It was a shock to the northern Ontario community of Hornepayne when the sawmill and bioenergy plant closed in late 2015. But the operation plans to be back working on a two-shift basis by this fall.

Bonus Christmas gift

The residents of Hornepayne, Ontario received a bonus Christmas gift late last year, with the shuttered sawmill/biomass power plant in the town coming back to life, thanks to industry veteran, Frank Dottori.

By Tony Kryzanowski

This past Christmas won’t soon be forgotten by residents of Hornepayne, Ontario, as they received a very big present: the shuttered sawmill and biomass power plant in the town, formerly owned by the Olav Haavaldsrud Timber Company, was brought back to life by veteran Canadian forestry businessman, Frank Dottori.

Founded in 1953 by Norwegian immigrants Olav and Elna Haavaldsrud, the family-owned company had fallen on hard times. Considerable money had been spent modernizing the sawmill just before the American housing crash in 2008. And there was a massive commitment to the adjacent $66 million Becker Cogeneration Plant, constructed to consume the sawmill’s waste. The Ontario government helped to support its construction, with $30 million in grants and loan guarantees.

A new Autolog computerized lumber grading system is one of the investments that the new owners have made to the Hornepayne sawmill.

Hornepayne is a small and remote northern community consisting of about 1,000 residents, and the sawmill and biomass power plant are the town’s biggest employers. But in November 2015, 146 workers suddenly found themselves unemployed. Mill management announced that unless they could negotiate a better power supply agreement with Ontario’s Independent Electrical System Operator (IESO), the power plant and sawmill would shut down. The power plant had a contract to supply eight megawatts of power to the IESO, but had the ability to produce nearly twice that amount on a consistent basis. No agreement was reached, and both the sawmill and power plant wound up in receivership.

Hornepayne Mayor Morley Forster said that the mill closure was a tough blow to the community, with some families forced to move away to find work.

But Frank Dottori, who founded forest company Tembec in 1973 and most recently returned to the industry by purchasing the idled Domtar sawmill in White River, Ontario, about 100 kilometres south of Hornepayne, saw opportunity knocking. He and a Toronto equity fund formed Hornepayne Lumber LP, and purchased the sawmill and biomass plant.

Initially, some 11 different parties expressed an interest in purchasing the sawmill from the receiver, with Dottori and Hornepayne Lumber LP ultimately prevailing.

The company purchased the Hornepayne sawmill in August 2016 out of receivership, firing up operations on a one-shift basis in January 2017 with 50 employees. It also later purchased and re-started the biomass power plant.

Since the re-start of these facilities, Forster has noted a much more positive mood among the town’s residents. The re-start has contributed a lot to the local economy; the closure had resulted in about half of the town’s workforce suddenly being unemployed.

Dottori says the facilities inject between $20 million and $30 million into the region annually, with positive spinoffs on many local businesses and on real estate values.

The potential purchase of the Hornepayne sawmill was something that had been on Dottori’s radar for some time because of the efficiencies it offered in managing the local wood basket and operations integration with his White River sawmill.

“We were sitting in the middle of a 500,000 cubic metre forest allocation and our north end was about 20 kilometres from that mill, with our eastern boundary being close as well,” he says. “So it’s a nice integration of our forest operations units, and gives us access to about one million cubic metres of wood fibre.”

The White River sawmill was one of many sawmills hit hard by the 2008 housing crash. It sat idle for several years before being purchased in 2013 by Dottori and a group of investors that includes the Pic Mobert First Nation and Township of White River.

When asked why he feels confident that he will succeed in Hornepayne, Dottori says the sawmill has a history of always making money—but it was victimized by a combination of circumstances, including what he described as the “financial depression” that set the sawmill down a path of accumulating debt from which it could not recover.

Dottori is counting on his extensive sawmilling experience and management style to return the Hornepayne sawmill to profitability, adding that prior to its closure, it was producing superior lumber grades aimed specifically at the domestic wood treatment market. So its fortunes are not tied to shipping softwood lumber to the United States. It’s a different story for the White River sawmill, with about half of its production shipped to the U.S., and it is now required to pay a softwood lumber tariff.

Also, the Hornepayne sawmill is a relatively modern mill, having recently been upgraded with a new Comact DDM12 log processing line. Dottori describes it as a “beautiful, streamlined, single-line sawmill” capable of producing about 120 million board feet of random length dimension lumber.

Logs arrive in cut-to-length dimensions and encounter one of two Cambio 18” debarkers prior to being processed through the Comact DDM12 breakdown unit.

“It’s actually been a fairly easy start up,” Dottori says. “The mill was rebuilt about 10 years ago, so it is in pretty good shape.” He says a bit more investment will be required, such as more lumber sorting bins and installation of an Autolog computerized lumber grading system in the planer mill, which they have already purchased.

Now that the sawmill and biomass plant are back operating, Dottori says a new agreement has been signed with the local union and they have managed to attract many of the sawmill’s experienced, hardworking employees back to the sawmill. Among his biggest challenges, though, is attracting logging and log haul contractors back to the community, and this is hampering how fast the sawmill can ramp up to two shifts.

“The problem is getting logging contractors because they were devastated from the crash in 2008,” says Dottori. “Virtually all of the contractors in this area got wiped out.” In fact, he says about 80 per cent of the province’s forest industry was decimated. A big problem facing the industry is that even as it experiences a rebound, many of the people remaining with logging experience are now in their 50’s and 60’s.

“Their interest in starting over again is not high,” says Dottori, “and there are very, very few young people interested in getting into the business, which puts us into sort of an awkward position where we are trying to import outside contractors. We are also experiencing a shortage of trucking contractors.”

The Hornepayne sawmill processes primarily black spruce, while its counterpart in White River about 100 kilometres away processes jackpine from the area’s wood basket. The sawmills complement each other well.

However, there is a plan to ramp up production at the sawmill to two shifts by fall. Dottori expects to complete negotiations soon with logging contractors to provide Hornepayne’s required wood supply for the coming year.

The Hornepayne sawmill, with its smaller diameter debarkers, is better suited to processing smaller diameter spruce that tends to grow primarily in the northern half of their Sustainable Forest License (SFL) area. The predominantly larger diameter jackpine in the SFL’s southern area will be diverted to the White River sawmill.

The biomass power plant provides benefits to both the Hornepayne and White River sawmills, taking wood waste like bark from both these facilities as fuel. It will also consume some wood residuals from forest operations. The plant was originally designed to consume between 175,000 to 200,000 tonnes of wood waste annually, while also providing steam for lumber drying and heat for buildings.

“The plant is competitive and it makes money, but it’s borderline,” says Dottori. “It could be a tremendous money maker and a sustainable force in the community. That’s where we want to go and I think we will get there.”

Part of the challenge is they are seeing the same difficulties experienced by the previous owners: dealing with the IESO and the cumbersome manner generally in which Ontario manages its power purchase and distribution system. Because of power purchase agreements in place with the IESO, the power plant is only running at about 70 per cent capacity. Hornepayne Lumber LP is hoping to convince the IESO to allow the company to provide more power from this facility.

“At 12 megawatts, it’s a really good project,” Dottori says. “At 15 megawatts, it’s a great project.”

The Hornepayne sawmill’s wood basket consists of approximately 20 per cent poplar, and finding a home for this entire resource is one of Dottori’s priorities. There are agreements in place for veneer logs, but the rest still needs to find a market since an oriented strandboard plant in the area—which was using the remaining poplar—converted to a wood pellet plant. It’s important to find a market for this wood as it will help to reduce logging costs.

What’s helping the forest industry in Ontario as a whole is the current demand and prices for lumber shipped to the U.S. Dottori says he can’t remember lumber prices being this high, and according to industry publication, Wood Resources International LLC, eastern sawmills operated at 10 per cent higher levels in 2016 than they did in 2015, and at 40 per cent higher levels compared to five years ago. However, that was before the recent implementation of the softwood lumber tariff on Canadian lumber shipped to the U.S.