Operations

Dissolving Pulp Segment

Fortress Specialty Cellulose Mill, Thurso, Quebec.

The Fortress Specialty Cellulose Mill is located in Thurso Québec, 150 kilometers west of Montréal and is situated on approximately 800 acres of land adjacent to rail lines and major highway connections to several ports in Québec. The company announced in December, 2011 that it had successfully completed the conversion of the mill from a former Northern Bleached Hardwood Kraft (NBHK) producer to a producer of dissolving wood pulp and commenced production. The mill employs approximately 322 workers and has a planned annual production capacity of ~ 173,500 tonnes (ADMT) of specialty cellulose also known as dissolving pulp.

Fortress Specialty Cellulose dissolving pulp sales are primarily for the rayon/viscose industry with a geographic focus on markets in Asia.

FIFTH Digester Project

In March, 2018 Fortress announced that its Fortress Specialty Cellulose mill has completed, on time and on budget, construction and commissioning of the 5th digester, which is expected to result in an incremental annual production capacity increase of 8,500 ADMT in 2018 and 17,000 ADMT in 2019. Fortress subsequently announced a strategic hemicellulose project supplement to the 5th digester project which involves installation of a new accumulator at the mill which will allow for the collection of hydrolysate. By separating the hydrolysate from the liquor stream, it can be further processed to produce a number of bio-products, including xylose and furfural. The Project will allow the Company to advance its research and development in hemicellulose derivative products. Hemicellulose is a cellulosic sugar, which when extracted and processed, has high value-added by-product potential such as for biofuel and biomaterial feedstock.

Xylitol Demonstration Plant

On March 26, 2018 Fortress announced that it had closed the acquisition of S2G Biochemicals Inc., a Vancouver-based developer of C5 sugar conversion technologies and exclusive global licensee of a xylitol process technology developed jointly with Mondelēz (MDLZ: NASDAQ), one of the world’s largest snack food companies. Fortress intends to commission the construction of a demonstration plant to produce xylitol at its Fortress Specialty Cellulose Mill. The demonstration plant will use C5 sugars extracted from hemicellulose to produce xylitol. The extraction and conversion of this residue will also further debottleneck the FSC Mill and increase its annual production capacity of dissolving pulp.

Cogeneration Plant

In 2013 Fortress Specialty Cellulose completed construction of a 24 MW cogeneration facility that produces green energy from biomass and began supplying power to Hydro Quebec. Fortress Specialty has entered into an energy supply agreement with Hydro Québec to provide net 24 megawatts of green power through 2028 including incremental power increase through April 2040.

SUSTAINABLE Wood Supply

The primary raw material used for the production of dissolving pulp is wood. Hardwood logs and wood chips – maple, aspen, poplar, birch are the primary raw material used by the Fortress Specialty Mill with approximately 60% of requirements from logs and 40% from chips. The Fortress Specialty Mill is located on the Ottawa River between the cities of Montréal and Ottawa in proximity to its major fibre sourcing centres that include the western region of Québec, the eastern region of Ontario and parts of northeastern United States. The Fortress Specialty Mill has obtained certification with the Forest Stewardship Council for Controlled Wood  (“FSC”)  FSC-STD40-005 V2-1, FSC-STD-40-004. The FSC identifies products which come from well managed forests certified in accordance with the rules of the FSC.

Fortress Advanced Bioproducts

Acquisition of S2G Biochemicals

On March 26, 2018 Fortress announced that it had closed the acquisition of S2G Biochemicals Inc., a Vancouver-based developer of C5 sugar conversion technologies and exclusive global licensee of a xylitol process technology developed jointly with Mondelēz (MDLZ: NASDAQ), one of the world’s largest snack food companies.

S2G and Mondelēz have developed and extensively tested the technology at pilot-scale and Fortress intends to build a demonstration-scale plant at the Fortress Specialty Cellulose Mill (FSC) in Thurso Quebec, with the capacity to produce up to 2,000 tonnes/yr. of xylitol, a high-value low-calorie sweetener. Following successful completion of the demo plant, Fortress expects to construct an approximately $150M full-scale xylitol plant at the Thurso Mill site.

FSC mixed hardwood and birch C5 sugars are a preferred and cost-effective source of xylose for the production of xylitol. The FSC Mill is expected to produce sufficient C5 sugars annually to provide the feedstock for up to an additional 20,000 tonnes per year of xylitol production.

Mondelēz, one of the world’s largest users of xylitol, has worked with S2G since 2013 to develop the technology and will assist with certification and qualification of Fortress xylitol.

Benefits of Fortress Specialty Cellulose S2G integration

The acquisition provides access to proprietary process technologies and expertise that will fast-track FSC’s plans to extract and add value from its C5 sugar stream as outlined in the Nov 29, 2016 hemicellulose /5th digester project announcement.

FSC’s existing infrastructure and investment in the fifth digester project make it an ideal site for the demonstration plant. The pproject will increase dissolving pulp production at Thurso and reduce cost/tonne with the added benefit of diversion of C5 sugars to xylitol production will reduce the load on the mill’s recovery boiler. The full-scale plant expected to be one of the world’s lowest cost producers of xylitol.

Xylitol will be targeted but clean C5 sugars can also open new strategic options as they can also be used as the building blocks for other high-value bioproducts and biochemical.

Please refererence the March 19th Fortress Advanced Biopoducts presentation for further details on the S2G acquisition and demonstration plant. The presentation is available for download from the investor relations page.