Two days after a fire destroyed a plywood mill that was the main employer in the northwestern Ontario town of Nipigon, the operation's owners say they plan to rebuild.

The Multiply Forest Products mill employed 130 workers in the town of 1,800. Only a month earlier, it had been bought by a local management firm — and employees loaned $300,000 of their own money to help modernize it.

On Thursday, the mill's owners met with employees and Nipigon Mayor Richard Harvey for the first time since the blaze.

Nipigon Coun. Hoss Pelletier told CBC.ca that the owners said they plan to rebuild the plant, which produced floor underlay, once the insurance paperwork was out of the way.

Pelletier estimated the process would take at least a year and leave employees without a job for an extended period of time.

"As a councillor and a local business owner, I anticipate that the upcoming time may be difficult," he said.

Despite the long delay, Pelletier called the plans to rebuild "quite encouraging."

Town officials have been busy talking with representatives from the provincial and federal governments to discuss options and potential aid.

Firefighters drained water supply

The fire forced the town was forced to declare a state of emergency on Tuesday when the hospital and homes ran out of water.

Water reservoirs in the area were emptied by the firefighting efforts but were back at capacity by Thursday.

However, the town was still under a boil water advisory after the local health unit conducted sample tests in Thursday morning.

Mill was being revitalized

The fire came a month after the local management firm bought the 50-year-old mill from Columbia Forest Products with plans to upgrade it.

"There was a lot of elation and excitement for the new equipment. You could say the community was riding a bit of a high," said Pelletier.

Beside the $300,000 loan from employees, the province offered to throw in $400,000 to help modernize the mill.

Pelletier said the fire has hit the town hard and caused many residents to doubt the future of Nipigon.