The Restrictive Covenant Agreement explains why the offers to purchase the mill in Fort Frances between 2014 and 2019, from forest companies, were not pursued by Resolute Forest Products.
Resolute, as a publicly traded for-profit company has every right to pursue the most cost effective course of action. In this case Resolute wanted to sell this facility to a company that did not and would not use the mill to process harvested forest resources.
Why, in December 2017 did the MNRF extend the Cross Route SFL for an additional 10 years and leave all the other terms and conditions in this SFL as written? Resolute announced the permanent closure of the Fort Frances mill in May 2014. This 10 year extension of the Cross Route SFL was based on the results of two independent third party audits of the Licensee’s (Resolute) compliance with the terms and conditions in this SFL. The six years preceding the extension of this SFL were not included in the audits. This explains why Section 3.1 in the Cross Route Forest SFL was not amended by the MNRF until September 10, 2020, as this amendment deleted the wood that was to supply the facility in Fort Frances. I believe it would have been very difficult for the MNRF to secure the 10 year extension to this SFL in 2017 had The Executive Council known the Fort Frances mill had not been in production for almost six years. The question: Why are we extending a License to supply wood to a permanently closed mill? Would have then required an answer from the MNRF.
The Restrictive Covenant Agreement also includes a clause that prohibits the owner of the Fort Frances facility from interfering, directly or indirectly, with the relationship between Resolute and the MNRF. I understand why Resolute wanted to preserve its operational relationship with the MNRF, as the disposition process of the Fort Frances Mill from 2014 through to the final sale to a Development Company in 2019, was fully supported by the MNRF. There is little to no value in a forest company buying a forest resource processing facility with no direct access to forest resources. The offers tendered by forest companies between 2014 and 2019 for the Fort Frances mill were reported to be in the Multi-Million dollar range. The community development company was able to purchase the same assets “without a wood supply” for $950,001.00.
The cost to replace and/or repair the paper machines and Kraft Mill in Fort Frances would have been expensive. However the buildings, rail lines, lagoons and infrastructure associated with this mill was priceless. Without question the demolition of this mill represents a loss to the Town of Fort Frances and surrounding communities, First Nations and Metis.
It also is a loss that will be felt by future generations of Ontarians in terms of the loss of reliable forest sector jobs and associated opportunities.