Meanwhile, Hill said he’ll be in Vancouver until he raises $800,000 or Aug. 31 arrives – whichever comes first.
Boundary Sawmills scrambles for $1 million to close mill purchase in Midway
With a target in sight of $1 million, Stephen Hill is literally hitting the pavement in Vancouver to raise the money needed to complete the purchase of the Midway mill site for Boundary Sawmills Inc. (BSI).
“I’m handing out brochures asking for assistance to pay off our deal with Fox,” said Hill. Hill has been working with the company since its inception and is the key promoter of share sales. “The clock was ticking and we weren’t making the headway we expected in the Boundary so I said, ‘we can sit here and do nothing or we can be proactive and we can make it happen.’ So we’ve come to Vancouver.”
Hill, a financial planner from Rossland, B.C. and $20,000 investor in BSI, is talking to commuters at busy stations from 5 to 8 a.m. then working his way through business centres from 8 a.m. to 5 p.m. hoping to encourage investors to come forward to fill the gap.
BSI has a purchase agreement with Montana-based Fox Lumber Sales Inc. for the mill that is coming due on Aug. 31. The agreement, worth $2.9 million initially including assumption of a $500,000 tax debt to the Village of Midway and a $1 million mortgage being held by Fox, was negotiated in early 2011. At the time, Hill said the group thought they had enough time to raise the remaining required capital to save the small town’s mill and local jobs.
“The original agreement we had when we started negotiations was that the note would be payable 60 days after production of finished goods. We knew it was far easier to raise money with an operating mill than a mill under construction,” Hill explained. “During negotiations that got changed. Back in January everybody thought we could easily raise the money and wasn’t concerned about the nine month time period. Everyone knew it was there, now I’m taking serious action to get it done.”
BSI financed the initial purchase, legal and accounting costs by raising $700,000 from 42 Boundary and Osoyoos area investors, $150,000 from an outside investor and $250,000 from the Village of Midway. With only $200,000 remaining in the bank, they are short $800,000 to close the deal.
When the mill shut down over three years ago, the Village lost about 150 jobs, but also the tax revenues that play a major role in their survival as a town. Fox Lumber filled the job gap for a while operating a remanufacturing plant on the site. They purchased the mill at bankruptcy auction from Pope and Talbot Inc. to protect their interests in the property, a move that has left them cash strapped and anxious to complete the sale, said Quintin Apedaile, director of operations and in-house legal counsel for Fox.
“If anybody out there has made a lot of concessions to allow this mill to possibly survive, Fox Lumber’s got to be on the top of that list,” said Apedaile. “We lost a lot of money in Midway, and if we did one thing while we were up there, it’s that we ended up owning it and it got kept together. We won’t be made whole from our investment in Midway, if we get paid out this will allow us to keep ourselves from going totally upside down, but it’s not been a profitable investment for us.”
Midway Mayor Randy Kappes, also owner of the local gas station, is hopeful that the cash can be raised to finalize the deal. The purchase agreement includes an option for Vaagen Fibre Canada, a branch of Vaagen Brothers Lumber out of Colville, WA, the current tenant, to pick up the note for the mill and take over ownership, but that could leave investors and the Village out in the cold on a project that was meant to give the community control over the mill site, Kappes added. Vaagen has started renovation work on the mill to get it up and running by October of this year and about 50 people are on the project right now.
“We’re very happy with what’s going on out (at the mill site.) It’s good to know the mill will be producing in October,” said Kappes. “We’re concerned about the thought of losing the (Village’s) investment, but our bigger concern the thought of anybody who put their money in losing theirs as well as if anything should happen we’d lose 40 percent of our tax base. We hope that someone steps forward and is willing to invest because it’s been a positive impact so far. If we can continue to make it a success it will continue to make the improvement that it has for our area.”
Fox Lumber is also willing the deal to close.
“We didn’t enter this agreement wanting in any way, shape or form to be back in the ownership position, that’s not what we want,” Apedaile added. “We’d love to see this mill running. We’d love to see this deal go through just like we’ve planned.”
Looking to the province to bail out the community is definitely not an option, explained MLA John Slater, Boundary – Similkameen who assisted the company with securing timber supply.
“I think it’s still very positive. Everybody wants these jobs for these families that have been devastated over the years,” said Slater. “The problem is there’s been over 50 mills close down in B.C. in the last three or four years. We can’t just say to a private organization, yes, we’re going to bail you out. We encourage them, we help them wherever we can and we certainly don’t put up any roadblocks. But the taxpayers shouldn’t have to subsidize private business.”
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