Image for Gunns’ sawmill future at risk

GUNNS Ltd’s newly acquired Bell Bay sawmill faces closure if the company can’t secure the softwood log allocation needed to make it viable, says managing director Greg L’Estrange.

The timber company’s continued Tasmanian presence would also be in jeopardy if the proposed $2.3 billion pulp mill did not go ahead, Mr L’Estrange said yesterday.

Mr L’Estrange said that all the company’s assets were up for review if they were not economically viable.

He said that the company needed a timber allocation of between 450,000 to 600,000 cubic metres to operate the former Forest Enterprises Australia mill at Bell Bay efficiently and competitively

The softwood timber allocation attached to the former FEA mill that Gunns acquired with its $48 million purchase was 290,000 cubic metres.

Gunns closes its last Scottsdale sawmill today to concentrate its operations at the more modern Bell Bay facility.

It has said that there will be jobs for at least 50 of the Scottsdale workers on the premise that the new mill would run two shifts to process the logs from both the old Scottsdale mill and the Bell Bay allocation.

“There might not be a mill there in the near future if we can’t get the allocation,” Mr L’Estrange said.

The 135-year-old Tasmanian company’s continued presence in the state was tied inextricably with the proposed pulp mill, Mr L’Estrange said.

“Without the pulp mill, I don’t think its (Gunns’) presence would be a significant one,” he said.

“We know where the business is going - there are a whole range of options available but we know that the pulp mill is the (viable) project for the company. That is what we are focused on.”

Mr L’Estrange said that the company had been negotiating with Forestry Tasmania for several weeks over the future of the timber allocation from its Scottsdale sawmill.

He said that Scottsdale had been “decimated” by poor timber allocation policy a few years ago and he hoped for a better result this time.

Mr L’Estrange said that Gunns was still talking with two financiers over funding for the pulp mill project.

The company has only four months to lock in finance and make a substantial start on construction before state construction permits for the mill expire in August.

The timber company was maintaining cash flow with revenue from sawmill operations and from its plantation management business, Mr L’Estrange said.

He still expected the company to feel the effects of the Japanese earthquake and tsunami, although Gunns did not deal directly with the mills shut by the disaster.

The company had not made any new sales of surplus infrastructure in recent weeks, Mr L’Estrange said.

“That concerns me,” he said.

“The issue is of a large value in incumbent assets on our balance sheets - there are too many structural, non- achieving assets.”

When asked whether he would still be with Gunns in August - now a key pulp mill deadline - Mr L’Estrange replied: “Of course I will be.”

Full Examiner story HERE