In a statement to the Australian Stock Exchange, Gunns said that the company had made a decision to proceed with one company to develop a `Joint Venture Agreement' for the project.

Gunns said it was ``moving forward positively with the preferred partner on that basis''.

``The Company involved has significant international experience in the pulp and paper sector,'' Gunns said.

``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 has not revealed which company it is in discussions with or where it is based.

The Tasmanian company's share price has shot up 7.22 per cent since the announcement.

Tasmanian Premier David Bartlett welcomed the news as a positive step forward in creating new jobs and ensuring that a world’s best practice pulp mill would be constructed.

“This Government supports the development of value adding and environmentally sustainable projects.

“In the current economic climate it is important that job creating projects, such as the pulp mill are brought on line as soon as possible," Mr Bartlett said.