RE:RE:Kevin Edgson's Comments Frankly crazy it has languished this low for this long without any management scooping up any shares. Glad to hear the analysts perk up a bit more in regards to the pulp business. Here's some quotes from the call (in no particular order):
With our operational footprint now better aligned with the current available fiber supply, we anticipate an improvement in our cost structure going forward. In addition, we believe there is significant opportunity to improve our operational efficiency and reliability, which will support the sustainability of the company for the foreseeable future and allow us to capitalize on the strong global pulp market fundamentals we believe will remain over the medium to long term.
To achieve this goal, we have identified a significant capital reinvestment plan with approximately $500 million of capital spend identified over the foreseeable future. This includes a major rebuild of the recovery boiler number one at Northwood, which will significantly extend the useful life of this critical asset. We currently anticipate the work on the boiler to commence in 2025, although the timeline may be accelerated or deferred depending on the condition of the boiler, which will be inspected during our planned maintenance outage in the third quarter.
We currently anticipate spending of more than $120 million on RB1 (recovery boiler number one), subject to final engineering and labor costs at the time of installation. The balance of the recapitalization consists of smaller projects aimed at improving reliability and asset performance. While timing and magnitude of spend will take into account market conditions and available cash flow, we currently anticipate our annual capital spend to trend in the neighborhood of $100 million for each of the next several years.
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In 2023, we currently anticipate capital spend of approximately $450 million to $500 million in the lumber segment, and approximately $70 million for Canfor Pulp, including capitalized maintenance. In addition, we anticipate Canfor will continue to allocate a modest amount of capital to repurchasing shares throughout the year.
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Sean Steuart:
Thank you. Good morning, everyone. I want to start with pulp, Kevin and or Pat. I just want to understand this longer-term capital program, because $0.5 billion, even if it's over the long run, is a lot of money. Can you speak to your comfort with your current liquidity position at Canfor Pulp and borrowing capacity and any perceived needs to bolster that liquidity ahead of more aggressive CapEx? And given the extent of how deep this this commodity price drop is, do you see a need to bolster the balance sheet further to fund this CapEx program?
Kevin Edgson:
Sean, Kevin here, and I'll answer it quickly on the basis that the purpose of the refinancing was to put us in a good solid place going forward. At this point, we're not going back to the market looking for money. What we're looking to do is between that financing and generation of cash within the organization to tackle our reinvestment plan as quickly as we can with the available money that we have.
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Ketan Mamtora:
Okay. That's helpful. And then switching to pulp and coming back, to an earlier question, how should we think about, kind of return expectation on this big reinvestment program, clearly in the short term, we understand that the market fundamentals are kind of tougher, pricing is down. I'm just curious kind of how you think about, normalized, earning power in the public business and kind of what the three investment program, what kind of a jump do you expect post that?
Don Kayne:
Ketan, I think the way I would respond to that is we remain confident in the long term fundamentals for the bulk business. And therefore what we're doing is working towards ensuring our facilities are in a condition that allows that sustainable operation long term. In terms of specifics around returns on various projects, I don't have anything there to share. And likewise, looking at earning power into the future is far too dependent on what the markets are doing. What we expect to do is be able to return our mills to a level within the cost curve that we think's appropriate for the facilities.
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Paul Quinn:
Okay, and then just overall, and I take a look at the enterprise value of Canfor pulp right now and I'm seeing it's around CAD200 million. You guys have just kind of announced the $500 million rebuild effort. What is the market missing on the valuation of your assets on Canfor pulp side?
Don Kayne:
If wish I understood Paul, I've got a whole bunch of phone calls to make to find the answer to that.
Paul Quinn:
All right, I'm a little disappointed myself. That's all I had. That's all I had. That's all I got. Thanks.