Fortress reported an adjusted net loss of $9.1 million, or diluted adjusted loss per share of $0.64 for the first quarter of 2012 on sales of $61.4 million. In the fourth quarter of 2011, the Company reported an adjusted net loss of $6.3 million or diluted adjusted loss per share of $0.44 on sales of $49.5 million and for the first quarter of 2011 adjusted net loss of $5.6 million or diluted loss per share of $0.42 on sales of $85.5 million.

Production of dissolving pulp commenced in early December 2011. Commercial production for accounting purposes, with the equipment operating as intended by management, began on March 18, 2012. After such date all sales and cost of sales will be included in the operating results.

The Specialty Papers Segment continued its strong performance in the first quarter. Margins remain strong and the order log is healthy. Contributing to the positive results were improvements in production efficiency, reduced pulp prices, full utilization of the Company’s new dry waste plant and strong sales tonnage and realized prices.

The Security Paper Products Segment experienced another difficult quarter. Unfortunately, the continued postponement of several major currencies has resulted in optimization challenges due to low volumes. There has been positive progress on securing orders, however due to lead times the benefit of such orders are not expected to be realized until at least the second half of 2012. Although the Company expects that these postponements will be resolved in due course, there can be no certainty as to when or whether all of the postponed orders will be reinstated.

Excluding corporate costs, the three business segments’ combined EBITDA was $0.7 million in the 3 months ended March 31, 2012. The Specialty Paper Segment contributed $9.4 million EBITDA while the Dissolving Pulp Segment and the Security Paper Products Segment generated EBITDA losses of $3.5 million and $5.2 million, respectively. Corporate costs contributed to EBITDA loss in the amount of $2.5 million.

Management’s Outlook

Dissolving Pulp Segment

Although we have not met the aggressive ramp up schedule originally proposed, management is very pleased with the progress at the Fortress Specialty Cellulose mill and believes that the ramp up schedule is consistent with industry standards. The new cooking plant and all expanded mill process areas have now proved capability and operated for extended periods at intended design levels. Minimal off-specification dissolving pulp product has been produced during the ramp up phase.

Dissolving pulp markets during the first quarter of 2012 were stable with supply and demand generally balanced. Global textile demand was relatively weak during the first quarter of 2012 as a result of tepid European and North American economies. Resulting dissolving pulp spot prices declined to $1,050 during the first quarter of 2012 which is generally considered to be at cycle low levels. Recently, dissolving pulp spot prices have increased to $1,150, which can be attributed to tightening supply as dissolving pulp mills in China have been shutting down to minimize losses.

The Company’s strategy is to expand its Dissolving Pulp Segment and pursue additional acquisitions and unique opportunities for conversion projects. See “Significant Developments”.

Specialty Papers Segment

Following the paper machine upgrade in 2011, production speed reached 450 m/min, as planned, which translated to an increased capacity of approximately 55,000 tonnes per year of non-woven wallpaper base at the Dresden mill. The Specialty Papers Segment has experienced a strong first quarter of 2012 and is expected to continue generating positive returns as it maximizes this increased capacity.

In May 2012, the Company announced that the Dresden mill had operated 24 hours per day (100% utilization) without stoppage for 20 consecutive days compared to an annual average utilization rate of 93% in 2011. As a result, waste in the same period has been reduced to approximately 5% from an annual average waste rate of 9.35% in 2011.

Security Paper Products Segment

In 2011, Landqart received orders from new customers in Asia, Africa and Latin America. It also completed the first production run of its new composite substrate, Durasafe. Interest in Durasafe from central banks is encouraging and Landqart is seeking to secure several new orders over the next 12 months.

An unexpected delay in the production and delivery of a significant order occurred in the fourth quarter of 2011 which has continued into the first and second quarters of 2012. This delay has resulted in a temporary disruption in the production schedule.

The Company is currently assessing strategic options for this segment, including the sales of non-core assets. In connection therewith, the Landqart mill announced in May 2012 that it has entered into an asset purchase agreement with a utility company for the sale of its hydropower assets and associated real estate for a price of CHF18 million. In order to maintain the supply of its operational power requirements, the Landqart mill has concurrently entered into a long term power purchase agreement with the same utility company at competitive rates. The sale of the hydropower assets has concluded subsequent to the quarter end.

Significant Developments

Consistent with the Company’s desire to grow its Dissolving Pulp Segment, in January 2012, the Company announced that it, through a wholly-owned subsidiary, entered into an asset purchase agreement (the “APA”) to acquire, together with 9109-3294 Quebec Inc. (“9109″), an affiliate of the Quebec Government, the assets relating to a pulp mill situated in Lebel-sur-Quevillon, Quebec owned by Domtar Inc. (the “LSQ Mill”), with the intent to convert the LSQ Mill into a dissolving pulp operation. As part of the acquisition, the Company will acquire a 30-megawatt non-operating cogeneration facility at the LSQ Mill, which it intends to restart and is expected to result in material energy savings. The company is seeking a long-term power supply agreement with Hydro Quebec which, once completed, is expected to provide the necessary power required to operate the mill, and a power purchase (cogeneration) agreement with Hydro Quebec in respect of the cogeneration facility for the purchase of electrical power.

The closing of the APA is subject to various conditions, including (i) the entering into of a collective agreement with the unionized employees of the LSQ Mill, (ii) the entering into of a loan agreement with Investissement Quebec (“IQ”) securing financing to implement the Company’s proposed business plan at the LSQ Mill, (iii) the parties to the APA entering into a trust agreement, (iv) the entering into of satisfactory ownership and access agreements with 9109, (v) finalizing satisfactory fibre supply arrangements with the Quebec Government, and (vi) Domtar Inc. completing its agreement with the City of Lebel-sur-Quevillon in respect of certain property taxes.

EBITDA is defined as net income before interest, income taxes, depreciation, amortization, non-operating income and expenses and stock based compensation which the Company considers to be a key performance indicator. Reference is also made to adjusted net income (loss) (calculated as net income (loss) less specific items affecting comparability with prior periods – for the full calculation, see reconciliation included in the tables titled “Net Loss to Adjusted Net Loss Reconciliation”) and adjusted net income (loss) per share (calculated as adjusted net income (loss) divided by the weighted average number of shares outstanding in the period). EBITDA, adjusted net income (loss) and adjusted net income (loss) per share are not generally accepted earnings measures and should not be considered as an alternative to net income or cash flows as determined in accordance with IFRS. As there is no standardized method of calculating these measures, the Company’s EBITDA, adjusted net income (loss) and adjusted net income (loss) per share may not be directly comparable with similarly titled measures used by other companies.

Selected Financial Information

The selected financial information presented herein is qualified in its entirety by, and should be read in conjunction with, our unaudited consolidated financial statements as at and for the three month period ended March 31, 2012 and the related notes thereon and our Management’s Discussion and Analysis (“MD&A”) filed on SEDAR.

Three Months Ended March 31

The Company

The Company was incorporated on May 30, 2006 under the laws of the Province of British Columbia. In the 2011 fiscal year, Fortress operated internationally in three distinct business segments: the Pulp Segment, Security and Specialty Papers Segment and Wallpaper Base Segment. The Company operates its dissolving pulp business at the Fortress Specialty Cellulose mill located in Canada which is also in the process of expanding into the renewable energy generation sector with the construction of a cogeneration facility. The Company operates its wallpaper base business at the Dresden mill located in Germany, where it is a leading international producer of specialty non-woven wallpaper base products. The Company operates its security paper products business at the Landqart mill located in Switzerland, where it produces banknote, passport, visa and other brand protection and security papers, and at its Fortress Optical facility located in Canada, where it manufactures optically variable thin film material (“OTM”). The segmentation of the Company’s manufacturing operations is based on a number of factors, including production, production processes, and economic characteristics.

Conference Call

A conference call to discuss the financial results for the first quarter 2012 will be held on May 15, 2012 at 9:30 a.m. (PST). To attend the conference call, please dial one of the following numbers:

North America: 1-855-353-9183

International: 1-403-532-5601

Participant pass code: 15086#

Conference Reference Number: 770462

A replay of the conference call will be available for 7 days. To access the replay, listeners may dial 1-855-201-2300 from North America or 403-255-0697 International. The conference reference number is 770462 and the participant pass code to access the replay is 15086 #.  For more: click here.

SOURCES: Fortress Paper, Marketwire

“The sale of our non-core hydropower assets at Landqart is designed to optimize our current asset base and redirect proceeds to our core businesses, and is consistent with our strategy of unlocking value for our shareholders,” said Chadwick Wasilenkoff, Chairman, Chief Executive Officer and President of Fortress Paper.

SOURCES: Fortress Paper, Marketwire

To participate in the conference call, please dial one of the following numbers:

A replay of the conference call will be available for 7 days. To access the replay, listeners may dial 1-855-201-2300 from Canada & the USA. The conference reference number is 770462 # and the participant pass code to access the replay is 15086 #.

Source: Fortress Paper, Marketwire

Mr. Boucher has over 30 years of industry experience in the specialty cellulose sector including 24 years at Tembec Inc. where he was the General Manager of the Temiscaming dissolving pulp mill. Mr. Boucher was responsible for overall mill optimization and development of specialty products, including a full range of acetate and other specialty pulps. Most recently, Mr. Boucher was General Manager of Ethanol Operations for Suncor Energy Inc. where he developed the facility from concept to an efficient operating mill.

Chadwick Wasilenkoff, Chief Executive Officer of Fortress Paper, commented: “Andre brings a wealth of experience and technical talent to Fortress Paper at a time when we are growing our dissolving pulp business. We feel his mill optimization and unique experience in transitioning a viscose-grade dissolving pulp mill to a specialty-grade dissolving pulp mill will further enhance our already strong specialty cellulose team. Andre’s addition provides us with more flexibility as we balance our key personnel between Thurso and our other strategic projects.”

In addition, Fortress Paper is pleased to announce that Marco Veilleux has been promoted to Vice-President, Business Development and Strategic Projects of Fortress Paper from his former role as Chief Operating Officer of Fortress Specialty Cellulose Inc. Mr. Veilleux was an important member of the executive team which managed the successful staffing, startup and conversion to dissolving pulp at the Fortress Specialty Cellulose Mill. Mr. Veilleux will focus on special and strategic projects, manage risk and compliance matters and will assume other key corporate responsibilities within Fortress Paper.

SOURCES:  Fortress Paper Ltd., Marketwire

Fortress reported an adjusted net loss of $6.3 million, or diluted adjusted loss per share of $0.44 for the fourth quarter of 2011 on sales of $49.5 million. In the third quarter of 2011, the Company reported an adjusted net loss of $7.8 million or diluted adjusted loss per share of $0.54 on sales of $84.0 million and for the fourth quarter of 2010 adjusted net loss of $1.7 million or diluted loss per share of $0.14 on sales of $83.5 million.

The fourth quarter of 2011 re-defined the Pulp Segment as the Company transitioned from a northern bleached hardwood kraft (“NBHK”) and specialty pulp producer to a dissolving pulp producer. Production of dissolving pulp commenced in early December and the Company has since ramped up production to approximately 72% of the planned capacity. Dissolving pulp sales are anticipated to provide materially higher margins than previous NBHK and specialty pulp sales.

The Wallpaper Base Segment continued its strong performance in the fourth quarter and achieved record results in the 2011 fiscal year. Margins remain strong and the order log is healthy. Overall, the global non-woven wallpaper market experienced growth in traditional and emerging regions in 2011. Following completion of upgrades to our paper machine in the summer of 2011, production speed increased to 450 metres per minute, representing a theoretical capacity of approximately 55,000 tonnes per year at the Dresden mill. Improvements in production efficiency, reduced pulp prices, full utilization of the Company’s new dry waste plant, together with a slight increase in sales prices, resulted in improved EBITDA margins.

The Security and Specialty Papers Segment experienced another challenging quarter. Throughout 2011, product mix, high raw material prices, pricing pressure, a strong Swiss currency, and less than optimal production efficiency on the Landqart mill’s paper machines contributed to a disappointing and difficult fourth quarter of 2011. Industry over-capacity during 2011, due in part to the postponement of several major currencies, was another factor that impacted performance at the Landqart mill, however the Company expects that banknote orders in 2012 will improve utilization and require the capacity of both paper machines to meet demands through the last three quarters of the year.

Fortress reported EBITDA of $3.3 million for the year ended December 31, 2011, compared to $25.9 million for the year ended December 31, 2010. Excluding corporate costs, the three business segments’ combined EBITDA was $11.1 million and $31.1 million in the years ended December 31, 2011 and 2010, respectively. Despite the economic challenges experienced in Europe during 2011, the Wallpaper Base Segment was able to contribute a record $31.5 million EBITDA which was significantly higher than the previous year at $22.7 million. The Security and Specialty Papers Segment generated significant losses in 2011 ($23.1 million EBITDA loss) compared to the prior year ($0.3 million EBITDA loss). The Pulp Segment which commenced operating in mid-2010, generated approximately $2.8 million and $8.7 million EBITDA in the years ended December 31, 2011 and 2010, respectively. Corporate costs contributed to EBITDA loss in the amount of $7.8 million in 2011 and $5.2 million in 2010.

Adjusted net loss for the year ended December 31, 2011 was $20.6 million or ($1.47) per share (diluted). Adjusted net income for the prior comparative period was $8.2 million or $0.67 per share (diluted).

Management’s Outlook

Dissolving Pulp Segment

Substantial progress is being made within the Company’s expanding dissolving pulp business. Since commencing production in December 2011, production has ramped up steadily to a current average rate of 415 tonnes per day (“tpd”), or approximately 72% of the planned capacity. The Company is aiming to achieve full planned production capacity by the end of the second quarter of 2012. The Company’s dissolving pulp product is currently exceeding quality expectations and meeting customer specifications.

Although the Company is still assessing and attempting to mitigate the impact of previously disclosed issues that arose during the fourth quarter of 2011, the schedule for the completion of the cogeneration project remains materially on-time for the fourth quarter of 2012 in accordance with the Company’s energy delivery obligations. However, in the latter part of the first quarter of 2012, the Company also reassessed the cogeneration project and identified certain deficiencies in a previous estimate from an engineering firm and scope of work adjustments necessary in order to commence delivery of power by this time.

Demand for dissolving pulp has historically been determined by the level of economic growth and has been closely tied to overall business activity. As the global economy slowed in late 2011, dissolving pulp prices weakened substantially, dropping to approximately US$1,100 per tonne. A stronger than expected demand for textiles in early 2012 saw a rebound of dissolving pulp prices to approximately US$1,280 per tonne in February 2012 with prices currently at approximately US$1,250 per tonne. The demand for dissolving pulp is expected to increase as the demand for textile fibres increases with the continued growth of the global population. Demand is also expected to be driven by the development of new applications for dissolving pulp and an increased focus on environmental awareness. The Company believes that favourable market conditions exist for additional dissolving pulp capacity entering the market. The Company’s strategy is to expand its dissolving pulp segment and pursue additional acquisitions and unique opportunities for conversion projects. See “Subsequent Event”.

Security Paper Products Segment

The outlook for the banknote industry remains generally positive with global demand for banknotes growing at approximately 4% per annum. The key driver of this growth continues to be the policies of central banks to upgrade the security and quality of their banknotes more frequently, thereby increasing the volumes of new notes that need to be printed. The growing automation of all aspects of the cash cycle, be it through Automated Teller Machines (ATMs) that dispense cash or the increased use of high speed banknote sorting equipment to process and sort cash, stimulates demand by requiring the withdrawal of increasing volumes of used banknotes from circulation and their replacement with new banknotes.

The banknote paper segment of the market continues to share in this growth. However, the continued overcapacity in this sector of the industry has led to fierce competition and price pressure in the high volume tender markets. Raw material prices (especially for cotton) have eased back from the acute levels seen in the first half of last year and there has been less exchange rate volatility since the intervention of the Swiss National Bank to set a ceiling for the Swiss franc appreciation against the Euro. Although recent market conditions have created difficulties for papermakers in general, Landqart remains focused on its strategy of expanding its markets beyond Europe and marketing its innovative proprietary technology to key customers. In 2011, Landqart secured orders from new customers in Asia, Africa and Latin America. It also completed the first production run of its new composite substrate, Durasafe. Interest in Durasafe from central banks is encouraging and Landqart is seeking to secure several new orders over the next 12 months.

An unexpected delay in the production and delivery of a significant order occurred in the fourth quarter of 2011 which has continued into the first quarter of 2012. Although this delay resulted in a temporary disruption in the production schedule, the Company expects to be able to resume production and deliveries in the second quarter.

The acquisition and integration of OTM has given Fortress a stake in the important and high value security thread market. The Company’s wholly owned subsidiary, Fortress Optical Features Ltd. (“Fortress Optical”) is currently engaged in developing the next generation of OTM products while continuing to produce OTM components for the colour shifting security thread market.

Fortress Optical will continue to work with preferred channel partners to convert the OTM component into a finished thread with the aim to sell these products into the banknote paper industry largely through its sister company, Landqart. The OTM colour shifting technologies will allow Landqart to offer its own highly secure and technically advanced security threads to its central bank customers. This is an important step forward towards greater vertical integration of the supply chain.

Specialty Papers Segment

The non-woven wallpaper market is expected to continue to grow at over 10% per year. Growth drivers include substitution of standard paper-based wallpaper and other types of wallcoverings with non-woven wallpaper in traditional and emerging markets. The overall wallpaper market is expected to benefit from a recovery in residential construction and remodeling.

Following the paper machine upgrade in 2010, production speed reached 450 m/min, as planned, which translated to an increased capacity of approximately 55,000 tonnes per year of non-woven wallpaper base at the Dresden mill.

Significant Developments

Overall, 2011 was a year of significant transformation including the following developments:

• The successful conversion of the Fortress Specialty Cellulose mill from a NBHK pulp producer to a dissolving pulp producer. Dissolving pulp production is anticipated to provide materially higher margins relative to NBHK pulp and specialty pulp previously produced at the mill.

• Continued margin and market share growth in the non-woven wallpaper market achieved by the Dresden mill.

• Security paper capacity at the Landqart mill increased from 2,500 tonnes to 10,000 tonnes. Significant headwinds were experienced in 2011 as this new capacity became available at a time where there was a general softening in the banknote industry and the postponement of several major currencies.

In January 2011, Fortress completed the acquisition of the assets from the Bank of Canada’s Optical Security Material division which it now uses to produce OTM contained in various banknotes. The Company paid a purchase price of $0.75 million for the assets and granted the Bank of Canada a royalty-free license to use the intellectual property sold to the Company for Canadian banknote applications. The assets have been relocated to the Fortress Optical Facility which the Company built adjacent to its Fortress Specialty Cellulose mill in Quebec.

The Company completed two bought deal short form prospectus offerings in 2011. In February 2011, the Company completed an offering (the “2011 Share Offering”) of 1,112,050 of its common shares (including the exercise in full of the underwriters’ over-allotment option) at a price of $51.75 per share, resulting in aggregate gross proceeds of $57.5 million. Proceeds of the 2011 Share Offering were used to finance certain capital expenditures relating to the Company’s Fortress Specialty Cellulose mill and the construction of the Fortress Optical Facility. In December 2011, the Company completed an offering (the “2011 Debenture Offering”) of 6.50% convertible unsecured subordinated debentures, including the exercise in full of the underwriters’ over-allotment option, resulting in aggregate gross proceeds of $40.25 million. The debentures are listed and posted for trading on the Toronto Stock Exchange under the symbol “FTP:DB”. Holders of debentures may, at their option, convert debentures into common shares at any time prior to maturity at a price of $37.50 per share. The proceeds of the 2011 Debenture Offering were used to reduce outstanding indebtedness, to fund costs arising from the Fortress Specialty Cellulose project and for working capital and general corporate purposes.

Subsequent Event

Consistent with the Company’s desire to grow its dissolving pulp segment, in January 2012, the Company announced that it, through a wholly-owned subsidiary, signed an asset purchase agreement (“APA”) to acquire, together with 9109-3294 Quebec Inc. (“9109″), an affiliate of the Quebec Government, the assets relating to a pulp mill situated in Lebel-sur-Quevillon, Quebec owned by Domtar Inc. (the “LSQ Mill”), with the intent to convert the LSQ Mill into a dissolving pulp operation. As part of the acquisition, the Company will acquire a 30-megawatt non-operating cogeneration facility at the LSQ Mill, which it intends to restart and is expected to result in material energy savings. In addition, a cogeneration expansion project will increase power capabilities to 50 megawatts of total power in respect of which the company is seeking a long-term power supply agreement with Hydro Quebec which, once completed, is expected to provide the necessary power required to operate the mill.

The closing of the APA is subject to various conditions, including (i) the entering into of a collective agreement with the unionized employees of the LSQ Mill, (ii) the entering into of a loan agreement with Investissement Quebec (“IQ”) securing financing to implement the Company’s proposed business plan at the LSQ Mill, (iii) the parties to the APA entering into a trust agreement, (iv) the entering into of satisfactory lease and other ownership and access agreements with 9109, (v) finalizing satisfactory fibre supply arrangements with the Quebec Government, and (vi) Domtar Inc. completing its agreement with the City of Lebel-sur-Quevillon in respect of certain property taxes.

EBITDA is defined as net income before interest, income taxes, depreciation, amortization, non-operating income and expenses and stock based compensation which the Company considers to be a key performance indicator. Reference is also made to adjusted net income (loss) (calculated as net income (loss) less specific items affecting comparability with prior periods – for the full calculation, see reconciliation included in the tables titled “Net Loss to Adjusted Net Loss Reconciliation”) and adjusted net income (loss) per share (calculated as adjusted net income (loss) divided by the weighted average number of shares outstanding in the period). EBITDA, adjusted net income (loss) and adjusted net income (loss) per share are not generally accepted earnings measures and should not be considered as an alternative to net income or cash flows as determined in accordance with IFRS. As there is no standardized method of calculating these measures, the Company’s EBITDA, adjusted net income (loss) and adjusted net income (loss) per share may not be directly comparable with similarly titled measures used by other companies.

Selected Financial Information

The selected financial information presented herein is qualified in its entirety by, and should be read in conjunction with, our audited consolidated financial statements as at and for the year ended December 31, 2011 and the related notes thereon and our Management’s Discussion and Analysis (“MD&A”) filed on SEDAR.

The Company

The Company was incorporated on May 30, 2006 under the laws of the Province of British Columbia. In the 2011 fiscal year, Fortress operated internationally in three distinct business segments: the Pulp Segment, Security and Specialty Papers Segment and Wallpaper Base Segment. The Company operates its dissolving pulp business at the Fortress Specialty Cellulose mill located in Canada which is also in the process of expanding into the renewable energy generation sector with the construction of a cogeneration facility. The Company operates its wallpaper base business at the Dresden mill located in Germany, where it is a leading international producer of specialty non-woven wallpaper base products. The Company operates its security paper products business at the Landqart mill located in Switzerland, where it produces banknote, passport, visa and other brand protection and security papers, and at its Fortress Optical facility located in Canada, where it manufactures optically variable thin film material (“OTM”). The segmentation of the Company’s manufacturing operations is based on a number of factors, including production, production processes, and economic characteristics.

Conference Call

A conference call to discuss the financial results for the fourth quarter 2011 will be held on March 6, 2012 at 9:30 a.m. (PST). To attend the conference call, please dial one of the following numbers:

A replay of the conference call will be available for 7 days. To access the replay, listeners may dial 1-855-201-2300 from North America or 403-255-0697 International. The conference reference number is 765945 # and the participant pass code to access the replay is 15086 #.

Forward-Looking Statements

Some information in this news release contains forward-looking statements that reflect the current views and/or expectations of the Company with respect to its performance, business and future events. The reader is cautioned that forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements including, without limitation, those relating to damage to our reputation, competition, maintaining our market position, marketability and price of our products, technology and protection of our intellectual property, dependence on our major customers, fluctuations in the price and supply of raw materials, fluctuations in foreign exchange and other risk factors detailed in our filings with Canadian securities regulatory authorities. These risks, as well as others, could cause actual results and events to vary significantly. Fortress Paper Ltd. does not undertake any obligation to release publicly any revisions for updating any voluntary forward-looking statements.

SOURCE: Marketwire

To participate in the conference call, please dial one of the following numbers:

SOURCES:

Fortress Paper Ltd., and Marketwire

Upon completion of the acquisition of the LSQ Mill, the Corporation intends to invest estimated capital expenditures of approximately $222 million to convert the non-operating northern bleached softwood kraft pulp mill into a low cost, high quality dissolving pulp mill and to increase the capacity of the cogeneration facility. In connection with the proposed capital expenditures, Fortress Paper has arranged certain financing initiatives to fund the conversion and cogeneration projects.

The LSQ Mill is planned to have an annual production capacity of approximately 236,000 air dried metric tonnes (ADMT) and is expected to be completed in late 2013. The LSQ Mill would significantly increase Fortress Paper’s annual dissolving pulp production capacity to over 437,000 ADMT, initially targeting viscose fibre (rayon) products.

Chad Wasilenkoff, Chief Executive Officer of Fortress Paper Ltd. , states, “The acquisition of the LSQ Mill and its planned conversion into a dissolving pulp operation represents an important milestone towards Fortress Paper becoming a leader in the global dissolving pulp industry. This project demonstrates the insight and perseverance of the Quebec Government and Fortress Paper Ltd.  in developing a unique opportunity which has been latent for several years, but when completed will revitalize the community of Lebel-sur-Quevillon and the surrounding areas of Northern Quebec. We are very pleased to be able to partner with Investissement Quebec on this project to build from our recent successful conversion of the Fortress Specialty Cellulose Mill, and also look forward to working closely with the city of Lebel-sur-Quevillon.”

Pursuant to the terms of the APA, at closing Fortress Global will pay a nominal cash amount and agree to contribute pursuant to a trust agreement in escalating tranches over the next 5 years an aggregate of $7.5 million and an additional contingent amount of $2.5 million only in the event of a permanent closing of the LSQ Mill in respect of environmental remediation costs. The closing of the APA is subject to various conditions, including (i) Fortress Global entering into a collective agreement with the unionized employees of the LSQ Mill, (ii) Fortress Global entering into a loan agreement with Investissement Quebec securing financing to implement its proposed business plan at the LSQ Mill, (iii) the parties to the APA entering into a trust agreement, (iv) Fortress Global and 9109 entering into satisfactory lease and other ownership and access agreements, (v) Fortress Global finalizing satisfactory fibre supply arrangements with the Quebec Government, (vi) an order in council by the Quebec Government authorizing the transaction, and (vii) Domtar completing its agreement with the City of Lebel-sur-Quevillon in respect of certain property taxes. The closing of the APA is expected to occur within 75 days.

The cost structure of the LSQ Mill will be materially impacted by the ability of Fortress Global to upgrade the cogeneration facility and to service the facility through a long-term power supply agreement with Hydro Quebec on satisfactory terms. In addition, Fortress Global is negotiating with the City of Lebel-sur-Quevillon for a mutually beneficial, long term municipal tax arrangement in respect of the capital expenditure program at the LSQ Mill which will assist in revitalizing the Northern Quebec region. Training and relocation grants discussions are ongoing with various government agencies, although no formal commitments have been provided at this time.

Investissement Quebec (“IQ”) has committed, by way of an agreement in principle, to grant Fortress Global a loan in the amount of up to $132.4 million comprised of two tranches to support Fortress Paper Ltd. proposed business plan in respect of the LSQ Mill. The loan will be secured by the capital assets of Fortress Global and will accrue interest at a fixed rate of 5.0% per annum for the first five years, followed by a rate not to exceed 5.5% per annum for the remaining five years, and will include an equity compensation in the form of 715,000 share purchase warrants of Fortress Paper Ltd. on terms to be determined. The first tranche of $102.4 million will have a term of 10 years and the second tranche of $30 million will have a term of three years. The loan is subject to completion of definitive documentation. As no definitive agreement has been entered into with respect to the IQ financing, there can be no assurance at this time that such financing will be completed on terms acceptable to Fortress Global or at all.

Fortress Paper Ltd. has also signed a subscription agreement with a Quebec financial institution providing for the subscription of an unsecured convertible debenture of Fortress Paper Ltd. (the “Debenture”) in the aggregate principal amount of $25 million maturing in five years with an interest rate of 7% per annum. The Quebec financial institution will have the option to convert its Debenture, in whole or in part, into common shares of Fortress Paper Ltd.  at any time after closing of the APA at a conversion price equal to the volume weighted average price of the common shares of the Corporation on the Toronto Stock Exchange (the “TSX”) for the five trading days immediately Fortress Paper Ltd. preceding the closing of the APA plus a premium equal to 50% of such trading price. The Debenture will be redeemable, in whole or in part, at the option of Fortress Paper, from the second anniversary date of its issuance at par plus all accrued and unpaid interest, provided that the volume weighted average trading price of the common shares of Fortress Paper Ltd.  on the TSX is not less than 125% of the conversion price. The Debenture financing is subject to various conditions, including the concurrent completion of the IQ financing, the closing of the APA and receipt of the requisite TSX approval.

In connection with the LSQ Mill acquisition, Fortress Paper Ltd.  will be hosting a teleconference to discuss the acquisition rationale in the form of a Presentation which is available by sending a request to info@fortresspaper.com and will also be posted at www.fortresspaper.com in due course. The teleconference will be limited in scope to the subject matter contained in this press release and the Presentation.

PLAYBACK ON DEMAND USER INFORMATION

To listen to a POD call:

1. Dial 1-877-353-9587 from Canada or the USA or dial 403-699-1055 from local Calgary or International.

2. Enter the 6 digit Conference Reference Number, 764917 followed by the # key.

3. Also enter the participant code 98030# when prompted.

SOURCES:

Fortress Paper Ltd., and Marketwire

Chad Wasilenkoff, Chief Executive Officer of Fortress Paper, commented: “We are extremely pleased with the speed at which the ramp up of dissolving production is proceeding at our Fortress Specialty Cellulose Mill and are focused on achieving our planned production capacity as soon as possible. With the shipment of our first orders, we have demonstrated our ability to successfully produce dissolving pulp that meets the stringent specifications of our customers.”

SOURCES: Fortress Paper Ltd., and Marketwire

Watch here: CEO and chairman of Fortress Paper, 

‘Talking to Entrepreneurs’ video series:

• PART ONE: Fortress Paper chief turns tired mill into multimillion-dollar venture
• PART THREE: Entrepreneurial paper chief explains contrarian investing strategy

The net proceeds of the financing will be used for repayment of debt, the funding of capital expenditures relating to the Fortress Specialty Cellulose Mill, working capital and general corporate purposes.

The offering is scheduled to close on or about December 22, 2011 and is subject to certain conditions including, but not limited to, the receipt of all necessary approvals including the approval of the Toronto Stock Exchange.

A preliminary short-form prospectus will be filed with securities regulatory authorities in all provinces of Canada.

Please refer to the press release issued by the Company on December 7, 2011 for further details with respect to the offering.

This news release shall not constitute an offer to sell or the solicitation of any offer to buy, nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities offered will not be and have not been registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) and may not be offered or sold in the United States except pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws.

About Fortress Paper

Fortress Paper is a leading international producer of security and other specialty papers and products. Fortress Paper operates three mills, the Landqart Mill located in Switzerland, the Dresden Mill located in Germany and the Fortress Specialty Cellulose Mill located in Quebec, Canada. Fortress Paper’s security papers include banknote, passport and visa papers and its specialty papers include non-woven wallpaper base products, and graphic and technical papers. Fortress Paper’s pulp business includes dissolving pulp produced at the Fortress Specialty Cellulose Mill.

SOURCES: Fortress Paper Ltd., and Marketwire