Tembec’s 200,000-acre timberland located in the central-southeast portion of the Gordon Cosens forest near Hearst is up for sale.
The land block was originally owned by the Ministry of Natural Resources who gave it to Tembec in exchange for land holdings to further expand the park along the Missinaibi River.
The company expects to receive a fair market value and retain access to a majority of the fibre.
Tembec has increased its 2006 target for revenue from the sale of non-core assets up to $150-$200 million.
Timberlands are categorized as either core or non-core assets, according to executive vice-president of business development and corporate affairs, John Valley. A company with 100,000 acres may use 90,000 acres for core timber harvesting. The remaining 10,000 acres may be situated by lakes or mountainsides, and could retain a higher value if developed into a resort or other commercial establishment, he explains.
“The money we can raise by selling them may be money that we could better use rather than having it tied up in those timberlands,” Valley says. “We intend to focus on our core businesses which include lumber, pulp and paper production.”
If the company cannot get a satisfactory price for the timberlands, they will not be sold.
“This is not a fire sale.”
A number of parties have shown expressions of interest in the property, including the Ministry of Natural Resources, forest management companies and investors who believe they can achieve a decent return on investment, Valley says.
He would not disclose how much Tembec is asking for the property nor any conditions of the sale.
“We have a good sense of what we are looking for should we choose to sell them,” Valley says.
Seven months ago, Abitibi Consolidated Inc. was in the same boat. They sold off 196,000 acres of timberland in the Thunder Bay region to American-owned NorthStar Forest Ltd., a subsidiary of Wagner Forest Management Ltd. for $55 million.
Wagner’s intention for the land is to manage it in much the same fashion as Abitibi, says Dave McGowan, timber pricing specialist with the Ministry of Natural Resources.
“The land generates a fair volume of timber, which will bring revenue for the investors along with considerable recreational potential,” McGowan says.
Within the property are a number of lakes and rivers, and a decommissioned rail bed.
Some Hearst property was also sold to NorthStar over five years ago. Algoma Central Railway sold their property to the American McDonald Trust. The family operation has since been selling it off piecemeal.
The land manager responsible for the Public Lands Act is Eric Boysen. He says private timberlands in Ontario account for less than 15 per cent of the total landmass. The other 87 per cent is Crown land. For that ratio to fluctuate at all, 100,000 hectares or more would have to change hands, which is not likely to happen.
“The public does not want to see large blocks of land being turned over to the companies,” he says.
Sustainable forest practices on public lands are mandatory according to the government’s Environment Act, but the Crown has a reduced influence on private property, he says.
Large timberlands are generally purchased by a group of investors who come together to form one company, McGowan says. Over 10 or 20 years, they usually improve the land value and put it up for sale.
He warns that United States land exchanges are not a barometer for Ontario lands.
“I don’t see the Crown’s policy in terms of land disposition changing at all.”
The industry’s fibre supply is based on current management forest plans. Legislation requires supply to remain sustainable, ecological and a continued part of the social fabric of the province.
“Our legislation doesn’t permit that to be compromised.”
