VANCOUVER, BC -- Canfor Corporation (TSX:CFP) announced it will permanently close two saw mills one week after signing an agreement to acquire Tembec Industries Ltd.'s southern British Columbia interior wood products assets, including a pair of sawmills.
Canfor said it would close its "historic" Rustad sawmill in Prince George, BC, and Tackama mill in Fort Nelson, BC. The Rustad mill had continuously operated for 62 years before closing due to the collapse of the U.S. residential housing market in 2008. The company said it had determined that modernizing the plant was cost prohibitive but that it would spend $300 million on upgrading other existing facilities.
Last week, Canfor inked a deal valued at $60 million to buy Tembec's Elko and Canal Flats sawmills and approximately 1.1 million cubic meters of combined Crown, private land and contract annual allowable cut. The deal also includes a long-term agreement for Canfor to supply residual wood fiber for Tembec's Skookumchuck mill.
"This acquisition is a key step in our ongoing approach to strengthening Canfor's fibrer position in BC and deepens our ability to meet the needs of our valued global customers," said Canfor President and CEO Don Kayne.
Over the next few years, Canfor said it would invest in excess of $50 million to enhance productivity and cost performance in the two newly acquired mills. The Elko and Canal Flats mills will provide an additional 420 million board feet to Canfor's annual capacity, bringing Canfor's total capacity in North America to greater than 5 billion board feet.
Don Kayne, president and CEO of Canfor, said, "Canfor is readying itself to supply the growing demand from Asia Pacific markets that we, the Province of British Columbia and the Government of Canada have worked so hard to build, as well as key strategic customers in North America. Our decision to make a significant new investment in BC is premised on the province's stable, cost-conscious policy environment and exceptional commitment to market development."
Canfor said it plans to work with the Forest Stewardship Council to achieve FSC certification of the Tembec forests it purchased. The company already has fiber certified by the Canadian Standards Association and Sustainable Forestry Initiative.
Canfor said finalization of the transaction with Tembec is subject to various " customary closing conditions" including regulatory approval and is expected to complete late in the first quarter of 2012.
Have something to say? Share your thoughts with us in the comments below.