Montreal-based Resolute Forest Products (TSX:RFP) said the strong Canadian dollar and competition from Europe forced it to put the mill, locally known as Bowater, into an indefinite idle.
The grim news comes only months after the provincial government provided a $50-million assistance package to the mill late last year.
Premier Darrell Dexter said his government tried everything within its power to keep the company in the province, and he blamed currency markets for the factory's demise.
"All of the partners came together to try and give the plant the best possible opportunity for the future. Unfortunately it didn't turn out as we would have wished," he said.
"That doesn't make the attempt to do that in any way invalid."
In December, Dexter announced the province would give the mill a $25-million forgivable loan to keep its two paper machines operating, and to help the company make efficiency improvements and upgrade its power plant.
The government says none of that money has been spent.
Dexter put most of the blame for the plant's demise on the high Canadian dollar and a 30 per cent erosion in the value of the Euro against the dollar.
"The plants in Europe are now able to sell into the world market at a considerable discount," he said.
"We recognize that advantage because it used to be ours. ... The results as anyone can see have been pretty profound."
The company's sawmill in nearby Oakhill and the Brooklyn Power Corp. are also affected by the shutdown. The company said it is looking at the feasibility of selling all of its assets and timberlands that it owns in the province.
Dexter said he is concerned about the possibility the company may sell the land to an overseas company that could ship wood fibre abroad.
However, he said he didn't know if the province would offer to buy the woodlands.
Dexter said the government will look for alternative uses of the idled mill and try to attract new industries to an area beset by high unemployment.
"Very shortly we will set up a transition process and it will be led by a prominent Nova Scotia leader. We intend to find a way forward for these communities," he said.
Company spokesman Seth Kursman acknowledged that workers made sacrifices in the form of concessions to try and save the mill.
"Everything that was really in the direct control of the people here, of government, of stakeholders across the board, people did — they stepped up and it makes the situation that much more frustrating," he said in an interview.
Kursman said the company, which was previously called AbitibiBowater, has also responded to global pressures by closing some of its paper-making machines in Quebec and Alabama.
The plant was initially scheduled to shut down Sunday for about two weeks. It was also idled last month, the latest in a series of scheduled down times for the mill since December.
Late last year, unionized workers at the mill voted to cut 110 jobs in an effort to reduce labour costs and help save the operation.
Don MacKenzie of the Communications, Energy and Paperworkers Union of Canada said the indefinite closure is a blow to the area, which has relied heavily on jobs at the mill during more than 70 years of operation.
"It's just got to be devastating to the members I represent," he said. "It's a sad day for the people of Liverpool and it will obviously have an impact to many spin-off jobs in the province, and it's simply another reflection of the turbulent times in the pulp and paper industry."
He too is worried the company's 212,000 hectares could be bought up by foreign interests and exported, making it unavailable to domestic interests that could use the raw fibre.
The lifeline thrown to the company also included $23.75 million the province spent to buy about 10,120 hectares of woodland from the company.
Another $1.5 million was offered over three years to train workers. So far, $605,000 has been spent on training and the remainder will be returned to province.
— By Alison Auld and Michael Tutton in Halifax