by Michael Kelly

“The 160 people whose jobs

depend on the Wedeene River
sawmill operation should know by
the end-of this week if the mill
will continue to run. Wedeene
went into. receivership Sept. 21,

‘and representatives of receiver Peat
_ Marwick ~ and Company are

keeping the mill in operation until
they determine whether it can go
on a break-even basis while they
try to sell it.

Colin Rodgers, who is managing .

the mill for Peat Marwick while

the operation is being assessed,
said last week the analysis will
take about 10 days to complete. If

' the mill is not losing money by

__ likelihood

‘ * small were sold as pulp," he said.

continuing to produce lumber —
without debt payments figured in.

_. = Rodgers thinks it will keep

going. If it is losing money, in all
there will be a
shutdown. Rodgers explained that
operating losses would have to be
financed by the banks, primarily
the Canadian Imperial Bank of
Commerce, that hold Wedeene’s
corporate debts. Any continued
operations will require the co-
operation of the banks, he said.

Peat Marwick intends to put
together an information package
for potential buyers and sell both
the mill and its associated forest
licences as a going concern, Rod-
gers said.

"Unfortunately, they didn’t have
enough wood," he said in examin-

ing the company’s failure. Rodgers

believes Wedeene could have
made a profit if timber supplies
would have been adequate to run a
second shift, or if the mill could
have been refitted to cut the full
timber profile available from its
licences in the North Coast Timber
Supply Area.

"They could only use about 40
percent of what they were cutting.
The logs that were too large had to
be sold on the Vancouver log
market, and the ones that were too

Ata presentation made to Premier
Vander Zalm and members of the
B.C. Cabinet in Terrace Sept. 25,
two corporate officers for
Wedecne, Kelly and Clayton
Williams, laid blame for the com-
pany’s insolvency squarely and
entirely on government policy. If
Wedeene had been allowed to sell
on export markets the 10 percent _

of its cut that was too large for the
~ mill to process, they said, the cash

- flow from the high prices foreign

log buyers pay would have
allowed Wedeene to build a large
log line at the Prince Rupert saw-
mill.

The Wedeene sawmill opened i in
May 1988. The company’s export
permit was revoked without notice
as part of policy changes brought
in by the Ministry of Forests in
October of that year.

Rodgers-said he expects potential
buyers would be companies that
already have supplies of timber in
the region.

The largest licence holder in the
North Coast TSA is Vancouver-
based International Forest Pro-

-ducts. Bill Rosenberger, timber

development engineer for the com-
pany, told the Terrace Review he

re er)

‘had scquainted upper management

officials in the company with the .
Wedeene situation. "We're inter-
ested in acquiring the timber. But
the quota is tied to the mill; that’s
the difficulty.”

Wedeene was. originally granted
cutting rights to about 170,000.
cubic metres of timber per year on
the north coast under the condition
that they would establish a sawmill
to process the wood. The two 20-
year renewable forest licences are

. Still tied. to-the mill.

“We already have more inills’
than we can supply with timber,"
Rosenberger said. "It [Wedeene]
doesn’t appear that attractive right
now."

Kelly and Clayton Williams, vice
president of woodlands and vice
president of manufacturing for
Wedeene, stated in an information
bulletin Sept. 21: advising their
employees of the company’s insol-
vency that joint venture negoti-
ations with West Fraser Timber,
another major licence holder in the
region, had broken down Sept. 18.

Wedeene stated, "The lack of.

profitability in the industry as a
whole left them [West Fraser] ina
position of being unwilling to take
on any additional capital require-
ments even though long term bene-
fits could be realized.”

West Fraser already has a saw-
mill in Terrace that produces 205
million board feet of green hem-
lock dimension lumber for export:
annually, The company also holds

a partnership “with Enso’ Forest”

Products in pulp mill in Kitimat.
Both operations use timber and
pulp cut on the company’s Tree
Farm Licence 41 in the Kalum
Timber Supply Area, and West
Fraser is presently awailing appro-
val from the Minister of Forests
for acquisition of another 240,000
cubic meter licence from Tay-M .
Logging in the North Kalum. ~

The other mjor licensee in the
region is Skeena Cellulose, which

already has a pulp mill in Prince
Rupert and a sawmill in Terrace.

The company has tenure on Tree
Farm Licence 1 and a 20-year
renewable forest licence in the

Kalum ‘TSA that give it a com-

bined cut of more than a million
cubic meters of timber and pulp
annually.

Orenda Forest Products of
Vancouver holds a 360,000 cubic
metre licence in the North Kalum,

and most of their cut is shipped

offshore through the port of
Stewart under a standing green
export permit. In the spring the
company unveiled a proposal to
build a chemi-pressurized ground-
wood pulp mill in either Stewart or
some other location in the North
Kalum as part of an application for
100,000 cubic metres of additional
tenure under Pulpwood Agreement
17. Orenda has since indicated that
the project may also include a
paper mill.

Acquisition of the Wedeene
assets could give Orenda additional
pulpwood and add some vertical
integration to the company, an
aspect that could be particularly
attractive if the government cuts
off raw log exports from the North
Kalum as has been recommended
_ by the legislature's Select Standing

Committee on Forests and Lands.

‘A company representative said -
-Monday, however, that Orenda has
absolutely no interest in picking up
Wedeene. .

. Despite. its financial difficulties,
there: ‘appears to be nothing wrong
- with: Wedeene’s :product. "It’s a -
good product,” Colin Rodgers said.

“We're shipping everything the
mill can produce,"

The Ministry of Forests. is going

to ‘let the receivership mn its

course, Gary Adolph, manager for -,

Adolph said the North Coast

district is currently. working on a .
‘resource management plan that .

will review the annual ‘allowable
cut, timber allocations and the
area’s land. base. He expects the

project to take several months and

involve public hearings.
' The Minister of Forests will have
to approve any sale agreement of

Wedeene because it will include ©

the transfer of a forest licence.

the North Coast ‘Forest District, A <<

said his office attempted to find &
additional wood for Wedeene but @

there were. no allocations left in

the district’s 650,000 cubic meter §
‘annual allowable cut. According to &
the Prince Rupert forest Region |
licensee list, Wedeene and associ- §
ate company Douglas Channel §
Resources held a combined cut of 5

169,946 cubic metres, Boyle and
Dean Logging holds 22,334,

Thomson Industries holds. 30,696,

and Intemational. Forest Products,
which operates a chain of sawmills

- SATURDAY,

in Vancouver and the Fraser Val- I

Iey, has a cut of 226,617.

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