Tembec Shuts Down Permanently its Smooth Rock Falls Pulp Mill

Temiscaming, Quebec, Canada, 05 December 2006 – Tembec today announced the permanent closure of its market pulp mill located in Smooth Rock Falls, Ontario. The mill had been indefinitely idled at the end of July 2006. After a thorough analysis of the current situation, the company has concluded that a sustainable and secure long-term operation at this site is not possible. A total of 185 unionized employees and 44 staff will be affected.

"The vintage and scale of this mill and its manufacturing costs relative to global competition, including the availability of affordable fiber, were all key factors in this decision," said Yvon Pelletier, Tembec executive vice president and president of the Pulp Group. "After thoroughly reviewing current and future economic conditions, we have made the difficult decision to permanently close the mill."

"Decisions of this nature are never easy to make, and Tembec regrets the impact of today's announcement on all employees, their families, and the Smooth Rock Falls community," said Pelletier. "Tembec will proceed with the mill's closure according to applicable laws, regulations, and the collective agreement."

"The company intends to act in a manner that will ensure that employees receive their severance pay in the next few weeks," said Pelletier. "The company will also take appropriate measures, including the provision of counselling and support services for affected employees."

As a result of this announcement, an unusual charge of CAD 31 million relating to pension, severance, and other items will be recorded in the quarter ending 30 December 2006.

Tembec is a large, diversified and integrated forest products company. With operations principally located in North America and in France, the company employs approximately 9000 people. Tembec's common shares are listed on the Toronto Stock Exchange under the symbol TBC. Additional information on Tembec is available on its Web site at www.tembec.com