nakusp and area community forestnakuspcommunityforest.com/.../2013/09/nacforbusinessplan2014.pdf ·...

NAKUSP & AREA COMMUNITY FOREST (2013) Inc.

BUSINESS PLAN April 23, 2014

Hugh Watt, R.P.F.True North Forestry Consulting Ltd.

(Adapted from original written by Jesper Neilsen, R.P.F. in 2007)

Nakusp & Area Community Forest (2013) Inc. (“NACFOR 2013”)

Business Plan (FINAL) - April 23, 2014 1

Contents 1. EXECUTIVE SUMMARY ........................................................................................ 4

Business Description ................................................................................................... 4 1.1.................................................................................................................................... 4 1.2 Key Objectives ..................................................................................................... 4 1.3 Ownership and Management ................................................................................ 4 1.4 Marketing Opportunities ...................................................................................... 5 1.5 Competitive Position ............................................................................................ 5 1.6 Financial Summary .............................................................................................. 6

2. MISSION STATEMENT ........................................................................................... 73. STRATEGIC GOALS AND OBJECTIVES .............................................................. 7

3.1 Operational Goals / Activity Schedule (“Action Plan”)....................................... 8 4. ORGANIZATION and MANAGEMENT ................................................................. 9

4.1 Ownership ............................................................................................................ 9 4.2 Structure ............................................................................................................... 9 4.3 Governance and Policy......................................................................................... 9 4.4 Management ....................................................................................................... 10 4.5 Operations .......................................................................................................... 10

5. ORGANIZATIONAL CHALLENGES.................................................................... 115.1 Management ....................................................................................................... 11 5.2 Strategic Planning .............................................................................................. 11 5.3 Public Consultation Process ............................................................................... 12 5.4 Stakeholder Organizations ................................................................................. 12 5.5 Other Communications ...................................................................................... 13 5.6 Conflict Resolution Process ............................................................................... 13 5.7 Monitoring/Inspection ........................................................................................ 14 5.8 Reporting and Communications ......................................................................... 15 5.9 Audits ................................................................................................................. 15

6. OPERATIONAL CHALLENGES ........................................................................... 156.1 Timber Profile (Species and Grade) ................................................................... 16 6.2 Terrain ................................................................................................................ 16 6.3 Compatibility With Non-Timber Resources ...................................................... 17

7. BUSINESS ENVIRONMENT ................................................................................. 177.1 Industry Overview .............................................................................................. 17 7.2 Timber Profile .................................................................................................... 18 7.3 Products .............................................................................................................. 18 7.4 Markets ............................................................................................................... 18 7.5 Log Supply and Competition ............................................................................. 19 7.6 Market Challenges.............................................................................................. 19

7.6.1 Maximizing Net Value From Timber ......................................................... 19 7.6.2 Local Nature of Log Markets ...................................................................... 20 7.6.3 Distance to Markets .................................................................................... 21

8. DISTRIBUTION OF FUNDS TO COMMUNITY .................................................. 219. RETURNS TO THE LOCAL AREA AND PROVINCE ........................................ 22



9.1.1 Economic Benefits ...................................................................................... 22 9.1.2 Social Benefits ............................................................................................ 22 9.1.3 Improved Forest Practices........................................................................... 23 9.1.4 Improved and expanded Forest Land Base ................................................. 23



APPENDICES

Appendix A: Area Map

Appendix B: NACFOR Corporate Structure

Appendix C: Local Contractor List

Appendix D: Local Manufacturers

Appendix E: Operating Forecast 2013-2017

Appendix F: Log price sensitivity estimate

Appendix G: Operational Goals / Activity Schedule

Appendix H: Historical 2007 Goals and status

Appendix I: Contract Award

Appendix J: Conflict Resolution Details



1. EXECUTIVE SUMMARY

1.1 Business Description

Nakusp & Area Community Forest (2013) Inc. (NACFOR or NACFOR 2013) is a company wholly owned by the Village of Nakusp. NACFOR has a 25 year replaceable Community Forest Agreement (CFA) with the government of BC that was approved in 2011. The original probationary licence was granted in 2007. It is an area based tenure of approximately 9185 ha with a 20,000 m3 allowable annual cut (AAC). This equates to roughly 500 logging truck loads of logs per year.

In exchange for the right to harvest timber, NACFOR is legally and ethically compelled to sustainably manage the land base making up the CFA. Part of the rationale presented to government prior to being awarded the CFA was the demonstration of a social responsibility and sharing of net proceeds with the people of the area, as well as operating in an environmentally responsible manner.

The CFA license area is made up of distinct operating areas at Galena Bay, Fosthall, Wensley Creek, Kuskanax, Scalping Knife, Wilson, Summit/Box Lake, and Slewskin. An overview map of the operating areas in relation to Nakusp is shown in Appendix A.

1.2 Key Objectives NACFOR’s main business objective is to sustainably manage forest land, yielding timber which is sold on the open market for profit, while meeting or exceeding social and environmental objectives.

Some examples of the social and environmental objectives are:

NACFOR is committed to stabilizing and growing the local forest industry by providing employment opportunities for local forestry and wood manufacturing businesses. This will be done by supporting existing business and encouragement of new local business initiatives. NACFOR is committed to fulfilling its business and social objectives in a sustainable and environmentally responsible manner.

1.3 Ownership and Management

NACFOR is a stand-alone entity, registered as a corporation in BC. The Village of Nakusp (the Village) is the sole owner and shareholder of NACFOR.



As sole shareholder, the Village has certain responsibilities and obligations which it is required to meet in order to fulfill statutory responsibilities. The Village has confirmed that the intent of the incorporation of NACFOR is to create an entity that is controlled by an independent Board of Directors (BoD), with day to day business conducted independently of the Village council.

A Village appointed volunteer board is responsible for strategic direction, setting policy, and facilitating the management of NACFOR. The management of NACFOR is done by management contract. The current local management contractor is True North Forestry Consulting Ltd.

1.4 Marketing Opportunities

NACFOR has a mixed species profile containing enough premium log grades to enable profitability when there is reasonable or better demand and price for logs. Premium log grades can be more widely marketed because it is economically possible to haul them further to different markets. Along with the premium logs come commodity and low grade logs during a logging operation. There are currently limited opportunities to market commodity and low grade logs due to a partly or completely monopolized market - few buyers, in many cases one buyer.

One of the biggest marketing opportunities for NACFOR going forward is to promote local manufacturing. By encouraging local manufacturing, NACFOR may secure a viable and local future market for logs, as well as fulfilling the social agenda of creating employment and promoting community self-sufficiency. Local manufacturers may have a direct competitive cost advantage in lower log hauling costs to their facilities. (Conversely they may be farther from end markets than their competitors.)

1.5 Competitive Position

Strong and innovative direction and management coupled with wealth preservation will allow NACFOR to endure through peaks and troughs in the economic cycle of the forest industry.

Some key success factors for NACFOR are:

1. Effective forward planning and harvest scheduling which includes adetermination of net stand values

2. Merchandizing the stands to realize the best net value for the logs.3. Maintaining adequate and accessible volume and species/grade mix; under permit

with roads built to access the timber.4. Being able to react to small markets or rapid changes in the marketplace.5. Demand for and price of premium/specialty grades, commodity grades and low

grades of wood.



6. Availability and expertise of contractors to log and haul logs to meet markettiming.

7. Ability of management to identify and navigate through multiple constraints torealize the Allowable Annual Cut (AAC) of the license.

8. Ability to meet multiple financial, environmental and social objectives, integratedwith on-going operations.

1.6 Financial Summary

One year: NACFOR is anticipating strong earnings in 2013 due to a) improved demand and price for logs and b) accelerated harvest levels in an effort to meet cut control commitments.

Longer term: A five year income forecast is shown in Appendix E, along with the assumptions used in developing the forecast. NACFOR is forecast to generate positive financial results over the next five years, ranging from 5% to 20% (approximate) return on revenue. Strengthening demand for logs is anticipated, and local shortages of certain species and grades may drive log prices up. There may be high volatility in log prices depending on the local and regional competition for logs. The income statement (Appendix E3) illustrates the high sensitivity of net income to log prices, log grade profile, and operating costs.

Appendix E2 shows a range of anticipated log pricing by species and grade.



2. MISSION STATEMENT

NACFOR strives to balance economic, ecological and social values in a manner that optimizes benefits for the local communities.

The mission statement will be re-visited by the Board periodically to ensure that there is harmony between the statement and the goals and objectives of NACFOR.

3. STRATEGIC GOALS AND OBJECTIVES

The Board of Directors is responsible for setting broad strategic goals for NACFOR. The Board sets goals in consultation with NACFOR management and members of the public through sub-committee work. Strategic goals set the direction and course for management.

Strategic goals may change over time depending on the Board direction, management, public suggestions, and external forces.

The current strategic goals and objectives are:

GOAL OBJECTIVES USED TO ACHIEVE GOAL

STATUS

GOAL 1: Ensure the sustainability of area forests

1. Monitor timber inventories to ensurethat calculated AAC’s are accurateand sustainable

2. Conserve non-timber forest resources.3. Develop a Forest Health Tracking

Strategy4. Achieve improved utilization from

wood waste products5. Develop a Sustainability Plan to guide

forest management activities.

In Progress On-going

Complete

On-going

New

GOAL 2: Optimize revenues from harvested timber.

1. Optimize economic utilization ofproduct mix.

2. Utilize open market log sales.3. Promote expansion of local wood

manufacturing4. Utilize market cycles to advantage

On-going On-going

On-going On-going

GOAL 3: Promote 1. Establish NACFOR as a stable,



community stability profitable and financially independent entity.

2. Provide funding for communitydevelopment projects and non-profitgroups.

3. Promote local value added expansion.4. Expand training opportunities for

youth

On-going

On-going On-going

On-going GOAL 4: Improve forest worker and public safety

1. Ensure CFA areas are economicallyviable.

2. Establish a fair and stable process forawarding of contracts.

3. Provide training opportunities forexperienced and entry-level forestworkers.

4. Establish a Fire Protection Strategy

Complete

Complete

On-going On-going

GOAL 5: Promote community involvement in local forest management

1. Establish an effective and inclusivepublic consultation process.

2. Establish a mechanism for disputeresolution.

3. Improve public access to local forestresources.

4. Provide and promote the disposition offorestry-related educational toolswithin the community. Establisheducational partnerships

On-going

Complete

On-going

On-going

3.1 Operational Goals / Activity Schedule (“Action Plan”)

The Activity Schedule (“Action Plan”) in Appendix G is a tool which provides a basic planning framework for operations. Completed items are checked off and new items are added, which provides an on-going record of accomplishment for NACFOR.

Original/ Historical Operational Goals: At the time of license application, NACFOR prepared an action plan to guide the initial activities. A listing of original goals and activities with the current status is in Appendix H. Goals which are still pertinent but not completed have been carried forward into the Activity Schedule.



4. ORGANIZATION and MANAGEMENT

4.1 Ownership

The Village of Nakusp is the sole owner and shareholder of NACFOR.

4.2 Structure

NACFOR was originally set up in 2007 as a corporation. It was recently re-structured as Nakusp & Area Community Forest (2013) Inc., and known more simply as “NACFOR 2013”. NACFOR is income tax exempt under the “municipal tax exemption” (paragraph 149(1)(d.5) of the Income Tax Act) The chart in Appendix B outlines the corporate structure. The relevant governing bodies are described in detail below.

4.3 Governance and Policy

NACFOR governance and operations must be consistent with the company Articles. Board members will be orientated and provided with copies of the Articles, significant policies and other pertinent documentation of NACFOR.

NACFOR is governed by a Village appointed Board of Directors, which is composed of a cross-section of the community. The exact number of Board members (currently seven) is determined by the Articles of the NACFOR, and availability within the Community. The Board of Directors must include a member of the Village Council and a member of the the RDCK Area K. or appointee.

Board members serve two year terms which are renewable for up to two additional terms. Further extensions may be granted so that retirement of Board members can be staggered over time.

The Board’s mandate is to provide governance and policy support on the following specific issues:

1. Legal accountability.2. Financial control.3. Strategic goals and guiding principles.4. Public consultation and conflict resolution processes.5. Hiring of management personnel.

The Board meets monthly with the possibility of some additional meetings to cover extraordinary issues.

To address needs in specific areas, Board sub-committees may be formed, for example:



1. Waste Management2. Community Funding3. Innovative Strategies4. Fire Management Strategy5. Finance and Marketing6. Youth7. Conflict Resolution

Sub-committees may be comprised of members of the public with particular expertise and interest in the given areas. Sub-committees will be chaired by a member of the Board of Directors who will report sub-committee findings, including any studies or recommendations, back to the Board.

4.4 Management

Management of NACFOR is on a contract basis, with the terms of reference for management services provided by a Request for Proposal (RFP) from the contractor candidate. Management undergoes a performance review on an annual basis by the Board. NACFOR will strive for local management in line with the strategic goals and objectives.

4.5 Operations

NACFOR has no direct staff. All NACFOR operations are done on a contract basis. Whenever possible, local contractors will be used for all of the following operations:

1. Forestry planning and mapping2. Road and Bridge Construction3. Harvesting4. Trucking5. Silviculture6. Road deactivation and maintenance

Appendix C is a listing of potential local contractors available within each of the above operational phases.

Any local contractor with a proven business record who expresses interest in working for NACFOR will be eligible to be added to the list and to work within their area of expertise.

NACFOR’s preferred method will be to award contracts on a rotational basis within each category.



NACFOR will offer a competitive rate to the contractor, based on industry standard costing tools, and subject to negotiation with the contractor. If a competitive rate cannot be negotiated with the contractor, NACFOR will reserve the right to move to the next contractor on the list.

Contractors will be assessed for performance attributes such as safety, competency, compliance, production and cost during the period of their contract. A performance summary report with recommendations will be filed at the end of the job.

Contracts may be awarded based on competitive bidding. A select invite bid system may be utilized, with invitees being chosen from known, reputable firms. NACFOR is not compelled to accept the lowest bid, or any bid, for work tendered. The current contract award process is included as Appendix I. Direct award contracts may be considered pending contractor availability and expertise and scope of work.

5. ORGANIZATIONAL CHALLENGES

Managing a Community Forest license presents NACFOR with many organizational challenges. Some of these challenges are:

1. Effective Management2. Adequate and Effective Strategic Planning3. Public and First Nations Consultation4. Conflict Resolution5. Monitoring and Improving Operations6. Reporting and Communications7. Audits

5.1 Management

The challenge of ensuring effective management is the responsibility of the Board. To date, NACFOR has utilized a renewable management contract with a local forestry firm. An annual management performance review has been implemented by the Board as a means to ensure effective management of NACFOR business.

5.2 Strategic Planning

Part of the Boards’ mandate is to undertake strategic planning and provide strategic direction for NACFOR.



Strategic planning effort will focus on monitoring existing goals and objectives to ensure that they are meeting the needs of NACFOR and the community, and developing new strategic goals and objectives.

The Board will meet periodically to focus on strategic planning. New goals and objectives may arise as a result of NACFOR or community needs and initiatives.

Strategic and operational goals will be consistent with all applicable legislation, regulations and governing documents.

5.3 Public and First Nations Consultation Process

Public consultation is an important and sensitive issue with respect to managing a Community Forest. Numerous stakeholders exist within any public forest tenure. Public expectations regarding the management of Community Forests may be higher compared to other licensees. Care must be taken not only to meet all legal requirements but to ensure that public concerns are considered and addressed.

NACFOR will meet all ‘Public Review and Comment’ requirements pertaining to a Forest Stewardship Plan outlined in Sections 20, 21 and 22 of the Forest Planning and Practices Regulation. Provisions include but are not limited to:

1. Public notice in a newspaper;2. Availability for public review;3. 60 days to allow for public response;4. Reasonable opportunity to review the plan; and5. Obligations to respond to relevant written comments.

In addition, NACFOR will meet legislative requirements for First Nations information sharing and consultation.

5.4 Stakeholder Organizations

NACFOR will make additional commitments to the Public Consultation Process beyond the legislation referenced above. It will encourage input and communication from local stakeholder groups including but not limited to:

1. Arrow Lakes Cross-country Ski Club;2. Arrow Lakes Saddle Club;3. Arrow Lakes Ridge rider Association (Snowmobile)4. Nakusp Rod and Gun Club.5. Nakusp Trails Society6. Summit Lake Ski Club



Other stakeholders and interest groups whom NACFOR is committed to consulting with during planning and permitting activities include licensed area trappers, wild crafters, guide outfitters and licensed water users.

Individuals or groups are encouraged to bring forward innovative ideas which can be implemented by or in conjunction with NACFOR. Although NACFOR recognizes that the first several years of operations must be focused primarily on establishing an efficient, stable and respected business, it also recognizes that it must be innovative and look to the future in order to realize the potential benefits of a CFA tenure.

5.5 Other Communications

NACFOR recognizes that maintaining a wide variety of communication mediums between the community and itself will be instrumental in implementing an effective public consultation process. In addition to meeting legislative requirements and encouraging stakeholder organizations as outlined above, communication mechanisms will include but not be limited to the following:

1. maintenance of the NACFOR website (www.nakuspcommunityforest.com);2. an annual open house to display and discuss proposed development and other

activities;3. annual operations summaries (which may be posted on the website);4. local newspaper coverage;5. information at the Village of Nakusp office.

5.6 Conflict Resolution Process NACFOR management will address any initial concerns or disputes. In many cases disputes can be avoided or minimized by effective initial communication about issues or concerns.

Two examples of potential conflicts arising from NACFOR planning or operational decisions are:

1. Contractor disputes; and2. Forest management concerns.

Contractor disputes may involve issues surrounding eligibility, rates or non-compliance. Every effort will be made to solve these at the management level. However, either management or the contractor will have the option to apply to the Board of Directors to initiate a conflict resolution process. A sub-committee established by the Board will review the contractor's application to determine whether or not they will hear the case. If they resolve not to hear it, management's decision will stand. If they resolve to hear the case, they will study all relevant information from both parties prior to making a decision.



Forest management concerns will be dealt with similarly to contractor disputes except that such concerns may originate from any member of the public. Public concerns over forest management might include but are not necessarily limited to issues surrounding watershed management, recreational use and botanical forest products. An annual public viewing will be held for all planned NACFOR activities. Any member of the public with a specific forest management concern will be required to inform NACFOR management in writing within a specified time period following the viewing. If the dispute cannot be resolved between management and the public individual or group, the public member(s) can apply to the Board of Directors for the initiation of a similar dispute resolution mechanism to the one described above for contractors. The conflict resolution sub-committee created by the Board of Directors will oversee any such disputes.

See Appendix J for an outline of the Conflict Resolution Process.

5.7 Monitoring/Inspection

NACFOR management is responsible for monitoring/inspecting all operational activities. In doing so, management will ensure that compliance is being achieved with requirements and/or targets including the following legislation, policy and NACFOR documents:

1. Forest Act;2. Forest Range and Practices Act;3. Forest Planning and Practices Regulation;4. Kootenay Boundary Higher Level Plan;5. NACFOR Forest Stewardship Plan;6. NACFOR Management Plan;7. NACFOR Business Plan;8. Forest Safety Council’s approved Safe Work Procedures;9. Cutting Permit and Road Permit documents;10. Contractor agreements;11. Agreements made with local stakeholders12. Other NACFOR documents

Monitoring/inspections will take place by the following means:

1. Pre-work and post-work meetings and documentation with contractors;2. Regular contractor inspections, documentation and follow-up;3. Meetings with affected parties (for example, watershed groups);4. Regular internal comparison of targets with results;5. Monitoring the degree of success in the meeting the goals of Board strategic or

operational initiatives.



5.8 Reporting and Communications

NACFOR management will be responsible for reporting inspection results and incidents, as needed, to the Board, government or appropriate agencies.

At the end of a contract, or periodically during a contract, performance reviews will be completed to document performance and recommend improvements.

A written monthly management report along with monthly financial statements will be prepared for the Board of Directors, and discussed at the monthly Board meetings. This will be the main form of communication between management and the Board.

Management is responsible for producing an annual synopsis/report for the Board which details the following:

1. Degree of success achieved in implementing specific directives orrecommendations put forward by the Board of Directors;

2. Contractor performance and compliance,3. Statistical data on planning, road building, harvesting and silviculture operations;4. Complete financial reports and analysis of financial results5. Planned activities, operational goals and a proposed operational budget for the

following year.

The company will also file an Annual Report for the Provincial Registrar of Companies.

5.9 Audits

NACFOR will hire an external auditor each year to conduct a full financial audit and ensure adherence to approved and acceptable standards (International Financial Reporting Standards). Part of the audit will include suggested improvements to the financial management of NACFOR. For the sake of efficiency and to match timing, the audit will be done in coordination with the Village audit.

Periodically the forest management plans and practices of NACFOR may be audited by the Forest Practices Board. In preparation for this, internal audits will be conducted periodically by management.

6. OPERATIONAL CHALLENGES

NACFOR has identified three primary operational challenges that must be met to be successful.



6.1 Timber Profile (Species and Grade) NACFOR’s timber profile (species and grade) is the single most important factor in determining its competitive position. NACFOR originally negotiated for an operating area with sufficient high-value timber to ensure good opportunities for success. This allows NACFOR to operate profitably in most market conditions.

There is a low percentage of timber over 140 years of age within the operating area. Much of the older high defect timber is contained within designated Old Growth Management Areas (OGMA's), taking it out of the operational timber profile entirely.

A key facet of forest planning is to estimate the net revenue that harvesting will yield from a given stand of timber. The method used is to estimate the proportion of species and log grades within stands targeted for development, monetize the stands with current or projected market pricing, apply an estimate of operating costs, and derive an estimate of net revenue. This removes some of the operating risk and allow harvesting to be (somewhat) scheduled according to perceived log market trends. Management will develop a proforma for each block early in the CP development cycle, which will be refined as development progresses. These individual harvesting proformas will become the basis of the log harvesting portion of the operational budget.

Longer term planning tools with an economic basis will need to be developed, refined and implemented in order to manage risk and help to ensure future success. A 20 year planning exercise is currently in progress in an effort to meet these needs.

6.2 Terrain

The NACFOR land base is considerably more challenging in terms of its operability than most areas in the B.C. interior. Steep and rugged terrain often necessitates the use of cable logging equipment that is more expensive to operate than ground-based (conventional) equipment that dominates most interior logging operations. Cable harvesting is estimated to comprise about sixty percent of area operations, increasing costs relative to some other B.C. interior licensees. The net effect is higher operating costs than the average interior licensee, the need for specialized equipment, and the need for trained workers with high capabilities and expertise to operate in these tough conditions.

This terrain also requires more specialized and expensive road construction. However because of previous harvesting almost all primary (“mainline”) roads are already constructed.

The economic recession from 2008-2012 created local instability resulting in a large erosion of cable logging contractor force and the skill sets needed to operate on this steep terrain. Presently there is a tremendous need for new workers and wage supported training opportunities for these workers. Going forward, NACFOR will need to play a



role in helping to rebuild these needed skills in the local labour and contracting force. In time they will be relying on these new workers to ensure successful logging operations.

6.3 Compatibility With Non-Timber Resources NACFOR is legally and ethically compelled to address a significant number of non-timber resource values in planning and implementing harvesting and forest management. Non-timber values to be addressed include water, recreation, wildlife, fish, biodiversity, visual quality, soils and wild crafting.

NACFOR’s goal is to realize the business and operational objectives without compromising the value and sustainability of other resources. NACFOR recognizes that it may incur additional costs in its operational activities in order to meet non-timber resource objectives including:

1. more detailed planning requirements and increased planning cost.2. increased harvesting costs.3. increased road construction and maintenance costs.4. Development of non-timber resources such as recreation trails and cultural

heritage sites.

Government realizes that community forests face unique costs and circumstances including a smaller economic scale than larger licensees, and has set stumpage rates for Community Forest licensees at 15 percent of the normal rate structure under current stumpage pricing for the B.C. Interior.

7. BUSINESS ENVIRONMENT

7.1 Industry Overview

NACFOR is part of a provincial industry that annually harvests approximately 75 million cubic meters of timber. The vast majority of this timber is harvested by large tenure holders with existing and efficient manufacturing plants.

The local and regional forest industry has fundamentally changed since 2008. The severe economic recession caused instability, insolvency and consolidation. As a result, there are now fewer outlets for logs within an economic working circle of Nakusp. Lack of log demand and serious cost control pressure ratcheted down the price of logs on the open market from 2008 to 2012. Currently there is some improved demand for wood but log sellers are in the position of being “price takers” because of the limited number of buyers. The picture could improve if demand increases or if regional shortages of certain species and grades occur.



As a relatively small tenure holder without any manufacturing facility, NACFOR’s challenge is to create income by selling logs into a monopolized market without the benefit of a possible gain in economic margin from producing a final product. New players in the market, including local manufacturers, would help this picture tremendously by offering other possible markets for logs.

7.2 Timber Profile NACFOR’s timber profile is representative of the “Kootenay mix,” a term used to describe the highly diverse species composition within the area’s forest. The main species within this mix are Douglas-fir, hemlock and cedar, with smaller components of larch, lodgepole pine and white pine. Spruce and balsam dominate higher elevation stands, which compose only a small fraction of NACFOR's operable area. Deciduous stems such as birch and trembling aspen compose a small component of area stands. NACFOR’s diverse forest is a valuable asset which should increase in value as BC’s timber supply tightens and world demand for wood increases.

7.3 Products The timber profile will produce a combination of high grade logs (poles, piling, building logs), commodity grade logs (sawlogs), and low grade logs (post and rail, pulp, firewood).

One goal of NACFOR’s operations is to upgrade volume from lower to higher value by merchandizing logs to the greatest extent possible. This includes correct log manufacturing, extensive log sorting on the landing, and finding niche log markets. Key markets to be targeted include Douglas-fir metric grades, timber frame products, piling, cedar and fir poles and post and rail grades. NACFOR tries to sell locally where markets exist.

7.4 Markets Demand for NACFOR’s timber depends on market conditions and log grades. Premium grade cedar and fir logs generally have good demand from 2 or more competitors, even when general market conditions are poor. Prices are negotiable but within a relatively narrow range typically. Commodity grade logs of all species have reasonable demand from 1 or 2 buyers, but NACFOR is a “price taker”. Demand for low grade logs (pulp, firewood) is generally reasonable, but margins are low (or negative). Price on low grade logs is typically not negotiable. Typically, NACFOR sawlog and pulp sales are made to large sawmills while sales of higher value products are made mainly to smaller and mid-size niche wood product producers.

A continuing challenge for NACFOR will be to adapt to changing markets and market conditions. Maintaining core financial strength will allow for patience to wait for better



conditions and higher log prices. Effective planning and operations will allow NACFOR to take advantage of market upswings and peaks. Quick reaction time to take advantage of niche markets is critical. This means that a variety of timber must be permitted and ready to harvest, and contractors must be available and able to harvest when needed.

7.5 Log Supply and Competition NACFOR is selling into a log market that is easily affected by a very changeable log supply. Other area forest licensees which may buy timber include International Forest Products (Interfor - Castlegar), Downie Street Sawmills (Revelstoke), Stella Jones, Kalesnikoff Lumber, Atco Lumber, Gold Island Cedar, Porcupine Wood Products. Most of their harvested annual quotas are used to support their individual product capacities, with some logs being used for trade purposes. When stumpage (Crown charge for timber) is low and/or lumber markets are low, licensees can often most economically meet their needs for logs by logging primarily on their own license areas, and buying less timber on the open market. When lumber prices are high and/or stumpage charges high, companies will tend to buy more open market timber. At these times, increased demand and competition should theoretically increase log prices.

The availability of timber from BC Timber Sales (a crown corporation selling timber on the open market) can affect the local and regional supply and therefore pricing of logs.

Other area community forests include the Kaslo Community Forest and Slocan Integral Forestry Cooperative (SIFCO) ,Harrop Procter Community Forest and Revelstoke Community Forest Corp (RCFC).

Other area suppliers of mixed species timber similar to that marketed by NACFOR include area woodlots and private land holders. The log supply from private land is very sensitive to log pricing, i.e. when prices improve, log supply increases from private land sources.

7.6 Market Challenges

NACFOR faces three principle market challenges: 1. Maximizing net value from timber2. Local nature of log markets3. Distance to markets

7.6.1 Maximizing Net Value From Timber NACFOR merchandizes logs by dividing them into different sorts tailored to the needs of individual mills. Where multiple markets exist, competition for the individual grades should result in an increase in log pricing.



NACFOR markets and pre-sells each timber sort in the bush. Often there are eight on-site log sorts at any one time. The additional operational costs resulting from sorting are offset by the ability to directly market and haul logs to specific buyers. Maintaining close attention to product quality and specifications should help to build solid relationships with buyers who are willing to pay premium prices for a known and dependable product.

One specific issue which NACFOR will seek to address over time, is the limited number of area manufacturers currently processing low value timber, particularly hemlock. Although current consumption of this product by area mills is sufficient to accommodate supply, the limited number of buyers reduces NACFOR’s negotiating strength on the selling price. Efforts will be made to help local manufacturers find markets for hemlock and other historically low value products and to adapt their production capacity to take advantage of those markets.

NACFOR will also seek to help local manufacturers to expand their markets in some existing products, for example Douglas-fir and larch piling. NACFOR’s timber profile contains a significant amount of straight, tall Douglas-fir and larch volume which meets pole and piling specifications. Expanding local production of this market would help NACFOR to increase revenues and to would also provide more jobs within the community.

Revenues and net income in the Forecast Income Statement 2013-2017 (Appendix E) have been derived assuming a projected product mix and pricing. The sensitivity of net revenue to these factors (mix and pricing) is high. Appendix F shows an estimate of log pricing sensitivity for the next five years.

7.6.2 Local Nature of Log Markets

Log markets have been very cyclical in the past five years. Very limited markets existed during the economic downturn 2008-2012. Log prices fell to historic low levels and markets for commodity grade and low grade logs were difficult to find or non-existent.

Timing harvest with markets is critical to success. The objective is to survive the downturns, prepare for better times, and harvest when the species or product is at or near its peak value. Developing a range of approved cut blocks will be key to ensuring that NACFOR maintains the market flexibility outlined above. NACFOR will seek to develop and maintain approved cutting permits for two to three years’ worth of harvesting.

NACFOR will switch to a “One CP” permitting method to be more responsive to short lived or niche markets within the next year. This should allow for single cut blocks to be permitted quickly in response to markets.



NACFOR typically has a high proportion of premium quality wood within its operating areas. While there is reasonable competition and pricing for premium products, there is very little competition for commodity and low grade products. NACFOR and other log sellers are “price takers” in these markets. Effort needs to be applied locally to help build other markets for logs.

7.6.3 Distance to Markets

Nakusp is in a remote location relative to log markets - historically the commodity and low grade wood in the Nakusp area has been dumped in the lake and towed south to mills at Castlegar. Premium grade products have been hauled to more distant markets resulting in high trucking costs to realize the premium value.

Very little of the timber harvested from the Nakusp area in recent history has been processed locally. One of NACFOR’s objectives is to increase the log supply for local sawmills. NACFOR hopes that the presence of an available supply of locally-based timber will encourage existing manufacturers to expand their operations and that secure supply may provide an impetus for new manufacturers to establish operations in the area.

8. DISTRIBUTION OF FUNDS TO COMMUNITY

The NACFOR Board of Directors is responsible for declaring annual dividends.

A reserve fund will be capitalized and maintained to buffer NACFOR against market volatility, to cover outstanding liabilities including silviculture commitments, and to allow for license management, planning and road construction ahead of harvest activities during times when revenue flow from harvesting is low.

The goal will be to maintain NACFOR as a financially strong entity that can survive through a poor economy and prosper when market conditions are favourable.

Dividends are payable to the Village of Nakusp (as sole shareholder). The intent of the Board of Directors and Village Council is that these dividends will be used to fund projects which have broad community benefit (including projects outside the Village boundaries) and that will will have a lasting effect on the community. Dividends will not be used for ongoing Village operations or capital expenditures of a routine nature.

The Board of Directors of NACFOR and the Village of Nakusp council will work together on a collaborative basis to determine the appropriate mechanism for distribution of these funds.



9. RETURNS TO THE LOCAL AREA AND PROVINCE

NACFOR is committed to providing economic, social and environmental benefits to the Village, surrounding RDCK defined area K, and to the Summit Lake Ski Hill.

By helping to increase economic self-sufficiency of the area, NACFOR will benefit all levels of government and the general population of the area.

9.1.1 Economic Benefits

The economic benefits accruing from NACFOR will include: 1. Division of allocated funds to community projects, local charities and other local

organizations. 2. Use of local labor and expertise in NACFOR management, planning and

operations. 3. Support and expansion of existing local mills through increased access to wood.4. Promotion of new log processing capacity in the local area.5. Increased opportunities for value-added industry through increased access to

wood.

9.1.2 Social Benefits

NACFOR will help to provide some broad social benefits to the people of the area including:

1. Working with local schools, colleges and universities to provide training andlearning opportunities on the NACFOR land base and with NACFOR operations.

2. Establishment of interpretive forest sites and trails, to increase public educationon forestry issues and provide employment for local workers including youth.

3. Working with local recreational user groups such as the Arrow Lakes CrossCountry Ski Club, Nakusp Trails Society, Arrow Lakes Ridge rider Association,Nakusp Rod and Gun Club, the Arrow Lakes Saddle Club and CanadianMountain Holidays heli-skiing to improve recreational use of the NACFOR landbase.

4. Helping to enable and provide local jobs and thereby increase the level ofcommunity self-sufficiency.



9.1.3 Improved Forest Practices

NACFOR seeks to improve long-term forestry and forestry-related practices within the community via the facilitation of strategies which may include the following examples:

1. Developing a Fire Protection Plan, including an Interface Fire ManagementStrategy;

2. Helping to facilitate a Waste Management Strategy, designed to improve woodutilization both in the forest and at local mills;

3. Conducting an Expanded Timber Supply Analysis, which will seek to verify thesustainability of established harvest levels via ground-based surveys and localanalysis;

4. Developing an Innovative Practices Strategy, which would act to promote andexpand the use of non-timber forest products for both commercial and non-commercial purposes.

9.1.4 Improved and expanded Forest Land Base

Through commitments to public consultation, providing tangible benefits to the community, and using innovative harvesting systems, NACFOR may be able to operate more easily than major licensees in historically contentious areas. This would expand the land base that is readily available for harvesting. One example is to create recreational areas and trail systems concurrent with harvest activities. Another example is to undertake interface fire protection on the edges of populated areas while still yielding an economic level of timber harvest.

To provide future security, self-sufficiency and self-determination for the local people, NACFOR will seek opportunities to expand the managed land base by acquiring additional Crown tenure or private forest land.

Appendix A – NACFOR Operating Areas

Appendix B – Corporate Structure

NACFOR CORPORATE STRUCTURE

Composition* 1 Village Council member 1 RDCK Area K member Delegates from general public

NACFOR Corporation Village of Nakusp is the

sole shareholder

Community Input (Annual open house, NACFOR

website, stakeholder meetings)

* Members will represent a cross-section of community.

* Total Board membership is defined by company Articles (currently 7 directors)

Board of Directors Governance

Policy Fund disbursement

Ensure proper management

NACFOR Management (Contract) Higher Level Planning

Harvest and Silviculture Scheduling Contract Operations Administration

Log Sales and Marketing

NACFOR Operations (Contract) Development Planning and Mapping

Roadbuilding and Deactivation Harvesting Silviculture

BoD Sub-Committees Finance and Marketing

Community Funding Innovative Practices Waste Management

Fire Management Youth

Conflict Resolution

APPENDIX B - NACFOR CORPORATE STRUCTURE

Appendix C – Local Contractors

1

NAKUSP AND AREA COMMUNITY FOREST

POTENTIAL LABOR POOL OF AREA CONTRACTORS

PHASE CONTRACTOR NAME LOCATION Forest Development True North Forestry Consulting Ltd Nakusp Fortech Forestry Consulting Nakusp Road and Bridge Building Cougar Valley Ventures Nakusp Crescent Bay Construction Nakusp Galena Bay Contractors Ltd. Nakusp Rubi Contracting Ltd Burton Grapple Yarding Arrow Lakes Logging Nakusp Convergent Management Group Ltd Nakusp Reitmeier Logging New Denver Tower Yarding Convergent Management Group Nakusp H.A. Friedenberger Contracting Ltd Nakusp J and D Logging Ltd Nakusp R & A Logging Nakusp Reitmeier Logging New Denver Conventional Logging DPM Contracting Fauquier Donald Kirk Logging Nakusp Matchett Logging Ltd Burton Convergent Management Group Nakusp Specialized Operations R. Hopp Logging Ltd. Nakusp E and F Logging Ltd. Nakusp

Harlow Creek Contracting Ltd. Nakusp

Salvage Harvesting Koert Dietermann Cont. Ltd Nakusp Trucking K & B Trucking Nakusp N & M Logging Ltd Nakusp Tercola Trucking Nakusp K Dupuis Nakusp T. Martin Trucking Nakusp Y2K Contracting Nakusp Rokel Enterprises Nakusp Grizzly Basin Nakusp B. Marcolli Trucking Nakusp Roland Enterprises Nakusp GBS Trucking Ltd Nakusp W and S Trucking Nakusp

2

Darrel Katchen Nakusp Reitmeier Transport Inc. New Denver Harlow Creek Contracting Ltd. Nakusp Marcolli Trucking Ltd. Nakusp Silviculture Hamling Lakes Nakusp Summit Lake Services Nakusp Greenridge Forest Consulting Nakusp Greenpeaks Resource Management Nakusp Scaling Pattom Services Ltd Nakusp Wildlife Management Ingersol Mountain Enterprises Nakusp

Appendix D – Local Manufacturers

Nakusp Local Wood Users (April 23, 2014)

NAKUSP AND AREA COMMUNITY FOREST LOCAL WOOD MANUFACTURERS

Company Name Primary Materials End Products Location Brisco Wood Preservers

Cedar Poles (contracted to pippco)

Nakusp

Stella Jones Cedar Poles (contracted to pippco)

Nakusp

PIPPCO 2004 Cedar, Douglas-fir, Larch

Poles and piling Nakusp

Kootenay Custom Sawing

All sawlog grades Lumber Nakusp

Summer Creek Enterprises

All sawlog grades Lumber Burton

Richard Dyck All sawlog grade Lumber, gazebos Burton

Zeleznik Sawmilling All sawlog grades

Lumber Nakusp

Box Lake Lumber Products

Cedar Post and rail Nakusp

Donny Rodger All sawlog grades Lumber Nakusp Herridge Truck and Sawmill

Cedar Cants and lumber Nakusp

Pine Street Holdings Birch, white pine Lumber Nakusp

Larry Guidon All sawlog grades Lumber Nakusp

Mike Friedenberger All sawlog grades Lumber Nakusp

NAKUSP AND AREA COMMUNITY FOREST MANUFACTURED WOOD USERS

Company Name Primary Materials End Products Location Box Mtn Wood Products

All Finishing carpentry Nakusp

Butch Warrantz All Finishing carpentry Nakusp Designs in Wood All Finishing carpentry Nakusp Fiddlehead Woodworks

All Finishing carpentry Nakusp

Scandic Timberframes

Dry Douglas-fir, cedar,White pine

Timber frame Nakusp

The Wooden Bow Yew Bow staves Nakusp Joseph Hughes All Various Nakusp

Appendix E – 5 year Financial Projections Appendix E1 –Operating Assumptions

Appendix E2 – Log Grade and Revenue Projection Appendix E3 – Net Income Projection

Year

Locations/Chart Total plan m3

Fir% Larch, Whitewoods

%

Hemlock% Cedar % Fir m3 Larch, Whitewoods

m3

Hemlock m3 Cedar m3 TOTAL

2013 Baerg, Slewiskin 75,000 45% 10% 30% 15% 33,750 7,500 22,500 11,250 75,0002014 Summit 20,000 40% 5% 35% 20% 8,000 1,000 7,000 4,000 20,0002015 Galena Bay 15,000 40% 10% 30% 20% 6,000 1,500 4,500 3,000 15,0002016 Summit/Box 20,000 20% 5% 60% 15% 4,000 1,000 12,000 3,000 20,0002017 Wensley,Scalping 15,000 30% 5% 45% 20% 4,500 750 6,750 3,000 15,000

TOTAL 145,000 56,250 11,750 52,750 24,250 145,000

Notes:2013 is the first year of a 5 year cut control period. Approximately 45,000 was carried forward from previous periodThis means approximately 145,000 m3 plus or minus 10% can be logged to the end of 2017

Year

Locations/Chart Total plan m3

Ground Skid %

Cable Grapple %

Cable Tower %

Aerial % Ground Skid $/m3

Cable Grapple $/m3

Cable Tower $/m3

Aerial $/m3

Average $/m3

2013 Baerg, Slewiskin 75,000 63% 31% 6% 0% 20.00$ 30.00$ 38.00$ 65.00$ 24.18$ 2014 Summit 20,000 60% 30% 10% 0% 22.00$ 33.00$ 40.00$ -$ 27.10$ 2015 Galena Bay 15,000 100% 0% 0% 0% 22.00$ -$ -$ -$ 22.00$ 2016 Summit/Box 20,000 50% 30% 20% 0% 22.00$ 33.00$ 40.00$ -$ 28.90$ 2017 Wensley,Scalping 15,000 80% 0% 20% 0% 26.00$ -$ 40.00$ -$ 28.80$

TOTAL 145,000

Projected Operating Areas and Species Profile 2013-2017Nakusp and District Community Forest Inc. (NACFOR)

Projected Logging Method and Cost by Operating Area 2013-2017

APPENDIX E1 - OPERATING ASSUMPTIONS

Year / Areas Species Species m3

Grade Grade % by

species

Grade% of total volume

Grade volume

m3

Delivered Price

estimate

Projected Total

Revenue

Trucking $/m3

Estimated Trucking Costs /

Douglas-fir 33,750 Building Logs,piling 1% 0.5% 338 90.00$ 30,375$ 8.00$ 2,700$ Metric, Peeler 69% 31.1% 23288 80.00$ 1,863,000$ 15.00$ 349,313$ Sawlog 20% 9.0% 6750 60.00$ 405,000$ 8.00$ 54,000$ Pulp/Firewood 10% 4.5% 3375 33.00$ 111,375$ 8.00$ 27,000$

Hemlock 22,500 Sawlog 95% 28.5% 21375 46.00$ 983,250$ 8.00$ 171,000$ Pulp 5% 1.5% 1125 34.00$ 38,250$ 8.00$ 9,000$

Cedar 11,250 Premium, Poles 10% 1.5% 1125 140.00$ 157,500$ -$ -$ Sawlog 85% 12.8% 9563 85.00$ 812,813$ 14.00$ 133,875$ Post and Rail 5% 0.8% 563 40.00$ 22,500$ 5.80$ 3,263$ Shake wood 0% 0.0% 0 80.00$ -$ -$ -$

Larch, White wood 7,500 Sawlog 100% 10.0% 7500 55.00$ 412,500$ 11.00$ 82,500$ TOTAL 75,000 100.0% 75000 64.49$ 4,836,563$ 11.10$ 832,650$

Year Species Species m3

Grade Grade % by

species


Grade volume

m3

Delivered Price

estimate

Projected Total

Revenue

Trucking $/m3

Projected Trucking Costs /

Douglas-fir 8,000 Building Logs,piling 2% 0.8% 160 95.00$ 15,200$ 8.00$ 1,280$ Metric, Peeler 75% 30.0% 6000 85.00$ 510,000$ 17.50$ 105,000$ Sawlog 15% 6.0% 1200 65.00$ 78,000$ 10.00$ 12,000$ Pulp/Firewood 8% 3.2% 640 33.00$ 21,120$ 8.00$ 5,120$



Larch, White wood 1,000 Sawlog 100% 5.0% 1000 65.00$ 65,000$ 11.00$ 11,000$ TOTAL 20,000 20000 69.79$ 1,395,720$ 12.73$ 254,560$


Grade Grade % by

species


Grade volume

m3

Delivered Price

estimate

Projected Total

Revenue

Trucking $/m3


Douglas-fir 6,000 Building Logs,piling 2% 0.6% 120 90.00$ 10,800$ 8.80$ 1,056$ Metric, Peeler 75% 22.5% 4500 85.00$ 382,500$ 13.30$ 59,850$ Sawlog 15% 4.5% 900 65.00$ 58,500$ 9.30$ 8,370$ Pulp/Firewood 8% 2.4% 480 33.00$ 15,840$ 8.00$ 3,840$


Cedar 3,000 Premium, Poles 20% 3.0% 600 140.00$ 84,000$ -$ -$ Sawlog 80% 12.0% 2400 90.00$ 216,000$ 10.50$ 25,200$ Post and Rail 0% 0.0% 0 40.00$ -$ -$ -$ Shake wood 0% 0.0% 0 80.00$ -$ -$ -$



Grade Grade % by

species


Grade volume

m3

Delivered Price

estimate

Projected Total

Revenue

Trucking $/m3


Douglas-fir 6,000 Building Logs,piling 2% 0.6% 120 90.00$ 10,800$ 7.40$ 888$ Metric, Peeler 75% 22.5% 4500 85.00$ 382,500$ 16.25$ 73,125$ Sawlog 15% 4.5% 900 70.00$ 63,000$ 8.80$ 7,920$ Pulp/Firewood 8% 2.4% 480 33.00$ 15,840$ 8.00$ 3,840$





Grade Grade % by

species


Grade volume

m3

Delivered Price

estimate

Projected Total

Revenue

Trucking $/m3


Douglas-fir 4,500 Building Logs,piling 2% 0.5% 90 90.00$ 8,100$ 6.00$ 540$ Metric, Peeler 65% 14.6% 2925 85.00$ 248,625$ 17.50$ 51,188$ Sawlog 25% 5.6% 1125 70.00$ 78,750$ 8.00$ 9,000$ Pulp/Firewood 8% 1.8% 360 33.00$ 11,880$ 8.00$ 2,880$

Hemlock 6,750 Sawlog 85% 28.7% 5737.5 55.00$ 315,563$ 7.75$ 44,466$ Pulp 15% 5.1% 1012.5 34.00$ 34,425$ 7.75$ 7,847$

Cedar 3,000 Premium, Poles 10% 1.5% 300 140.00$ 42,000$ -$ -$ Sawlog 85% 12.8% 2550 95.00$ 242,250$ 13.90$ 35,445$ Post and Rail 5% 0.8% 150 40.00$ 6,000$ 5.80$ 870$ Shake wood 0% 0.0% 0 80.00$ -$ -$ -$

Larch, White wood 750 Sawlog 100% 3.8% 750 65.00$ 48,750$ 7.40$ 5,550$ TOTAL 15,000 15000 69.09$ 1,036,343$ 10.52$ 157,785$

2014 Summit

2013 Fosthall,

Baerg, Slew

2015 Galena

2016 Box Summit

2017 Scalping

Knife, Wensley

Nakusp and District Community Forest Inc. (NACFOR)Log grade and revenue projection 2013-2017

APPENDIX E2

5 yr TOTALProjected Harvest Volume (m3) 75,000 20,000 15,000 30,000 15,000 155000

$/m3 Total $ $/m3 Total $ $/m3 Total $ $/m3 Total $ $/m3 Total $

RevenueLog sales 64.49$ 4,836,563$ 69.79$ 1,395,720$ 72.20$ 1,082,940$ 63.98$ 1,919,415$ 69.09$ 1,036,343$ 10,270,980$ Interest 20,000$ 30,000$ 30,000$ 30,000$ 30,000$ 140,000$

64.75$ 4,856,563$ 71.29$ 1,425,720$ 74.20$ 1,112,940$ 64.98$ 1,949,415$ 71.09$ 1,066,343$ 10,410,980$

Operations CostsTree to truck 24.92$ 1,869,000$ 27.70$ 554,000$ 22.00$ 330,000$ 29.50$ 885,000$ 28.80$ 432,000$ 4,070,000$ Hauling 11.10$ 832,650$ 12.73$ 254,560$ 10.37$ 155,616$ 11.36$ 340,736$ 10.52$ 157,785$ 1,741,347$ Stumpage 1.50$ 112,500$ 2.00$ 40,000$ 2.00$ 30,000$ 2.50$ 75,000$ 2.50$ 37,500$ 295,000$ CP Development 2.00$ 150,000$ 3.00$ 60,000$ 3.00$ 45,000$ 3.00$ 90,000$ 4.00$ 60,000$ 405,000$ Road construction 1.00$ 75,000$ 3.00$ 60,000$ 5.00$ 75,000$ 3.00$ 40,000$ 4.00$ 60,000$ 310,000$ Road maintenance 0.50$ 37,500$ 2.00$ 40,000$ 0.50$ 7,500$ 0.50$ 15,000$ 1.50$ 22,500$ 122,500$ Contract Supervision 0.50$ 37,500$ 0.50$ 10,000$ 0.50$ 7,500$ 0.50$ 15,000$ 0.50$ 7,500$ 77,500$ Silviculture accruals 5.00$ 375,000$ 5.00$ 100,000$ 5.00$ 75,000$ 5.00$ 150,000$ 5.00$ 75,000$ 775,000$ Annual rent 0.25$ 18,750$ 0.25$ 5,000$ 0.25$ 3,750$ 0.25$ 7,500$ 0.25$ 3,750$ 38,750$ Total production costs 46.77$ 3,507,900$ 56.18$ 1,123,560$ 48.62$ 729,366$ 55.61$ 1,618,236$ 57.07$ 856,035$ 7,835,097$

AdministrationAudit and legal 0.27$ 20,000$ 1.00$ 20,000$ 1.33$ 20,000$ 0.67$ 20,000$ 1.33$ 20,000$ 100,000$ Bookeeping/clerical 0.16$ 12,000$ 0.60$ 12,000$ 0.80$ 12,000$ 0.40$ 12,000$ 0.80$ 12,000$ 60,000$ Management costs 2.93$ 220,000$ 5.00$ 100,000$ 6.67$ 100,000$ 5.00$ 150,000$ 6.67$ 100,000$ 670,000$ Total admin costs 3.36$ 252,000$ 6.60$ 132,000$ 8.80$ 132,000$ 6.07$ 182,000$ 8.80$ 132,000$ 830,000$

Total costs 50.13$ 3,759,900$ 62.78$ 1,255,560$ 57.42$ 861,366$ 61.67$ 1,800,236$ 65.87$ 988,035$ 8,665,097$

Net income (loss) 14.62$ 1,096,663$ 8.51$ 170,160$ 16.77$ 251,574$ 3.31$ 149,180$ 5.22$ 78,308$ 1,745,884$ Income to revenue ratio (%) 22.6% 11.9% 22.6% 5.1% 7.3% 16.8%

2013 2014 2015 2016 2017

Nakusp and District Community Forest Inc. (NACFOR)Net Income Projection 2013-2017

APPENDIX E3

Appendix F – Log Price Sensitivity/Projection

Species Grade

Typical Delivered

Price estimate

$m3 Low Range estimate

$/m3 High Range estimate

Typical Trucking $/m3

Typical Net price FOB

landing Comments

Douglas-fir Building Logs,piling 90.00$ 80.00$ 125.00$ -$ 90.00$ Very limited markets, may improve as building picks up Metric, Peeler 80.00$ 70.00$ 95.00$ 20.00$ 60.00$ Large market, primary markets are Downie in Revelstoke and Kalesnikoff in ThrumsSawlog 60.00$ 50.00$ 70.00$ 10.00$ 50.00$ Large market -InterforPulp 33.00$ 30.00$ 35.00$ 8.00$ 25.00$ Large market - Celgar

Hemlock Sawlog 48.00$ 40.00$ 60.00$ 10.00$ 38.00$ InterforPulp 34.00$ 30.00$ 40.00$ 10.00$ 24.00$ Celgar

Cedar Premium, Poles 140.00$ 125.00$ 160.00$ -$ 140.00$ For poles 60 feet and less, longer ones are rarer but command higher prices.Sawlog 90.00$ 70.00$ 120.00$ 16.00$ 74.00$ Post and Rail 40.00$ 35.00$ 45.00$ 8.00$ 32.00$ Local marketShake wood 80.00$ 70.00$ 90.00$ 8.00$ 72.00$ Local market

Larch, White wood Sawlog 50.00$ 40.00$ 75.00$ 10.00$ 40.00$ Interfor

Low range are drawn from historical prices 2008-2012Many existing mills occupy a specific niche so a regional fibre shortage may increase product demandAverage price are reflective of current market pricing, July 2013.Note that Prices are FOB landing, for delivered price add trucking to destination

Nakusp and District Community Forest Inc. (NACFOR)Log Price Sensitivity 2013-2017

Appendix G – NACFOR Activity Schedule

F:\COMMUNITY FOREST\3 NACFOR Core Plans\2 Business Plan\Planned Activities_November2013

PART 1 - OPERATIONSCATEGORY ACTIVITY STANDARD OF MEASUREMENT ONE YEAR TARGET 5 YEAR TARGETCore Plans Update Business Plan Plan is consistent with long term CFA and NACFOR

operationsBoard to review annually to measure performance

Complete review and revision; Board approval; Village of Nakusp ratification

Core Plans Update Management Plan NACFOR meets CFA legal obligations Plan consistent with NACFOR goals and objectives

Apprived management plan

Core Plans Forest Stewardship Plan Ensure FSP meets forest management commitments Review FSP annually to ensure compliance

Maintain an approved Forest Stewardship Plan

Core Plans 20-year Harvest Plan Categorize operability of all mature timber within NACFOR chart

Complete ground truthing, mapping and database

Continue to update info

Core Plans Timber Supply Review Complete official Timber Supply Review of NACFOR chart for Ministry approval using Long Term Harvest Plan as template

Establish acceptable criteria in consultation w/ MFLNRO

Effectively promote use of NACFOR methodology in overall TSA Timber Supply Review

Planning Timber Supply Expansion Mainain landbase in CFA to meet AAC Identify areas for expansion Expanded CFA approved

Planning Roads Maintain current road permits for NACFOR operational areas

annual review of road permit status - to be completed by April 1 of each year

Update road permit status as required

Planning Single Cutting Permit Cutting permit approval Approved by December 31, 2013 Maintain cutting permit approval as required

Planning CFA Boundary Review CFA boundary located and mapped according to legal linework

Clean up linework and finalize CFA boundary

N/A

Planning Forest Management Planning Framework

Forest management activities meet legal obligations Prepare an auditable process for tracking and meeting legal forest management obligations

Ensure compliance with updated legislation

Planning Sustainable Forest Management Planning

CFA licence is sustainable Develop a sustainable forest management plan

Sustainable Forest Management Plan is current

Forest Development Develop new cutting permit areas

Complete layout and obtain approval for additional timber harvest -CP103 SW Slewiskin (~17500m3)

60000 m3 developed by November 2012. 30,000m3 approved by December 2012


Complete layout and obtain approval for additional timber harvest -CP104 SW Slewiskin (~30,000m3)

CP/RP approval;


Recce Galena Bay chart for development potential; complete layout and obtain approval for timber harvest

complete by December 31, 2013


Recce Scalping Knife chart; complete layout and obtain CP approval



Recce Summit/Box chart for development potential; complete layout and obtain approval for timber harvest


Forest Development Update NACFOR Development Standards and Procedures

Efficient and effective forest management processes that meet EMS and operational requirements

Review existing field and office standards and revise as required

Review and assess compliance

Harvesting CP 102 (Slewiskin) Complete harvesting of 40000 m3 (all five blocks) Complete by Aug 1, 2013 N/A

Harvesting CP 106 (Fosthall) Complete harvesting of 27000 m3 (entire CP) Complete by Aug 1, 2013 N/AHarvesting CP 103 (Slewiskin) Complete harvesting of approximately 30000 m3 complete by December 31, 2013 Complete by Dec 31, 2014Harvesting CP 104 (Slewiskin) Complete harvesting of approximately 30000 m3 complete by December 31, 2013 Complete by Dec 31, 2016 (market

dependent)Harvesting CP 101 (Galena Bay) Complete harvesting of approximately 15000 m3 Pending contractor availability Complete by Dec 31, 2016 (market

dependent)Roads Road Maintenance Ensure all roads under road permit and RUP are

maintained per standards and agreement specifications

Annual road inspections Continue to maintain roads as needed per inspections

Land Based Investment Program (LBIP)

Spacing - Surveys Obtain 2012-13 LBIP funding to complete approximately 30 ha of Pre-Stand Tending surveys

Complete surveys by October 1, 2012 Complete approximately 100 ha over 5 year period pending funding availability and priorities


Spacing - Prescriptions Obtain 2012-13 LBIP funding to complete approximately 20 ha of Pre-Stand Tending prescriptions

Complete prescriptions by October 1, 2012

Complete approximately 100 ha over 5 year period pending funding availability and priorities


Spacing - Works Obtain 2012-13 LBIP funding to complete approximately 20 ha of Pre-Stand Tending prescriptions (incl. 3.5 ha approved 2011-12)

Complete spacing by November 1, 2012

Complete approximately 100 ha over 5 year period pending funding availability and priorities

Basic Silviculture CP 102 (Slewiskin) Reforest five blocks following harvesting completion Complete planting in blocks 1 & 5 by June 30, 2014

Stand tending treatments as needed to maintain stocking

Basic Silviculture CP 106 (Fosthall) Reforest eight blocks following harvesting completion Complete planting by June 1, 2014 Stand tending treatments as needed to maintain stocking

Basic Silviculture CP 103 (Slewiskin) Reforest blocks following harvesting completion N/A at present. Set target completion following harvest

Stand tending treatments as needed to maintain stocking

Basic Silviculture CP 104 (Slewiskin) Reforest blocks following harvesting completion Sow seedlings for 2015 planting Stand tending treatments as needed to maintain stocking

Maintain continuous inventory of 40,000 to 80,000m3

Planned Activities_November2013 14/11/2013

F:\COMMUNITY FOREST\3 NACFOR Core Plans\2 Business Plan\Planned Activities_November2013

CATEGORY ACTIVITY STANDARD OF MEASUREMENT ONE YEAR TARGET 5 YEAR TARGETBasic Silviculture CP 108 (Wensley) Establish free-growing stand to meet obligation Monitor seedling performance Stand tending treatments as needed to

maintain stockingRecreation Interpretive Forest Trail Work towards NACFOR Management Plan goal to

establish a trail network in the CFA licence areaComplete and erect signage by April 1, 2013

Ongoing partnership with Nakusp Trail Society to maintain trail and signage

Recreation Fosthall Falls Trail Work towards NACFOR Management Plan goal to establish a trail network in the CFA licence area

Complete field reconnaissance and build trail

Ongoing trail maintenance

Recreation Galena Mushroom Interpretive Signs

Work towards NACFOR Management Plan Goal 5 to promote community involvement in local forest management

Work with mushroom experts to develop site and sign content

Ongoing trail/signage maintenance

Recreation Cultural Heritage Site - Arrow Lake

Work towards NACFOR Management Plan Goal 5 to promote community involvement in local forest management

Work with archaeologist to develop a cultural heritage site

Ongoing site maintenance

NACFOR Signage Project Signage Prepare and erect signage for completed but unsigned projects (Spacing 2010 and 2011, CP 108 Blk 1, CP 102 Blks 1-5, CP 106 Blks 1-8)

Complete and erect signage by April 1, 2013

Continue to update completed projects annually with on-site signage

NACFOR Infrastructure Storage Yard Activate yard Activate by Nov 1, 2012. Maintain. Amend use as appropriateAdministrative Annual Reporting Business Plan commitment Sec. 5.8 Reporting and

Communications - report on activities and accomplishments in the past year for reporting to Village, Board and Public

Annual report to be prepared by April 1 Assess reporting requirements for meeting Business Plan objectives

Administrative Annual Operating Budget Projected income based on volume estimates by cutting permit and development activities. Budget reflects non-cutting permit activities to meet CFA licence obligations

Budget to be prepared by December 31 annually

Evaluate process for meeting budgeted targets

Administrative Contract Award Process Meet Business Plan obligations for contract award Maintain a current list of available contractors with updated rotation status. Establish contractor evaluation criteria

Evaluate to ensure it is a fair and equitable process that meets planning requirements

Administrative Financial Reporting Ensure NACFOR financial reporting is completed to an auditable standard annually.

Accrue silviculture costs upon CP completion

Continue to accrue silviculture costs and revise to reflect accurate costs as required

Administrative Block Tracking system Database to track NACFOR activities and obligations Update ongoing as new permits developed

Review system and assess performance

Administrative Contracts All contractors are working under contract or other agareement; Contractor compliance with NACFOR safety requirements

Develop contract templates; all contractors working for NACFOR have established safety measures

Maintain contracts; ongoing monitoring of Contractor safety measures

Administrative Data Management NACFOR data meets needs for ARC standards and NACFOR mapping needs.

Complete review and organizational structure of NACFOR data

Update as required to meet current software needs

Community Initiatives Bioenergy Proposal Project support within the scope of NACFOR business plan

Establish terms of reference with project partners

Project implemented

Community Initiatives Skills Training Facilitate training opportunities for forest workers Work with Selkirk College and Community Services on training initiatives

Community Initiatives Wood Manufacturing and Marketing Workshop

Work towards NACFOR Management Plan Goal 3 to promote community stability

Partner with Bridges II to develop wood manufacturing and marketing opportunties in Nakusp and area

Continue to expand marketing and manufacturing oppportunities in the community

Planned Activities_November2013 14/11/2013

Appendix H – Historic Goals (2007)

Goal Status 3.2.1 Short Term Goals (Years 1 through 2.5) 1. Finalize transfer agreements with previous tenure holders by February,

2008. COMPLETE

2. Establish contract award policy via consultation with local contractors by June, 2008

COMPLETE

3. Form Waste Management Sub-Committee by June, 2008 COMPLETE 4. Form Innovative Strategies Sub-Committee by June, 2008 COMPLETE 5. Form Fire Management Sub-Committee by June, 2008 COMPLETE 6. Form Finance and Marketing Sub-Committee by June, 2008 COMPLETE 7. Form Youth Sub-Committee by June, 2008 COMPLETE 8. Form Conflict Resolution Sub-Committee by June, 2008 COMPLETE 9. Form Community Funding Committee by March, 2010 COMPLETE 10. Establish working relationships with stakeholder groups affected by CP

development ON-GOING

11. Establish working relationships with non-timber forest resource users ON-GOING 12. Start harvest operations by July, 2009 COMPLETE 13. Meet all forest stewardship related commitments ON-GOING 14. Begin to build a cash reserve from NACFOR profits ON-GOING 15. Distribute annual newsletter to area residents by Dec, 2009 Not Done 16. Establish a NACFOR information display at the Nakusp Village Office Not Done 3.2.2 Medium Term Goals (Years 2.6 through 5) 1. Develop Fire Protection Strategy by December 31, 2010 ON-GOING 2. Develop Forest Health Tracking Strategy by December 31, 2010 COMPLETE 3. Develop Long Term Marketing Strategy by December 31, 2010 ON-GOING 4. Develop Waste Management Strategy by December 31, 2012 ON-GOING 5. Determine sustainable harvest levels via Expanded Timber Supply

Analysis by December 31, 2012 ON-GOING

6. Increase locally obtained wood manufacturing volumes by fifteen percent above pre CFA levels

ON-GOING

7. Continue to build cash reserve and cap at 1 million dollars ON-GOING 8. Begin funding for community projects and non-profit groups ON-GOING 9. Establish at least one interpretive forest site or trail network COMPLETE 10. Continue to meet all forest stewardship related commitments ON-GOING 11. Harvest at least 90% of 100 000 m3 5 Year Cut Control ON-GOING 12. Continue to fine-tune all original goals and amend them to meet

changing demands ON-GOING

3.2.3 Long Term Goals (Year 6-Forward) 1. Successfully convert 5 year probationary CFA to a longer term tenure COMPLETE 2. Adjust harvest levels to reflect findings of Expanded Timber Supply

Analysis ON-GOING

3. Implement Fire Protection Strategy ON-GOING 4. Implement Forest Health Strategy ON-GOING

5. Implement Long-Term Marketing Strategy ON-GOING 6. Implement Waste Management Strategy ON-GOING 7. Implement appropriate incremental silviculture projects ON-GOING 8. Become a recognized leader in provincial and community forestry in

the implementation of innovative and sustainable forest practices ON-GOING

9. Continue to fine-tune all original goals and amend them to meet changing demands.

ON-GOING

Appendix I – Draft Contract Award Process

NACFOR Contract Award Process

Draft Contract Award Process_July2013 8-Jul-13 1

Operational phases will be contracted out to local contractors when possible within following work categories:

Forestry planning and mapping Road and Bridge Construction Harvesting Trucking Silviculture Road deactivation and maintenance Supervision

Based on the Expression of Interest form submitted to NACFOR, a list of local contractors will be maintained with up to date information on work category, eligibility, operational capacity and availability for each of the operational phases. Eligibility will be updated annually.

Contractors must meet the following eligibility criteria: 1. Approved WorkSafeBC registration within appropriate WorkSafeBC classification2. BC Safety Council certification or registration3. Maintain liability insurance

o $5 million – logging and road buildingo $2 million – road maintenance and deactivation, silviculture and development,

supervision4. Good financial standing5. Provide references6. Company must be based within the local business area or hire locally; if local hire is not

possible, work will be awarded to contractors or consultants with previous NACFORexperience

7. Work under a prime contractor if not on contractor list8. If a shareholder owns shares in more than one eligible company only one company can bid on the

work.9. Favourable rating in previous contracts with NACFOR.

Contracts may be awarded to eligible contractors based on a rotational system within each contract category, considering operational capacity, timing and contractor availability.

Contract award decisions and rationale will be documented.

NACFOR retains the option to drop a contractor from the list if safety, environmental or production requirements are not met.

Operational categories may be sub-divided by size to ensure small contractors have an opportunity to bid on work.

If a competitive rate cannot be negotiated with the contractor, NACFOR will reserve the right to move to the next contractor on the list.

NACFOR Contract Award Process

Draft Contract Award Process_July2013 8-Jul-13 2

Contracts may be awarded by a select invitation competitive bid process.

NACFOR is not compelled to accept the lowest or any bid for work tendered.

Trucking contractors will preferably be hired by the logging contractor for the convenience of NACFOR.

Appendix J – Conflict Resolution

Nacfor Conflict Resolution – April 23, 2014

NACFOR CONFLICT RESOLUTION PROCESS FOR CONTRACTOR OR FOREST MANAGEMENT DISPUTES

Step 1: Complainant and NACFOR management attempt to settle dispute. Step 2: Failing agreement in Step 1, one or both parties apply in writing to Board of Directors to initiate Conflict ResolutionProcess. Step 3: If the Board of Directors determines that the case does not merit further investigation, it dismisses the application and determines that NACFOR management’s decision will be binding. Otherwise, it proceeds to Step 4. Step 4: NACFOR calls on the BoD Conflict Resolution sub-committee to do an initial evaluation. Step 5:Sub-Committee asks each party to submit its version of events in writing. Step 6:Sub-Committee first determines if there are any legal issues to be reviewed. If there are, or if the sub-committee believes there may be, it refers the issues in question to legal counsel for advice. Step 7:Sub-Committee heeds any legal advice provided prior to proceeding with the rest of the investigation. Step 8: Sub-Committee sets deadlines for completion of each of the remaining steps in the conflict resolution process. Step 9: Sub-Committee meets separately with both management and the complainant, seeking clarification on any facts that are missing or that do not match between the two written versions of events. The parties provide written answers to the sub-committee questions. Step 10:If it deems a negotiated settlement to be possible, the sub-committee briefs the two sides on potential solutions to the conflict and makes a final attempt to get the parties to achieve their own negotiated settlement, offering to mediate any discussions if both parties prefer this method. Step 11:If a negotiated settlement is deemed impossible, or is tried but fails, the sub-committee makes a written recommendation to the Board of Directors based on all of the facts that have been made available. Step 12:The Board of Directors can accept or reject the recommendation or it can ask for further clarification from the sub-committee on the settlement terms. Once the Board of Directors ratifies the sub-committee’s recommendation, it becomes binding.

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