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The former Cottage Craft Woollens building on Water Street, which was undergoing renovations, burned to the ground shortly after 3 a.m.
"The investigation has led police to believe the fire may have been deliberately set," RCMP Cpl. Dan Smith, of the Sgt. George, detachment said in a statement on Monday afternoon.
Fire crews were called to the vacant building at 3:05 a.m., said the town's fire chief Kevin Theriault.
About 45 firefighters from four departments responded, he said. "Blacks Harbour came in with aerial to assist us, and Oak Bay and St. George."
It took about four hours to get the blaze under control. "It did have a sprinkler system; unfortunately it wasn't activated," said Theriault.
The…