Abstract: A method and apparatus for comminuting and drying material utilizing a closed-loop cyclonic system including a cyclonic comminution chamber, and further incorporating heated or dried air for desiccation of the material, as well as reducing the air pressure of the system to provide enhanced drying of the material. The present invention further contemplates to a cyclonic mill system configured to fiberize and dewater cellulose and other materials in a highly efficient and cost effective manner. The present system employs indirect heat drying and fiberizing for the continuous drying and processing of moist cellulose (i.e., paper) material by cyclonically agitating same in a hot air flow via a specially designed cyclonic mill, which is configured to effectively dewater and decimate wet cellulose material from a variety of sources for form fiberized cellulose material suitable for thermal insulation.