KEWEENAW LAND ASSOCIATION, LIMITED

Transcription

1 KEWEENAW LAND ASSOCIATION, LIMITED Annual Shareholders Meeting May 4, /5/2015

2 Forward looking statements Safe Harbor This presentation contains forward-looking statements. These forward-looking statements are subject to a number of risks and should not be relied upon as predictions of future events or promises of a given course of action. A number of factors such as land use, environmental and other governmental regulations, risk of loss from fires, floods and windstorms and other natural disasters could cause actual results to differ materially from those described in the foreword-looking statements. As with any investment, past performance is not a guarantee of future results. 5/5/2015 2

3 Board of Directors David Ayer Chairman John E. Earhart Brian D. Glodowski President/CEO Donald J. Hoffman Marjorie E. Nesbitt Frederick J. Weyerhauser 5/5/2015 3

4 Management, Administrative and Forestry staff Management Administrative Forest Operations Log Sales Brian Glodowski President/CEO Paula Aijala Administrative Assistant Mark Sherman Operations Manager Tom Moon Log Sales Representative Jim Simmons Controller Julie Wiemeri Senior Accountant Dan Taavola District Forester Art Norden Log Yard Manager John Tincher PC Administrator Jay Flynn District Forester Scott Peterson Equipment Operator Rebecca Holm Accounting Assistant Matt Konoske District Forester Jonathan Stelter Field Forester Jamin Partanen Field Forester Phillip Moon Field Forester Kyle Greishop Field Forester 5/5/2015 4

5 Corporate Overview Major supplier of logs and pulpwood in the Lake States region 168,000 acres of fee timberland 402,000 acres severed and attached mineral rights Annual harvest of over 75,000 cords per year Forest Stewardship Council (FSC) certified for over 20 years Principle Business Segments Forest Management Log Sales and Marketing Real Estate Minerals Market capitalization of $140.3 million 1.3 million shares outstanding Current share price $108, 52-week price range of $79 - $119 5/5/2015 5

6 Ownership concentrated in western UP MI, Northern WI In progress Ironwood Log Yard Ownership concentrated in the western UP and northern Wisconsin 5/5/2015 6

7 Ownership concentrated in western UP MI, Northern WI Strong regional forest products industry provides stable market for our products 5/5/2015 7

8 2014 Financial Highlights (EBITDA) Profitability Log Sales (in Millions) $9.88 $8.34 $9.67 Timber Operations Income (in Millions) Other Income EBITDA Net Income Harvest Volume (cd-eq) 75,363 71,244 82,493 Timber Operations Income up over 50% from prior year Favorable pricing Improved product mix 6% increase in total harvest volume from /5/2015 8

9 Positive stock performance over the long-term KEWL S&P 500 Keweenaw has outperformed the S&P 500 index over past 20 years 10% 9% 8% 9.87% 7% 7.12% 6% 5% 5.88% 4% 3% 3.54% 2% 1% 0% 10 Year 20 Year 5/5/2015 9

10 Success of operations aligned with our log marketing strategy Focus on long-term supplier relationships Over 30 veneer, sawlog and pulpwood customers Consistent supplier in all market conditions Provide sale quantities that matters Represent up to 25% of our customer s log purchases Log yard creates value-added opportunities Packaging of logs based on markets and pricing Accumulate sale quantities of minor species Log remanufacturing used to improve grade and price Provide third-party log scaling and inventory services 5/5/

11 Expanding margins by increasing prices and containing costs Gross Margin Per Cord Equivalent Log Sales $131 $117 $117 Cost of Sales Gross Margin $46 $38 $37 5/5/

12 Improving timberlands through strategic acquisitions and divestitures 2014 Accomplishments Added 1,316 acres of timberland at an acquisition cost of $790 per acre Sold 617 acres of HBU properties at an average price of $1,388 per acre Utilize like-kind exchange where feasible 5/5/

13 Leveraging our expertise to generate additional income Provide log scaling and inventory services to existing customers Fee based service Utilizing existing infrastructure and yard operations Actively purchasing open market timber Increases revenues and market share Harvested 5,700 cd eq in 2014 Additional $133,000 in gross margin 5/5/

14 Significant acreage of higher and better use (HBU) properties 14,350 acres under commercial, aggregate, mineral or recreation leases 26 developed property lots 8 miles of lake frontage which includes Lake Superior and Lake Gogebic 30 miles of major river frontage 5/5/

15 Potential for mineral development 402,000 acres of mineral rights in Michigan Currently two active mining and mineral exploration leases Copperwood (formerly Orvana) Highland Resources Several areas of known mineralization Copper Iron Michigan is a favorable mining district Established mining permit process Recent start-up of Eagle Cap Mine near Marquette, Michigan 5/5/

16 Subsurface ownership across wide range of mineral features Copperwood White Pine Groveland 5/5/

17 Significant environmental review and permitting process Michigan Department of Environmental Quality (DEQ) Office of Oil, Gas, and Minerals Water Resources Division Air Quality Division Part 632: Nonferrous Metallic Mining Part 303: Wetland Protection Part 31: Water Resource Protection, NPDES Permit Part 315: Dam Safety Part 55: Air Discharge Part 301: Inland Lakes and Streams Part 632 Mining Permit 5/5/

18 Basic economic terms for Copperwood lease Primary lease area acres 20-year lease agreement Annual rental with escalation clause - currently $40,000 per year Sliding scale Net Smelter Royalty (NSR) upon commencement of production 2% NSR if Copper Benchmark Price < $2.00 per lbs 4% NSR if Copper benchmark > $4.00 per lbs Option Agreement on an additional 2,382 acres Annual rental with escalation - $11,910 per year 5/5/

19 Relatively long time frame for bringing mine into production Year Activity 1956 Lease by USMR in Western Syncline, first drilling campaign, discovery of Copperwood Additional drilling, sinking of 71 meter vertical exploration, 635 meters of exploration drifts 1959 Activities cease, BCR terminations of leases in early 1960 s 1983 Termination of Western Syncline leases by AMAX 2008 Orvana signs leases at Copperwood, began drilling, environmental studies 2010 Completed NI compliant Mineral Resource estimate 2011 Completed Prefeasibility Study 2012 Completed Feasibility Study, Part 632 Mining Permit approved 2013 Wetlands, Inland Lakes, Dam Safety permits approved Additional drilling for geotechnical metallurgical studies 2014 Highland Copper Company, Inc. acquires Orvana Resources US 5/5/

20 Realization of mineral assets dependent upon many risk factors beyond the mineral owners control Long time frames from exploration to mine development Exploration Feasibility studies (metallurgical and operational) Permitting (local governments, MDEQ, EPA) Capital requirements Significant swings in commodity metal demand and prices China represents 40% of copper consumption Iron ore currently near long-term lows Changes in regulatory environment Regional and local acceptance to mining 5/5/

21 Keweenaw s Strategic Plan Manage timberlands sustainably Maximize the value of what we harvest today Increase the value of the standing timber inventory for future harvest Add production timberlands Strategic acquisitions (blocking, access, growth rates) Divest of non-core and lower quality lands Year year average annual growth rate Acres under Management 161, , , , , % Timber Operations Income (millions) $ 0.09 $ 1.18 $ 1.44 $ 0.95 $ % Log Sales (per cd eq) $ 99 $ 111 $ 117 $ 117 $ % Gross Margin (per cd eq) $ 24 $ 37 $ 37 $ 38 $ % 5/5/

22 Improved sales realization from forest management activities At the operational level: Concentrate on removing lower quality, slower growing trees Subsequent harvests show improvement in product mix Additional gains as we move towards a higher percentage of managed stands Summary of grade mix - Hardwood stands only Hardwood Stands Veneer Sawlogs Sawbolts Pulpwood Wt Ave Sales Realization* per cd eq % Δ 1 st Cut Stands 2.7% 9.6% 6.7% 81.0% $127-2 nd Cut Stands 3.9% 13.5% 8.8% 73.9% $138 9% 3 rd Cut Stands 5.7% 22.9% 8.0% 63.4% $159 15% * - Based on 2014 product prices 5/5/

23 Additional improvements in overall asset value Moving from 19% sawtimber to 35% sawtimber results in an increase of $600 per acre in added value to standing hardwood inventory 1 st cut stand - 19% sawtimber 3 rd cut stand - 35% sawtimber Assumes 2014 sales realization and average standing hardwood inventory of 19 cd eq per acre 5/5/

24 Committed to improving shareholder value Improving the quality and volume of timber through active forest management Acquiring productive timberlands while divesting of non-strategic properties Direct marketing of logs allows us to maximize value in all market conditions Effective utilization of existing assets to generate additional sources of revenues Purchasing open market stumpage Providing fee based services Property and mineral lease income 5/5/

25 KEWEENAW LAND ASSOCIATION, LIMITED If you have questions or wish to contact us regarding this presentation material, please call or us at: Toll Free David Ayer Chairman Brian D. Glodowski President/CEO Keweenaw Land Association, Limited 1801 E. Cloverland Drive Ironwood, Michigan /5/