Conifex Timber Inc. (“Conifex”, “we” or “us”) (TSX: CFF) announced
today that, in light of imminently expected transportation
challenges that will affect all Canadian lumber producers for an
unspecified period, together with already existing unfavourable
market conditions, Conifex is reducing its sawmill operating
schedule at its Mackenzie, British Columbia site to a one-shift
basis for the foreseeable future and temporarily curtailing its
power plant, each commencing on August 26, 2024. We anticipate an
end to the curtailment of our power plant by September 30,
2024.
On August 18, 2024, Canadian National Railway
formally notified the Teamsters Canada Rail Conference (the
"Union") that it would begin locking out Union workers early on
August 22, 2024, and the Union issued a 72-hour strike notice to
Canadian Pacific Kansas City Rail.
“Unfortunately, a reduced operating schedule at
the sawmill is necessary for the foreseeable future due to the
combined impact of our inability to ship production on a two-shift
basis to end markets for an unspecified timeframe, reduced demand
for our lumber products, low lumber prices and punitive lumber
export duty impositions,” said Andrew McLellan, President and COO
of Conifex.
While it is difficult to quantify the impact
that the reduced operating schedule will have on production
capacity, the power plant curtailment is anticipated to impact
power production capacity by approximately 24.6 GWh. If there is a
near-term resolution to the imminent transportation challenges,
Conifex may be in a position to end the curtailment of the power
plant before the end of September.
“Conifex will closely assess and adjust the
sawmill operating schedule as supply chain and market conditions
evolve. We are working on a priority basis to position Mackenzie
for long term sustainable production and will be seeking to
mitigate the impacts on our employees as much as possible,” said
Mr. McLellan.
Conifex continues to work collaboratively with
the Ministry of Forests to implement important policy decisions,
including a decision published by the Minister of Forests today,
under Section 63 of the Forest Act to align annual harvest volumes
with the Chief Forester of British Columbia's May 2023 Allowable
Annual Cut ("AAC") determination for the Mackenzie Timber Supply
Area ("TSA"). Accordingly, the Minister has prescribed an 18.4%
reduction of AACs of Replaceable Forest Licences to align harvest
levels to the current AAC.
Effective August 19, 2024, the AACs of Conifex’s
Forest Licence A15385 and Forest License A93631, in which Conifex
owns a 50% interest, have been reduced by 117,172 cubic metres and
55,576 cubic metres, respectively. The new AACs for the licenses
are 515,328 cubic metres and 244,424 cubic metres, respectively, or
a total available sawlog supply of 759,752 cubic metres
annually.
Current open market timber volume available for
sale in the Mackenzie TSA exceeds 1.7 million cubic metres
annually. At Conifex’s existing footprint, the requirement to
procure additional timber volume represents less than 10% of the
available open market timber supply. A primary consequence of the
Minister’s decision is that Conifex’s internal timber supply will
account for a slightly lower portion of our sawlog consumption,
while open market sawlog purchases will account for a slightly
higher portion.
To help ensure that manufacturing facilities in
the Mackenzie TSA have assured access to sawlog supply for decades
to come, Conifex also expects the Ministry will update its
methodology for determining cost allowances and stumpage charge
impositions and put additional safeguards in place to ensure
harvesting in the southwest partition zone is sustainable. We
expect this approach should also encourage BC Timber Sales to
better meet its mandated requirement to provide a full range of
cost and pricing benchmarks for timber harvested from public land
in British Columbia.
“While the decision to reduce our operating
schedules was difficult, and we regret the impact this will have on
our employees, their families, and the community, we are encouraged
by the fact the Mackenzie TSA has the highest sawlog surplus of any
TSA in the interior region of BC, and are confident the Ministry
recognizes it is in the public interest to strengthen the economic
sustainability of the ultra-forest-dependent community of Mackenzie
and nearby First Nations communities. We do not anticipate any
challenges securing sawlogs to maintain capacity operations in the
future once logistical and market conditions permit a return to
full operations,” said Ken Shields, Chairman and CEO of
Conifex.
For further information, please contact:
Trevor PrudenChief Financial Officer (604)
216-2949
About Conifex
Timber Inc.
Conifex and its subsidiaries' primary business
currently includes timber harvesting, reforestation, forest
management, sawmilling logs into lumber and wood chips, and value
added lumber finishing and distribution. Conifex's lumber products
are sold in the United States, Canadian and Japanese markets.
Conifex also produces bioenergy at its power generation facility at
Mackenzie, B.C.
Forward-Looking
Statements
Certain statements in this news release may
constitute “forward-looking statements”. Forward-looking statements
are statements that address or discuss activities, events or
developments that Conifex expects or anticipates may occur in the
future. When used in this news release, words such as “estimates”,
“expects”, “plans”, “anticipates”, “projects”, “will”, “believes”,
“intends” “should”, “could”, “may” and other similar terminology
are intended to identify such forward-looking statements.
Forward-looking statements reflect the current expectations and
beliefs of Conifex’s management. Because forward-looking statements
involve known and unknown risks, uncertainties and other factors,
actual results, performance or achievements of Conifex or the
industry may be materially different from those implied by such
forward-looking statements. Examples of such forward-looking
information that may be contained in this news release include
statements regarding: our planned operating format and expected
operating rates; expectations regarding our results of operations
and performance; our perception of the industries or markets in
which we operate and anticipated trends in such markets and in the
countries in which we do business; our ability to supply our
manufacturing operations with wood fibre and our expected cost of
wood fibre; our expectation for market volatility associated with,
among other things, the softwood lumber dispute with the US;
potential negative impacts of duties or other protective measures
on our products, such as antidumping duties or countervailing
duties on softwood lumber; continued positive relations with
Indigenous groups; demand and prices for our products; the
availability and use of credit facilities or proceeds therefrom;
expectations regarding our liquidity levels; and our expectations
for US dollar benchmark prices. Material factors or assumptions
that were applied in drawing a conclusion or making an estimate set
out in the forward-looking statements may include, but are not
limited to, our future debt levels; that we will effectively market
our products; that capital expenditure levels will be consistent
with those estimated by our management; our ability to obtain and
maintain required governmental and community approvals; the impact
of changing government regulations and shifting political climates;
that the US housing market will continue to improve; that
transportation services by third party providers will resume in a
timely manner; our ability to ship our products in a timely manner;
that there will be no additional unforeseen disruptions affecting
the operation of our Mackenzie power plant and that we will be able
to deliver power therefrom after ending the curtailment; our
ability to obtain financing on acceptable terms, or at all; that
interest and foreign exchange rates will not vary materially from
current levels; the general health of the capital markets and the
lumber industry; and the general stability of the economic
environments within the countries in which we operate or do
business. Forward-looking statements involve significant
uncertainties, should not be read as a guarantee of future
performance or results, and will not necessarily be an accurate
indication of whether or not such results will be achieved. A
number of factors could cause actual results to differ materially
from the results discussed in the forward-looking statements,
including, without limitation: those relating to potential
disruptions to production and delivery, including as a result of
equipment failures, continuing labour issues, the complex
integration of processes and equipment and other similar factors;
labour relations; failure to meet regulatory requirements; changes
in the market; potential downturns in economic conditions;
fluctuations in the price and supply of required materials,
including log costs; fluctuations in the market price for products
sold; foreign exchange fluctuations; trade restrictions or import
duties imposed by foreign governments; availability of financing
(as necessary); and other risk factors detailed in our 2023 annual
information form dated March 31, 2024 and our management's
discussion and analysis for the year ended December 31, 2023 and
the quarter ended March 31, 2024 available on SEDAR+ at
www.sedarplus.com and other filings with the Canadian securities
regulatory authorities. These risks, as well as others, could cause
actual results and events to vary significantly. Accordingly,
readers should exercise caution in relying upon forward-looking
statements and Conifex undertakes no obligation to publicly revise
them to reflect subsequent events or circumstances, except as
required by applicable securities laws.
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