03/16/2012 10:56 EDT | Updated 05/16/2012 05:12 EDT

Nova Scotia props up fund for shuttered NewPage Port Hawkesbury paper mill

PORT HAWKESBURY, N.S. - Nova Scotia will provide an additional $14.8 million to support Cape Breton's struggling forestry industry as negotiations to finalize a sale of the shuttered NewPage Port Hawkesbury paper mill continue, Premier Darrell Dexter announced Friday.

Dexter said a $15-million fund originally announced last September to keep the mill's woodlands operation intact would be doubled and extended until the end of this September.

The new funding will include up to $9 million for the mill's supply chain and $5.8 million to keep the mill in a state of readiness once a sale is complete, Dexter said.

"We don't want to be in the business of subsidizing a mill that's not going to be sustainable," Dexter said in Port Hawkesbury.

"What we want to do is to ensure that the mill is there as an asset, so that when a new operator comes along for the long term that we have an industry that's going to be here for decades to come."

Dexter said the fund has generated 400 jobs since the mill in nearby Point Tupper, N.S., was closed last September.

He said negotiations to finalize the proposed sale of NewPage Port Hawkesbury to Pacific West Commercial Corp. have taken longer than he hoped, but he is confident a deal will be done.

"We're optimistic about the potential for a deal," Dexter said. "How long that will take we still don't know."

He said the government would also allow the mill to access $10 million provided under a May 2006 agreement between Stora Enso, the mill's previous owner, and the former Tory government.

The mill employed about 1,000 people before it closed. At the time, its Ohio-based parent company said it was forced to halt operations because it was losing about $4 million a month as it struggled with soaring electricity and shipping costs, a strong Canadian dollar and declining demand, particularly for newsprint.

The mill is under creditor protection until March 31.