St. Marys Paper Corp. has emerged one of the Northern Ontario's forest industry survivors.
With new local ownership in place, the once-bankrupt Sault Ste. Marie super calender mill resumed full production on all three paper machines in early August.
The start-up coincided with the Aug. 6 arrival of Natural Resources Minister David Ramsay in delivering a much promised $17 million aid package. The loan is earmarked for working capital.
The 112-year-old operation, which has teetered on the brink of insolvency throughout its history, almost closed for good last spring after a two-month shutdown.
Besides being the city's oldest industry, it's one of the Sault's largest private employers at 320 workers.
New company president Gord Acton, who pounded the pavement of Toronto's financial district in June to raise $43 million from an undisclosed national lender, says he's pushing ahead with plans to build a co-generation plant.
Acton says St. Marys is "actively engaged in talks" to partner with their waterfront neighbour Algoma Steel which began construction on a co-gen using off-gases from their coke ovens and blast furnace to product electricity.
St. Marys wants to add wood waste into the mix in a dual fuel boiler combined with Algoma's fluctuating gas cycle.
Acton says the next phase will be seeking approval from the Ontario Power Authority for a joint venture, or else apply to build their own independent facility.
Minister Ramsay says the mill is eligible to tap into other provincial program funding for forestry and renewable energy.
High energy prices were one of the factors that almost sank cash-strapped St. Marys last October when combined with a strong Canadian dollar and the company's inability to make pension fund payments.
The previous ownership headed by Ron Stern and Belgravia Investments attempted to refinance by asking for pension and wage concessions, but their proposal was rejected by the Communications, Energy and Paperworkers Union (CEP).
The company shut down its No. 5 paper machine April 21 until a local ownership group lead by Acton emerged to rescue the operation in bankruptcy court from a liquidator.
The new ownership includes senior management people plus some confidential equity partners.
Continuity will exist with Marc Dube returning as business manager. Todd Black remains in charge of production with Walter Vail remaining as head of sales and Gerry Henson serving as company CFO.
"That was a key in putting the deal together," says Acton, "having some people with historical knowledge about the mill."
Things are looking solid with their order book.
Super calender paper is primarily purchased by publishers and retailers for high quality advertising inserts, flyers and catalogues.
Some of the first few tonnes of glossy super calender paper that came off the reels of its workhorse No. 5 paper making machine in late June were published in the National Enquirer.
The U.S. tabloid has been a regular customer along with Sears, Kmart, Wal-Mart and the Canadian Automobile Association's glossy travel magazine.
Most clients have returned, says Acton, but not with same order volumes as before. Understandably, during the bankruptcy and the two-month shut-down, many had to look elsewhere for supply. But he's hopeful their high quality product will eventually bring them back into the fold.
The flexibility of the mill to handle customers' immediate spot orders should also work in their favour, says Acton.
Producing a specialty paper with a sunny market forecast for niche U. S. customers played a major role in securing private investment capital.
Acton says their pro forma documents provided in advance of the transaction, detailing their manufacturing and co-generation plans received a "good response" from the financial community.
"Pure financing of a pure fibre play on the manufacturing side is difficult unless you're into specific market sectors," says Acton..
Investors liked their improved cost structure which involved thinning out their workforce with 40 fewer jobs, reworking the pension plan with the CEP union's blessing, making changes in wood handling and finding ways to bring in different types of kraft to the mill.
"We've running a successful experiment with semi-dried kraft," says Acton, a cheaper alternative to St. Marys having to dry it before processing through their hopper and auger system.
"It's been about looking at every cost line."
Because of their staggered start-up and an abbreviated fiscal year, Acton says they'll have a better picture of production numbers and cost savings by mid-September. In the past, the company's No. 5 machine has produced 150,000 tonnes of the mill's annual 220,000 tonne production.
"The mill runs best as an integrated mill with all three machines up and running at peak efficiency."
In August, management was convening with consultants to explore development plans for new lines of business by investigating ways of making saleable by-products from production waste.
"We've got active plans in that regard," says Acton.
One idea is developing a possible packaging product using pulp and clay residue.
"We're looking at taking that residue and turning it from a cost line into a profit line."
The residue process already has approval from the U.S. Environmental Protection Agency and St. Marys is applying for Canadian approval.
