Ottawa says it can provide $12M loan to keep northern Ontario paper mill open

The federal government said Friday that it can provide a $12 million loan to help keep a northern Ontario paper mill from closing.

Jobs Minister Patty Hajdu said in a letter to Kap Paper that the federal support would be an “exceptional” one-time measure to give the company time to develop a “pivot strategy” to stay competitive in the long run.

Kap Paper said late last month that it would have to idle operations at the struggling Kapuskasing mill after failing to secure immediate financial support from Ottawa. The mill directly employs about 420 people and supports 2,500 jobs in the region.

In her letter to Kap Paper CEO Terry Skiffington, Hajdu said the $12 million would come from two different Federal Economic Development Agency for Northern Ontario programs, with conditions that include regular financial review.

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“The federal operating support is an exceptional one-time measure in recognition of the significant role that Kap Paper plays in the regional forest economy and labour market, and to give more time for your company to develop options for long-term competitiveness,” the minister wrote in the letter she posted on X.

“There are expectations that Kap Paper will meet critical milestones in the planning and development of a pivot strategy within a few months.”

A spokesperson for Kap Paper said Friday that the company was expected to issue a statement about Hajdu’s letter.

Kap Paper previously said that it received $50 million in loans from the Ontario government and had approached Ottawa for funding, but the timing wasn’t “aligning” for a solution to keep the mill open. Officials and residents in the region have urged the two levels of government not to point fingers at each other and to work with the community to save jobs.

Hajdu noted in her letter that Kap Paper is facing closure because of the impact of tariffs and changes in newsprint markets, and that it’s working on strategies to save the company.

The loan offer is “not a confirmation of any ongoing operating support nor a positive decision on a longer-term capital investment in Kap Paper,” she wrote.