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New Forest buys Gunns plantations says no to pulp mill

The new owner of vast tree plantations previously held by failed timber company Gunns Ltd will focus on exporting the resource as woodchips and is sceptical about prospects for a pulp mill in Tasmania. Sources: The Australian, ABC News

Receivers KordaMentha announced Sydney-based timber investment fund New Forests had purchased almost 100,000 ha of Gunns’ plantations, two export woodchip mills and port access.

New Forests purchased the assets in a competitive process but was not interested in buying Gunns’ permit to build and operate a pulp mill in the Tamar Valley, for which the plantations had been intended as feedstock.

KordaMentha said it would continue to negotiate with several parties who had expressed an interest in the pulp mill permit and is expected to eventually find a buyer at some price.

However, any proponent of the $2.5 billion project would now need to secure a wood supply agreement with New Forests for all of the 100,000 ha, in addition to a further 100,000 ha held by a variety of other entities.

New Forests chief executive David Brand said his company – understood to have paid about $330m for the Gunns assets – would focus on chipping the plantation timber and exporting it to Japan, China and India.

Dr Brand was sceptical about the economics of the controversial pulp mill proposed by Gunns, which sank into liquidation in March last year after being placed into administration in September 2012.

“A lot of pulp and paper companies that are listed are trading at below their net asset value, so why would someone invest in new pulp mills?” Dr Brand said.

“People have been talking about someone investing in the (Gunns) pulp mill for 10 years, but it hasn’t become a reality and no one has approached us for a wood-supply agreement.”

However, with new pulp mills coming on line in Asia, and the growth of the demand in China and India, he expected a “very strong recovery” in Australian woodchips exports.

“There is an expectation that the overall market demand (for woodchips) will increase by about 25% over the next two years,” he said.

“There is an increasing move for Vietnam to shift to domestic processing, rather than woodchip export, and … that would be significant opportunity for Australia to fill.”

He would not rule out considering any request for a wood supply agreement from a pulp mill proponent.

However, he suggested veneer and engineered wood products were a more likely form of future down-stream processing in Tasmania.

Dr Brand confirmed New Forests remained interested in further acquisitions but would not comment on speculation it intended to purchase Forest Enterprises Australia.

KordaMentha is still hoping a buyer can be found for the pulp mill permits.

Spokesman Michael Smith said several parties expressed interest in the pulp mill site and permits on a “standalone basis” and confidential negotiations will continue.

State Parliament was recalled before the March election in an effort to make the permits more attractive to investors.

Seven companies from Australia, the UK, the US and Asia made up the list of final bidders for Gunns’ assets.

The Tasmanian Premier and Opposition leader want to meet New Forests to discuss the future of timber processing in the state.

Resources Minister Paul Harris welcomed the sale, but admited he would like to see more value added to Tasmanian timber.

“There can be, and there are better processes, we will drive that, we will work towards that.”

Opposition leader Bryan Green disagrees that a pulp mill may never be built.

“There will be demand for pulp on into the future, that’s been forecast, there will be other mills built around the world, we just hope it’s built in Tasmania,” he said.

Tasmanian Greens leader Kim Booth was pleased New Forests has not bought the pulp mill permits.

“I think for Tasmanians that’ll be a good thing because I understand they’re not interested at all in a toxic pulp mill proposal,” he said.

Australian Greens Leader Christine Milne is not surprised the permits remain unsold.

“The reality is the market knows it is valueless,” she said. “There is no social licence for a pulp mill in the Tamar Valley, it is toxic, it always was toxic and so now we’ve got a reality check which is the value was only in the plantation estate.”