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log sawmill at Ward Cove is a significant example of this 

 effort . 



CAPITAL INVESTMENT - DYNAMICS 



Continuing to build for the future and relying on its 

 contract with the government for timber supply, KPC made the 

 follow capital investments during 1988: 



$ millions 



1. Construction of new small 

 log sawmill (completed 



March 1989) $11.8 



2. Logging equipment 6.0 



3. Pulp mill additions and 

 improvements (including 

 environmental control 



facilities) 9.0 



4. Logging roads 8.5 



$35.3 



KPC STUMP AGE RATES ARE POSITIVE 



The economics of Southeast Alaska forest harvest and 

 processing are now solid and returns for economic stumpage are 

 very positive. Under the upward stumpage adjustment provisions 

 in KPC's contract (Sections 2(b)2 and 2(c)2), the Forest 

 Service has adjusted the stumpage rates for volumes for all 

 species actually logged from August 1 - December 31, 1988, up 

 to an average of $68.03 per thousand board feet (MBF) . This 



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