Employees of the QualitYarns NZ Ltd's woollen mill in Milton will find out their future this afternoon.
Managing director Mike Barra said the company had issued redundancy notices to all 28 employees last Thursday, coming into effect tomorrow.
A meeting will be held this afternoon to advise how many workers would be losing their jobs or getting temporary contracts.
Mr Barra said some staff would be re-employed on a casual basis to satisfy immediate needs of some customers. This would be assessed weekly.
In a written statement, Mr Barra said it had been an "extremely difficult'' decision to make and referred to the economic climate of the country and the rising production costs.
"We've been working hard to find a solution to our problems and we're still hoping we can find a solution to move forward.''
He said staff would get redundancy payments despite it not being in their contracts.
The mill has been a major employer in the town since the Bruce Woollen Mill was established 1897. Milton has a population of 2000.
Bruce ward councillor Gaynor Finch said yesterday the closure had hit Milton hard.
"It's really sad that it is closing. Twenty-eight jobs - that's a lot for a small town like Milton."
The mill has been a major employer in the town since the Bruce Woollen Mill was established 1897. Milton has a population of 2000.
Mrs Finch said she knew of one man who had worked at the mill his entire life.
"I feel for Mike Barra [managing director]. It would not have been an easy decision to make.
He's been very involved in the Milton community and everyone in the town was really proud of their working mill."
Murray Grant, who farms near Milton, said he would be sorry to see the mill close.
Attempts to contact Mr Barra were unsuccessful, but the Otago Daily Times understands a statement is expected to be released today or tomorrow.
Ken Young, of First Union (formerly National Distribution Union), said the mill was completely "un-unionised".
Former Clutha mayor Juno Hayes, who lives in Milton, said he was sad to hear of the mill's closure but understood there were some "expensive issues" to fix on the site, such as the boiler.
"Mike Barra has done a good job and run a good business but with world markets changing and more work done offshore in China, it's harder for smaller businesses to keep running. For those who have lost their jobs, it's going to be a tough time."
Mr Hayes said he did not know of any jobs around Milton but said one of the sawmills nearby might be looking at expanding and hiring more staff next year.
The Bruce Woollen Mill was bought by Alliance Textiles in 1962, and after the mill closed in 1999, it was later bought by its present owners.
The company opened the mill on January 17, 2000, with 11 staff, and by the end of its first year employed 35 people. It was the only mill in New Zealand producing woollen, semi-worsted and worsted yarns.
