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VANCOUVER, BRITISH COLUMBIA-- Aug 14, 2017 -Fortress Paper Ltd. (TSX:FTP) ("Fortress Paper" or the "Company") reported 2017 second quarter operating EBITDA of $4.3 million, a decrease of $2.0 million relative to the comparative prior year period and a decrease of $3.2 million over the previous quarter. The Dissolving Pulp Segment generated operating EBITDA of $3.5 million and the Security Paper Products Segment generated operating EBITDA of $2.8 million. Corporate costs included in operating EBITDA were $2.0 million.

Pursuant to the Company's normal course issuer bid (the "NCIB"), the Company repurchased 54,688 common shares for a total cost of $360,000 at an average price of $6.58 per share during the second quarter. The Company has the ability to purchase an additional 355,321 common shares under the NCIB.

Retirement of Yvon Pelletier

After 36 years in the forestry industry, including nearly five years at Fortress Paper, Yvon Pelletier will be retiring from the Company effective October 1, 2017. Chadwick Wasilenkoff will re-assume the role of Chief Executive Officer and President and continue to serve as Chairman of the board. In order to facilitate a smooth transition of Mr. Pelletier's duties and strong customer and government relationships, he has agreed to a two year consulting agreement.

Yvon Pelletier, Chief Executive Officer of Fortress Paper, commented: "I would like to thank the whole team at Fortress for sharing these past five years of my career with me. With the addition of Giovanni Iadeluca to Thurso's operations and Mr. Wasilenkoff's full-time involvement, I am confident that I am leaving the Company in good hands for the next stage of improvement and growth."

Second Quarter 2017 Results by Segment

Dissolving Pulp Segment operating EBITDA was $3.5 million for the second quarter of 2017, representing an increase of $0.3 million over the prior year comparative period and a decrease of $4.8 million when compared to the first quarter of 2017. The results of the second quarter of 2017 were negatively impacted primarily by lower production rates, increased production costs and a decline in dissolving pulp prices. Production efficiency and costs were impacted by the operational challenges experienced in the chemical recovery area of the mill and a three day planned outage. Average production cost in the quarter was $991 per air dried metric tonne ("ADMT") which is above target. Corrective measures and efficiency initiatives have been identified and scheduled to be completed during the annual October shutdown. The shutdown is planned to be extended a few days this year due to the incremental work required in connection with the fifth digester project. Ongoing initiatives to reduce operational costs are focused primarily in the following areas: improving productivity, reducing fuel consumption, increasing power generation, and reducing chemical costs. Separately, the fifth digester project is on time and on budget with an anticipated completion date at the end of the first quarter of 2018, and which is expected to result in an incremental annual production capacity increase of 8,500 ADMT in 2018 and 17,000 ADMT in 2019 compared to current production capacity. The Company sold 34,672 ADMT of dissolving pulp in the second quarter of 2017, down from 39,931 in the previous year comparative period.

Security Paper Products Segment operating EBITDA was $2.8 million for the second quarter of 2017, representing a decrease of $1.0 million compared to the prior year comparative period, adjusted for $0.9 million of rent, and an increase of $1.3 million compared to the first quarter of 2017. The Landqart mill continues to implement new initiatives to improve efficiencies and profitability. The build-out and installation of the second finishing machine has been materially completed, is undergoing final testing and is on schedule to be fully operational before the end of the third quarter of 2017. The additional finishing machine is expected to de-bottle-neck the mill and provide more production flexibility. The Landqart mill sold 3,139 tonnes of security paper in the second quarter of 2017, compared to 2,714 tonnes in the prior year comparative period.

Management's Outlook

Dissolving Pulp Segment

Over the last two months, viscose staple fibre ("VSF") prices have recovered from recent weakness, returning to August 2016 levels. Dissolving pulp prices usually lag behind the VSF price, however management has seen recent price increases occurring. Management now believes that full year average dissolving pulp pricing will be comparable to 2016. Despite the weaker than expected second quarter financial results, management expects to achieve annual operating EBITDA similar to the prior year, subject to market factors such as dissolving pulp trend pricing and a stable Canadian dollar relative to the US dollar.

Security Paper Products Segment

The Landqart mill has a full order book for 2017 and continues to build out its 2018 order book comprised of a mix of new and repeat orders including for Durasafe®. Operating EBITDA at the Landqart mill for the quarter ended June 30, 2017 exceeded expectations due to a significant order shipping in the quarter originally planned for shipment in the third quarter of 2017. Operating EBITDA in the third quarter is expected to be lower when compared to the second quarter due to the aforementioned shipment and lower margin product mix.

As previously announced, Landqart received another Durasafe® order in the second quarter, and based on multiple trials being conducted at various stages, management continues to anticipate additional Durasafe® orders in the near, medium and long term.

Corporate and Cash

Corporate expenses in the second quarter decreased by $0.3 million compared to the previous quarter to $2.0 million. Cash and restricted cash ended the second quarter at $58.5 million, up from $57.8 million at the end of the previous quarter.

Management remains pleased with this increased liquidity profile and believes that cash on hand and anticipated cash generated from operations and other initiatives will be sufficient to meet all debt obligations and to contribute to future business growth initiatives.

For a summary of significant developments please refer to the Management's Discussion and Analysis for the three and six month period ended June 30, 2017 (available on SEDAR at

Selected Financial Information

The selected financial information presented herein is qualified in its entirety by, and should be read in conjunction with, the Company's unaudited condensed consolidated financial statements as at and for the three and six month period ended June 30, 2017 and the related notes thereto and Management's Discussion and Analysis, which are available on SEDAR.

Reference is made in this news release to operating EBITDA (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 an indicative measure of operating performance and a metric to evaluate profitability. Operating EBITDA is not a generally accepted earnings measure and should not be considered as an alternative to net loss or cash flows as determined in accordance with IFRS. As there is no standardized method of calculating this measure, the Company's operating EBITDA may not be directly comparable with similarly titled measures used by other companies. Reconciliation of operating EBITDA to net loss reported in accordance with IFRS is included below.


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