No, lumbermills require the forest to be present, and it remains there when the lumbermill is built. The forest will still give the health bonus, and the happiness bonus under enviromentalism.
That's basicly the use of the Lumber Mill, getting that tile upgraded without losing that health bonus, if you have a lot of flood plains some forests with lumberwills van work wonders.
The chance that forest will grow in an unimproved tile is based also on the amount of unimproved forest on it's side (see CvPlot::doFeature() in 1.61 sdk). Lumbermill is an improvement.
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