Fraser Papers Completes Pulp Mill Rebuild

Toronto, Ontario, Canada, 26 June 2007 -- (Marketwire) -- Fraser Papers Inc. (TSX:FPS) announced today the completion of a CAD 10 million capital rebuild of the recovery boiler at its Edmundston, New Brunswick, sulfite pulp mill.

The rebuild was completed during a recent 21-day outage and is expected to result in increased production in excess of 50 tons per day of pulp or 18,000 tons annually. Higher internal pulp production will displace purchases of higher cost market pulp at forecasted annual savings of approximately CAD 3 million based on current market prices for softwood and hardwood kraft pulp.

The company also announced a new initiative to further improve the financial performance of its specialty papers business by optimizing production at the adjacent paper mill located in Madawaska, Maine. The plan involves a transition of the company's specialty paper business to its larger, more efficient paper machines, the permanent closure of the highest cost manufacturing capacity and a decreased reliance on fossil fuel with new energy reduction initiatives. The company estimates savings from this optimization plan of an additional CAD 14 million per year.

In summary, the optimization plan announced today includes:

- The permanent closure of paper machines No.1 and No.2, representing 70,000 tons per year of freesheet paper capacity or 14% of the total plant capacity, effective 26 August 2007;

- The transfer of specialty grades currently produced on these two paper machines to the remaining six paper machines at the Madawaska operation;

- A focus on growth in specialty uncoated groundwood papers with the permanent closure of one off-machine groundwood coating line, previously announced on 31 May 2007; and

- Specific energy initiatives, including the permanent closure of one oil-fired boiler and turbine, that will reduce greenhouse gas emissions by 35% and oil consumption by 3.5 million gallons per year, effective October 2007.

"The initiatives announced today will provide a much needed and immediate improvement to our business," said Peter Gordon, Fraser Papers' president and chief executive officer. "Expected savings will be generated from reduced purchases of high cost market pulp, lower steam and power costs as a result of the closure of high cost, oil-fired boilers, and higher manufacturing productivity. While we recognize the inevitable impact on individuals, families, and the community, we believe it is the best course of action to ensure the long-term success of our East Papers operations."

These changes will affect 135 employees at the Madawaska mill, including the 29 employees affected by the previously announced closure of the groundwood coating line. Certain employees may be eligible for an early retirement program. The company will work with the union and local government agencies to assist individuals affected by this announcement to mitigate the effect of these transition measures.

"Moving our lightweight publishing and packaging grades to larger, more technologically advanced equipment will increase our capacity to serve and grow with existing and future customers in these key strategic markets," added Gordon.

Fraser Papers estimates the announced changes will result in a pre-tax restructuring charge in the second quarter of approximately CAD 16 million.

Fraser Papers is an integrated specialty paper company that produces a broad range of specialty packaging and printing papers. The company has operations in New Brunswick and Quebec, Canada, and in Maine and New Hampshire, USA. Fraser Papers is listed on the Toronto Stock Exchange under the symbol: FPS. For more information, visit the Fraser Papers Web site at www.fraserpapers.com.