Mr. Chadwick Wasilenkoff reports

FORTRESS PAPER ANNOUNCES FIRST QUARTER 2013 RESULTS

Fortress Paper Ltd. had 2013 first quarter EBITDA loss of $2.6-million. Excluding corporate costs, combined EBITDA (earnings before interest, taxes, depreciation and amortization) loss of the three business segments Fortress operated in during the first quarter of 2013 was $300,000 in the three months ended March 31, 2013. The recently discontinued specialty papers segment contributed $10.5-million EBITDA, while the dissolving pulp segment and the security paper products segment generated EBITDA losses of $8.7-million and $2.1-million, respectively. Corporate costs contributed to EBITDA loss in the amount of $2.3-million.

Fortress reported a net loss (including discontinued operations) of $12.4-million, or diluted loss per share of 85 cents for the first quarter of 2013, on sales of $99.7-million. In the fourth quarter of 2012, the company reported a net loss of $4.2-million or diluted loss per share of 29 cents on sales of $96.1-million, and for the first quarter of 2012, net loss of $10.7-million or diluted loss per share of 75 cents on sales of $61.4-million.

The Fortress specialty cellulose mill is still considered to be in ramp-up mode, working toward full capacity and operating efficiencies. Although market prices for dissolving pulp improved in the first quarter of 2013, the company's sales in one quarter are typically secured by the end of the previous quarter. The combination of the lower realized dissolving pulp prices and challenges experienced at the mill contributed to disappointing results in the first quarter of 2013.

The security paper products segment had its best quarterly result in the past two years. Metrics continue to improve as the Landqart mill experienced its highest sales volumes and revenues relative to any comparative period in 2012 and 2011. However, less than favourable conditions, including impacts on the company's business as a result of the strength of the Swiss franc against the euro, overcapacity in the banknote paper industry and increased competition for orders continue to adversely impact the results of the security paper products segment.

The specialty papers segment, which has been discontinued with the sale of the Dresden mill in April, 2013, had a strong first quarter.

Management's outlook

Dissolving pulp segment

Dissolving pulp markets improved during the first quarter of 2013, but remain challenging due to continued excess supply. The market price of dissolving pulp in China, as reported by China Chemical Fibers & Textiles Consultancy Group (CCF), a leading professional data analysis company relied upon in the dissolving pulp industry, improved from December lows of $830 (U.S.) to $840 (U.S.) per air-dried metric tonne to approximately $930 (U.S.) per air-dried metric tonne in February and March. Management believes that current depressed dissolving pulp prices are indicative of unusual market conditions and are not sustainable, as the global industry has been experiencing mill shutdowns and mills swinging capacity to produce paper pulps. The company expects that dissolving pulp prices will remain under pressure until new expected capacity is absorbed.

Viscose staple fibre demand in China has been stable in the first quarter of 2013, as operating rates remain healthy, although fibre prices weakened at the end of March. Cotton prices remained relatively stable in China during the first quarter of 2013. However, when compared with 2011, cotton prices still remain low, which could lead to possible cotton crop plantation reductions in 2013. Cotton reserve management, particularly in China, may affect future cotton pricing.

The Fortress specialty cellulose mill pulp production rates remained below management expectations during the first quarter of 2013, as the mill faced continuing challenges with digester and evaporator capacity issues. The mill recently completed a 10-day maintenance shutdown that began in late April. The company expects that the maintenance shutdown will address issues in order to improve production, generate stable operations and reduce production costs. Finished goods inventory levels at the end of the first quarter were minimal.

The cogeneration project continues in its commissioning and start-up phase. Power generation is expected by the end of the second quarter following the completion of testing and adjustments.

Although depressed dissolving pulp prices have impacted the Fortress specialty cellulose mill results, the company is continuing the implementation of its comprehensive operating excellence program designed to improve overall efficiency and productivity. In parallel, it has commenced an aggressive cost reduction program. In the third quarter of 2013, the company expects to realize significant benefits from production improvements, cost reduction initiatives and the cogeneration facility. In addition, the company has strengthened mill management and, with new leadership, expects to make material progress toward targets over the remainder of the year.

The Fortress global cellulose (FGC) mill project continues to advance. Engineering design for the conversion to produce dissolving pulp is near completion with an updated capital expenditure estimate of $250-million plus or minus 10 per cent. A comprehensive review of the overall project is continuing. The company has incorporated learnings from our Thurso capital projects, including a more gradual ramp-up curve. This results in additional cash requirements of $70-million to $100-million for working capital, including start-up costs, raw materials, inventory and various other items, to finance the entire FGC mill project and its operational ramp-up. As a result, the company is evaluating options for different sources of funds to cover increased budgeted capital expenditures and provide ramp-up working capital. Final budgeted costs and financial models are being further refined.

The company is currently in the process of exploring strategic options to mitigate the financial risk, including alternative financing structures, joint ventures and partnership opportunities. While the project economics continue to be attractive, the company will be comparing the FGC mill investment opportunity to other strategic options for shareholder value creation. Due to changing economics and market conditions, there is no assurance that the FGC mill project will proceed to completion as previously planned. The company intends to report its decision regarding the strategic direction of the FGC mill early in the third quarter.

Security paper products segment

The security paper products segment continues to be adversely impacted by a strong Swiss franc relative to the euro and overcapacity in the industry, resulting in fierce competition for tenders. Despite these difficulties, the Landqart mill has a strong order book with good visibility well into the second half of the year. The mill is currently operating at full capacity. Estimated volumes to be produced and sold in 2013 are expected to be significantly higher than in 2012. Landqart is now producing its second order of its new composite paper-polymer-paper substrate Durasafe and is pursuing several more sales opportunities for this new product. This second order of Durasafe includes security threads from Fortress Paper's optical thin film division. The Landqart mill has also been awarded paper orders in several new markets during the first quarter of 2013. These orders are expected to be produced and delivered later this year.

The Landqart mill has substantially completed the majority of the production of its largest banknote order and has delivered over 70 per cent of its contract volume. The Landqart mill is continuing its efforts to enter into new markets to diversify its customer base in preparation for the completion of this contract. The company is confident that it will continue to meet its sales target through a combination of repeat orders in established markets together with new business. Landqart has improved operational results systematically over the past two quarters and management anticipates this trend to continue through the second quarter of 2013.

Significant developments

Sale of the Dresden mill

In March, 2013, the company and its wholly owned subsidiary, Fortress Security Papers AG (FSP), entered into a share purchase agreement with Glatfelter Gernsbach GmbH & Co. KG and its parent, P.H. Glatfelter Co., pursuant to which FSP agreed to sell all of the shares of its wholly owned subsidiary, Dresden Papier GmbH, to Glatfelter Gernsbach for a total purchase price of 160 million euros (approximately $213-million (Canadian)), subject to a working capital adjustment. Pursuant to the terms of the share purchase agreement, the company agreed to guarantee the obligations of FSP and Glatfelter agreed to guarantee the obligations of Glatfelter Gernsbach thereunder.

The sale of the Dresden mill completed on April 30, 2013. Net proceeds received from the sale, after closing working capital adjustments and the settlement of Dresden's outstanding loans, guarantees and factoring arrangements with Commerzbank AG and CommerzFactoring GmbH, as applicable, were approximately 120 million euros (approximately $159-million), which is subject to postclosing working capital and tax adjustments.

With the sale of the Dresden mill, the company no longer operates in the specialty papers (wallpaper base) industry.

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 interim financial statements as at and for the three-month period ended March 31, 2013, and the related notes thereto, and the management's discussion and analysis filed on SEDAR.

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

                                                  First    Fourth     First
                                                quarter   quarter   quarter
                                                of 2013   of 2012   of 2012
                                                                           
Sales from continuing operations               $ 57,559  $ 58,748  $ 23,711
EBITDA from continuing operations               (13,162)   (9,023)  (11,333)
EBITDA                                           (2,627)      242    (1,987)
Net (loss) from continuing operations           (18,814)   (9,829)  (14,206)
Net (loss)                                      (12,373)   (4,227)  (10,670)
Adjusted net (loss) from continuing                                          
operations                                      (20,618)  (11,138)  (15,436)
Paper shipments (tonnes)                          2,179     1,688       995
Pulp shipments (air-dried metric tonne)          39,147    46,909    35,682

Adoption of advance notice policy

Fortress Paper's board of directors has approved an advance notice policy. The purpose of the policy is to provide shareholders, directors and management of the company with a clear framework for nominating directors. The policy fixes a deadline by which director nominations must be submitted to Fortress Paper prior to any annual or special meeting of shareholders and sets forth the information that must be included in the notice to Fortress Paper in order for a nominee to be eligible for election. No person will be eligible for election as a director of Fortress Paper unless nominated in accordance with the policy.

In the case of an annual meeting, notice to Fortress Paper must be given not less than 30 nor more than 65 days prior to the date of such meeting, provided that if the meeting is to be held on a date that is less than 50 days after the date on which the first public announcement of the date of such meeting was made, notice may be given no later than the close of business on the 10th day following such public announcement.

In the case of a special meeting called for the purpose of electing directors that is not also an annual meeting, notice to the company must be made no later than the close of business on the 15th day following the day on which the first public announcement of the date of such special meeting was made.

The policy is effective, and in full force and effect, as of the date it was approved by the board. In accordance with the terms of the policy, the policy will be placed before shareholders of Fortress Paper for approval at the next annual general meeting of shareholders of the company to be held in 2014. If the policy is not confirmed at the next AGM by ordinary resolution of shareholders, the policy will terminate and be of no further force and effect following the termination of the next AGM.

The full text of the policy is available under Fortress Paper's profile on SEDAR.

Conference call

A conference call to discuss the financial results for the 2013 first quarter will be held on May 14, 2013, at 9 a.m. PST. To participate in the conference call, please dial one of the following numbers:

North America:  1-855-353-9183

Vancouver:  604-681-8564

Calgary and international:  403-532-5601

Edmonton:  780-429-5820

Toronto:  416-623-0333

Ottawa:  613-212-0171

Montreal:  514-687-4017

Participant passcode:  15086 followed by the pound key

Conference reference No.:  957288 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 957288 followed by the pound key and the participant passcode to access the replay is 15086 followed by the pound key.

We seek Safe Harbor.