Sappi to Convert Cloquet, MN Kraft Pulp Mill to Produce Chemical Cellulose and Upgrade PM 3 at Somerset Mill

Nov. 10, 2011 (Press Release) - Sappi Limited announced today the approval of a US$170 million capital project to convert the kraft pulp mill in Cloquet, Minnesota to chemical cellulose used in textile and consumer goods markets. The planned conversion is slated to come online in 2013 and once complete will allow the production of 330,000 metric tons of chemical cellulose per year.

Approved capital plans also call for a US$13 million project to upgrade coated paper manufacturing at the Sappi Somerset Mill in Skowhegan, Maine. These investments reflect Sappi Limited's confidence that the North American region can play a significant role in the global chemical cellulose market, complementing already strong market positions in release and fine papers.

"The chemical cellulose conversion project at the Cloquet Mill is consistent with our announced strategy to diversify further into this fast growing segment," said Ralph Boėttger, Chief Executive Officer Sappi Limited. "The globally low cost position of Sappi's Cloquet pulp mill will provide an attractive platform for growth with our current chemical cellulose customers as well as open up new markets to us."

Sappi is currently the world's largest manufacturer of chemical cellulose out of its Saiccor Mill in KwaZulu-Natal, South Africa. The Cloquet project, together with the earlier announced expansion at the Sappi Ngodwana Mill in South Africa will bring Sappi's total chemical cellulose capacity to over 1.3 million metric tons per year.

"We are excited about the new growth opportunities this investment in chemical cellulose brings to Sappi Fine Paper North America, all of our employees and the Cloquet community," said Mark Gardner, President and Chief Executive Officer Sappi Fine Paper North America. "Our planned conversion will allow the continued production of kraft pulp for maximum flexibility to react to changes in global pulp markets. This project, together with the coated paper investment at Somerset Mill, ensures that we can grow profitably in both cellulose and fine paper markets for years to come."

The Cloquet conversion project will not affect the company's coated paper business at that site. Dry fiber handling systems and improvements to paper machine capabilities approved as part of this project ensure that product quality across all grades will be unaffected.

Currently, the Cloquet pulp mill produces hardwood kraft (NBHK) pulp for market sales. Sappi will work closely with its pulp customers to ensure an orderly transition, including, where appropriate, making supplies available from its Somerset Mill in Skowhegan, Maine.

The US$13 million capital project at the Somerset Mill includes upgrades to the existing gap former on PM3, improving its cost structure and allowing the production of a broader range of products on the machine. The PM3 rebuild project is slated for completion in fall 2012.

SOURCE: Sappi