Fortress Global acquires S2G Biochemicals to build a xylitol demo plant

Type of post: NEWS.

Fortress Global Enterprises (Fortress) is a producer of dissolving pulp that owns a mill located in Thurso (Quebec, Canada) known as Fortress Specialty Cellulose Mill (FSC Mill). Recently, the company unveiled its plans to grow revenues and profitability of its mill through the production of a valuable bioproduct.

On 15^th March, Fortress announced that it had signed a share purchase agreement with S2G Biochemicals (S2G) and its shareholders (see press release). Upon completion of the transaction, Fortress (through a newly formed special purpose company) would construct a demonstration plant to produce xylitol at its FSC Mill, utilizing the proprietary process technologies and the know-how developed by S2G and Mondelēz International (see more information about the process here: “S2G BioChem to build demo biorefinery in Sarnia for producing xylitol and bioglycols”, 3/7/2017). Eleven days later, Fortress confirmed the successful completion of its acquisition of S2G (see press release).

Key points of the new project

Feedstock	C5 sugars extracted from hemicellulose (residue from the FSC Mill). Hemicellulose sugars are a cost-effective feedstock for xylitol production due to their high xylose and low ash content.
Products and production capacity	2,000 tons per year of xylitol.
Investment	The construction, commissioning and optimization of the demonstration plant is budgeted at approximately 33 million C$. Fortress will provide 5 C$ million in funding for the special purpose company in cash or in-kind. Moreover, it is in the process of securing the balance of the required funding through various non-dilutive sources, including federal and provincial grants, other non-recourse financing and consortium partners.
Expected start-up	2020

Figure 1. Fortress Specialty Cellulose Mill in Thurso (extracted from its website). The mill will house the new xylitol demo plant.

The extraction and conversion of this residue will also further debottleneck the FSC Mill and increase its annual production capacity of dissolving pulp. The plant is expected to produce sufficient C5 sugars annually to provide the feedstock for up to an additional 20,000 tons per year of xylitol production which Fortress intends to utilize by constructing an approximately 150 million C$ full-scale plant following successful completion of the demonstration plant. When complete, the full scale plant would be expected to generate up to 40 million C$ of EBITDA annually.

The estimated annual global xylitol sales volumes in 2017 were approximately 200,000 tons and it is expected an annual growth rate of 6.5% through 2024. Current spot prices for xylitol vary by region and are in the 3,500 – 4,500 $/ton range. Today, the majority of xylitol is produced in China employing outdated process technologies. Fortress is well positioned to become a global low-cost producer.