People stand outside the AbitibiBowater paper mill in Grand Falls-Windsor, N.L., after the company shut down production on Feb. 12, 2009. A possible reopening of the mill has been shelved. (Tara Brautigam/Canadian Press)

A possible deal to reopen a defunct paper mill in central Newfoundland fell apart Tuesday after the company that was considering purchasing it said the provincial government breached its confidentiality.

"Motion Invest announced [Tuesday] that it no longer has any interest in the AbitibiBowater newsprint mill at Grand Falls-Windsor," said a statement from Motion Invest sent to CBC News Tuesday.

Motion Invest, a private equity firm with offices in Toronto that last year bought Lott Feinpappen GmbH & Co., said it was taken by surprise when provincial Natural Resources Minister Kathy Dunderdale said last Thursday that Lott was considering buying the mill.

"Motion Invest had been in confidential discussions to undertake a feasibility-viability study into creating a new non-newspaper print mill. However, due to recent and wholly incorrect reports and statements that it was close to a deal to purchase, Motion Invest has now decided to withdraw its interest," the news release said.

Motion Invest said it had already spent more than $75,000 on a preliminary review and site inspection.

Minister defends government

Reached by phone Tuesday after the statement was released, Dunderdale described Motion Invest's comments as "mind-boggling."

She said the release understated the seriousness of Motion Invest's involvement.

"They are saying they had only committed to a study and that is absolutely incorrect. That is not what the proposal that was put to us last week contained. There has never been talk of a study," Dunderdale said.

'They are saying they had only committed to a study and that is absolutely incorrect'—Kathy Dunderdale, natural resources minister

Dunderdale said that last week the company sent the province a proposal with many details, including when the mill would reopen and how many people it would employ.

In its proposal to government, Motion Invest asked for $52 million in loans and loan guarantees from the provincial government, she said.

Dunderdale said she may make the company's proposal public after she speaks with provincial justice officials.

She also defended her decision to confirm last week that Lott Paper was interested in the mill.

"We have said very little about it. My response was a reply to a direct question in the house of assembly when the leader of the Opposition asked had we received a proposal from this company," said Dunderdale. "I wanted to be as honest as possible and create enough caution so that people would know there was still a long row to hoe before we made a decision on the merits of this proposal."

Dunderdale said she didn't misspeak in a scrum with reporters last Thursday when she identified Lott Paper as the company that was considering buying the mill.

"The first contact we had was from Bob Roche on behalf of Lott Paper. The investment was going to be made by Motion Invest," she said. "The principal who was interested in making this investment was a principal with Lott Paper who would be bringing the knowledge and experience from Lott Paper to Grand Falls-Windsor, even though the investment was coming from Motion Invest."

Reached by phone Tuesday after Motion Invest's news release was made public, Toronto-based businessman Bob Roche said he had no comment to make but promised to do an interview with the CBC on Wednesday.