Residents of Port Hawkesbury, N.S. breathed a sigh of relief on Saturday after a deal to reopen the town’s paper mill was salvaged.

News that Pacific West Commercial Corporation agreed to buy the 50-year-old NewPage paper mill came one day after the bid for the company’s purchase collapsed, leaving local residents devastated.

The paper mill is a large employer in the town of 3,300.

Late Saturday, Nova Scotia Premier Darrel Dexter announced that the government negotiated a new deal with Pacific West Commercial Corp., which has offered $33 million for the facility.

"This government has worked for a year now to restart that mill," Dexter said in a statement. "We didn't do this because it was popular. We did it because it was the right thing to do."

The mill shut down last September, throwing some 600 people out of work and affecting another 400 forestry contractors.

At the time, NewPage cited the high Canadian dollar and increased rates for shipping and electricity as the reasons for its closure.

The provincial government has since spent $124.5 million in a funding package along with $36.8 million to keep the mill in a hot idle state.

Dexter said the money should be repaid in 12 years.

Late Friday, Pacific West Commercial announced that an unfavourable tax ruling from the Canada Revenue Agency made the purchase of the mill economically unviable.

News that the deal had collapsed came as a huge disappointment to Port Hawkesbury residents.

“It’s pretty awful,” former mill employee Pat MacKinnon told CTV Atlantic before the deal was salvaged. “I worked there for 35, 36 years. I feel for the ones that thought things were going to work.”

Port Hawkesbury Mayor Billy Joe MacLean said the whole town was optimistic about the new deal.

“I must say, I didn’t sleep well last night,” he said.

Other residents said they had turned down other job offers with the expectation that the mill would reopen.

However, Dexter said the government and the company resumed negotiations Saturday and eventually came up with a revised agreement.

The mill opened in 1962.

With files from The Canadian Press