A year after Cascades Inc. padlocked operations at their Thunder Bay coated paper mill and put 500 workers out of work, new investors with deep pockets and industry savvy are poised to re-open it.
Under the new banner of Thunder Bay Fine Papers, a group of local and out-of-town investors looking to buy the idled Lakeshore Drive operation is confident the mill could be producing by early spring once a Canadian equity investors group concludes its due diligence process by late January.
The undisclosed group signed a letter of intent with the principals of the local company, headed by Dennis Bunnell, and will provide the bulk of the $35 million needed for capital upgrades and operating funds.
“If we get the keys to the mill by Feb. 1, then it’s possible to be making paper as early as the end of March,” says Andre Nicol, vice-president of sales.
Once a negotiated deal with Cascades is finalized, the mill could employ 340 and produce 200,000 tonnes of coated paper annually when in full production.
More financial support is expected from Queen’s Park through provincial grants, loan guarantees, breaks on electricity rates and money to build a co-generation unit. The province previously supplied $96,000 to the City of Thunder Bay for a business plan used by Thunder Bay Fine Papers to search for investors.
Nicol couldn’t confirm an official start-up date, but says most of the investors group’s research work on their proposal has been done. “There’s still a few things they still wanted to cover before they were satisfied so they promised to finish up (by late January)."
He anticipates “few major reservations by their board” who are already involved in the pulp and paper industry. “They’ve come back to us and said this is a good time to be doing this.”
Nicol says Cascades has been “very helpful and cooperative” and although terms on their original letter of intent with the Quebec forest products giant has expired, Cascades intend to proceed with the sale.
Bunnell is familiar with the mill having served as the last president of Provincial Papers, the employee-run Thunder Bay predecessor company prior to the Cascades’ acquisition in 1997. Partner John Hitchman is also a former mill manager.
Nicol has a long career in the paper business in newsprint sales and operates a converting plant in Thunder Bay, which will become part of the new operation. He will be organizing the sales team.
Natural Resources Minister David Ramsay, who attended the Jan. 4 news conference in Thunder Bay, to show his support says the company principals are an experienced group with knowledge of the mill and vast industry smarts in operations, administration and sales.
“There was a lot of grey hair there (at the Jan. 4 press conference) which made me very reassured.”
Company officials told Ramsay they are already filling their order book.
Nicol says with an industry trend toward more glossy, finished papers, their consultant reports this particular market segment holds the greatest potential for profitability.
Nicol was part of the founding Thunder Bay Fine Papers group formed in the fall of 2005 when Cascades announced they were closing the mill. The Quebec company blamed high energy costs, a strong Canadian dollar and unfavourable market conditions for the closure.
To overcome power costs, the local group intends to build a co-generation plant with an energy firm using wood waste. They will be able to access provincial Forest Sector Prosperity Funds for that project.
The group also has a memorandum of agreement with four unions, the largest being the Communications, Energy and Paperworkers. The proposed 10-year agreement contains a starting five per cent wage reduction with profit sharing provisions and greater job flexibility.
Nicol expects more than 500 direct jobs will be created in mill, woodlands and transportation work with a $125 million payroll, as well as other indirect servicing jobs.
“It’s a big impact to Thunder Bay.”
