Good morning, ladies and gentlemen, and welcome to GreenFirst's 2024 Strategic Capital Expenditure Presentation Conference Call. Please note that all lines are in the listen/mute mode only to prevent any background noise. During this conference call, GreenFirst representatives will be making certain statements about future financial and operational performance, business outlook, and capital plans. These statements may contain forward-looking information or forward-looking statements within the meaning of Canadian Securities law. Such statements involve certain risks, uncertainties, and assumptions which may cause GreenFirst's actual or future results and performance to be materially different from those expressed or implied in future financial statements. Additional information about these risks, factors, and assumptions is included in GreenFirst's MD&A and annual AIF, which can be accessed on the company's websites or through SEDAR+. After the speakers' remarks, there will be a Q&A session. Please make sure to submit your questions through the online portal.
I will now pass it over to Joel Fournier to begin the management presentation. Please go ahead.
Thank you very much, Sylvie, and good morning, everyone, and thank you for all shareholders that take the time to participate in the call this morning, so I would like to briefly touch base on the objective of this call and this meeting. Not so long ago, we did a press release and discussed about the rights offering, and we also discussed our intention to spend CAD 50 million in CapEx to get CAD 18 million in incremental EBITDA, and we thought it would be a good idea to spend some time with our shareholders and go a little bit more in detail about the capital expenditure plan we're looking to do, so we're going to try to explain a little bit more the objective and go in more detail of the CapEx plan.
But more so at the end, we're going to take the time to answer all questions you may have with the presentation. So starting up with the first slide here, why we think it's a compelling investment opportunity with GreenFirst? There's many reasons, but I will try to summarize them. The first one is right now, as you know, GreenFirst is a pure-play lumber company located in North America. Lately, we did a prudent Spin-out with Kap Paper, so we've successfully done the Spin-out. Now we're 100% sawmill player, and we can continue to focus on growing our sawmill business going forward. And GreenFirst is a bit of a unique position compared to our peers because we do have, when you talk about growth, one of the most important things is you need to have the log supply to be able to support the growth.
GreenFirst, we do have access to more logs at a competitive price, and our intention is to use them to grow our business. Another very important factor to note why this is the right time to grow the business is when we look at all the lumber market fundamentals, we see future good potential. In other words, we think there's another good cycle coming at us. If you look at the main forecaster, they're all in agreement around this. Presently, there's a housing gap in the United States of around 2.5 million houses, so that gap will have to be closed at some point. We expect interest rates to continue to decrease. Therefore, it will push more pressure on lumber demand. Therefore, we think the lumber price will come up going forward. What's important about this opportunity is we mentioned that a couple of times.
We're looking to do it off-cycle. And what I mean by off-cycle is when the lumber market is very, very good and mills are making money, it's not the right time to shut down your mill to do those projects. Doing the project off-cycle is do it when the market is low and be prepared before the market turns around so you can take advantage, full benefit of the market improvement. The other thing I would like to mention is culturally, before you think about spending money in a mill, you need to make sure that the right mindset is there for continuous improvement. And I'm pleased to report that if you look at our results since 2022, GreenFirst has successfully been able to reduce costs and increase production over years.
In fact, we did reduce our costs since 2022 by 9%, and we also reduced our G&A close to CAD 8 million per year, and we were below our target of CAD 40 per thousand that we previously announced earlier this year. It's critical that that mindset of continuous improvement is there before we're thinking about spending any capital expenditure, and we believe we do have that mindset. Another thing to mention is GreenFirst has a strong track record of increasing lumber production. I already mentioned that we got 28 million FBM since 2022- 2024, but now we're looking to do a step change. If we really want to be a top quartile player, continuous improvement, it's only part of the equation. We do have identified projects for phase I, which is around CAD 50 million of CapEx.
But we also had identified a phase II for CAD 70 million capital expenditure. And those two phases together will really push GreenFirst to be a top quartile lumber producer and be the biggest player in Ontario. Other reasons to mention why we should do those projects is we do have a seasoned management team in place. If I think about Michel Lessard, our President, Peter Ferrante, our CFO, and myself, we do have experience in each of our fields, and we make a good team together, and we believe this is key to successfully drive those CapEx plans forward. GreenFirst, also, we have a strong commitment with ESG. In fact, all our forests are FSC certified, and we continue to do so. Next slide, please. I will pass it over to Michel Lessard to cover the recent highlight with GreenFirst.
Yeah, thanks, Joel Fournier. So I'm pleased to provide an update on our achievements and strategic milestones, which underscore the significant progress we've made across several key areas. So starting with Q4 2022, we successfully sold an interest in 203,000 acres of private forest land for around CAD 49 million. These transactions not only provided a significant cash infusion but also allowed us to focus on optimizing our core operation.
Moving into Q1 2023, we completed the divestiture of non-core sawmill assets located in La Sarre and Béarn in the province of Quebec for around CAD 94 million. This marked a pivotal step in repositioning the company to focus only in Ontario, aligning with our strategic vision. In Q4 2023, Joel Fournier has been appointed as CEO, and in Q3 2024, Peter Ferrante joined us as CFO. Their extensive experience is very important as we continue to concentrate our efforts on the lumber sector.
During Q3 2024, we achieved two significant milestones. First, we successfully completed the purchase of a buy-out group annuity, transferring around CAD 27 million of defined benefit obligation and resulting in a net settlement gain of CAD 1 million. Second, our cost reduction initiative brought tangible results. SG&A costs decreased from CAD 52 per thousand board feet in 2023 to CAD 35 per thousand board feet year-to-date as of the Q3 of 2024.
These efforts reflect our commitment to driving efficiency and enhancing profitability. Looking ahead now to Q4 2024, we finalized the spin-out, as Joel Fournier mentioned, of the Kap Paper mill, solidifying our position as a pure-play lumber producer. In addition, we launched a rights offering with the potential to raise approximately CAD 97 million. This initiative is supported by CAD 20 million backed up from Robotti & Company, which demonstrates their confidence in our industry and more specifically in our company.
Finally, for 2024 year-to-date, we are proud to report record-breaking production levels at several of our mills. Additionally, we achieved approximately CAD 8 million in operational improvements through non-CapEx initiatives, underscoring our ability to drive value without significant capital investment. So in summary, our actions over the past two years reflect a clear commitment to strategic execution, operational efficiency, and position the company for sustainable growth. Each of these milestones strengthens our foundations and prepares us for the opportunities that lie ahead. Over to you, Joel Fournier.
Thank you, Michel Lessard. So on this slide, when I did the introduction, I kind of covered the fundamentals of why this is a good opportunity right now, so we'll go a little bit more in detail. One of them was we believe there's another good cycle coming up at us as far as lumber price. And if we use FEA in this case here, but there's other forecasters that are aligned with this, so when we look at the demand for lumber, on the graph here, you could see from 2014- 2028, the green bar is the repair and remodeling segment, which drives around 50% of the lumber demand in North America. And at the bottom gray bar, you could see the housing start, so clearly, you could see from now on, there's an expectation that the demand will grow. Therefore, it will push pressure on price.
And the main factor of that demand to grow, it's things that I've already mentioned. There's a housing deficit in the United States of 2.5 million houses, and we expect interest rates to continue to come down. All of those factors will push demand upward. Therefore, it should have an influence on the price. Next slide. Talking about price, we kind of covered the demand section, but here you could see what will be the impact on price. So this graph represents a Western-based SPF in U.S. dollars since 2024- 2028. And right now, we just came off a very difficult cycle for lumber price, but I'm pleased to report that since July, the price went up week after week from CAD 338 per thousand to CAD 470 right now.
For all the reasons we mentioned on the previous slide, forecasters believe that the price will continue to go up going forward. What we would like to do at GreenFirst is spend the money at the right time now and be prepared when the lumber market will turn around to take full advantage of high price. Next slide. We talk about the market, we talk about price, demand. Now let's discuss a little bit more about the project in detail. Like we said earlier, phase I, we're looking to spend CAD 50 million that will generate CAD 18 million in additional EBITDA. To come up with the CAD 18 million, we use 2024 prices. We're looking to execute on all those projects in the next 18 months to complete everything all across the sites.
So if you look on the left section of the slide, I will start with Chapleau. What we're looking to do at Chapleau is we're looking to install a brand new saw line and a cogeneration boiler, and also we're looking to replace the existing planer mill. At the Kapuskasing site, we're looking to install a new batch kiln to dry our wood because we're presently sending our wood off-site to be dried, so there's a good saving by doing it on-site. And we're looking also to change one of the main saw lines we have by using used equipment from our Kenora sites. Of course, this used equipment will be refurbished with up-to-date technology.
At Hearst, we're looking to install a brand new planer mill and a saw mill positioning system, and also we're looking to install a new debarkers that some part will come from our old Kenora site, and at Cochrane, we're looking to put a brand new planer mill. So in a nutshell, what will be the outcome of those projects? This will help to grow our output by 20% compared to actual. It will reduce costs by another 10% after we're done with all those projects. It will improve lumber recovery or how efficient are we to extract lumber from each log we consume. Very important factor, it's going to help us to consume the log that we own presently. So we do have excess wood in front of us that we could transform in our mills, so that project will help us to consume that wood.
Another thing to mention is by growing the business, we're going to grow volume with our key partners as far as consumers, including Box Store. So there's an opportunity right now on the market to strengthen that relationship with them. And of course, the last one here, when we're done with all those projects, it's going to improve the break-even EBITDA point for GreenFirst. Next slide. Okay. So here on that slide, you could see there's a picture of all the sites and a little bit more detail around the CapEx plan at each of the sites. So if I start with the top left picture, that's the Hearst site. So we're looking to spend CAD 6 million at Hearst, and really, the project that we carefully selected will increase capacity, it will increase production, and will help us to consume the available wood we have in front of us.
We're expecting to grow production by 23 million FBM, and that will generate an additional CAD 3 million in EBITDA per year. On the top right side of the slide, this is the Kapuskasing sawmill. So we're looking to spend CAD 11 million at Kapuskasing sawmill, and the project mainly here will improve a little bit capacity, but it will focus more on recovery or how efficient are we to extract more lumber for each log we cut at this mill. So we expect production to go up by CAD 6 million FBM, and the incremental EBITDA would be around CAD 4 million per year. Bottom left, at the Chapleau site, we're looking to spend around CAD 25 million on that site.
Really, the project here is to increase capacity, and this is one of the first projects we would like to go with because it's a low-risk project, and I'm going to give more detail later on in the presentation. The project at Chapleau will bring us an additional CAD 32 million FBM per year and an additional CAD 8 million EBITDA per year. Just to mention that we get some fairly good payback with those projects at Chapleau. One of the reasons is because the current technology we have is 40 years old +. When you look at today's technology, there's a big step change as far as the efficiency we're going to get here. The top right, that's the last mill, Cochrane saw mill.
We're looking to spend around CAD 7.5-CAD 8 million to upgrade the planer mill, and that will remove the main bottleneck we have at that site. It will allow us to put another shift at the mill or partially more shift at the mill, and that will bring another CAD 15 million FBM per year and an additional CAD 3 million in EBITDA. And the way we choose our project, we have a big list of projects. We involve all the sites, experts to select those projects. We consult third parties. So we carefully choose our project, the one that has the best return for every dollar we're looking to invest. And like I said earlier, all those EBITDA and incremental EBITDA benefits are based on 2024 price. So we expect some price increase. Therefore, there's some upside with those EBITDA.
On that slide here, you could see a little bit where the improvement will come from. In the middle section here, you could see how our production costs and the production kind of evolve over the years and where it will go after the project. When you look from 2022- 2024, we did increase production by 9% with continuous improvement and other initiatives. For phase I of the capital expenditure, we're looking to improve production by another 18%. Overall, it's going to be a 27% increase in production or 75 more million FBM with the phase I of our CapEx. If you look at the gray, the bar chart, this is the evolution of our costs. From 2022- 2024, we did improve or reduce our cost by 9%.
With this phase I project, we're looking to reduce by an additional 15%. So overall, that will represent from 2022 to the end of phase I of the CapEx, a $68 per thousand improvement in cost overall. And like I mentioned, we're ready to hit the ground with our project. We're going to wait after the rights offering is done, and we're looking to execute all of those projects within the next 18 months. This is an important slide. We want to do those projects to increase EBITDA and for increased capacity, use the wood. But if you think about GreenFirst and how it's going to position the company in the future, this graph is very important to share. So once we're done with phase I, it will strategically position GreenFirst in a much better place to face the cyclical variation of lumber price.
We produce a commodity, and commodity prices vary over time. People may argue with that, but every eight to 10 years, there's a good cycle and there's a bad cycle coming up. So we need to make sure we position the company to face good cycle, but more so bad cycle going forward. So when you look at this graph here, I think it represents this very well. The gray line, this is Western-based price in U.S. dollars. And if you look at the solid green line at the bottom, this is our current break-even EBITDA when the company starts to make positive EBITDA going forward. So you could see when you look at where our break-even EBITDA is compared to the variation of the lumber price, right now we're kind of 50% of the time negative EBITDA, which is not where we want to be.
If you look at the light green bar after phase I of our capital expenditure, we're looking to increase or get our break-even EBITDA by CAD 60-CAD 70 per thousand better. So when you compare the two bars for our break-even EBITDA, we could go from 50% negative EBITDA to 90% positive EBITDA through the lumber cycle. And this is where we need to be going forward. So that's one thing. The other thing is also because we expect price increase, those projects will help us to make even more money when the lumber price goes up. So we're looking to capitalize on future price increase with those projects. Next slide. So this slide kind of gives a little bit more color about where the EBITDA will come from. We talk about capacity, cost improvement.
So here, if you look at the middle of the slide, we put the lowest limit and the highest limit of what will be the EBITDA gain based on 2024 price. So the lowest limit, we're looking for a CAD 16 million EBITDA. And we thought it was good to share with our shareholder that out of the CAD 16 million incremental EBITDA, CAD 14 million will come from actual production. It will come from cost saving from what we're producing now. Of course, with those projects, we're looking to increase capacity.
And there's CAD 2 million that will come from cost reduction, but solely on the incremental production we're going to get with those projects. Similar story on the right side, the highest limit, we're looking to get CAD 21 million of EBITDA, which CAD 17 million will come from cost saving from actual cost reduction and CAD 4 million for future capacity increase.
One thing I would like to mention on that slide. I said already multiple times that the incremental EBITDA was based on 2024 lumber price. Now, if price increases by $10 per thousand FBM, this will drive another $5 million of incremental EBITDA of all the number I've shared on that slide. So for example, if lumber prices go up by $20, then it's going to be $10 more in incremental EBITDA on top of the number I've shared here. So we try to be conservative with the EBITDA gain because we use 2024 price. If there's price uptick, then the company will make more money.
For all those reasons I mentioned in the previous slide, we believe this is a unique opportunity for our investor to participate in our growing at the right time when the lumber market is low, and we want to be ready when the lumber market will turn around. We believe that this will, after we're done with the CAD 50 million investment, we believe that will drive significant value to our shareholder, and it will position or accelerate our vision and mission of becoming a top quartile lumber producer in North America. Next slide. We thought this would be good information to share with our shareholders. When you're talking about spending money, increasing capacity, there's a cost to that.
We said it's CAD 50 million, but we thought it would be a good idea to share similar other projects of what was the cost to grow capacity in the lumber segment in North America. If you look at the graph here, you could see GreenFirst on the left side at CAD 658. On the right side, those are other projects that happen in North America. It could be like a brand new saw mill they build in U.S. South. It could be an addition to a saw mill that they did in U.S. South or other parts of the country. You could clearly see on this graph that for GreenFirst, it costs CAD 658 for every thousand FBM of incremental production we're looking to do at GreenFirst.
And all the rest of the projects we were able to capture in North America, it was more expensive to increase lumber capacity. So I guess the story we would like to share here is if our shareholder, if you guys are looking to take a strong position in the lumber segment, we believe it's a better opportunity to do it at GreenFirst because you're going to do it a fraction of the cost to increase lumber capacity. And why we're cheaper than our peers? I think I already mentioned that, but we carefully choose each strategic capital expenditure we're looking to do in our mill to maximize every dollar we're going to spend. So we did not look at doing major building expansions that are very costly. When you talk about building expansion, you talk about civil, and the cost of your expenditure could go high very quickly.
So we carefully look at quickest payback and also how we could maximize every dollar we're going to spend. And to that regard, we also look to use equipment as well where it makes sense. So for all those reasons, that's why we can increase lumber capacity at a fraction of the cost compared to our peers. Next slide. So for that slide, I will pass it over to Peter Ferrante, our CFO, that will cover our financial position.
Thank you, Joel Fournier, and good morning, everybody. I will share with you all references to selected financial highlights as it relates to us here at GreenFirst. The numbers on this page are all referenced to our latest financial statements that we've published as of September 2024, and they've all been adjusted for the minimum CAD 20 million of rights offering that we will be receiving.
In terms of our cash position, it's at CAD 20 million. But more importantly, our liquidity position is at CAD 44 million, which would also include availability under our asset-based lending facility combined with our equipment financing credit facility. When referencing to duties on the deposit, this represents duties paid by GreenFirst starting from the dates of acquisition from Rayonier. Of this amount, we have accrued a duty receivable totaling approximately CAD 33 million, including interest, representing overpayments between the amount GreenFirst actually paid of approximately CAD 60 million for the years 2021 and 2022 versus the rates finalized by the United States Department of Commerce as it relates to those years. With regards to book value of assets, the amount is roughly CAD 316 million, which includes primarily inventory as well as property, plant, and equipment.
As it relates to book value per shares of CAD 8.16, this indicator is inclusive of the additional approximately 3.6 million shares that will be issued subsequent to the CAD 20 million of rights offering that we made reference to. Overall, we are currently in a good financial position, and it will only get stronger following the outcome of the rights offering. I will now pass it along back to Michel Lessard to continue the presentation.
Thank you, Peter Ferrante. We are extremely proud of our forestry operation based solely in Ontario, where we focus on sustainable practices. We prioritize environmental stewardship by promoting biodiversity, maintaining forest health, and complete utilization of the trees where best. Our commitment to sustainability extends to all aspects of our business, ensuring that our lumber is produced safely. This not only protects our employees and the environment, but also adds long-term value for stakeholders.
Our Gordon Cosens Forest near Kapuskasing has been FSC certified for 20 years and was the first forest to be FSC certified in the Canadian Boreal Forest, showcasing our dedication to sustainable forestry. Our team is committed to excellence and implementing best practices for a sustainable future. Back to you, Joel Fournier.
Thank you, Michel Lessard. This is the last slide of our presentation, and I would like to summarize quickly what we discussed so far. We believe this is the right time and a unique opportunity for a shareholder to exercise their rights offering here and be part of this growing with GreenFirst. And I'll just reiterate quickly the reason of why we believe this is.
Number one, if you look at what we have done so far, we show a track record of continuous improvement, and this is critical to have that mindset in place if you're looking to execute well on major strategic capital expenditure. If you don't have that mindset, then you're looking for slower payback. We believe we have that mindset, and we demonstrate cost reduction and continuous improvement over the years, and we're going to continue to do so. Number two is the market fundamentals are showing that lumber price will come up. Of course, we want to do those projects off-cycle. We believe it's the right timing, and we want to be ready when the market will rebound.
Also, like I mentioned already, we're in a kind of a unique position because to support our growth, we do have access to wood supply, which is fundamental to support all of this project. Overall, we can continue with continuous improvement, but now we're looking to do a real step change with reducing our cost and increasing our capacity. This capital expenditure will help us to achieve that. All those reasons will help us to achieve our vision and our mission that you can see on the slide here. Our vision, where we're looking to go is we're looking to be the largest wood producer in Ontario. That's one of our goals. Our mission, of course, is it's one thing to be the biggest player, but also we're looking to be top quartile cost in North America.
So those projects will help us to get there. So that concludes the first part of the meeting. Thank you very much for your time. And I just want to reiterate quickly that please know that this presentation, if you want to refer to it, it's available on our website. You can access it at any time. And now we're going to go to the next part of the presentation, and we're going to take the time to answer any question you may have about the presentation. Thank you very much. Please post your question in the portal. Thank you.
Okay. So hello, everyone again. This is Joel Fournier. We do have a couple of questions coming in, so we'll try to answer all of them as they come. Number one is, why does the company believe this is the right time to invest in the CapEx program?
I'll take the time to answer this one. When you look at all the projects we're looking to install, we do have a very strong experienced team across the sites that are familiar with those types of CapEx. We're not looking to install a one-off, a brand new technology that was not tested elsewhere. We do have experience with those types of CapEx, and we'd have a good team in place. If you look at the past few years, we've successfully integrated around CAD 30 million of CapEx already in the last three years, and it went very well. Another thing to mention is those projects. There's always risk, but those projects are low-risk in nature because the way we quote them, most of them are turnkey, so all costs are in.
We partner with some equipment suppliers to make sure we have a performance guarantee in contract, so the results will be there as promised. Also, because we do those projects off-cycle, there's numerous advantages of doing that. When you do projects off-cycle, you could have a quick turnaround because you have the best people from the equipment supplier to do the startup of your mill. You're not competing with 100 different projects across North America. Quick turnaround, quicker payback. We believe we can negotiate, and we did negotiate better equipment price because we're off-cycle, and there's numerous other advantages. Okay. This is Joel Fournier again. There's a question here. It said, how disruptive should we expect those projects to be in terms of the 12- to 18-month timelines? Very good question. Each of those projects will be disruptive depending on the project itself.
But I'll take, for example, the biggest one we're looking to do. It's the new saw line at Chapleau for CAD 25 million. So roughly, we're looking to curtail or stop part of the operation for around one month to install the brand new saw line. And then we expected or we're looking to do a ramp-up for another three months. So we're going to gain production week after week, month after month after we're fully up to speed after three months. This is the type of conservatism we put in our number. But of course, we're going to continue to do everything we can to minimize any disruption in our operation. So when we look at those projects, we look also to schedule 24-hour people to work around the clock to make sure we minimize any downtime that we're going to have going forward.
Other things we look, you don't have any choice to stop your line when you're installing new technology, but we can minimize the downtime. Other things we're looking to do is we're looking to do catch-up shift. So we're working closely with our employee to do Saturday shift, Friday night shift to make sure we cover what we're going to lose for production when we stop the mill to do those projects. Okay. Another question that came in. Do you have any update with regards to the rights offering, and do you expect to raise the full CAD 97 million and how you will use it? I will let Peter Ferrante, our CFO, to answer that question.
As stated on our previous earnings call, we will not know the final amount raised related to the rights offering until mid-December, more specifically December 12th, 13th.
However, as we stated in our press release, we've already had CAD 20 million that has been committed to us part of the rights offering by a new investor, Robotti & Co. We've also spoken to some of our other key shareholders, and they've all expressed their desires to also participate in the rights offering at various levels. In a nutshell, we're prepared for multiple scenarios with regards to the use of funds depending on the final outcome. We plan on doing various strategies, which include working capital management, investment in CapEx, and depending on the level of interest, other future potential strategic opportunities.
Okay. We do have another question. How did the company select its CapEx project and the order in which to complete them? So I'll take this one on.
So we briefly covered that in the presentation, but all projects we selected related to equipment installation that we already implemented in the past. And we carefully selected all those projects to make sure we have the quickest payback as possible. And if you recall the slide, what's the cost of the incremental production? We clearly show that GreenFirst, for every dollar you're going to spend, it's going to be more cost-effective to get that extra capacity. We also involve all the sites. So the GM of each saw mill, the people at each site were involved, as well as a third-party expert to help us make the best choice for those projects. Okay. We do have another question here. Does the company have sufficient wood supply as well as production capacity to achieve your stated production increase? Very good question.
I'll pass it over to Michel Lessard to answer this one.
Thanks, Joel Fournier. And thanks for the question. As Joel Fournier mentioned also earlier that the wood supply is really fundamental if you want to increase your production. So we know that without wood supply, you can have the best projects, but again, you're not going to be able to go too far without it. So the good news, and that's very particular to GreenFirst, is that we have currently also sufficient wood supply, but not only enough wood supply, but it's economic and sustainable also wood supply that we have. So not only to satisfy the phase I that we spoke about, but only the phase II that we referred also in our press release. So we currently operate our saw mills in two shifts, but we have the ability also to run them on a three-shift basis.
Okay.
We got multiple questions around this one. With the recent duty rate adjustment announcement, what are the future possibilities of collecting on this duty deposit in the future? We had a couple of questions related to the Donald Trump tariff. I will let Michel Lessard cover this one.
Yeah. Thanks, Joel Fournier. No, that's a very good question. Regarding the duties, there's currently no imminent settlement being contemplated between the Canadian and U.S. government. With the Donald Trump election, we'll see how its administration will want to approach this. That being said, on our side, what we control also is the Canadian lumber industry. We continue to work with the Canadian government to seek a fair settlement for all the duty deposit. But again, it's something that we're following very closely, and we'll continue to do so.
Okay.
We have another question here that flowed very well with the previous one. It's with recent commentary from the new U.S. administration on raising duty and tariff across the board. What is your position on how this will impact the company? So I will cover this one. So we have heard various input from the industry expert right now that the duty rate could increase to 30% in August 2025, and we're planning accordingly. Let's not forget that Canada is between 25% and 30% of all North American wood supply. So if you look at history, every time we saw a duty rate increase, we saw the lumber price increase accordingly, sometimes fully to the duty increase, sometimes a percentage. And so we believe the similar thing will happen again. And unfortunately, when we see a duty rate increase, unfortunately, the primary people affected will be the end user.
Another question here related to mainly the market. So we've been hearing that housing starts are expected to materialize, but it's been several years now. How confident are you that demand will rise in the near future? I will let Peter Ferrante to answer this question.
Very good question. So let me start with, we've all seen interest rates have started to come down, and we believe this will continue, and a similar impact is expected on mortgage rates. This will altogether help slow down inflation. Secondly, there is a significant housing deficit in North America. When you combine this with the average age of the homes that are actually out there that have been built 30- 40 years ago, we also believe there's going to be an increased requirement for remodeling and renovations.
Finally, a third element that we're seeing out there is that a lot of construction builders, in terms of residential, industrial, and commercial, they're all exploring more efficient, cost-effective, environmentally friendly solutions, which would indirectly drive them towards using wood over steel. And this is something new that we've seen over the last several years.
Okay. Another good question here that came up with the recent closure of the Kap Paper Mill in Ontario, and we're looking to increase production at our mill. Therefore, we're going to increase residue production. Do we have any issue with managing those chips? I will let Michel Lessard answer that question.
Thanks, Joel Fournier. For sure, the entire industry in Ontario is facing a serious challenge finding a home for chips.
Following the closure of Domtar Espanola, you had also AV Terrace Bay, and also during last summer, you had Témiscaming High Purity Cellulose Mill that's located in Témiscaming, Quebec, so that's it for GreenFirst. CapEx is consuming the majority of our chips that the saw mills are producing, so that's really helpful. Also, we have a long-term contract with Rayonier, so we maintain the confidence in this long-term contract, and under this contract, Rayonier is required to take the chips from us or to find an alternative for that, and as I mentioned, because of the closure of the Témiscaming High Purity Cellulose last summer, so they've been very collaborative to find alternatives to place our chips. The other thing I would like to mention is that the Ontario government also has put in place a support program that helps reaching chips consumers also over longer distances.
So that's also very helpful for us. So just shortly, just to mention, we don't anticipate any issue with the residual or more chips that's going to be produced following these projects.
Okay. Hi, this is Joel Fournier again. Another question that came up. Do you have the equipment for this project lined up already? I guess I'm wondering what level of certainty you have that you'll be able to get those projects done on time and on budget as described. So presently, I'm going to take this one. Presently, we do have some equipment lined up already. We didn't send any PO yet because we're waiting to see how much money we're going to get with rights offering. But like I said, we're ready to hit the ground. We did our due diligence as far as equipment selection. We negotiate prices and contracts for those equipment.
And as we speak, we're finalizing the detail of being ready to send PO out. And yes, we do believe that we're going to hit cost and benefit for those projects. We did not overshoot. When we look at those projects, we did not overshoot as far as payback. We tried to be realistic and conservative. We also use technology to come up with those payback. You could do some simulation that will give you a good idea of what will be your benefit. And personally, some of those projects we're looking to do, I did similar projects with other companies with my past experience, and it's nothing new as far as payback. And one thing I would like to finish is in our contract with the equipment supplier, we did put performance guarantee to make sure we deliver on benefit. Okay. Another question that came in.
What was management's position on the forward-looking pricing that was used in the presentation? I'll pass this one over to Michel Lessard.
Thanks, Joel Fournier, so on the pricing analysis, so what we did, so we used the third-party data from FEA. After that, we compared this data to other third-party forecasters such as RISI, and also we used the industry analyst forecast and after that, after reviewing all that, so then we concluded that everybody was aligned, so all good on that.
Okay. Another question that came up. The company has made reference that the proposed expansion plan can be achieved at a lower cost versus its competitor. Can you give us more detail and color on this, so I'll take this one over, so we're investing in the mills right now that are already functional.
And like I said, we carefully selected a project to avoid any high-cost addition requiring long-time turnaround. So for example, when you look at a saw mill and you're looking to put a brand new saw line, you could look at putting a brand new building extension, bigger building, bigger footprint. All of that is very expensive and could consume more time. So what we did is, for example, the new saw line we're looking to install at Chapleau, we do have the building right now. It's long enough, it's big enough, everything is there, so there's minimum civil work to do. And fitting a line with the existing building, it's a much more cost-effective project in that regard. We also have been working with vendors that have worked with us in the past and have proven track record of installing similar equipment and technology in other places.
Finally, as you recall the slide here that I shared, most of our competitors are growing in U.S. South in search of available wood basket, whereas GreenFirst is positioned uniquely with high-quality strength wood available in large demand by our builders. I think I mentioned that a couple of times. We do have access to wood, and this wood is in very high demand compared to our peers. This is high-quality SPF, and actually, there's a premium on our wood compared to our peers. Okay. There's another very good question that came on. Would it be more attractive to invest in CapEx or to buy back share? I'm going to take this one. We discussed that. Of course, we'll look at that. But if we look at the current situation of GreenFirst, our cost profile could be much better to face the lumber cyclical thing going forward.
So we thought it would be much better for the company to now invest in capital expenditure, lower our cost profile to make sure we survive the down cycle, and also we take advantage of the upcoming market that we think is coming at us. Buy back share, it's a good idea, and it's certainly something we're going to, like I said, we discussed about that, but it's certainly something we're going to discuss next going forward. Another question that came in: If you do not raise the CAD 50 million required in proceeds from the rights offering, how do you plan to finance this CapEx project? I will let Peter Ferrante to answer the question.
Okay. Thank you, Joel Fournier. We believe the dollars, as you say, will primarily come from the rights offering. In the event they don't, we do have additional thoughts or strategies.
We continue to explore options to monetize on our duties and other non-core assets. As it relates to the equipment themselves, we are working both with our vendors and our bank for additional financing opportunities. Finally, as commodity prices are increasing, we expect the company to be able to be in a position to generate additional positive operating cash flows. As such, various options do exist to us, and we will take advantage of every option available to us.
Okay. We do have another question here. What is management's confidence level in achieving the CAD 18 million of additional EBITDA saving? I will pass this one over to Peter Ferrante.
With regards to our phase I, the CAD 50 million investment is focused primarily on replacing equipment that is legacy in nature, which was purchased during the RYAM acquisition, of which the majority of this equipment is dating back to Tembec and even prior. Let's remember the CAD 18 million that we referenced to in terms of improvement is directly related and attributed to cost savings as we grow capacity with newer and more efficient equipment producing higher volumes per shift. In addition, these new equipments will allow us to improve our roundwood recovery, which will convert a higher percentage of our sales mix to higher-grade lumber as opposed to chips. Again, going back to the question that was asked before, yes, production will go higher, but due to our higher recovery, we'll have less chips.
Finally, what is not included in the $18 million, as commodity prices do increase, it will bring additional EBITDA dollars to the bottom line. As stated in our presentation, of approximately $5 million in EBITDA savings for every $10 dollar increase in commodity price. Similarly, as we improve our cost structure, it will provide a defensive position when prices may eventually drop. All in all, we believe the combination of our internal capabilities, these projects that we have selected, the market fundamentals that are currently out there, and the outlook in terms of future pricing will position us well towards achieving our stated objective.
Okay. I would like to thank everyone on the call. I look at all the list of the questions that we have here in the portal, and I think we cover all of them through different answers we have or different questions we have.
So this concludes this presentation, but I would like to reiterate that the presentation is available on the website, and if you guys have more questions, you could send us an email directly, and we'll take the time to reach out to you and answer your question. Thank you very much for your time today.
Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending, and at this time, we ask that you please disconnect your lines.