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The long and tortuous struggle to keep Prince Rupert's Skeena pulp mill afloat ended yesterday, when a British Columbia judge ordered the mill's owner into receivership, officially launching a program to sell off its assets.

The order marked the failure by New Skeena Forest Products Inc. to secure financial backing to put the mothballed mill and related assets, once linchpins of the regional economy, back into production.

"It hurts like hell," New Skeena president Daniel Veniez said yesterday. "I have killed myself trying to save a carcass that nobody else wanted."

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Mr. Veniez added that he and his business partner George Petty tried to seek out every possible investment alternative over the past two years.

The mill, which along with related sawmills and other assets once accounted for 10,000 direct and indirect jobs in northwestern B.C., has been on a lifeline for years. In 1997, the provincial government bailed it out after a former owner, Repap Enterprises Inc., ran into financial trouble.

But the Skeena operation continued to lose money and, in 2002, the province sold it for $6-million to a company controlled by Mr. Veniez and Mr. Petty, formerly the chairman of Repap and now partners with Mr. Veniez in New Skeena.

Since then, the plants have been mothballed, as New Skeena tried to strike new labour agreements, find potential customers for production and line up financial backing.

The strain on the communities and local economy was evident, as municipal governments stewed about back taxes and New Skeena and labour groups battled over labour concessions.

Yesterday, Mr. Veniez said New Skeena had done everything necessary to make the mill a viable operation, including reaching new labour deals, but was unable to find a financial saviour who would pump in $50-million to restart operations.

New Skeena came close to a deal with Woodbridge Co. Ltd., the holding company of Toronto's Thomson family, but that deal collapsed in August, after Woodbridge was unable to come to terms with an industry partner. Mr. Veniez identified that company yesterday as Tembec Inc., a Montreal-based forest products company.

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For the past month, New Skeena has been negotiating with MatlinPatterson Global Advisers LLC, a New York-based fund that specializes in financially distressed companies. MatlinPatterson had agreed to put forward $1-million to keep the company afloat while it conducted due diligence. The deadline for that deal was yesterday.

New Skeena had assigned itself into bankruptcy on Aug. 30, after operating under creditor protection for about a year. But after that assignment, a stay was granted that allowed the company to seek financial backing.

Describing it as "an unfortunate day," B.C. Supreme Court Justice Donald Brenner yesterday said he had no alternative but to lift the stay and appoint a receiver.

Looking tired and pale, Mr. Veniez yesterday said he felt regret for employees who would never return to their former jobs.

Until Friday, the company had employed about 30 people who were working on environmental remediation at the Prince Rupert site.

New Skeena's parent company, NWBC Pulp and Timber, is owed $10-million and CellMark, a Swedish pulp marketing firm, is owed $6-million.

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Prince Rupert is owed about $22-million in back taxes, while the forest company owes about $7-million to the communities of Terrace, Port Edward and New Hazelton.

New Skeena's principal assets, none of them currently operating, are its pulp mill in Prince Rupert, a sawmill in Terrace and forest tenures.

Some observers in the courtroom yesterday said the region needs an operating pulp mill to keep its economy healthy.

"The forestry economy is the only economy we have," said Elmer Derrick, chief negotiator with the Gitxsan Treaty Society and a resident of Hazelton in northwestern B.C.

"We need to put our people back to work."

Laurie Cater, publisher of Madison's Canadian Lumber Reporter, said New Skeena's assets are likely to be sold piecemeal, with some likely to be dismantled for parts or moved to other locations.

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"I would be astonished if anyone stepped in" to bid for the assets as a whole, Mr. Cater said, adding that most potential buyers have already been approached. "I don't think anybody could come along and say they could do a better job than [Mr. Veniez]did."

With files from Canadian Press

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