FORT FRANCIS, Ontario (From news reports) -- The recently purchased Fort Frances mill cannot be restarted for the purpose of manufacturing pulp or paper, according to a recently uncovered document.
A restrictive covenant agreement between Resolute Forest Products and 2670568 Ontario Limited, a subsidiary of Riversedge Developments who purchased the mill property on July 9, says the equipment inside the mill cannot be used to manufacture newsprint, coated or uncoated mechanical paper, recycled market pulp, kraft market pulp, and tissue.
While Riversedge Developments CEO Justus Veldman said he's committed to exploring every option to restart the shuttered mill, the restrictive covenant agreement he signed states that the company must "redevelop the closed and non-operational pulp and paper mill . . . for purposes other than a pulp and paper mill."
Veldman said Riversedge is currently committed to a three- or four-month-long process to determine the viability of the mill assets prior to any redevelopment or repurposing of the facility but the restrictive covenant agreement prevents the paper machine from being sold or transferred unless designated for scrap metal.
He said there is no agreement in place preventing the mill from transitioning to a new operator, such as Repap Resources, but the signed agreement states it cannot be used to manufacture "kraft market pulp," which is the product Repap wants to make.
"There are restrictive covenants as far as a non-compete goes because the market is a shrinking market, so there are non-competes in place that prevent a further watering down of the market," Veldman explained.
"But I think the proponents who we are talking to on converting the mill to potentially a brown paper--meaning packaging or a cardboard or other options--is potentially very viable and we're having those discussions as we speak."
"We can make cardboard all day long," added Veldman, who questioned whether the mill can be converted, if there is capital available to covert it, and if there is enough wood fibre to sustain all of the mills in northwestern Ontario.
"The fibre source is an issue, is a challenge regionally, I think everybody knows that," he remarked
"There is a limited supply of fibre. So to protect the other mills regionally, that has to be a discussion with the province and those are ongoing," added Veldman.
However, Unifor national representative Stephen Boon stated earlier this year that there is more than enough fibre to support an operation in Fort Frances.
Within 450km of the town, there have been 11 permanent mill closures and two partial mill closures in the last 15 years, he noted.
Mills in Kenora, Dryden, Thunder Bay, Sioux Lookout, Nipigon, Red Rock, and Red Lake were all able to secure wood fibre and operate at the same time without issue.
As well, in 2016, Resolute identified enough fibre was available to operate the Fort Frances mill during negotiations with a potential buyer.
Meanwhile, Veldman said if the mill isn't restarted it could be repurposed into a large cannabis operation that could create upwards of 200 jobs.
He said Riversedge has achieved success in repurposing shuttered properties in other communities but has had to redevelop as well.
"I don't think that with a declining industry like paper there are too many people that would want to be in my shoes to try to A) figure out how to restart it or B) reposition these mills," Veldman charged.
"It's very difficult and very stressful and it takes a community to make this work."
Veldman said he'd be happy to speak to the restrictive covenant agreement in a public setting or at an open house which is currently being planned at the Fort Frances mill.
It remains unknown whether taxes on the mill property have been paid this year, totalling $800,000 and the mill property was bought for $1, according to land title records.