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Klabin to Build New 1.5 Million MTPY Pulp Mill in Brazil

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Klabin, São Paulo, Brazil, this week reported that it will build a new pulp mill in the city of Ortigueira, in the State of Paraná, Brazil, with the capacity to produce 1.5 million metric tpy of pulp, of which 1.1 million metric tpy will be hardwood pulp and 400,000 metric tpy will be softwood pulp. The new mill project is known as "Project Puma."

The company believes that Project Puma differs from other ongoing pulp projects in its flexibility to produce two types of fiber at the same mill and for enabling the supply of fluff pulp to the Brazilian market (fluff pulp is currently imported). Additionally, it will be possible to obtain a lower cost in the production of the two fibers, as well as to benefit from excellent inbound and outbound logistics and to produce 144 MW of surplus energy, the company notes.

Klabin currently owns 107,000 hectares of planted forest with pine and eucalyptus that will ensure wood supply for the new mill. The average distance between the forests and the plant is 74 km, ensuring competitiveness and low cost of wood transportation. Transportation of part of the mill's production will be made through railroad to the port of Paranaguá (State of Paraná).

The implementation of Project Puma, which is expected to begin on the 1Q 2016, represents an important step for Klabin, in light of the significant increase of its production capacity, which will not only supply pulp markets, but will also enable future expansions in packaging paper machines, as well as provide operational gains and positive impacts in its financial results.

As previously disclosed, the company's management had been conducting negotiations with investors to implement Project Puma through the establishment of a new company that would be called Klabin Celulose, which would receive the company's contribution of 107,000 hectares of planted forests in the State of Paraná, as well as financial resources from investors, while preserving majority control by the company. Under this structure, investors would have the right to withdraw from Klabin Celulose within a certain period, under conditions pre-established by contract.

Although implementation of Project Puma through Klabin Celulose is feasible and in the company's interest, management believes that development of the project directly by Klabin will better address the interests of the company and its shareholders.


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