Forward - Looking Statements

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2 Forward - Looking Statements Certain statements contained in this presentation constitute forward-looking statements. The words anticipate, continue, estimate, expect, may, will, project, should, believe and similar expressions typically are used to identify forward-looking statements. The use of forward-looking statements reflects our current views and/or expectations with respect to our performance, business and future events, and in this presentation includes statements relating to: our expectations relating to our business at the Landqart Mill and the Fortress Specialty Cellulose Mill; our expectations relating to achieving targeted production capacity and cost position at our Fortress Specialty Cellulose Mill; expectations relating to financial performance, EBITDA and margins; foreign exchange impact on EBITDA and revenues; the state of the dissolving pulp markets; expectations regarding future global demand for dissolving pulp and textile fibres; expectations relating to the security papers industry and banknote markets; and expected use of proceeds from transactions. Forward-looking statements are based on the then-current expectations, forecasts and assumptions about the business and the industry and markets in which we operate, including: that our orders at the Landqart Mill will be sustained over the short and long term; there will be no unforeseen delays, disruptions or other market forces negatively affecting our production volumes, sales and relationships with our customers; that the market conditions for dissolving pulp will follow expected trends; that we will successfully achieve planned sales targets and production cost improvements; that foreign exchange rates will not vary materially from current levels and will have the impact on our financial results as projected by management; that the equipment will operate as expected; that we will realize significant cost savings from production improvements, cost reduction initiatives and the cogeneration facility; that current depressed dissolving pulp prices are indicative of unusual market conditions and are not sustainable over the medium to long-term; that demand for viscose staple fiber will continue to grow which will result in an increased demand for dissolving pulp; that our strategy of diversifying geographical sales mix will assist in mitigating the application of antidumping duties and reduce our reliance on shipments to China; that the Landqart mill will be successful in securing new orders and operate on a consistent and regular basis; that we will be able to diversify our customer base; that we will obtain any necessary financing on acceptable terms; and that our operations and strategy will allow us to meet our debt repayment obligations or that other arrangements will be available to us on favorable terms. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict, including, without limitation: that we may experience additional unforeseen delays, financing difficulties or costs that will impact our projects, operations, financial performance and liquidity; that our dissolving pulp operations and cogeneration plant will not meet anticipated production capacities, efficiencies, utilization rates, cost structure and sales volumes; and those risks relating to our reputation, competition, changes in the market, potential downturns in economic conditions, dependence on major customers, fluctuations in the price and supply of raw materials, foreign exchange fluctuations, labour, regulatory requirements and other risk factors listed from time to time in our filings with the Canadian securities regulatory authorities which are available on SEDAR at These risks, as well as others, could cause actual results and events to differ materially from those anticipated in such forward-looking statements. Accordingly, readers should not place undue reliance on forward-looking statements and information, which are qualified in their entirety by this cautionary statement. These statements speak only as of the date of this presentation and we do not undertake any obligations to update such forwardlooking statements, except as required by applicable securities law. When we disclose production costs in this presentation, such costs are based on a variety of factors and inputs which may not be comparable to similar types of costs disclosed by other companies. All financial information presented herein is qualified in its entirety by, and should be read in conjunction with our audited and unaudited financial statements and management s discussion and analysis which are available on SEDAR at Market and industry data contained in this presentation is based upon information, surveys or studies conducted by independent third parties and independent industry or general publications and our knowledge of, and experience in, the markets in which we operate. We have no reason to believe that such information is false or misleading in any material respect, however market and industry data is subject to variation and cannot be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. This information has not been independently verified by us or any of our respective directors, officers or representatives and no representation is given as to the accuracy of any of the data from third party sources referred to in this presentation. 2

3 CHIEF EXECUTIVE OFFICER, Fortress Paper Ltd. Yvon Pelletier Mr. Pelletier was named CEO of Fortress Paper Ltd on October ; he has held the position of President of Fortress Specialty Cellulose since February Mr. Pelletier has over 30 years of experience in the pulp and paper industry and has held leadership roles in technical, operational, and commercial areas. CHIEF FINANCIAL OFFICER, Fortress Paper Ltd. Kurt Loewen Mr. Loewen is a Chartered Professional Accountant in Canada and has been with Fortress Paper since August In addition to Chief Financial Officer he has held the positions of Controller and Corporate Secretary of Fortress Paper. He served in public practice in audit and accounting at Deloitt & Touche LLP. EXECUTIVE CHAIRMAN, Fortress Paper Ltd. Chad Wasilenkoff Former CEO, President and founder of Fortress Paper Ltd. Founded, financed and held executive positions with several successful public companies in Canada. CHIEF EXECUTIVE OFFICER, Landqart AG. Axel Wappler Mr. Wappler has over 25 years of international experience in the paper and manufacturing industries, with leadership roles in operations, sales and executive management. PRESIDENT, Fortress Specialty Cellulose Giovanni Iadeluca Mr. Iadeluca is a Chartered Professional Accountant with over 20 years of senior management experience in the manufacturing industry. Mr. Iadeluca was formerly the Chief Executive Officer of AV Terrace Bay Inc., a wholly owned subsidiary of the Aditya Birla Group. 3

4 Market Capitalization ~$90.6M Shares issued and outstanding: 14,288,352 - Insiders own or have direction and control of over 29% $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 Share Price as at July 6, 2017: Toronto Stock Exchange - FTP $6.34 CAD OTCQX - FTPLF $4.86 USD $3.00 $2.00 $1.00 $0.00 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 All figures as at July 6,

5 Fortress Market Capitalization Is Significantly Less Than Aggregate Investments Made in PP&E (as at March 31, 2017) Aggregate Investment in PP&E/Plant Upgrades $421M* Enterprise Value $257M** 1Q17 Book Value $214M Market Cap $91M** *CAPEX on property, plant and equipment as at Mar31, 2017: Security Papers Segment $102M since 2007, Dissolving Pulp Segment: $319M since 2010 ** Market cap as at July 6, 2017 and EV= market cap as at July 6, net debt at Mar 31 st

6 Millions $ Premier manufacturer and operator in two distinct global business segments: Dissolving Pulp and Security Papers Sales Mix By Segment, FY 2016 Both segments have favorable end-market fundamentals Dissolving Pulp Segment ( DP ) serves Viscose Staple Fibre ("VSF") and rayon filament markets Fortress Specialty Cellulose ("FSC") ~ 165,000 ADMT mill located in Canada 24 megawatt cogeneration power facility supplies renewable energy to Hydro Quebec Security Papers, 48% Dissolving Pulp 52% Security Papers Segment produces banknote, passport & visa papers Landqart s ~10,500 tonne mill located in Switzerland Diverse international customers in Europe, Americas, Africa and Asia Sales Consolidated sales of over $331 million in All figures expressed in Canadian dollars All figures in metric tonnes or air dried metric tonnes (ADMT) 6 *Last Twelve Months at end of Q *LTM1Q 2017

7 Growing end-markets High barriers to entry Strong order book EBITDA margins anticipated to benefit from focus on improving cost structure 7

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9 Growth rate (%) (Ha/MT) 100% 80% 60% 40% 20% 0% -20% Textile Fibres Demand 84% Food Demand 63% Population Arable Land 42% 43% 34% 21% 24% 12% 20% 16% 6% 11% -1.2% -2.5% -3.7% -4.9% Per capita fibre consumption has risen from ~ 5kg in 1960 to almost 14kg in 2016 Textile fibre demand growth expected to increase by over 60% through 2030 VSF growth has historically outpaced textile fibre demand growth Arable Land Requirement Competition for other agricultural products results in less arable land available for cotton production VSF Irrigated Cotton Rain-fed Cotton Source: The Fiber Year 2015, ICAC, The Future of Cellulose Fibres. Franz Martin Hämmerle. (September 2011) 9

10 (L/Ha) Cotton acreage accounts for just 2.4% of the world's arable land 11,000 L of water to produce 1 pair of jeans from cotton, or 4 pairs of jeans requires a swimming pool quantity of water Cotton consumption is responsible for 2.6% of global water use, including all uses of fresh water for agriculture and personal consumption But cotton accounts for ~11% of global pesticide use and ~24% of global insecticides use 16,000 14,000 12,000 Annual Water Consumption 11,700 14,300 10,000 8,000 6,000 4,000 8,300 2, VSF GM Cotton Conventional Cotton Organic Cotton Source: World Wildlife Fund for Nature and The Future of Cellulose Fibres, Franz Martin Hämmerle. (September 2011) 10

11 2006 World Fiber Production 74.8 mt 2016 World Fiber Production Million tonnes (mt) Natural Fibers 30.1 mt 29.7% Cellulosic, 6.5 mt 6.4% Synthetics, 64.8 mt 63.9% Cellulosic 3.6 mt 4.8% Natural Fibers 32.9 mt 44.1% Synthetic 38.3 mt 51.1% 90.% 70.% 50.% % Growth in Volume 80.3% 69.3% 30.% 35.6% 10.% Source: The Fiber Year 2017 and Hawkins Wright, 2010 World Survey on Textiles & Nonwovens -10.% -9.4% -8.5% Cotton Natural Fibers Cellulosic Synthetics Total Fiber Production 11

12 Dissolving Pulp Cotton Linter Pulp Polyester Nylon, Acrylic, etc. VSF Cotton Synthetics World Textile Market 12

13 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Price ($US per Tonne) High correlation between prices of Cotton, VSF and Dissolving Pulp Rayon grade chemical cellulose demand grew by 7.2% in 2016 $5,000 $4,500 $4,000 $3,500 Historically VSF traded at a premium to Cotton Cotton Cotton currently priced at $48/t premium to mid grade VSF $3,000 $2,500 $2,000 $1,500 $1,000 $500 VSF Dissolving Pulp Recent cotton price trend reversal positive for VSF pricing $- Source: CCF Group as at July 6, 2017 Dissolving Pulp (CCF China) VSF Cotton

14 Price (Yuan/Tonne) VSF prices up ~ 3376 Yuan ($ 495 USD) since 2016 lows. VSF price increases are a leading indicator for DP price increases which remain below longer term trend price Jan-16 May-16 Sep-16 Jan-17 May-17 Source: CCF Group as at July 6, 2017 High Grade VSF 14

15 Dissolving pulp production capacity, ~165,000 ADMT/yr. Pulp mill capacity utilization provides significant margin upside potential as operations continue to improve Abundant and secure fiber and energy costs provide a competitive advantage Highly trained technical production staff to expand market opportunity Management focused on cost reductions, production improvement, power generation and product development to improve margins Fortress Specialty Cellulose Mill, Thurso, Quebec 15

16 Cogeneration power plant came on line September 2013 External sales to Hydro Quebec provide stable and predictable financial benefit 24 MW contracts with Hydro Quebec through September 2028 including incremental power increase through April 2040 Targeting over 5% power generation efficiency improvement in 2017 MWH 200, , ,000 11,513 Power Generation 19,778 19,571 19,641 $( 000s) 25,000 20,000 15,000 80,000 10,000 40,000 5,000 Based on 352 Days of Production Annually at Contracted Rate *Last Twelve Months at end of Q *LTM 1Q 2017 Power generation Cogen Revenue - 16

17 In November 2016, Fortress Paper announced a $23.4 million investment in a digester capacity increase and production of value added products The project includes the installation of a fifth digester which is expected to result in an incremental annual production capacity increase of 8,500 ADMT in 2018 and 17,000 ADMT in 2019 Strategic project of utilizing birch to manufacture dissolving pulp and development in hemicellulose derivative products. Birch grows abundantly across Canada and is considered an underutilized species of tree Funding for the project from non-repayable contributions by Federal and Provincial agencies should approximate $12.5 million with the balance from the Hydro Québec "Rate L" tariff, cash on hand and operating cash-flows 17

18 Millions $ Millions$ Sales ADMT 200, ,000 Sales totaled $48.7 million for Q compared to $41.2 million for Q ,000 80,000 The cogeneration facility generated $5.1 million in sales revenue from the generation of power in Q compared to $4.2 million for Q ,000 - ** *LTM1Q Sales DP shipments (10) (20) (30) EBITDA *LTM1Q 2017 EBITDA **Includes NBHK *Last Twelve Months at end of Q Operating EBITDA for the Dissolving Pulp Segment for Q was $8.3 million, compared to $6.7 million for Q The results of the first quarter were impacted by improvements in production rates and quality 18

19 Price ($US per Tonne) 3,000 *$850 CAD Delivered Cost 0.75 CAD/USD Dissolving Pulp **PO Price $US/CAD 800 1,067 1,200 1,600 1,600 2,133 EBITDA *$850 CAD Delivered Cost.90 CAD/USD Dissolving Pulp **PO Price $US/CAD ,200 1,333 1,600 1,778 EBITDA , , , , May-09 May-10 May-11 May-12 May-13 May-14 May-15 May-16 May-17 Dissolving Pulp (CCF Price $US) CAD *Medium term target, **Average Sales Price of Dissolving Pulp ($/admt, net of duties if applicable) based on 165,000 ADMT production 19

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21 Banknotes and coins in circulation in percent of nominal GDP As the supplier of Swiss franc banknotes, the SNB thus takes the view that the reports about the death of cash are not just exaggerated they are unfounded. The SNB has no plans whatsoever to do away with cash. Fritz Zurbrügg Deputy Chairman Governing Board Swiss National Bank World Bank Note Summit February 2017 Global demand for cash is growing at a rate of 4% 6% per year Multiple demand drivers: New or upgraded security features 80-90% of production is for replacement of physically aging banknotes currently in circulation Expanding ATM usage - 4.8% projected growth rate from Economic expansion in emerging markets The global market size for banknotes is forecasted to increase from $9.5 billion in 2016 to $11.2 billion in 2021 Sources: BIS, ECB, SNB, Currency News, Smithers Pira, Atmia Benchmarking study, and Management Estimates 21

22 Estimated Commercial Sector Security Substrate Production Capacity, 2014 Crane 7% Innovia 10% Louisenthal 22% Other 11% Landqart 11% Fabriano 15% De La Rue 13% Arjo 12% Source: Management Estimates. All Percentages Approximate Highly Concentrated and Disciplined Industry 22

23 Landqart Mill, Switzerland Invested ~$102 million in capital expenditures in the Landqart Mill since 2007 Sustained focus on product innovation builds reputation and market share which contributes to higher margins Continuous commitment to improving efficiency and operating costs CAPEX in property, plant and equipment as at March 31,

24 Strong market position, track record & established customer base Sole manufacturer of banknote paper for Switzerland and have manufactured banknotes for dozens of other countries including the Euro Produce passport and visa papers for several European, Asian and African countries State-of-the-art and highly efficient facilities Established reputation for producing banknotes of highest security and quality Well-positioned to increase market share and expand margins Strong order book with fixed orders from existing customers for production in 2017 and 2018 Proven and experienced operational management team Average of ~20 years experience in the security paper products industry Leading industry player with proprietary technology Proprietary Durasafe and Durafort technologies represent the next generation of banknote paper and provide a competitive advantage R&D and innovative security features well positioned to meet customers needs 24

25 Windows Security Paper With Watermark 35g/mˢ Transparent window 40 µm Polymer core 40 µm Durasafe three layer construction Plain security paper 35g/mˢ Zone of polymerinfiltrated paper Total grammage: 110g/mˢ Total Thickness: 40 µm 25

26 Swiss 50 Franc Swiss 20 Franc New customer for Durasafe announced June 8, 2017, the Central Bank of the Bahamas - the fifth country to produce a banknote on Durasafe substrate, shipping expected to commence in 2018 SNB launched the 9 th series of the Swiss Franc with the 50 Franc note on April 12, 2016, the 20 Franc note was issued May 17, 2017, the second in the six banknote series expected to be phased in by the SNB between 2016 and 2019 The National Bank of Kazakhstan released the new 20,000 Tenge note December 2015 Moroccan 25 Dirhams released in Dec 2012 was the worlds first banknote issued on Durasafe substrate Kazakhstan 20,000 Tenge Moroccan 25 Dirhams 26

27 A new finishing line has been ordered to eliminate the main bottleneck at the Landqart mill. Anticipated increase in finished product capacity up to 15% (depending on product mix). The finishing line is expected to start in Q Increased operational flexibility Improved quality, efficiency and reliability Reduced fixed and internal logistics costs 27

28 Millions$ Millions$ Sales (Security) *LTM1Q 2017 Sales Shipments EBITDA (Security) 8.1% 5.1% 4.0% 3.7% *LTM1Q 2017 EBITDA EBITDA % of sales *Last Twelve Months at end of Q tonnes 12,000 10,000 8,000 6,000 4,000 2, % 8.00% 6.00% 4.00% 2.00% 0.00% Sales were $43.8 million in Q compared to $39.7 million for Q The Landqart mill sold 2,836 tonnes of security paper in Q1 2017, compared to 2,474 tonnes for Q Operating EBITDA for the Security Paper Products Segment for Q was $1.5 million compared to operating EBITDA of $1.6 million for Q Due to the sale and leaseback transaction of the land and buildings, rent of $0.9 million has been incurred quarterly since the third quarter of Adjusting for rent, the first quarter of 2017 compares favourably to the prior year comparative period Results in the first quarter of 2017 were impacted primarily by product mix 28

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30 Millions $ Millions $ 400 Sales 300 Total sales were $92.5 million for Q compared to $80.9 million for Q *LTM1Q Yearly EBITDA Operating EBITDA was $7.5 million for Q compared to operating EBITDA of $6.4 million for Q (10) (20) (30) (40) *LTM1Q 2017 EBITDA 30 *Last Twelve Months at end of Q1 2017

31 Millions $ Cash was $57.9 million at March 31, Includes $17.4 million restricted cash Quarterly Cash Balance Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Q1-17 Repayments of principal for debt outstanding as at March 31, 2017 are required as follows: Year Q $ millions Thereafter 84.1 Total Cash and cash equivalents Restricted cash 31

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