Mark Davis
President & CEO

Good morning ladies and gentlemen. Thank you for joining us on this conference call and webcast.

Joining me today is Vic Wells, Vice-President, Finance and Chief Financial Officer. Vic and I will answer any questions you may have following our remarks.

Two years ago Chemtrade completed its initial public offering and we committed to creating value for our unitholders by delivering value to our customers.

Today, we're pleased to announce our second accretive acquisition, the purchase of the BC Chemicals Division of Canfor Corporation.

The BC Chemicals business is a perfect fit with our existing business model. It also meets our on-going goals of increasing unitholder value, and constantly delivering value to our customers.
During our annual meeting in May, we discussed our goals of diversifying our earnings stream, and increasing the scale of the business, in order to ensure sustainable and growing distributions. The purchase of BC Chemicals meets both of these goals.
We also discussed the importance of our business model in delivering the stable distributions expected by our unitholders. At the core of our business model is the intent to mitigate the effects on distributions of possible fluctuations in commodity prices and volume.

BC Chemicals lines up ideally with our business model, effectively reducing Chemtrade's exposure to commodity fluctuations.

Finally, we outlined some of the key criteria we consider for all potential acquisitions, namely:

BC Chemicals meets these criteria. It adds scale and diversity of earnings and fits with our business model of reducing exposure to commodity price and volume risks.

Let me tell you a bit more about the business and the acquisition transactions.

As the news release indicates, we are acquiring the operations and assets of BC Chemicals from Canfor for $117.3 million. Last year, Canfor announced it was divesting non-core assets, which included the BC Chemicals business, a wholly owned division of Canfor.

As BC Chemicals becomes part of Chemtrade we will be calling it the Pulp Chemicals business, and will refer to it as Pulp Chemicals for this conference call.

Pulp Chemicals produces sodium chlorate and crude tall oil, both of which are chemicals used by the pulp and paper industry. Sodium chlorate is used to bleach pulp, and crude tall oil is used as a less expensive alternative energy source to natural gas. Crude tall oil is also referred to as CTO.
The bulk of Pulp Chemical's earnings are generated from sales of sodium chlorate, and the majority of those sales are to Canfor's Prince George, British Columbia, pulp and paper mills. Canfor will be a strong partner for Chemtrade as it is a leading North American producer of pulp and paper with a good competitive position.
Before describing the operations and the assets we are acquiring, which are first class, let me add a few more comments on why we believe this business is a good fit with our existing operations and business model.

Clearly, key to this transaction are the long-term agreements between Canfor and Chemtrade.

The acquisition is structured to include 10-year exclusive contracts under which Canfor will continue to purchase the majority of Pulp Chemical's sodium chlorate production, and will pay a fee for the processing of 100% of Canfor's soap skimmings into CTO.

Approximately 65% of the pro forma EBITDA we expect to earn from Pulp Chemicals is derived from these long-term contracts that mitigate the normal effects of changes in commodity pricing, volume or raw materials.
The 10-year sodium chlorate agreement provides that Canfor is entitled to purchase 74% and obligated to purchase 62% of the current annual plant capacity.

The price per tonne that Canfor pays is adjusted for changes in cost of the main raw materials, namely electricity, salt, caustic soda and steam. These raw materials constitute approximately 95% of variable costs and 65% of the total cost of producing sodium chlorate.

Clearly, with Canfor purchasing the majority of the capacity and our ability to adjust the price Canfor pays for changes in the costs of the major inputs, we have significantly stabilized the earnings we can expect from these sales.

In addition to the long-term sodium chlorate agreement with Canfor, the business has other long-term agreements that together with the Canfor agreement cover approximately 85% of the total sodium chlorate capacity.

Under the 10-year CTO agreement, Canfor is entitled to 100% of Pulp Chemicals' CTO processing capacity. Canfor pays an annual fee for processing services that is designed to provide for a complete recovery of costs and a fixed dollar margin.
We believe these are excellent arrangements for both Canfor and Chemtrade. We are delighted to be entering into a long-term relationship with Canfor. Canfor will receive the attention and focus deserved by a key customer, and Chemtrade and its unitholders will benefit from the high quality, stable earnings stream that our partnership will produce.
Let me now describe the business in a bit more detail.
Sodium chlorate is used for the production of chlorine dioxide, which in turn is used in the bleaching phase of the kraft pulping process. The majority of the sodium chlorate produced by Pulp Chemicals is currently used in Canfor's Prince George pulp and paper mills, with the balance of production being sold to third parties.
CTO is produced from soap skimmings that are removed from pulp mills to allow them to increase their production capability. Processing of these soap skimmings produces CTO. Most of the soap skimmings processed by Pulp Chemicals are received from Canfor's three Prince George pulp and paper mills, and then returned to these mills as CTO for use in their power boilers as an alternative fuel to natural gas.
Pulp Chemicals is located in Prince George, British Columbia adjacent to Canfor's two Prince George based mills, the Intercontinental Pulp mill and the Prince George Pulp and Paper mill. Deliveries of sodium chlorate, CTO, soap skimmings, steam and waste water are made via pipeline between the mills and the Pulp Chemicals facility.

The third mill, Northwood Pulp mill, is located approximately five kilometres from the Pulp Chemicals business and the other two mills. Deliveries to and from the Northwood mill are made by railcar.

The close proximity of the three Canfor mills to Pulp Chemicals yields a significant freight advantage for Pulp Chemicals relative to all other potential competitors. And, as Prince George is the major transportation hub for northern and central British Columbia, Pulp Chemicals has efficient transportation links to other customers and suppliers.

The sodium chlorate facility consists of two cell lines having total capacity of about 78,000 tonnes per year. In basic terms, the cell lines undertake a very simple process of combining salt and water, and then passing electricity through the solution to produce sodium chlorate.

The cell lines have been well maintained and are currently in the final stages of a five year $4 million anode recoating program. This program will not only improve electricity utilization, which represents approximately 50% of sodium chlorate manufacturing costs, but will also boost production capacity by reducing the required number of down days.

The program is expected to be completed in May 2004 and the remaining costs for the recoating program have been pre-funded as part of the financing for the acquisition. Anode recoatings are only needed every 12-15 years, so the timing is excellent for us in this regard.

The CTO plant has a capacity of approximately 30,000 tonnes annually with volumes consumed almost entirely by Canfor as an alternative source of energy to natural gas.

Both the sodium chlorate and CTO plants are efficient state-of-the-art facilities that have been well maintained and upgraded. Excluding the major anode project (which will not be required again for at least 10 years) annual maintenance capital expenditures have averaged about $500,000 over the last 5 years.

The business has 36 employees; 28 employees are members of the Pulp, Paper and Woodworkers of Canada union. This is the first year of a new union contract that will run until 2008.

I'll now turn the call over to Vic to discuss the financial matters.

Vic Wells
Vice-President Finance & CFO

Thank you, Mark.

On the financial side, the Pulp Chemicals acquisition is a very positive transaction for Chemtrade and our unitholders. The business has consistently strong sales and EBITDA, and has improved its EBITDA margin over the past two years.

In 2002, net sales were $52.4 million compared with $47.6 million in 2001, an improvement of 10%. EBITDA for the year was $20.1 million, up 27% from $15.8 million in 2001.

For the six months ended June 30, 2003, net sales were $24.9 million and EBITDA was $10.1 million.

As Mark has mentioned, the majority of the sales and EBITDA are generated by the sodium chlorate business. For example, in the first six months of this year, approximately 86% of BCC's revenue was from sodium chlorate sales, and the remaining 14% from CTO sales.

In terms of EBITDA, sodium chlorate contributed 80% versus 20% for CTO.

On a pro forma basis, the combined businesses, that is, Chemtrade and the Pulp Chemicals business would have produced EBITDA of $28 million, and distributable cash of $21.4 million, or 97 cents per unit on a basic basis, for the 6 months ended June 30, 2003. This compares with EBITDA of $18.9 million and distributable cash of $14.1 million, or 87 cents per unit, that Chemtrade actually generated.

Obviously the acquisition is very accretive for Chemtrade unitholders. Taking just one measure, albeit the most important, basic distributable cash per unit is 10 cents higher than Chemtrade standalone, or an increase of approximately 11%.

As Mark has explained, on a going forward basis, Canfor will continue to purchase most of the output from the plant. The pro-forma earnings are indicative of what we believe the business will look like going forward, but Chemtrade will also benefit from the stable earnings generated by the new Canfor agreements that mitigate market fluctuations of price and input costs.

In terms of financing for the acquisition, it will be paid for from the proceeds of a new issue of units and increased bank debt. The total cost of the purchase, including costs, is estimated at $126 million.

As you know, we also announced entering into a bought deal for $86 million of Subscription Receipts through a syndicate of underwriters led by CIBC World Markets. The Subscription Receipts will be exchanged for units of the Fund upon completion of the acquisition.

The balance of the purchase price, approximately $40 million, will be financed by an increase in our bank facility. This is a non-amortizing term debt maturing on May 31, 2005.

We continue to focus on maintaining the conservative leverage ratios expected of an income trust. On a pro forma basis, our debt is still a very conservative 1.6x pro forma EBITDA. We continue to pursue a strategy of modest leverage and maintaining a strong balance sheet.

As I mentioned, on a pro forma basis, the consolidated business would have generated distributable cash per unit of 97 cents on a basic basis, or an accretion of approximately 11%.

Since our IPO, we have followed a conservative, and sustainable distribution policy, which has included holding back some distributable cash so that we would be able to continue to pay consistent distributions even in the event of unforeseen interruptions to the normal course of business.

We've faced some of those conditions this year with the on-going Inco strike and the rapid rise of the Canadian dollar. However, this policy and the performance of the business even under difficult conditions, allowed us to maintain the annual distribution rate we established at the end of last year of $1.76 per unit.

If you annualize the numbers you saw in the press release, we expect the new business to add approximately 20 cents per unit to basic distributable cash.

Consistent with our conservative distribution policy, and assuming the acquisition closes by the end of August, we plan to increase the supplemental quarterly distribution by one cent per unit, effective with our third quarter supplemental distribution which is payable at the end of October. This will increase our annual distribution rate to $1.80 per unit.

Once the Inco strike settles we will look again at distributable cash being generated and consider whether a further increase in distributions is sustainable, and therefore, warranted.

Mark Davis

Thanks Vic.

To summarize, we are very excited about this transaction and our new relationship with Canfor.

We have succeeded in increasing both the scale and diversity of our earnings, which, as I indicated, is beneficial to the long-term sustainability of distributable cash. Further, the Pulp Chemicals business clearly meets our growth criteria.

The transaction and relationship with Canfor has permitted us to structure the business to fit our business model.

The long-term agreements with Canfor minimize commodity risks and are a great addition of high quality earnings for the future.

Lastly, but most importantly, the transaction is immediately accretive to our unitholders.

Thank you for your attention.