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Fraser Papers to Close Berlin, NH Pulp Mill

March 8, 2006 (Press Release) - Fraser Papers announced yesterday the permanent closure of its pulp mill located in Berlin, New Hampshire. The mill, which has an annual capacity of 230,000 tonnes of NBHK pulp, will continue production until May 6, after which time shutdown activities will commence. This closure will affect 250 employees.

"Rising costs of wood, energy and chemicals over the past three years have led to a significant deterioration in the financial results at our pulp mill in Berlin despite the efforts of our employees and the State of New Hampshire to improve the sustainability of the operations," said Dominic Gammiero, president and chief executive officer of Fraser Papers.

"We considered the short and long term market outlook for hardwood fibre costs, other rising input costs and capital requirements, and determined that it was appropriate to reduce our exposure to market pulp. We are planning to operate the adjacent Gorham paper mill on purchased fibre. The change in fibre supply options will better position the Gorham paper machines for specialty paper grades. We will also be evaluating the potential market-related shutdown of one of the five paper machines at the Gorham paper mill," Gammiero said.

In 2005, over 55% or 130,000 tonnes of the total pulp produced at the Berlin pulp mill was surplus to the requirements of the Gorham paper mill and was sold to other paper mills, including Fraser Papers' mill located in Madawaska, Maine. This action will allow Fraser to reposition its market pulp business at the company's pulp mill located in Thurso, Quebec, which produces a variety of high quality maple and other NBHK specialty pulps.

Preliminary estimates indicate that the closure of the Berlin mill will result in a cash restructuring charge in the first quarter of $3 million, plus an additional pre-tax, non-cash charge related to fixed assets and working capital that will be dependent on the final determination of asset recoveries, particularly as they relate to the co-gen facility. The carrying value of the Berlin pulp mill and related assets was $48 million at December 31, 2005.

Fraser Papers is an integrated specialty paper company which produces a broad range of technical, and printing & writing papers. The company has operations in New Brunswick, Maine, New Hampshire and Quebec.

SOURCE: Fraser Papers Inc.




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