Juken New Zealand (JNL) is planning to make a "significant investment" to upgrade and modernise its triboard mill in Kaitaia but job losses are likely.
The company said the proposed investment would make the 30-year-old mill modern, safer and return it to profitability. Parts of the mill would be shut down during that process, which would result in a more efficient operating structure, while new technology and machinery would streamline production.
The company met with employees on Tuesday about the proposal.
New Zealand general manager Dave Hilliard said although the proposal involved some "hard decisions", it would give certainty to the community about the long-term future of the mill.
"The triboard mill is important to JNL and to Kaitaia, and we want to keep it open for the long term, which is why we're proposing to make a multimillion-dollar investment in upgrading the site.
"This investment will result in a modern, safer, more efficient mill that can continue to be one of Kaitaia's largest employers well into the future.
"We are being upfront, although the steps required to be taken to address the mill's issues are unfortunately likely to result in some job losses."
Three major issues relating to plant, people and production made it difficult for the mill to operate sustainably.
"The machinery and technology are old, despite investment in recent years," Hilliard said.
"The site presents health and safety challenges that need to be urgently addressed, and the mill's production is severely constrained by inadequate and uncertain log supply in Northland."
Because of these issues, the mill is making a substantial loss.
Streamlining production was likely to impact staffing levels. The company employed about 250 fulltime staff in Northland, and the proposal would reduce fulltime numbers at the triboard mill.
The precise number of roles affected would not be known until consultation with staff and unions had been completed and a final decision made.
Far North Mayor John Carter was sorry to hear that some jobs might be lost, but welcomed Juken NZ's plans to modernise its triboard mill as great news for Kaitaia.
"Juken's mills are vital to the Kaitaia and Far North economies. The company is a very important citizen, and its investment in the triboard mill's future is hugely positive."
The council would be working with the company over the supplying of water and other issues, he added.
A major problem facing the mill, a shortage of logs and an uncertain supply picture in the future, was not one that JNL alone could remedy.
"We are in early but constructive discussions with the Government about the shortage and how it can be solved. This is an issue that is impacting all Northland mills, and creating real uncertainty around wood processing in the region," Hilliard said.
He acknowledged the efforts of the Minister of Forestry Shane Jones, who was actively working with the company to help resolve the supply shortage, and was a strong advocate for the forestry sector.
Meanwhile, the consultation with Kaitaia employees, which began on Tuesday, would run for two weeks.
The company would then consider feedback on the proposed changes before making any final decisions on the future structure of the triboard mill.