Feasibility of Small Mill Investments for Utilizing Small Diameter Hardwood from Coal Lands in Southwestern Virginia

At the request of a major southwestern Virginia landholding corporation, an analysis was made of the economic feasibility of small mills for utilizing small diameter hardwoods from coal lands in southwestern Virginia. Unlike most other landowners in southwestern Virginia, coal companies frequently own large contiguous blocks of timber, have a profit motive, and have the financial resources to invest in wood processing facilities. Nine alternative wood processing mills were evaluated using discounted cash flow analysis. Four of the nine mills analyzed were economically feasible at a 15 percent minimum acceptable rate of return, but only the SHOLO and scragg mills showed acceptable rates of return when operating at 80 percent of capacity.

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