April 17, 2010 / 12:39 AM / in 8 years

Sinar Mas unit to buy Canada's Mackenzie pulp mill

VANCOUVER (Reuters) - A unit of Indonesia’s Sinar Mas will buy a idled pulp mill in Mackenzie, British Columbia, with plans to resume production from the Canadian plant for Asian markets by fall, officials said on Friday.

The mill and town in northern British Columbia have become symbols of the economic woes that have dogged Canada’s forestry industry over the past three years with plant closures and job losses in rural communities.

British Columbia forestry minister Pat Bell even struggled to hold back tears as he announced the complex deal to reopen the facility that was shuttered in the 2008 collapse of North American forestry firm Pope & Talbot.

“It tore my heart out to see that town go down ... For me, Mackenzie is back and it deserves to be back,” Bell told a news conference about the town of 5,000 people that saw all of its lumber, pulp and paper mills all close in the economic crisis.

Sinar Mas’s Netherlands-based unit, Paper Excellence BV, will pay C$20 million ($19.8 million) for the mill, and invest between C$30 million and C$40 million to restart it, plus additional costs, officials said.

The mill’s union has signed a contract for the more than 240 workers, and the McLeod Lake Indian Band, which holds resource rights in the area, says it will ensure the facility receives sufficient fiber supplies.

Sinar Mas plans to market about 80 percent of the mill’s NBSK pulp production in Asia, said Peter Wardhana, a director of Paper Excellence.

Wardhana said the company, which already owns a mechanical pulp mill in Meadow Lake, Saskatchewan, is interested in more acquisitions in Canada. It is in final talks with Tembec to buy two of the Canadian firm’s pulp mills in France.

Sinar Mas tried to buy the Mackenzie mill in 2008, but the deal fell through partly because of the international credit crunch. That proposed transaction had also included two other Pope & Talbot mills.

“This is a completely separate deal,” Wardhana said.

The original deal’s collapse launched an almost bizarre chain of events that saw an Alberta businessman buy the then idled mill, only to abandon it when it became clear he had no financial backing.

Workers found themselves manning the plant for weeks without pay to ensure hazardous chemicals stored there would not leak out into the community. Eventually, the province and community took control of the property.

The C$20 million purchase price paid to the community development agency will pay off the debt built up by the prior owner during what a local official described on Friday as “that misadventure.”

Sinar Mas has been criticized for its logging practices in Indonesia, and environmental group, Greenpeace, said it will be monitoring the operations in Canada.

“Sinar Mas should expect their environmental record in Indonesia and the Greenpeace campaign to follow their business wherever it goes,” the group said in a statement.

Bell said he has discussed the deal with Greenpeace and other environmental groups, and said the province and the McLeod Indian Band are satisfied with the company’s environmental practices at its Saskatchewan mill.

Reporting Allan Dowd; editing by Rob Wilson

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