Borregaard: LignoTech South Africa

The owners of the lignin joint venture in South Africa, Borregaard and Sappi, have agreed on an extension of the agreement governing the lignin co-operation and on a reduction in the annual production capacity for lignin.

The parties have agreed to extend the term of the agreement to the end of 2032 (previously 2027).

With effect from 2021 the lignin production capacity will be scaled down from the current 180,000 tonnes to 130,000 metric tonnes dry substance per year. The reason is that Sappi's Saiccor dissolving pulp mill, which supplies the lignin raw material to the joint venture company, will be expanded in order to increase total cellulose capacity on the site. The expansion will be based on magnesium sulphite technology, whereas the current calcium sulphite capacity will be reduced. The remaining calcium sulphite line will continue to supply lignin raw material to the joint venture.

The lignin capacity expansion by 20,000 tonnes carried out in 2017 was made possible mainly by the installation of a pre-concentrator unit. This equipment will continue to be in use as part of the new concept with reduced total production capacity for lignin. No investments will be needed in order to adapt to the new supply situation for lignin raw material.

For LignoTech South Africa this means that the whole production of lignin for exports can be sold in powder form, based on the existing drying capacity. This will be a good basis for further diversification of the product portfolio. The company will be less dependent on the construction market, and sales of liquid lignin to regions currently oversupplied with this type of product can be eliminated.

LignoTech South Africa is a joint venture company owned by Borregaard (50%) and Sappi (50%), established in 1997.

For background information see the stock exchange notice dated 7 July 2015.

Sarpsborg, 4 July 2018

Per Bjarne Lyngstad, Chief Financial Officer, +47 952 44 515
Jørn Syvertsen, Director Investor Relations, +47 958 36 335

This information is subject to the disclosure requirements pursuant to Section 5-12 of the Norwegian Securities Trading Act.