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Active negotiations lift hopes that idled Duluth, Minn. paper mill may be revived
DULUTH, Minn. (From news reports) -- Continued talks with representatives of a company interested in perhaps acquiring the shuttered Verso paper mill in Duluth have intensified in recent weeks, drawing increased attention to the fate of the facility and the 220-plus people it employed before a shutdown was announced in late June.

Randy Nebel, Verso's newly appointed president and CEO, hinted at the possibility of a sale of the Duluth facility during a Nov. 9 earnings call.

In response to an analyst's questions about the future of the two mills Verso closed this summer, Nebel said the company had put efforts to sell its idled Wisconsin Rapids operation on hold but observed: "Duluth has got some people interested, and that is ongoing."

Local media reached out to the president and CEO of a papermaking company and potential buyer believed to be engaged in those active talks, based on reports from knowledgeable sources, but he did not return the call.

Duluth mill manager John Bastian said he could not discuss any details of negotiations or the parties involved, but he did acknowledge: "We have for sure one interested party. There are some pretty big hurdles to get over, and we're working like crazy to get over those hurdles to get the deal done. But that's about all I can say."

Those negotiations also have involved Nancy Aronson Norr, director of regional development for Minnesota Power, which helped launch the plant in conjunction with Pentair Inc. back in 1987, and the power company still fulfills most of the mill's considerable energy needs.

Citing non-disclosure agreements, she, too, declined to confirm the identity of the interested prospective buyer.

But Aronson Norr said that since the beginning, she has remained optimistic the Duluth facility will reopen "because of the quality of the mill and its talented work force."

As for the pace of recent talks, she said: "It's been all-consuming for us for weeks, really since we've been engaged."

At the time of its closure, the Duluth mill primarily produced graphic supercalendered paper -- the sort of stock often used in magazines, catalogs and advertising circulars -- and the market for that commodity has continued to wane in recent years.

Verso had been looking to pivot production in Duluth to brown kraft papers that are frequently used to produce grocery bags and a wide array of packaging materials, including cardboard.

Before the COVID-19 pandemic took hold in the U.S., Verso invested more than $5 million to begin producing kraft paper at a modest scale of 90,000 tons per year at its Duluth plant. While that partial conversion proved successful, fulfilling the company's expectations, according to former president and CEO Adam St. John, Verso decided against a proposed full-scale conversion to the product as the nation's economy crashed and the papermaking industry reeled.

While markets for the Duluth mill's long-time mainstay -- supercalendered paper -- remain in the dumps, demand for brown or kraft papers has intensified as a result of the pandemic, which has fueled online commerce deeply dependent on the availability of packaging materials.

Chris Fleege, director of the city's planning and economic development division, also has been involved in efforts to help orchestrate a sale of the mill.

Duluth Public Information Officer Kate Van Daele said Fleege was not available to comment on the status of those talks Thursday or Friday, citing the sensitive nature of present negotiations.

But in a previous interview, Fleege suggested the future viability of the plant likely will depend on its conversion to brown paper, requiring a large infusion of capital, upward of $35 million.

"Really, whoever buys this mill, eyes wide open, they'll probably have to make this conversion because the graphic paper market continues to see erosion, and COVID only made it worse," he said.

Meanwhile, demand for packaging materials remains intense. That spells opportunity at the Duluth mill for the right buyer willing to invest, according to Aronson Norr.

"I think it's likely that any buyer would want to take advantage of market opportunities in what has become a massive uptick in demand for this type of brown paper, as we all continue to order merchandise online," she said, noting the shift away from plastic shopping bags also promises to drive demand for brown paper stock further.

"So, anyone interested in this mill is probably exploring it quite aggressively," she said.

Yet Aronson Norr noted that it's difficult to tell exactly what the market for brown paper will look like coming out of a COVID-19 pandemic.

"I think anyone in this space would want to get in and establish their market share, prove their quality, their competitiveness, and you know all the things you'd want to do when you have a fast-growing market but one that is a little bit less predictable," she said.

Another key selling point for the Duluth mill is its experienced and talented staff, according to Fleege, who previously warned that the longer a shutdown continues, the greater the likelihood that former Verso employees will take other jobs, perhaps outside the region.

Aronson Norr seconded those concerns, saying: "You definitely want to get those folks feeling like there's opportunity sooner, rather than later, so they don't relocate or take other positions. No question."

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