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Multi-million dollar upgrade for Nairn Centre mill
EACOM Timber is ramping up its operations in Ontario, starting with a major multi-million dollar investment in its Nairn Centre sawmill, near Sudbury.
By Tony Kryzanowski
During the recent Canadian forest industry downturn—when companies were taking dramatic downtime, shutting sawmills, or getting out of the solid wood industry because of the collapse of the American housing market—EACOM Timber Corp was among the few companies buying sawmills. Now it is investing in them.
EACOM Timber has been in the headlines of late, being the subject a friendly takeover offer valued at $181.8 million from New York-based investment firm Kelso & Co. The company is headquartered in Montreal, but its management has deep roots in British Columbia’s forest industry, though its operations are in Ontario and Quebec. It has recently completed an upgrade to its sawmill in Nairn Centre near Sudbury, Ontario in the range of $5 million to $6 million. A significant upgrade was recently completed at its sawmill in Elk Lake, Ontario, and the company has decided to reconstruct a sawmill that burned down last spring in Timmins, Ontario.
EACOM also resumed operations at two sawmills in Quebec last fall, one in Val-d’Or and one in Matagami. Both had been shut since the second half of 2011 due to poor market conditions.
During the third quarter of 2012 alone, EACOM spent over $6.3 million on capital in improvements, which it says will be covered substantially by its business interruption insurance claim resulting from the Timmins fire, which so far has amounted to $13.7 million for business interruption and $10 million for property damage.
Mel Lemky, company vice president of manufacturing for the Ontario region, says both the Nairn Centre and Elk Lake facilities are working hard to take up a considerable portion of the company’s lumber production capacity lost because of the Timmins sawmill fire. Capital investments and temporarily adding more shifts to those sawmills is helping to make it possible. The company plans to break ground to rebuild the Timmins sawmill later this year.
The Nairn Centre sawmill can produce about 150 million board feet annually on two shifts, which is more than the Timmins sawmill was producing prior to the fire. It manufactures primarily 2 X 4 and 2 X 6 in 8’ to 16’ lengths for the North American market, with some lumber dimensions also produced for export to the United Kingdom. It consumes about 600,000 cubic metres annually of predominantly jackpine, which average about 7.5” in diameter. The wood is harvested within about 160 kilometres of the sawmill.
Lemky says EACOM expects to achieve a seven per cent increase in fibre recovery as a result of capital investments made at Nairn Centre.
“We are taking wood that would traditionally be made into chips and making it into lumber, so chip price versus lumber price, there is quite a lift in value,” says Lemky. “And with better processes, we get a bit more length, and a bit more exacting standards. So at the end of the process, you not only get better recovery, but a better and more predictable product.” The sawmill has also found markets for all of its residuals.
Because of its location, the Nairn Centre sawmill is ideally suited to market its lumber throughout the northeastern and mid-western United States. It has produced lumber for decades in south central Ontario, with its operations historically tied to some extent to the pulp mill still owned and operated by Domtar in nearby Espanola. Lemky, a recent arrival in Ontario from working in the softwood industry in B.C., says the sawmill still sells its chips to the pulp mill and “when you have employees with over 30 years seniority, you know that it’s been there for a while.”
More recently—prior to the EACOM purchase—the sawmill has endured a number of start-ups and shutdowns, during a time when Lemky says “the market tried to find its footing again.” Under EACOM ownership, the sawmill has been operating on a steady basis for well over a year. At present, it employs about 125 workers with a third shift added to help maintain some of the production lost from Timmins. Eventually it will stabilize at about 90 employees unless the Ontario government makes more resources available.
EACOM Timber arrived on the Canadian forest industry scene in 2008. EACOM President and CEO Rick Doman has considerable forest industry experience, as former CEO of Doman Industries and Western Forest Products in B.C. EACOM became a major industry player in June 2010 when it completed the acquisition of the Domtar Forest Products Division for $80 million plus elements of working capital of approximately $46.5 million.
Today EACOM owns eight sawmills in Ontario and Quebec, one remanufacturing facility, and has a partnership arrangement on a I-Joist plant.
When asked about the timing of EACOM’s purchase of the Domtar Forest Products Division, Lemky says it was a good opportunity.
“During a time when lumber prices are lowest, the valuation of mills is normally at their lowest,” he says. “It’s a time to seriously look at buying into the industry.” Once an investment is made, the goal then is to look at ways to improve performance, which is what EACOM is doing at its sawmills at the present time.
EACOM has production capacity of approximately 900 million board feet.
The Nairn Centre sawmill processes cut-to-length logs in 16 ‘ lengths through one processing line. Lemky says the recent major capital investment at the sawmill had very specific goals in mind.
“Optimization and the ability to capitalize on your optimization is really the primary goal,” he says. “In other words, getting more lumber and also better lumber out of your trees. Focusing on optimization not only brings you the most return, but these areas were also the most neglected systems at the sawmill.”
The logs entering the mill first encounter one of three Nicholson debarkers. One is a 27” debarker and the other two are 22” debarkers. The logs are processed through an Optimil canting line and then through a McGeehee 10” gang. The lumber is processed further through a USNR optimized edger and a Comact trimmer. The lumber proceeds to a 50 bin sort and is then stacked in preparation for drying.
“We installed an upgrade on the Porter Engineering scanner on the Optimil line for log optimization,” says Lemky. “We also installed a new USNR scanner on the optimized edger.”
Between the sawmill and planer, a new Wellons, direct-fired, natural gas dry kiln was installed to dry the lumber.
EACOM operates two planing lines and has installed a lumber auto-grading system provided by VAB Solutions on both lines. One planer line produces studs and the other planer line produces random length lumber. Lemky says the grading system on the stud side is entirely computer-based without human intervention, but there is always a human grader present to ensure that quality and specifications are being met.
“We always keep a licensed grader on the line just in case we have a malfunction anywhere. They can pick up on it,” says Lemky. A grade checker also keeps a watchful eye on the random length line.
“With the VAB system, it has become a very easy job just to keep an eye on flow issues and how it is grading,” says Lemky. “Intervention levels are probably less than one per cent.”
He adds that EACOM has adopted auto grading because there is uninterrupted flow-through using a mechanical system versus human graders, and the technology has shown that it can deliver very predictable results. He adds that VAB Solutions has earned a reputation as a quality equipment provider in this area and they were competitive on price.
Making the transition to mechanical auto-grading is also contributing to the sawmill’s ability to capture more value.
“It gives you a lot of options because of the great improvements that have been made in computing speeds,” says Lemky. “You can load many different recipes into it and it can run them all simultaneously because of such an increase in technology.”
In terms of what EACOM will install for auto grading in its other facilities, Lemky says the company is keeping a close watch on how the technology is evolving.
“It’s probably the one area of technology that is still moving ahead in leaps and bounds every year or two,” he says. “So we are going to pay attention to who has developed what at any given time just because of the capabilities that are coming with that technology right now.”
EACOM employees are happy and excited to see some capital investment being made into the sawmill at Nairn Centre.
“We’re still looking to improve more because we now actually have the tools that we can work with,” says Lemky. “I don’t think looking at upgrades with paybacks is something we’ll ever quit doing.”
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