November 2011

In August, The Teal-Jones Group was contacted by Extreme Makeover: Home Edition (a television show that builds houses for families facing financial, health and other difficulties) requesting our product for their latest project. Many years ago our product was used on another EM: HE home and their choice to use it again demonstrates their preference for Teal's quality.

We are pleased to announce that The Teal Jones Group was able to participate in this project. The house utilized our 18" R&R Teal Tone Sidewall Shingles for the exterior and used the 18" R&R Natural Sidewalls for the interior. The house was recently completed and the big reveal has happened for the family.

The episode utilizing Teal's product aired Friday, October 28, 2011 and may be viewed at the Extreme Makeover: Home Edition website under the McPhail family.

We were extremely pleased to be a part of this project and wish the McPhail family health and happiness in their new home.

We would like to take this opportunity to thank the Teal Cedar Shake & Shingle mill crew and Reman crew for the tremendous job they did and continue to do in producing such a high quality product. The care and pride each person takes in his/her work is commendable and deserving of recognition.

The Teal-Jones Group Management

September 23, 2011

We are very pleased to announce that QMI-SAS Global (third party independent auditors) have again recommended The Teal-Jones Group, Fraser Valley & Honeymoon Bay Operations for continued registration to the CSA Z809-2002 Sustainable Forest Management System as well as the Dryland Sorts and the Surrey and Sumas mills to PEFC Annex 4 Chain of Custody.

The Operations underwent their annual audit in September and all findings proved to be in compliance with the set standards and regulations. Positive comments were noted on the audit indicating that the system is working well.

The Fraser Valley Operation along with our Honeymoon Bay Operation voluntarily participates in the CAN/CSA Sustainable Forest Management System which provides the public with assurance that environmental and sustainable harvesting is being conducted.

These harvesting operations work in conjunction with The Teal-Jones manufacturing facilities which also voluntarily participate in the PEFC Annex 4 Chain of Custody.

The Teal-Jones Group is firmly committed to the sustainability of our Forests, our Environment, our Employees, and the Economy of British Columbians.

The Teal-Jones Group Management

January 21, 2010

The following letter has been sent to Minister Pat Bell (B.C. Minister of Forest), Gordon Campbell (Premier of B.C.) and Gordon Hamilton (Forestry writer for the Vancouver Sun Newspaper). The letter firmly states The Teal-Jones Group’s position on raw log exports and the special interest movement to remove the ban.

Hon. Pat Bell
Minister of Forests and Range
Province of British Columbia
PO Box 9049
STN PROV GOVT
Victoria BC
V8W 9E2

Log Export Policy - Debate

Dear Minister Bell,

The debate around log policy restrictions has again become an active current subject in the industry. Lobby efforts directed to relaxation or flexibility of existing log policies are based on helping the industry during bad economic times and purport to assist all sectors of the forest industry in the current severe down turn. These assertions are ill conceived and in fact will result in significant long term harm to the industry as explained below.

Teal Jones believes it is very well positioned to express a view on policy impacts on the coastal forest industry as the company, (1) is the 4th largest tenure holder on the coast, (2) owns 2 sawmills with a capacity of 300 million board feet, (3) is one of the larger Cedar shake and shingle manufacturers on the coast, (4) has extensive value-added operations in lumber, shakes and shingles, (5) operates in 7 communities on the coast, (6) is one of the larger producers of residual chips for the coastal pulp and paper industry, and (7) sells B.C. solid wood products to 4 continents.

The Pearce report commissioned by the Province of B.C. in 2001 provided a strategic view of the future of the B.C. coastal industry and included much needed investment in a small log conversion mills. Since the report, Teal Jones is the only company that has built a new green field small log mill on the coast. The Pearce report's conclusions are confirmed by the Pacific North West sawmill industry which was reinvented in the post Spotted Owl era, and is based on conversion of second growth small logs.

For the provincial government to ensure that the conversion segment, sawmilling, plywood and value-added, is to grow and thrive in the future, it is essential to stay the strategic course. To cede to short term self interest pressures from certain industry groups would not only be disastrous to the conversion segment in the long term, but also damaging, not beneficial, in the short term.

The proponents for increasing log exports typically argue:

1. Better returns from export prices, will increase harvesting activity with related benefits to the economy,
2. Logs that can be harvested exceed what can be consumed by local mills,
3. More harvesting will increase supply for local mills, and
4. B.C. will develop more markets for its logs.

Issues related to log exports that are typically not highlighted:

1. Log exporters take premium lengths leaving a downfall for local sawmills - these do not only make the sawmill programs uneconomic but are not suited for specific offshore lumber programs,
2. Log exporters, in effect increase sawmilling in offshore markets in turn reducing demand for B.C. lumber,
3. Local sawmills run reduced shifts, a major reason being lack of log availability,
4. In many cases, the offshore markets for logs are limited; extra logs to the market only serve to reduce price and in turn reduce the value derived back to the province,
5. In the short term while there is increased economic activity from harvesting, it is to a large degree offset by local mills taking downtime due to the export of quality logs,
6. In the long term damage to the conversion mills will reduce the sawmilling, plywood, pulp and paper (residual chip-dependant), and value-added industries, and in turn significantly reduce the value the province derives from its primary resource, and
7. Decimation, over time, of the conversion businesses will make the B.C. coast a log exporter only and with no domestic option; offshore customers will then negotiate the log prices to the lowest common denominator.

The provincial government needs to ensure the protection and development of a small log conversion industry on the coast. This is the strategic direction already chosen by the government. It is necessary to stay the course in the face of special interest lobbying. A key example is policy makers in Russia, the largest wood exporter in the world, who have enacted significant raw log export taxes with the goal to increase domestic manufacturing and capture more value from its own resource.

The argument for viable economic harvesting on the B.C. coast is not solved through short term log export flexibility. The problem is endemic. The B.C. coast has suffered from historic inefficient management and work practices, and inefficiencies compounded by the costs of a highly regulatory regime, a prime example being the added costs stemming from the Bill 13 legislation. For decades, B.C. coast logging costs have been at the high end when compared to other wood producing regions in the world.

Teal Jones continually faces log shortages, particularly the right lengths and sorts, for its offshore lumber programs. The company actively puts in offers to purchase logs destined for the export market to ensure it obtains log supply for its own mills. The Teal Jones' small log mill has current order potential that would consume an additional 250 thousand cubic meters annually even in this depressed market.

In conclusion, Teal Jones feels it is imperative to maintain log export policies that provide a 'first right' to conversion in B.C. resulting in capturing higher finished-product values and creating economic benefits from manufacturing wood products in the province.

Yours truly,

Hanif A Karmally
Vice-President and Chief Financial Officer

cc: Hon. Gordon Campbell, Premier of British Columbia
Rick Jeffrey, President CFPA
Gordon Hamilton, Vancouver Sun