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Canfor shutters Vavenby BC sawmill, Interfor buys cutting rights for $60 million

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VANCOUVER, BC, Canada — Citing long-term log supply constraints, Canfor Corp. announced June 3 it would permanently close its Vavenby sawmill. The closure will become effective in July, following an orderly wind down, the company said.

The news comes a little more than a month after Canfor announced a temporary shutdown of its British Columbia sawmills, Local news sources report more than 170 people will be affected by the Vavenby closure.

“Due to the current and long-term log supply constraints we face in the Vavenby region, along with the high cost of fiber, we have made the very difficult decision to permanently close the sawmill and sell the associated forest tenure to Interfor. The ongoing depressed lumber markets have expedited this decision,” said Don Kayne, president and CEO, Canfor.

Reductions in sawmill capacity due to decreases in the annual allowable cuts following the Mountain Pine Beetle epidemic also had an impact, Kayne said. The Vavenby sawmill had an annual production capacity of approximately 250 million board feet.

“Today’s decision is not a reflection on our employees, our contractors or the local communities of Vavenby and Clearwater who have all contributed significantly to the operation of our mill,” added Kayne. “We deeply regret the significant impact to our employees, contractors and the communities, and will be working to support them through this difficult time.”

The demise of the Vavenby sawmill is latest in a string of temporary and permanent mill closures to hit the BC region within the past year. In May, Tolko Industries announced it would permanently close its Quest Wood sawmill and eliminate a shift of employees at a sawmill in Kelowna. Just a month earlier, Interfor Corp also announced it would temporarily curtail production at three of its sawmills in British Columbia.

Following the closure of Vavenby, Canfor (TSX:CFP) will have 12 sawmills in Canada, with a total annual capacity of approximately 3.55 billion board feet. The company is headquartered in Vancouver, British Columbia.

Canfor has agreed to sell the cutting rights associated with the sawmill to Interfor Corp. for $60 million. The sale is expected to close in the third quarter of 2019, subject to customary closing conditions including the consent of the Minister of Forests.

Interfor noted the purchase of the cutting rights will help solidify the long-term log supply at its Adams Lake mill, and support the continuation of a two-shift operating configuration. Interfor also said it will add a new dry kiln to support additional value-added processing at the mill. In 2009, the company completed a four-year $140 million modernization of the Adams Lake sawmill and has since invested more than $40 million at the operation.

“While business conditions in the Interior are currently challenging, we’re in the business for the long-term and believe the capacity rationalization now underway will help reset the equation going forward,” said Duncan Davies, Interfor president & CEO.  “This transaction materially enhances Adams Lake’s log supply and sets the stage for its future success in much the same way the investments made ten years ago set the stage for its success over the last decade.”   

The transaction will also provide a basis for Interfor (TSX: IFP) to engage more actively with local First Nations to explore a variety of forest stewardship and partnership opportunities in the region, the company added. “We believe strongly that working with First Nations in a collaborative manner is an important step in the right direction for the B.C. forest industry,” Davies said. “We have a number of successful partnerships with First Nations in B.C. and look forward to a constructive dialogue on how we can build on these arrangements in the Thompson/Okanagan region.”

Headquartered in Vancouver, Interfor has lumber operations in Canada and the United States, with an annual production capacity of approximately 3.1 billion board feet.

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