New Forests refuses to take on Gunns mill

THE prospect of a world-scale pulp mill being built in Tasmania’s Tamar Valley has been diminished.

THE prospect of a world-scale pulp mill being built in Tasmania’s Tamar Valley has been diminished — but not extinguished — by an initial failure to find a buyer for the project permit.

Receivers of Gunns Limited, KordaMentha, are finalising the sale of the failed forestry company’s plantations — previously earmarked to feed the mill — to Sydney-based timber investment fund New Forests.

New Forests was not interested in bidding for the permit to build and operate the proposed $2.5 billion pulp mill, and successfully competed against two bidders who were seeking both plantations and the mill permit.

Without the 100,000ha plantation estate to feed the mill, the project is not seen as viable, with industry sources saying “every stick” of available plantation in Tasmania was needed for the mill to achieve production of 1.3 million air-dry tonnes of pulp a year.

Industry sources said the failure to sell the plantations and mill permits and 650ha project site as a package meant the stalled project was less likely to proceed.

However, it was still possible that one of the two unsuccessful bidders interested in the permit could negotiate a joint venture or wood supply agreement with New Forests, then buy the permit and develop the mill.

“It will now obviously be a case of whether anyone does buy the pulp mill permit and, if they do, whether or not they can enter into a supply agreement with presumably New Forests,” said Terry Edwards, chief of the Forest Industries Association of Tasmania.

Some in the industry believe New Forests, understood to have obtained the plantations and two woodchip mills for about $330 million, is more likely to have the trees harvested, woodchipped and exported.

However, Mr Edwards said even if this was the case in the short term, it was still possible a pulp mill proponent could persuade New Forests to enter into a longer-term wood supply deal for the project.

“New Forests is an investment firm that buys to make money, and to make money you need to look at the available opportunities,” Mr Edwards said.

“If the immediately presenting opportunity is harvest, chipping and exporting, then certainly they will do that with the trees that are mature enough at the moment.

“But I imagine if they were approached by an investor who wanted to buy the pulp mill permit and said ‘we will improve the return you can get on those trees if you enter into a long-term supply agreement with us’, then … you would have a close look at that.”

The Weekend Australian understands that packaging and paper-maker Visy has been among the companies showing an interest in the pulp mill assets. However, Visy would not comment and is understood to have had concerns about the level of contention surrounding the project and the apparent rekindling of the so-called forest wars in Tasmania.

It is also unclear whether New Forests, which prides itself on ethical investment and top-flight certification, would be willing to join a project that remains controversial due to its fast-tracked state approval.

New Forests and KordaMentha declined to comment. The receiver said it was “ finalising negotiations”. A decision on the sale is expected on Tuesday or Wednesday.