KEWEENAW LAND ASSOCIATION, LIMITED

Transcription

1 2016 Annual Shareholders Meeting May 2, 2016

2 Forward looking statements Safe Harbor This presentation contains some 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. 2

3 Board of Directors David Ayer Chairman John E. Earhart Brian D. Glodowski President/CEO Donald J. Hoffman James A. Mai Marjorie E. Nesbitt Frederick J. Weyerhauser 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 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 4

5 Keweenaw at a Glance 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 79,000 cords per year Forest Stewardship Council (FSC) certified for over 20 years Principal Business Segments Forest Management Log Sales and Marketing Real Estate Minerals Market capitalization of $115.1 million 1.3 million shares outstanding Current share price $89, 52-week price range of $68 - $111 5

6 2015 Financial Highlights Timber Sales $11.3 million in timber sales 14% increase from prior year Higher sales driven by favorable pricing, increased harvest volume $12.0 $10.0 $8.0 $6.0 $4.0 $2.0 TIMBER SALES REVENUE (in millions) $

7 Cord Eq Harvest $ per CD EQ 2015 Financial Highlights Operations Results HARVEST VOLUME CD EQ Total harvest volume of 79,024 cd eq 90,000 $143 $150 $140 Log Sales Realization of $143 per cd eq 80,000 70,000 $111 $117 $117 $131 $130 $120 Strong demand for all products $110 Improved logging conditions but harvest volume constrained by contractor availability 60, Log Price - $/Cd Eq) $100 7

8 2015 Financial Highlights EBITDA Net Income $2.39 million EBITDA In millions Log Sales $11.28 $9.88 $8.35 Net income of $1.16 million Timber Operations Income $0.89 per share net income Other Income EBITDA Net Income Per Share Net Income $0.89 $0.66 $0.55 8

9 2015 Financial Highlights Gross Margin Gross margin up $18 per cd eq since 2013 Paying logging contractors higher prices to meet competition GROSS MARGIN Per CD EQ Log Sales $143 $131 $117 Cost of Sales Gross Margin $56 $46 $38 Cost of Sales Percentage by Category Logging Freight Roads Log yard Other 57% 30% 7% 3% 2% 9

10 Committed to enhancing value across entire asset portfolio Timber Over 2.8 million cd eq standing inventory Improve product mix and growth over successive harvest cycles through best silvicultural practices Land 168,000 acres fee land Grow timberland base through disciplined acquisitions Minerals 402,000 acres of mineral interests Promote the development of mineral assets to bona-fide exploration and mineral mining entities Seek best margins on timber sales by directly marketing logs to a diverse customer base Divest of non-strategic properties, seek value creation opportunities on key HBU properties Generate income through exploration leases and sand and gravel royalty agreements 10

11 Diverse customer base provides better margins while minimizing credit risk Lakes States Region ranked #1 in terms of paper output Annual Production Statistics Produces over 2.7 million tons of pulp, paper, and DWP 534,000 tons of corrugated medium Over 1.1 million sq ft of OSB 11

12 Generating additional revenue from expansion of log yard Providing fee-based scaling and inventory services to multiple customers Ability to inventory over 8,000 cords In 2015, generated $100,500 in additional income from scaling and inventory fees 12

13 Volume per Acre (cd eq) Percent Sawtimbe Mix Increasing value through active management and strategic land acquisitions 20 Increased sawtimber mix by 4.2% 25.0% % 20.0% 16.0% % % while also increasing total standing inventory by 16.1% 5.0% % Total Volume per Acre Percent Sawtimber Linear (Total Volume per Acre) 13

14 Acres under management Appraised Value Per Acre Appraisal continues to reflect increasing timberland asset value Timberland Appraisal Results Acres Under Management Appraised Value Per Acre Appraised value of $901/acre 170,000 $1, % increase over previous appraisal in , , ,000 $900 $800 $700 Compound annual growth of 4.8% over past 17 years 162, ,000 $600 $500 KLA stock prices increased from $24.37 per share* to $89.00 per share 158, , ,000 $400 $300 $200 Compound annual growth rate of 7.9% 152, , $100 $- * - split adjusted basis 14

15 Patient approach to realizing value from HBU and other non-core lands Significant inventory of HBU properties and other non-strategic lands 5 development projects with a total of 23 lots in inventory 8 miles of Lake Superior and Lake Gogebic frontage 8,000 acres of HBU recreational lands Total Lot Sales since 2003 $1,530,000 Total Pre-Tax Margin $970,000 15

16 Significant Mineral Assets 402,000 acres of mineral assets Active mining and exploration activities occurring within the region Areas of known iron ore and copper deposits 16

17 Generating revenue from mineral assets even in a depressed commodity market Realized $280,000 in rental income from Copperwood since beginning of lease in 2008 Sand and gravel income of $264,000 over past 5 years Dependent upon state-federal highway projects Difficult to predict Mineral revenues by source (thousands) year total Copperwood $30.9 $35.9 $49.5 $51.9 $51.9 $220.1 Other Exploration Leases $201.4 Sand and Gravel $264.4 All Sources $116.3 $135.6 $134.3 $152.6 $147.1 $

18 Current status of Copperwood Project Project fully permitted minimal regulatory risk KLA Lease Property Estimated copper resources of over 1 billion lbs Highland has secured additional financing for further development of the project Has agreement in place to acquire White Pine Mine assets Goal of minimizing development costs and environmental impact of Copperwood Mineral Resource Estimate NI Tech Report 4/15/2015 Copperwood Resource Category Copper Contained (M lbs) Silver Contained (M oz) Measured Indicated Total 1, Inferred Satellite Inferred 1,

19 Focused on creating value for our shareholders Achieved measurable gains in timberland value over time Disciplined approach to adding high-quality productive timberlands Efficient and effective management of all assets providing current income 19

20 ----- 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