Native village's forest company goes global

An isolated First Nations region on the northern British Columbia coast is emerging as a new economic powerhouse, leading the rebirth of the forest industry in that part of the province.

There are no roads to the village of Lax Kw'alaams, and most British Columbians would be hard-pressed to find it on a map.

But in the last decade, this village, 30 kilometres by boat north of Prince Rupert, has levered its own forest resources to build a solid financial balance sheet and focus on building a northwestern empire of wood with a global reach. From the verge of bankruptcy, it has transformed itself into an economic engine for the region. Its logging operations are pumping millions of dollars into the neighbouring economies of Prince Rupert and Terrace.

And it's leading the way on a new type of development: rebuilding the forest industry from the bottom up through its wholly owned subsidiary, Coast Tsimshian Resources.

The transformation of Lax Kw'alaams, formerly called Port Simpson, began in 2004 with the shrewd purchase of the timber holdings of the old Skeena Cellulose pulp mill in a court-ordered sale. Overnight, Coast Tsimshian Resources became one of the top five tenure holders in the province, with the rights to more than 700,000 cubic metres of timber a year.

Today, the village of 1,000 people controls a logging business earning an estimated $30 million a year in revenues. Its operations throughout the region pump badly needed cash and jobs into the cities of Terrace and Prince Rupert.

In the village itself, forestry revenues have helped pay for sidewalks, paved roads, a swimming pool and new initiatives in education that changed the face of the community. Suicides, a chronic problem in isolated First Nations communities, have dropped to zero.

Putting a bid on the pulp mill's timber rights was a huge risk, said chief councillor Garry Reece.

"But we also saw the chance (to buy the timber rights) as a huge opportunity. We looked at the second growth that's going to be happening in the Terrace forest licence, and we knew it would be a valuable asset down the road," Reece said.

"We also knew it was a huge risk. We based it on the Skeena pulp mill reopening and the Terrace sawmill staying open. None of that happened."

With no local sawmill or pulp mill to buy its wood, by any standard valuation, Coast Tsimshian was in trouble. But the company sees it another way. The collapse of the old industrial sites means the slate in the Northwest has finally been swept clean.

Coast Tsimshian is rebuilding it from the bottom up.

"We can build our business differently because there's nothing left here that we have to keep going," Coast Tsimshian president Wayne Drury said.

Coast Tsimshian is the largest forest licensee in a coalition of regional licensees working together to redevelop the area's forest industry. The old way of logging -- to provide wood for one large mill -- is dead in the Northwest, Terrace economic development officer Sam Harling said. The rebuilding is based on establishing a cluster of manufacturers that could utilize everything from wood chips to sawlogs.

"Our focus is to extract value right from the stump," Harling said. "The challenge is, we don't have a lot of places to send our logs."

Coast Tsimshian sells logs into the domestic market. Its logs are often milled at Vancouver custom-cut sawmill Terminal Forest Products. But it also exports overseas. In 2009, Coast Tsimshian became a global forest industry player when it opened a trade office in Beijing, an aggressive move for any forest company.

University of B.C. sociologist Ralph Matthews describes the transformation taking place within the village economy as "the globalization of Lax Kw'alaams."

In a research paper, he said the band council pursued a development strategy aimed at globalizing its economy by first asserting its traditional rights over the lands in its territory, then hiring outside expertise to run the corporation and, finally, buying the legal rights to the timber resources of the failed pulp mill.

Overall in 2009, Coast Tsimshian harvested 350,000 cubic metres of logs, enough to fill 10,000 logging trucks. It exported more than half of that -- 200,000 cubic metres -- mainly to Japan, Korea and now, China. Margins were thin, Drury said, but the company made a profit, keeping its head above water during the worst year in memory for the forest sector.

Drury said Japan buys the high-grade logs, Korea the middle range and China goes for the worst, which it can remanufacture.

Eventually, Drury said, the company wants a small sawmill that has a low capital cost and can make low-grade lumber from the low-grade logs. In B.C., demand for low-grade lumber has outstripped the supply from major industry players, whose mills are built around manufacturing high-grade construction lumber.

As well, Coast Tsimshian has put a bid on the old Prince Rupert pulp mill, which the city has expropriated and is selling to recover unpaid taxes. The company has no plans to restart it, but sees its power plant, which can run on wood pellets and is capable of generating 50 megawatts of electricity, as having future value.

"We are looking down the road at a pellet plant," Reece said. "We are getting involved in a lot of stuff within our territory."