The mill, which will be built in Opatovice, and scheduled for start-up in 2007. Its main product will be uncoated supercalendered paper for magazines. It will also produce improved newsprint and have a total capacity of 380,000 tonnes per year.

The Finnish paper producer announced in August that it was looking to build a 400,000-tonnes-per-year mill, with Opatovice a likely site.

Myllykoski president and chief executive Sverre Norrgrd said the decision to build the mill in the Czech Republic had been made in response to customers' requests.

The paper mill is the first large-scale forest industry project to be undertaken by a Finnish company in Eastern Europe.

The firm has indicated that once full production at the site is reached, it may look to rationalise its current operations.