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Forest Economics 318 January 22, 2013 CREATING VALUE FROM COASTAL FORESTS

Forest Economics 318 January 22, 2013 CREATING VALUE FROM COASTAL FORESTS. J.W. (Bill) Markvoort R.P.F . Table of Contents. Value Parameters BC Timber Sales Bid Strategies Knowledge Know the Timber Sale and the Timber Know the Market Know the Rules and Regulations Know Yourself

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Forest Economics 318 January 22, 2013 CREATING VALUE FROM COASTAL FORESTS

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  1. Forest Economics 318January 22, 2013CREATING VALUE FROM COASTAL FORESTS J.W. (Bill) Markvoort R.P.F.

  2. Table of Contents • Value Parameters • BC Timber Sales • Bid Strategies • Knowledge • Know the Timber Sale and the Timber • Know the Market • Know the Rules and Regulations • Know Yourself • Preparing a Winning Bid • BC Timber Sale A74395, Conrad Creek • Information Bid Package • Winning Bidder • Bid Spreadsheet • Final Economic Results • Conclusions

  3. VALUE PARAMETERS • Log values • By species • By log sorts • Utilization • Harvesting Costs • Roadbuilding • Logging • Transportation • Sorting • Marketing

  4. BC TIMBER SALES • SBFEP formed in 1980 • Reorganized as BCTS in April 2003 • Strategy is to provide • A credible point of pricing to harvest timber on public timberland • Optimize net revenues to Crown • Provide opportunities for customers to purchase timber in an open and competitive market. • BCTS manages and administrates • Forest planning and timber cruising • Engineering and layout • Access road construction • Silviculture and Free to Grow.

  5. BID STRATEGIES • Know the Timber • Know the Market • Know the Rules and Regulations • Know Yourself

  6. KNOW THE TIMBER SALE • BCTS Website • Timber Cruise • Tender Package Summary • Invitation for Application (Bid Sheet) • Key Maps (Location, Cruise, Harvest) • Road Layout, Profiles and Cross Sections • Sample TSL document • Advisories • Talk to the People who Know • Contact Person at BCTS • Local Knowledge on Roads, Dumps • Quotes on Towing, Barging, Sorting • Road and Dump Use Fees • Paper Recce • Put all information in a spreadsheet • Make go/no go decision on site visitation • More important on remote sales

  7. KNOW THE TIMBER • Walk the Sale • Walk the road locations • Reactivation • New Roads and bridges • Endhaul Requirements and pits • Deactivation requirements • Walk the the blocks thoroughly (especially near boundaries) • Identify harvesting systems • Identify reserves • Identify creeks and riparian areas. • Be aware of biodiversity and wildlife requirements • Assess the timber • With knowledgeable people • Compare visual estimates with cruise • Local defects (white speck, powderworm, kasuri) • Other Factors • Log Dump Reactivation • Foreshore Tenures • Windfirming

  8. KNOW THE MARKET • Domestic • Accurate Prices based on Industrial Sorts • Specialty Sorts • Trends in Pricing • Pre-Selling • Export • Surplus Tested • Longer Timeline • Extra Costs • Fee-in-Lieu • Requires greater Quality Control

  9. KNOW THE RULES AND REGULATIONS • Registration and Eligibility • Outstanding Stumpage Accounts • Deposits (Bid versus Total Security Deposit) • Term Extensions and Costs • Withdrawals and Failures to Enter Into the Licence • Pre Work Meeting • Forest Act and Regulations and Other Legislation

  10. KNOW YOURSELF • Risk/Reward • Capital Requirements • Work in Process • Financing • Equipment • Experience • Location

  11. PREPARING A WINNING BID • Prepare Spreadsheet Model • Lock in Log Values • Lock in Harvesting Costs • Stumpage is Locked In • Calculate Available Bid • Calculate Profit and Risk Margin • Bonus Bid

  12. Take notice that, pursuant to Section 20 of the Forest Act, Timber Sale Licence A89069 is being offered for sale by the BC Timber Sales Strait of Georgia Business Area. Tenders will only be accepted from individuals or corporations registered as a BC Timber Sales enterprise in Category 1, 2 and 3 under the BC Timber Sales Regulation.Closing Date: FEBRUARY 7, 2013 at 11:00 a.m.Closing Location: Applications will be accepted by the Timber Sales Manager, Campbell River Timber Sales Office, at: 370 South Dogwood Street, Campbell River, BC V9W 6Y7. Geographic Location: McNeil LakeEstimated Volume: 23,676 - cubic meters, more or lessEstimated Area: 32.8 ha. Estimated Species: Hemlock 10,236 m³ (43%), Douglas-fir 7990 m³ (35%), Cedar 4,374 m³ (18%), Alder 1,076 m³ (4%), more or less.The preceding volume and species estimates are based on samples from a Full Cruise. Please see tender package for additional detail. Bidders are strongly advised to conduct a thorough field review of the licence area to verify timber volume and grade estimates.Licence Term: 12 monthsUpset Stumpage Rate: $20.39/m³. The upset stumpage rate was determined in accordance with the Coast Appraisal Manual and applicable to coniferous sawlog grades.

  13. CONCLUSIONS • Knowledge is Key (no surprises) • Work within your level of expertise • Leave margins for both risk and reward • Bid within your limits • Keep re-evaluating your budgets

  14. CONCLUSIONS • If you get it all right and with a bit of luck you end up with:

  15. A Happy Forester

  16. HOWEVER • If Lady Luck works against you • This is what could happen • Timber Sale A80080 Jennis Bay • Over $150,000 of roads already built plus deposits • Then on April 21, 2011

  17. Thank You

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