packaging Ochlocknee, Georgia Owned Manufacturing and packaging Ripley, Mississippi Owned Manufacturing and packaging Shenzhen, China Leased Sales office, customer service Taft, California Owned Manufacturing and packaging Vernon Hills, Illinois Owned & Leased Research and development Wisbech, United Kingdom Leased Non-clay manufacturing and clay and non-clay packaging, sales, customer service We have no mortgages on the real property we own. The leases for the locations listed above expire as follows: Jalisco, Mexico in 2020; Alpharetta, Georgia in 2021; Shenzhen, China in 2025; Vernon Hills, Illinois in 2026; Wisbech, United Kingdom 22 in 2032 and Chicago, Illinois in 2033. The leases for the Coppet, Switzerland and Jakarta, Indonesia offices are on a year-to-year basis. We consider that our properties are generally in good condition, well maintained and suitable and adequate to carry on our business.