''All the indications I'm getting at the moment is that it's European,'' said Pulp and paper industry analyst Robert Eastment, who publishes the Hobart-based Industry Edge.

''I am still open to the idea it could well be someone out of China.''

Swedish pulp and paper manufacturers Sodra had been viewed as a possible partner for the project, but talks between the companies were reported to have broken off over differences on the environmental standards used.

''Over the past six months, Gunns has progressed a detailed process to identify partners for potential participation in the Bell Bay pulp mill,'' the company said in a statement to the Australian Securities Exchange today.

''Gunns has now made a decision to proceed with one company to develop a joint-venture agreement for the project, and is moving forward positively with the preferred partner on that basis,'' the company said.

Hong Kong-based Nine Dragons Paper, the world's largest paper maker, could be among possible Chinese players, Mr Eastment said, in part because the company wants to move upmarket.

''They're all in the middle road of carton boards but want to move to the top end of carton board,'' used in packaging items such as pharmaceutical and perfume products, he said.

Higher-end carton packaging requires the better quality pulp of the variety expected to be produced from the Tasmanian mill.

Gunns said in its release, that ''the company involved has significant international experience in the pulp and paper sector,'' without elaborating.

''In parallel with the joint-venture process, Gunns has continued to progress negotiations with project finance banks, with market conditions in the sector having recently improved,'' Gunns said.

Gunns' ability to finance the project has been hampered by ANZ bank's decision to pull out of banking consortium, and by the later outbreak of the global financial crisis, which deterred lenders to ventures viewed as of higher risk.

With markets rallying since March and the appetite for deal making returning, the issue between Gunns and potential partners is thought to centre on control of the proposed entity.

Environmentalists objecting to the impact of the pulp mill on Bell Bay, in northern Tasmania, have mounted a long-running campaign against the project.