A furor has erupted in Ontario, Canada over the proposal of a “mega-quarry” that could potentially contaminate the waters of five large rivers in the areas that would surround it. Petitions have been passed and the Canadian government has been besieged with requests to put a stop to any potential drilling in such an environmentally compromised area.
The quarry project revolves around drilling through potato fields that a group called The Highland Companies has purchased for $50 million in order to mine for reserves of limestone.
Due to its desirability for use in building, a large limestone find could yield tens of billions of dollars for the quarry’s operator. That would be quite a profit indeed on a $50 million potato field. But the quarry needs approval and success in order to realise that profit, amd neither of those things are anywhere near to assured.
But the real story is who’s behind the request for the project; a quiet hedge fund titan based in Boston.
The Highland Companies, a company that describes itself on its own website as “the operating and investment vehicle for a group of private investors based in Canada and the United States… By building sustainable local businesses.”
One of those investors in Highland is the Boston-based hedge fund Baupost Group, a $20 billion fund managed by Seth Klarman, a press-averse, secretive legend in the field of value investing and a man who has made millions through his approach of conservative margin trading.
Klarman also has a long history of eschewing media attention and conducting his business in relative silence, which makes his involvement with a controversial project like the Ontario quarry even more curious.
“This has to be driving him absolutely nuts,” said one analyst familiar with Baupost.
Baupost, per the fund’s policy, would make no direct comment to Business Insider on the controversy surrounding the “mega-quarry,” or the fund’s involvement with Highland, but they did refer us to a written statement made this week to Toronto’s Globe and Mail. In that statement, the fund says that although they are aware of the controversy and believe Highland will comply correctly with Ontario’s environmental procedures, the project “is consistent with [Baupost’s] long-term, value-oriented strategy.”
“It’s just not margin trading and it’s risky,” says the analyst we spoke to, who disagreed with Baupost’s assertion that the quarry project is similar to its previous investments. “It just doesn’t seem like Klarman’s style.”
And judging from where Baupost has made most of its major profits, it seems that the Highland quarry project is out of the ordinary indeed.
Klarman has made a career out of what he’s referred to as “mispricing,” taking on investments that he sees as being valued incorrectly and positioning himself to reap the rewards of the inevitable correction. He’s also been historically wary of the stock market’s volatility and is notoriously risk averse.
Furthermore, his foray into commodities has been light at best with the majority of his investments having been made in Communications and Biotech, per the information submitted on the fund’s 13F report from March of this year.
Overall, it would seem that the Ontario limestone quarry is an uncomfortable entrance for Klarman and Baupost into the world of commodity production.