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Montreal-based Resolute says it plans to spend about $270-million (U.S.) to build a tissue-paper machine and converting operations at its pulp mill in Calhoun, Tenn.

Christinne Muschi/The Globe and Mail

Pulp and paper producer Resolute Forest Products Inc. is striking out in a new strategic direction with the decision to enter the North American tissue market.

Montreal-based Resolute says it plans to spend about $270-million (U.S.) to build a tissue-paper machine and converting operations at its pulp mill in Calhoun, Tenn.

The facility, which will make premium toilet paper and paper towels for the private-label retailing sector, represents a major shift away from Resolute's traditional businesses, including newsprint and commercial paper, which have been in decline for years.

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Tissue products are expected to roll off the production line at Calhoun by the first quarter of 2017.

Resolute will "continue to look at opportunities to expand our presence in this growing market," president and chief executive officer Richard Garneau said.

The company says tissue products are on a strong growth curve in North America, in contrast to other paper products, and most of the sector's growth is expected to be in the premium segment.

"This is the big strategy announcement a lot of people have been waiting for," Resolute vice-president of corporate communications Seth Kursman said in an interview.

"It's opening a new chapter in the company's operational history.

"We see market contraction in so many areas, such as commercial paper and newsprint. You turn and look at tissue and that has consistently grown for the past 20 years," he said.

Resolute is not ruling out acquisitions to continue growing in the sector at some point in the future, Mr. Kursman said.

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One major advantage over the competition will be Resolute's ability to source its own pulp, he added. "We'll be one of only two major at-home tissue producers to have fully integrated fibre. The other one is [Atlanta-based] Georgia Pacific."

Resolute is currently in talks aimed at concluding deals with retailers, he added.

The tissue industry leader is Texas-based Kimberly Clark Corp.

At full capacity, the new facility in Calhoun will churn out about 60,000 tonnes per year of toilet paper and paper towel. It will use excess slush pulp over and above the additional dried market pulp capacity associated with a previously announced new continuous pulp digester project at the Calhoun mill.

The $270-million investment – which received financial aid under state and local business-development programs – is expected to create 105 new jobs at the mill.

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