Big business set to pump big money into northern B.C.

Gordon Hoekstra - Prince George Citizen

December 27,2010

With West Fraser, Canfor and Rio Tinto Alcan the latest companies to announce major capital spending plans in northern B.C., 2011 is set to have a noticeably different economic flavour than the past two years.

West Fraser and Canfor - both of which have extensive operations in northern B.C. - are planning to spend a combined $375 million on their solid wood mills. The companies also have U.S. operations, so not all of the money will be spent in British Columbia.

Rio Tinto Alcan just announced it will spend $300 million at its aluminum smelter in Kitimat in preparation for a future $2.5-billion project.

A back-of-the-envelope calculation shows that spending in forestry and mining in the North - including projects moved from the shelves in 2009 during the recession, and proposed projects that have passed regulatory reviews - totals nearly $2.5 billion.

That doesn't include spending in the northeast's oil and gas sector, or a proposed $1.1-billion natural gas pipeline between Summit Lake, just north of Prince George, and Kitimat.

What it does include is a $500-milllion upgrade and expansion of the Endako molybdenum mine west of Prince George, the proposed $900-million Mount Milligan gold and copper mine northwest of Prince George, and Western Coal's $230-million program to expand production in northeast B.C.

It also includes Canfor Pulp's planned $100-million upgrade of its Northwood pulp mill in Prince George.

It is by no means a comprehensive list.

But Prince George businesses expect to benefit from the renewed capital spending.

College of New Caledonia economist Al Idiens says that while there is still some uncertainty - as the the fallout from the financial crisis is not over - the renewed capital spending is an indication of what is coming in the next five years. It will take a few years for some of these projects to be completed.

The Mount Milligan mine, in particular, promises the first new heavy-industry jobs in the Prince George region in more than a decade. The mine is expected to create 400 jobs. Between 200 to 600 workers will also be needed during the mine's two-year construction period.

Idiens also noted that while pulp and minerals have always flowed east to Asia, lumber has also found a home in an emerging Chinese market.

"There's room for optimism," observed Idiens.

Mackenzie was particularly hard hit by the downturn in the economy, and at one point, all of its wood-manufacturing plants were shuttered, putting an estimated 1,600 people off the job.

Since then, a pulp mill and two sawmills have restarted. There is also the prospect of jobs and business from the nearby Mount Milligan mine, expected to swing into full construction in 2011.

Conifex, a new company which bought and re-opened one of the shuttered mills in Mackenzie, has plans for upgrades in 2011. "Overall, the feeling in town is good," said Mackenzie Mayor Stephanie Killam.

Some sawmills remain on indefinite shutdown, including Canfor's Rustad Bros. and Winton Global's sawmills in Prince George.

But Canfor and West Fraser's capital spending plans far outstrip the dismal year of 2009. Canfor spent $59 million in 2009 on capital improvements, while West Fraser spent just $19 million.

Brian Fehr of the BID Group of Companies is looking forward to the increased forestry spending. Fehr expects his companies, which include Del-Tech Manufacturing in Prince George, will secure work. "We like that," he said.

Bruce Sutherland, who heads up Prince George-based WolfTek Industries, is particularly optimistic about the burgeoning coal sector.

The coal sector located in the Tumbler Ridge area, 175 kilometers north of Prince George, all but died earlier this decade. But increased demand for metallurgical coal used in steel making from Asia has brought the sector back on its feet. Western Coal now employs more than 900 people at its growing contingent of mines.

Teck Resources is expected to make a decision on another major northeastern coal project in 2011.

"It's a beautiful thing," said Sutherland, of the growth in capital spending in the North.

Sutherland's concern now is that the growth is not stymied by a lack of skilled workers and transportation bottlenecks.

Sutherland, the former chair of the Northern Development Initiative Trust and the College of New Caledonia, says there is a need for trained engineering technologists and engineers.

He would also like to see the B.C. government undertake improvements to Highway 97 north needed to better access industrial work in the mining and oil gas sectors in northeast B.C.

A Northern Trust-commissioned report concluded the provincial government needs to make about $135 million worth of improvements along Highway 97 to open northeast B.C.

The payoff would be access to a market estimated at $2 billion annually that is currently dominated by Alberta firms who can more easily supply the mining equipment and material to the region.