Catalyst to permanently close Snowflake

recycle paper mill

Release Date: Monday, July 30, 2012

Monday, July 30, 2012

Richmond, BC – Catalyst Paper today announced the permanent closure of its Snowflake

recycle mill located in northeastern Arizona and its subsidiary the Apache Railway

Company. This follows extensive efforts to improve the operation’s financial performance in

the face of intense supply input and market pressures. The operation is scheduled to shut

production on September 30, 2012.

“The decision to close Snowflake is an extraordinarily difficult one given the exceptional

effort that employees, unions and public officials have given to address the unique

challenges at this mill, said President and CEO Kevin J. Clarke. “We understand and regret

the difficult impact within the Snowflake community and surrounding region created by

closure of the mill. I want to acknowledge and thank all who have given us their unwavering

support and cooperation. There were no stones left unturned.”

Catalyst implemented a number of measures since acquiring the Snowflake operation in

2008, to address market challenges and input cost pressures. These included production of

higher-value specialty paper grades at what was formerly a newsprint-only mill, capital

investment, productivity, quality and service improvements, full leverage of the mill’s

environmental attributes, and competitive labour agreements. Catalyst has also explored a

range of alternatives, including attempting to sell the mill on a going concern basis.

However with newsprint demand down more than 10 per cent annually since the end of

2008, old newsprint (ONP) price volatility and higher freight costs as procurement and sales

have been forced to go further afield to source recycled paper supply and secure product

orders, the mill’s profitability could not be restored. ONP prices have increased

approximately 163% since 2009. A US$5 per ton increase in ONP price has a negative

impact of approximately US$2 million on EBITDA and approximately US$1 million on net

earnings. Snowflake generated negative EBITDA since 2009. The closure of the mill is

expected to result in savings of annualized selling, general and administrative expenses and

avoid future operating losses associated with Snowflake. Catalyst recorded a $161.8 million

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asset impairment charge, required under GAAP, in the latter half of 2011. The closure will

result in some initial cash costs, which are expected to be recouped from working capital

and the sale of Snowflake mill assets in 2013.

“Reduced quality of ONP as municipalities moved to single stream waste recovery

combined with ONP price volatility driven by export markets were obstacles on the input

side. Added to these challenges are the protracted demand decline for recycled newsprint

and other printing papers. While we did everything possible to prevent this outcome,

employees, vendors and customers needed the certainty that today’s announcement

provides,” Mr. Clarke said.

Mr. Clarke and other Catalyst executives are meeting today with employees and union

representatives at the Snowflake Mill and Apache Railway Company to outline the closure

plan. The operations currently employ 308 salaried and hourly workers. Catalyst will honor

its obligations to employees and will work closely with suppliers, customers and regulators

through the wind-down of operations. The site will subsequently be prepared for sale and

repurposing.

Catalyst is contacting Snowflake customers today to advise them of specific transition plans.

The closure is not anticipated to have any impact on operations at Catalyst’s other mills.

The company offers a range of environmentally preferred products, using fibre sourced from

sustainably managed forests and manufactured at its low-carbon mills in BC.

Catalyst Paper manufactures diverse specialty mechanical printing papers, newsprint and

pulp. Its customers include retailers, publishers and commercial printers in North America,

Latin America, the Pacific Rim and Europe. With four mills, located in British Columbia and

Arizona, Catalyst has a combined annual production capacity of 1.8 million tonnes. The

company is headquartered in Richmond, British Columbia, Canada and is ranked by

Corporate Knights magazine as one of the 50 Best Corporate Citizens in Canada.

Forward-Looking Statements

Certain matters set forth in this news release, including statements with respect to expected

savings as a result of the closure of Snowflake and Catalyst’s transition plans for Snowflake,

are forward-looking. These forward-looking statements reflect management’s current views

and are based on certain assumptions including assumptions as to future operating

conditions and courses of action, economic conditions and other factors management

believes are appropriate. Such forward looking statements are subject to risks and

uncertainties that may cause actual results to differ materially from those contained in these

statements, including those risks and uncertainties identified under the heading “Risks and

Uncertainties” in Catalyst’s management’s discussion and analysis contained in Catalyst’s

annual report for the year ended December 31, 2011 and report for the first quarter of 2012,

which are available at www.sedar.com.

Investors:

Brian Baarda

Vice-President, Finance & CFO

604-247-4710

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Alistair MacCallum

Vice-President, Treasurer & Corporate Controller

604-247-4037

Media:

Lyn Brown

Vice-President, Marketing & Corporate Responsibility

604-247-4713

About Catalyst

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