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Recycling venture receives funds.

Sturgeon Falls Repulping Ltd. is proceeding with its plan to develop a corrugated cardboard recycling plant in that northeastern Ontario community.

The company, a joint venture involving MacMillan Bloedel Ltd. and the West Nipissing Economic Development Corporation, officially began on April 16 with a ceremony marking the start of 14 months of construction for the new operation.

For the community the new venture represents the preservation of 145 jobs, $6-million in payroll and $2 million in taxes. Its initiation marks the completion of more than a year's worth of behind-the-scenes work.

According to Jim Thibert, the senior community development economist with the Ministry of Northern Development and Mines, MacMillan Bloedel's Sturgeon Falls mill "was on the block" last fall.

The future of the mill became unclear after the company permanently closed its hardboard siding operation last December, chopping more than half the mill's workforce.

The stimulus for the partnership of the company and newly formed economic development corporation was the need to compete with new competition.

"They (the mill) have competition from outside of Ontario which can enter their market and take Toronto. Essentially, if they weren't competitive they'd shut down," Thibert commented.

In addition, MacMillan Bloedel was faced with paying between $8 million and $10 million to meet new federal toxic discharge requirements for pulp and paper mills in 1993/94.

"If MacMillan Bloedel made huge profits they could absorb it (the cost), but they were already uncompetitive," said Thibert.

In response, the Sturgeon Falls division went to the company's corporate office with a proposal for a recycling plant, to switch over to repulping cardboard. The reasoning was that it would make the company competitive and help it meet the toxicity guidelines.

To date the project has received a $4-million grant from the Ministry of Environment, a $4-million loan from the Northern Ontario Heritage Fund Corporation and a $1-million loan from the Ministry of Northern Development and Mines.

Financing also includes commercial loans totalling $2.6 million and $2.9 million equity in MacMillan Bloedel's electric power plant, which is being used as collateral for the company's share of commercial loans.

"That leaves a $2.5-million shortfall (or $250,000 per year)," said Thibert. "This money has to come from commercial sources. We went back into the pro forma, fine-tuned performances and financial management and reduced the shortfall to $87,000 per year."

"It's coincidental that $87,000 is the same as having $1 million in the bank ($87,000 interest per year)."

The economic development corporation has taken on the challenge of raising these funds in the community, and intends only to use the interest and return the donations once the term is over.

"MacMillan Bloedel is very clear about not investing. They are totally over-subscribed," said Thibert. "Aside from that, they've been absolutely magnanimous and co-operative. They've agreed to Sturgeon Falls Repulping servicing a five-year contract with Stone Consolidated for 70,000 tons per year. They gave us that. They accepted all the liabilities of design, construction and operation."
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Title Annotation:Sturgeon Falls Repulping Ltd.
Publication:Northern Ontario Business
Date:May 1, 1992
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