A forestry town in northern New Brunswick will receive $12 million in government funding to help its transition following the closure of its mill.

Premier Shawn Graham announced on Thursday that Dalhousie will receive $8 million in funding from the federal government and $4 million from the province to establish a community action plan.

The funding is meant to support projects aimed at infrastructure, labour market development and economic diversification as the community transitions.

The AbitibiBowater Inc. mill in the small coastal community of Dalhousie closed in January as part of company downsizing.

New Brunswick's forestry industry has been hard hit by high fuel costs, a slowing U.S. economy and the competitive disadvantage of the high Canadian dollar.

Of 85 mills that were running in New Brunswick in 1995, only 16 are still fully operational. The others have permanently or temporarily closed or are running at reduced capacity.

The Dalhousie mill, which began operating in 1928, was a cornerstone of the local economy. Beyond the 330 people directly affected by the closure, there were other job losses in the town of 3,600 because many local firms supplied products to the mill.

Olin Corp. also announced that it would shut down its Dalhousie chemical manufacturing plant by the summer, costing the town another 100 jobs.

The government funding will be available for projects in the entire Dalhousie-Restigouche East region.

Graham and his Liberal cabinet were in Dalhousie on Thursday for a cabinet meeting and to make the announcement.

"We came here today for a very simple reason," Graham said. "We want to understand firsthand what the people of this region are experiencing."

Dalhousie Mayor Clem Tremblay said he was pleased to hear about the new funding but hopes there is more financial aid to come.

"This special funding will assist us in setting up a plan to help us move forward," Tremblay said.

Tremblay has maintained that despite the closures, the town still has a future because of its port, the local tourism industry and the potential to attract new industry.

While the politicians met, about 15 demonstrators gathered outside the meeting to protest the government's recent decision to eliminate early French immersion in the province's English schools.