Gaining access to Crown fibre will be a key issue for a potential buyer of the idled Fort Frances pulp and paper mill.
Repap Resources Group notified Resolute Forest Products in mid-December of its intentions to enter into negotiations to acquire its northwestern Ontario mill. The private Canadian and U.S. investors group wants to restart the plant and introduce a new mix of products in 2019.
“This is a sophisticated group of investors that includes folks with long histories in the forestry and paper industry, including a specific knowledge of this mill,” said Tannis Drysdale, the town’s economic development consultant, in a phone interview.
“I have every confidence that they understand what it will take to open up the mill.”
Repap is a private consortium of Canadian and U.S. investors with more than 180 years of combined managerial experience in purchasing and revitalizing closed pulp and paper mill assets. The group is partnering with 4Front Capital Partners, a Toronto investment bank.
“They have looked at other idle paper mills in North America and I know the attractive feature of the Fort Frances mill is the local fibre matches well with the product that they intend to make,” said Drysdale.
Repap’s proposed plans are to produce packaging grades – sack kraft papers – in Fort Frances, such as cement bags and heavy grocery paper bags, the latter following a growing consumer trend to curtail the use of non-recyclable plastic shopping bags.
“The market is actually growing for that type of product,” said Drysdale.
Should Repap acquire the property, they’ve informed town officials that 263 jobs could be created.
Rather than keep Repap’s interest under wraps, newly elected Fort Frances Mayor June Caul and the municipality decided to make it public on Dec. 13 in an effort to spur Resolute into making a deal and convince the province to “step up to the plate” and help get the mill reopened.
“The possibility’s always been in our minds, hoping that someone would come through and be interested in buying it.
“Hopefully it will make a difference with Resolute. It’s either going to get them moving or make them unhappy with us.”
The Fort Frances mill operated for 100 years until Resolute finally pulled the plug on the previously closed operation in 2014, declaring it not economically viable.
It dealt a major blow to the one-industry town of 7,700 and permanently placed 250 people out of work. The loss to the community of its largest private employer has been offset somewhat by the opening of New Gold’s Rainy River Mine, 65 kilometres to the northwest.
But sentiment has been growing in the community about how active the Montreal-based forest products giant has been in marketing the property.
The province stepped in on the town’s behalf to ensure Resolute kept the buildings winterized and heated in case a buyer surfaced.
Questions have also arisen if the company has been hoarding wood in the nearby Crossroute Forest, a Crown forest management that is specifically – and has been historically – attached to the Fort Frances mill.
The successful purchase of the mill is contingent on the new owners having access to locally sourced Crown fibre.
Back in 2014, the shuttered mill attracted considerable interest from a Wisconsin company, Expera Specialty Solutions, but the American specialty paper producer later withdrew its purchase offer, one of the issues being the inability to secure nearby wood.
Drysdale said there is should be significant volume available nearby in the Crossroute Forest, the Crown management unit that is specifically and historically allocated to the Fort Frances plant, given that the fibre was there in the past.
Currently, Resolute harvests saw spruce, pine and fir logs from the Crossroute for its Sapawe sawmill in Atikokan, 150 kilometres to the east.
Smaller diameter, pulpwood-sized logs still remain in the Crossroute – considered less desirable for sawmilling – but other forestry producers in the area have encountered problems accessing hardwood on the Resolute-controlled forest.
A recent annual report on the Crossroute, prepared by Resolute, indicates only 52 per cent of the allocated stands is being harvested.
“It’s illogical to believe that there would not be fibre supply in this forest to feed this mill,” said Drysdale.
To reopen the Fort Frances mill, a potential new operator would have to negotiate a wood supply agreement with the province.
“Certainly, we’ll be looking to the provincial government to ensure that fibre can be accessed and is available, if the private sector partners can make a deal,” said Drysdale.
For years, Fort Frances and the surrounding communities have working to obtain an Enhanced Sustainable Forest Licence (ESFL) from Queen’s Park in order to free up more wood from Crossroute.
Caul said because Resolute sits at the table of that ESFL group, the company may be more amenable to freeing up more wood for other regional producers.
“Hopefully the (Resolute-Repap) negotiations will go well and it will be sold and up and running again.”
In an emailed reply, Resolute spokesman Seth Kursman confirmed receiving a letter from Repap representative Sean Twomey on Dec. 12, indicating an interest in the mill.
Over the years, he said the company has spent more than $30 million to maintain the mill in a “hot, idle state while we explored all available options.”
He called the possibility of Resolute returning to manufacturing in Fort Frances “highly unlikely.”
Instead, the company was considering doing an environmental stewardship-type project for the town, handing over two mill-related properties as a goodwill gesture.
“At this time, there is a growing number of people and organizations expressing an interest in properties associated with the site. We must therefore proceed expeditiously, and with this in mind, we will make representatives of Resolute available to meet with Mr. Twomey and his associates.”
Kursman did not respond if the mill’s biomass boiler and steam turbine would be included in any asset sale.
Caul said while the news has generated considerable chatter around town, she is attempting to manage expectations that negotiations are in the early stages and any deal is far from done.
Beyond the emails and phone conversations with the potential buyers, she was hopeful for a face-to-face meeting when some of the principles from Repap arrive in town to tour the plant before Christmas. An engineering team connected with Repap is expected to evaluate the site in the coming weeks.