VFCFC – Nov 14, 2013 Board meeting

VFCFC – Nov 14, 2013 Board meeting Agenda 2012 Annual Report: Planning/ Cutting Permit Development/Mtn Pine Beetle Strategy Harvesting Road building/Road maintenance Reforestation Revenue /Log Destinations Cut control 2012 Summary 2013 Operating Plan Approvals Other – meeting Licence commitments

VFCFC 2012 Annual Report Planning Cutting Permits CP 3 approved Jan 2012 (~86,000 m3); CP 4 submitted Oct 2012 (~53,000 m3); CP 5 is ready to be submitted (~17,000 m3);

VFCFC 2012 Annual Report Harvesting Current year - logged 107,533 m3 to the end of October, 2012 Logging completed by Upper Similkameen Indian Band and Dennis Cook Holdings Ltd. Post Harvesting Activities and Reforestation 105.6 hectares were prepared for 2013 planting 45,030 trees were planted on 39.4 hectares Mtn Pine Beetle Strategy: Continue harvesting on stands that are affected by Mtn Pine Beetle; Conducted aerial overview flight in August to observe infestation distribution and intensity; Focus harvesting plans on stands with the highest intensity attack levels;

VFCFC 2012 Annual Report Road Construction/ Road Maintenance Existing road upgrade: 0.8 km Temporary road construction: 11.1 km Permanent road construction: 3.5 km

Forecast Revenue ($/m3) VFCFC – Revenue - 2012 Block Forecast Volume (m3) Forecast Revenue ($/m3) Actual Volume (m3) Actual Revenue ($/m3) Total Actual Revenue CHI008 19,000 $177,294 18,883 $10.56 $199,368 CHI043 22,258 $150,687 21,807 $9.86 $215,084 CHI044 14,500 $110,125 17,106 $6.54 $111,945 CHI041 43,322 $424,829 49,737 $6.80 $338,203 Total 98,980 $862,935 107,533 $8.04 $864,600

VFCFC – Log Destinations - 2012 Volume (m3) Ave Price ($/m3) SPF sawlogs to Weyerhaeuser 75,016 Q1,2 - $47 Q2 ,3 - $50 Oversize SPF to Gorman Bros 1,609 Q1,2 - $70 Q2 ,3 - $75 Pulp to Ledcor chipper 22,569 $27.38 Pulp to Firemaster 1,747 $28.38 Post and Rail to PWP and PPR 3,219 $32 Fir to Vaagan and Tolko 3,372 $50 to Vaagen $55 to Tolko Total – All Destinations 107,533

Cash Flow - 2012 Month Forecast ($) Actual ($) Jan $0 Feb $93,480 $110,086 Mar $297,996 $281,344 Apr $40,747 $40,843 May Jun $100,000 $64,807 Jul $250,000 $137,457 Aug $260,000 $85,921 Sep $59,109 Oct $85,032 Nov Dec Total 2012 $1,138,000 $864,600 Cash flow was estimated against a total volume of 104,277 m3. Actual total volume delivered in 2012 is 107,533 m3. However, our pro-forma had estimated 15% pulp (6,498 m3) and we delivered 32% pulp (15,768 m3) from CHI041. With SL net revenue at about $9/m3 after stumpage and pulp net revenue at about $0/m3 after stumpage this is a revenue shift of approximately $85,000. Grade 4 credits should make the pulp volume difference available for future harvest.

Cut Control (m3) 2010 2011 2012 est 2013 est 2014 est 5 yr total AAC 20,000 70,000 250,000 Total Harvest 13,085 107,533 96,215 93,600 310,433 Harvest charged to AAC 9,875 a 87,511 86,000 78,000 252,579 A 2011 cut control letter is still being appealed. MOF missing a requested credit.

2012 Summary Harvest strategy and forest stewardship plans are being safely executed. 13,085 m3 were logged in 2011 and 107,533 m3 were logged in 2012 for a total of 120,617 m3 harvested to date of the Licence. all timber management and legal obligations are being met. The Licence has been included in Weyerhaeuser’s Environmental Management System and is certified to the Sustainable Forestry Initiative (SFI) standard. Economics are being affected by deteriorating condition of beetle attacked timber.

2013 Operating Plan Continue to log beetle uplift volumes in Mtn Pine Beetle stands (consistent with Mtn Pine Beetle strategy) Jan to April Log approximately 79,215 m3 June to August Log approximately 17,000 m3 in a block that has a forecasted high pulp %. This affects its economic viability. Recommend we include it in the 2013 plan. It is the right forest management decision to log it. Weyerhaeuser and VFCFC renegotiate a block specific fee structure for this block. Forecast revenue of $609,503 See 2013 Operating Plan for more detail

Approvals Weyerhaeuser requests from the VFCFC Board to approve the 2013 Operating Plan, specifically to: harvest Blocks CHI 040, 044 and 045 (approximately 97,000 m3). sell: Pulp at market price to local outlets first (Ledcor and Firemaster) Post and rail to Princeton Post and Rail and Princeton Wood Preservatives unless otherwise agreed to by all parties – production split 50/50 Oversize (>18” logs) and all Douglas Fir to best market. Carry out all other forest management obligations as defined in the Timber Management Agreement (ie planting, site preparation, road construction, road maintenance, surveys, cutting permit layout, etc)

VFCFC - Other Forest Licence Committments (i) The Agreement Holder must conduct at least one formal public meeting each calendar year in a format satisfactory to the District Manager for the purposes of informing the general public of the activities the Agreement Holder proposes to undertake with respect to the Agreement. (ii) Notwithstanding (i) above, the Agreement Holder, in conducting a formal public meeting(s), and in informing the general public of the activities the Agreement Holder proposes to undertake, will: Actively promote ongoing public awareness Report on activities related to past and future harvesting, including forest management performance, and Provide an accounting of participation in community projects/investments and general economic activity attributable to the operation of this Agreement.

VFCFC - Other Management Plan commitment examples The Community Forest will: 1.2.2.1 invest in archaeological and cultural site assessment in the initial years of the Agreement to fill in information gaps identified by the Upper Similkameen Indian Band. 1.2.3.3 explore options, including research and field trials, for enhancing the …… 1.2.4.3 will also engage in a planning process with ski association…. 1.3 …use a performance measures table to evaluate performance 1.8.3 ..develop a formal communications plan during the first year of operation….

VFCFC - Other For the Board to consider: Develop a plan to meet commitments Funding for land based projects Weyerhaeuser can assist

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