SEARSPORT – A Brazilian company has begun building a $5 million facility at Mack Point that will allow it to import a liquid clay used in the paper industry.

Para Pigmentos SA, based in Rio de Janeiro, Brazil, is leasing a site owned by Sprague Energy near the port facility.

The company will construct two holding tanks, a processing building and a ship unloading system to pump kaolin from ships that dock at one of the two state-owned piers at Mack Point.

Kaolin is a clay, similar in consistency to paint, used to coat paper for glossy products, said Mike Bush, director of community economic development at Eastern Maine Development Corp. in Bangor.

A slurry made up of 85 percent clay mined in Brazil and 15 percent water, the product is sucked out of a ship’s hold, he said.

Agents are added to inhibit mold and prevent the clay from binding, but for the most part, it is a raw natural resource, Bush said. He said the material is benign.

Bush and a consultant working for Para Pigmentos attended the Searsport selectmen’s meeting Tuesday night to ask the town about setting up a tax-increment financing package for the company.

Known as TIFs, the arrangements let towns shelter new valuation from consideration for school aid and county tax purposes, while allowing property taxes from a new development to be targeted for some economic development activity in the municipality.

A TIF also allows the municipality to return some or all of the property taxes to the business for a period.

Town Manager Sandra Blake said Wednesday that selectmen support the development, but are in the early phases of considering the TIF. “We need to get a lot more details,” she said.

Bush said Para Pigmentos has indicated that if it gets a property tax break through the TIF, a second phase of construction, valued at $3 million, might follow.

“If they receive some help, they could proceed with the second phase,” Bush said.

Initially, five jobs will be created with average base wages of $35,000, according to a statement from EMDC. An additional three jobs are planned if the expansion follows in 2007.

SW&B Construction of Auburn is the general contractor on the construction of the facility, though much of the subcontracted work will be awarded to local companies, according to EMDC.

Blake said the initial construction was represented before the town planning board as a Sprague project. Sprague, based in Portsmouth, N.H., handles liquid and bulk cargoes such as heating oil and propane.

Sprague’s Searsport terminal manager was unavailable for comment Wednesday.

Bush said Para Pigmentos plans to bring one or two shiploads a month into Searsport. The facility is designed to handle 250,000 tons per year. The product will be refined and shipped to mills throughout New England and eastern Canada.

Some 100,000 tons are destined for the International Paper mill in Bucksport, he said. The mill produces glossy, coated paper that uses kaolin for such customers as Time, Newsweek and Sports Illustrated magazines.

The kaolin would be transported from the storage facility by truck or railroad car, Bush said. Para Pigmentos operates a similar import facility in South Portland, he said.

With the paper industry seeming to struggle in Maine in recent years, the investment by a business supplying mills might come as a surprise to observers.

“I guess you’d have to see it as a positive sign,” Bush said.