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Quality, supply of wood no problem for Kap mill.

Quality, supply of wood no problem for Kap mill

In discussions over the future of the Spruce Falls Power and Paper Company in Kapuskasing, talk has centered on the sale of a power station, on mill modernization and on government assistance.

However, a paper mill depends as much as anything else on an ample supply of trees. And in that area, at least, Spruce Falls is in good shape.

The operation has a good forest management agreement (FMA) with the province, says Lane LaCarte, district lands, engineering and administration supervisor with the Kapuskasing district of the Ministry of Northern Development.

"It would be a mainstay in the saleable features of the operation here," LaCarte said. "It (Spruce Falls) has a sufficient volume (of timber) to feed the operation without any problems of long-distance hauls."

LaCarte said the Spruce Falls mill needs only spruce as its raw material. It does not use other varieties of trees such as jack pine.

"Black spruce fibre is by far the best for the quality of the product they're producing," he said, noting that it is top-quality fibre.

An FMA gives a company the right to harvest in certain prescribed areas in accordance with regulations for harvesting and reforestation.

In all, the Spruce Falls FMA covers 92 townships, primarily in one block. Most of the land is owned by the province, but three of the townships are "freefold," meaning that they are owned outright by the company.

Despite the security an ample supply of timber provides, LaCarte said the survival of the mill still depends on the demand for its paper.

"It (the timber supply) won't save any mill in economic hard times where there isn't a market," he said. "It comes down to overall economics."

LaCarte is optimistic that the proposed employee takeover of the mill will be successful.

"I think they (the employees) can take over the mill," he said, noting that similar takeovers have happened elsewhere.

When workers own shares or make personal investments, it breeds a far better work ethic, he said.

LaCarte believes that if there is an employee takeover, the mill can maintain its current level of employment. However, he noted that the mill requires a substantial investment in new technology, which may affect 200 to 300 workers.

He suggested that it may be possible for the company to take up the slack by producing other products, noting that at one time Spruce Falls operated a sideline business of producing high-quality, two-by-four lumber. However, the operation was cancelled because it was not financially feasible at the time.


Despite LaCarte's enthusiasm for the Spruce Falls' FMA, retired company president Fred Campling plays down its significance.

"We have one of the original FMA's signed in 1980," he said. "I don't think it's particularly different from any other FMA."

Campling noted that the company has one FMA covering all its cutting area, where other companies may have more than one.

The mill has a good source of fibre, but that is not anything unique since other mills also have good black spruce, he added.

The mill does not use jack pine, he said, "largely because there is very little of it on our limit."

Campling said the former sawmill operation at Spruce Falls ran until 1986 when the federal government imposed the "infamous" 15-per-cent export to the United States.

"That put us out of business," he stated.


The future of Spruce Falls should be decided in the next few months.

Mill co-owner the Kimberly-Clark Corporation of Dallas has given the Purchasing Employees Group (PEG) a two-month extension to June 30 to acquire Spruce Falls.

Darwin Smith, Kimberly-Clark's chairman and chief executive officer, has approved the 10-year business plan developed by PEG and has set out the terms of a $40-million loan which will be made to the Spruce Falls employees.

Meanwhile, PEG says the New York Times, a 49.5-per-cent partner in the mill, is prepared to negotiate a long-term newsprint contract providing for 50,000 metric tons of production annually.

Kimberly-Clark and the New York Times are threatening to reshape the mill unless it can quickly sell the Smoky Falls hydroelectric station to Ontario Hydro for $133.6 million.

If the sale of the mill does not occur, a restructuring would cut 1,200 jobs from the workforce of 1,450.

Under the downsizing scheme, commonly referred to as the Amos plan, the company would use only one paper machine, while the other three would shut down. The woodlands operation would also be discontinued.

While Kimberly-Clark has set a deadline of June 30 for the deal to close, Ontario Hydro must do an environmental assessment before following through on a 1989 agreement to buy the Smoky Falls power station. The assessment for its proposed hydroelectric development projects on the Mattagami River could take up to a few years to complete.

"We do not feel the environmental process should be impeded nor realistically could it," said Ted Jewell, the mayor of Kapuskasing and chairman of PEG. "The PEG request to the provincial government is that it advance the agreed-upon sum for the Smoky Falls transaction to Ontario Hydro for payment to the Spruce Falls owners and as a result of which all company assets would be transferred to the employees."

Under the PEG proposal, the province would hold an account receivable against Ontario Hydro which would be paid whenever the environmental assessment is approved for the Mattagami River project, regardless of how long that may take.

"I am confident that the provincial government recognizes that an economic disaster is avoidable at Kapuskasing and area with prompt, early action on the 1989 agreement entered into between Ontario Hydro and Spruce Falls on the Smoky Falls sale," Jewell said. "My confidence stems from three conversations I have had with Premier Bob Rae, who is very supportive of the PEG undertaking."

Meanwhile, Brock Smith, the deputy minister of Northern Development, has been named chairman of a working committee established to resolve the province's concerns with the PEG business plan.

PHOTO : The Purchasing Employees Group (PEG) of the Spruce Falls Power and Paper Company has requested the province advance funds to Ontario Hydro for the purchase of Smoky Falls and provide loans for the modernization of the mill.
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Title Annotation:Kapuskasing, Ontario-based Spruce Falls Power and Paper Company
Author:Bickford, Paul
Publication:Northern Ontario Business
Date:May 1, 1991
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