Mill proponent turns to private-sector investors.

• Author: Ross, Ian

The proponents of a North Shore wood-fibre mill will likely take their proposal to the capital market without the support of a lead equity partner.

Saying he had "no alternatives left," Graeme Lowry, president of Algoma Mill Works (AMW), will approach private and Bay Street financial institutions this fall to find investors to build a $105-million birch plywood mill.

Before severing ties in July with the Elliot Lake and North Shore Business Development Corp. (ELNOS), a venture capital firm, Lowry was hoping to secure about $5 million in leverage capital as a "show of faith" of regional support before approaching the private financial market.

In marking time for eight years to receive the provincial wood allocation needed to proceed with the mm, Lowry says "the time for waiting is passed" and they will shop the project on the capital market.

"We're in a tough spot because the company is going to try to launch the whole program, and it doesn't have significant funding in the bank to get all the work kicked off in terms of lawyers, financiers and getting a road show going to talk to institutional people about the project.

"It would help matters and assure the outcome if lead equity investors were to materialize, but at the moment we have to basically go to the market. There are no alternatives left, and we have to hope for the best outcome."

If built, the mill would represent a major economic shot in the arm for many of the stagnant communities along the north shore of Lake Huron. The project is projected to employ 200 in mill operations, plus a further 100 in harvesting and transportation. The annual payroll is tabbed at $13 million.

AMW believed they had secured some lead equity funding through the new Patten Post Diversification Fund Group. Eleven North Shore communities stretching from Thessalon to Spanish were eligible for funding under a special $14.6-million economic development fund. But since the money is administered by the Northern Ontario Heritage Fund, there are strict guidelines in place against directly subsidizing private-sector projects.

"There have been discussions with Algoma Mill Works as to what their needs are," says Mike Tulloch, chairman of the Patten Post communities, "but it won't...