Mr. Yvon Pelletier reports

FORTRESS PAPER REPORTS SECOND QUARTER 2017 RESULTS AND CEO RETIREMENT

Fortress Paper Ltd. had 2017 second quarter operating EBITDA (see definition near the end of this news release) of $4.3-million, a decrease of $2.0-million relative to the comparative prior-year period and a decrease of $3.2-million over the previous quarter. The dissolving pulp segment generated operating EBITDA of $3.5-million and the security paper products segment generated operating EBITDA of $2.8-million. Corporate costs included in operating EBITDA were $2.0-million.

Pursuant to the company's normal course issuer bid (NCIB), the company repurchased 54,688 common shares for a total cost of $360,000 at an average price of $6.58 per share during the second quarter. The company has the ability to purchase an additional 355,321 common shares under the NCIB.

Retirement of Yvon Pelletier

After 36 years in the forestry industry, including nearly five years at Fortress Paper, Mr. Pelletier will be retiring from the company effective Oct. 1, 2017. Chadwick Wasilenkoff will reassume the role of chief executive officer and president, and continue to serve as chairman of the board. In order to facilitate a smooth transition of Mr. Pelletier's duties and strong customer and government relationships, he has agreed to a two-year consulting agreement.

Mr. Pelletier commented: "I would like to thank the whole team at Fortress for sharing these past five years of my career with me. With the addition of Giovanni Iadeluca to Thurso's operations and Mr. Wasilenkoff's full-time involvement, I am confident that I am leaving the company in good hands for the next stage of improvement and growth."

Second quarter 2017 results by segment

Operating EBITDA for the dissolving pulp segment was $3.5-million for the second quarter of 2017, representing an increase of $0.3-million over the prior-year comparative period and a decrease of $4.8-million when compared with the first quarter of 2017. The results of the second quarter of 2017 were negatively impacted primarily by lower production rates, increased production costs and a decline in dissolving pulp prices. Production efficiency and costs were impacted by the operational challenges experienced in the chemical recovery area of the mill and a three-day planned outage. Average production cost in the quarter was $991 per air-dried metric tonne, which is above target. Corrective measures and efficiency initiatives have been identified and scheduled to be completed during the annual October shutdown. The shutdown is planned to be extended a few days this year due to the incremental work required in connection with the fifth digester project. Continuing initiatives to reduce operational costs are focused primarily in the following areas: improving productivity; reducing fuel consumption; increasing power generation; and reducing chemical costs. Separately, the fifth digester project is on time and on budget with an anticipated completion date at the end of the first quarter of 2018, and which is expected to result in an incremental annual production capacity increase of 8,500 air-dried metric tonnes in 2018 and 17,000 air-dried metric tonnes in 2019, compared with current production capacity. The company sold 34,672 air-dried metric tonnes of dissolving pulp in the second quarter of 2017, down from 39,931 in the previous year comparative period.

Operating EBITDA for the security paper products segment was $2.8-million for the second quarter of 2017, representing a decrease of $1.0-million compared with the prior-year comparative period, adjusted for $900,000 of rent, and an increase of $1.3-million compared with the first quarter of 2017. The Landqart mill continues to implement new initiatives to improve efficiencies and profitability. The buildout and installation of the second finishing machine has been materially completed, is undergoing final testing, and is on schedule to be fully operational before the end of the third quarter of 2017. The additional finishing machine is expected to debottleneck the mill and provide more production flexibility. The Landqart mill sold 3,139 tonnes of security paper in the second quarter of 2017, compared with 2,714 tonnes in the prior-year comparative period.

Management's outlook

Dissolving pulp segment

Over the last two months, viscose staple fibre (VSF) prices have recovered from recent weakness, returning to August, 2016, levels. Dissolving pulp prices usually lag behind the VSF price, however, management has seen recent price increases occurring. Management now believes that full-year average dissolving pulp pricing will be comparable with 2016. Despite the weaker-than-expected second quarter financial results, management expects to achieve annual operating EBITDA similar to the prior year, subject to market factors, such as dissolving pulp trend pricing and a stable Canadian dollar relative to the U.S. dollar.

Security paper products segment

The Landqart mill has a full order book for 2017 and continues to build out its 2018 order book, comprising a mix of new and repeat orders, including for Durasafe. Operating EBITDA at the Landqart mill for the quarter ended June 30, 2017, exceeded expectations due to a significant order shipping in the quarter originally planned for shipment in the third quarter of 2017. Operating EBITDA in the third quarter is expected to be lower when compared with the second quarter due to the aforementioned shipment and lower-margin product mix.

As previously announced, Landqart received another Durasafe order in the second quarter, and, based on multiple trials being conducted at various stages, management continues to anticipate additional Durasafe orders in the near, medium and long term.

Corporate and cash

Corporate expenses in the second quarter decreased by $300,000, compared with the previous quarter to $2.0-million. Cash and restricted cash ended the second quarter at $58.5-million, up from $57.8-million at the end of the previous quarter.

Management remains pleased with this increased liquidity profile, and believes that cash on hand and anticipated cash generated from operations and other initiatives will be sufficient to meet all debt obligations and to contribute to future business growth initiatives.

For a summary of significant developments, please refer to the management's discussion and analysis for the three- and six-month period ended June 30, 2017 (available on SEDAR).

Selected financial information

The selected financial information presented herein is qualified in its entirety by, and should be read in conjunction with, the company's unaudited condensed consolidated financial statements as at and for the three- and six-month period ended June 30, 2017, and the related notes thereto, and management's discussion and analysis, which are available on SEDAR.

Reference is made in this news release to operating EBITDA (defined as net income before interest, income taxes, depreciation, amortization, non-operating income and expenses, and stock-based compensation), which the company considers to be an indicative measure of operating performance and a metric to evaluate profitability. Operating EBITDA is not a generally accepted earnings measure and should not be considered as an alternative to net loss or cash flows as determined in accordance with IFRS (international financial reporting standards). As there is no standardized method of calculating this measure, the company's operating EBITDA may not be directly comparable with similarly titled measures used by other companies.

                 SELECTED FINANCIAL INFORMATION AND STATISTICS
             (in thousands of dollars, except shipments, unaudited)

                                                   Q2 2017   Q1 2017   Q2 2016
                                                                         
Sales                                             $ 86,599  $ 92,460  $ 87,993
Operating EBITDA                                     4,289     7,489     6,307
Net (loss) income                                   (2,087)   (2,745)    6,893
Adjusted net (loss)                                 (8,193)   (2,999)   (6,921)
Paper shipments (tonnes)                             3,139     2,836     2,714
Pulp shipments (air-dried metric tonnes)            34,672    37,833    39,931

A conference call to discuss the financial results for the second quarter 2017 will be held on Aug. 15, 2017, at 6 a.m. PDT. To participate in the conference call, please dial one of the following numbers:

• 604-681-8564 for Vancouver;
• 403-532-5601 for Calgary or international;
• 780-429-5820 for Edmonton;
• 416-623-0333 for Toronto;
• 613-212-0171 for Ottawa;
• 514-687-4017 for Montreal;
• Toll-free 1-855-353-9183 from Canada and the United States.

Participant passcode:  15086 followed by the pound key

Conference reference No.:  1221180 followed by the pound key

A replay of the conference call will be available for 30 days. To access the replay, listeners may dial 1-855-201-2300 from North America or 403-255-0697 international. The conference reference number is 1221180 followed by the pound key and the participant passcode to access the replay is 15086 followed by the pound key.

A presentation to complement the company's second quarter earnings conference call is available under the investor relations section of the company's website or by sending a request to info@fortresspaper.com

About Fortress Paper Ltd.

Fortress Paper operates internationally in two distinct business segments: dissolving pulp and security paper products. The company operates its dissolving pulp business at the Fortress specialty cellulose mill located in Canada, which has expanded into the renewable energy generation sector with the construction of a cogeneration facility. The company operates its security paper products business at the Landqart mill located in Switzerland, where it produces banknote, passport, visa, and other brand protection and security papers.

We seek Safe Harbor.