Borregaard and Rayonier Advanced Materials announced on 1 June 2015 that they have entered into a non-binding letter of intent regarding the establishment of a new lignin operation adjacent to Rayonier Advanced Materials' Fernandina Beach pulp mill in Florida.

The new company will reportedly be owned 55% by Borregaard and 45% by Rayonier Advanced Materials.

The Fernandina Beach mill manufactures specialty cellulose and lignin raw material as co-products from softwood. Utilising Borregaard's know-how and technical expertise, the new company will initially manufacture lignin products suitable for concrete admixture and similar applications targeting primarily the North and South American markets. The products will be marketed through Borregaard's international sales network and will represent a 30% increase in the lignin sales volume at full capacity.

It is anticipated that the project will be completed in two phases over 5 years. The parties estimate an aggregate $110 million for a capacity of 150,000 metric tonnes dry substance per year. The first phase is expected to commence commercial operations in 2017.

The new operation will benefit from the development work in the BALI project, and takes priority over a first BALI plant. Longer term, the BALI technology remains a strategic lignin raw material option for Borregaard.

Completion of the new operation is subject to board approval by both companies and conclusion of definitive agreements, as well as final engineering, refinement of capital estimates, and obtaining required permits and other approvals.

"The Fernandina Beach project represents an excellent growth opportunity for our lignin business in a global market which for some time has been supply constrained", says Per A. Sørlie, President and CEO of Borregaard.

"Pursuing this opportunity with the leader in lignin-based chemistry significantly enhances the prospects for success while reducing operational and market-based risk," says Rayonier Advanced Materials CEO Paul Boynton.