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April - 1997 - Past Issue

Barter System Sees Mill Trade Lumber For Loader

By Reg Barclay
Copyright 1997. Contact publisher for permission to use.

Shortly before completing a major mill upgrade last fall, Northlands Forest Products in Fort MacMurray opted for an unusual way to turn some of the added plant lumber production into a new yard machine.

Northlands entered into a barter arrangement that will see it deliver lumber to the equipment manufacturer - Caterpillar - in exchange for a new Cat 950F wheel loader. The deal was put together by Finning, Cat dealer for Alberta, and Caterpillar World Trading. Started 15 years ago, Caterpillar World Trading offers new equipment in exchange for commodities like diamonds, oil or lumber.

Northlands co-owner Howie Ewashko says a subsequent fire at the mill has put lumber deliveries to Cat on hold, but only temporarily. The 950F, which was already on site, was not damaged in the fire. Once back into production, the mill will begin delivering lumber to CWT under the terms of the deal; it will be up to Cat to find a use or market for it.

"I think there is a big advantage for us to do deals like this," says Ewashko. While some operators might enter into a similar barter arrangement to protect cash flow, Ewashko says Northlands simply saw it as a way for the mill to realize a better return for lower-end wood products.

Finning's Gordon McDougall, based in Fort MacMurray, says the plan on going into the deal was that Cat would find a manufacturer, probably in the US, who would turn the Northlands wood into a product such as crating that Cat could then use in its own operations.

He says Caterpillar World Trading began on that basis, with the company exchanging equipment for steel, which it used in manufacturing machines. "It's grown from there and it really comes into play now in facilitating business, especially in countries with hard currency problems. There might be a diamond mine in Russia, for example, where they badly need equipment but don't have the cash to pay for it. A formalized barter arrangement like this presents an option, if a suitable deal could be worked out, of paying in diamonds instead. Every deal is different but the basic idea is to put something together that makes sense for everybody."

April 1997 - Table of Contents

Last modified 06/08/97

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