In an Australian Securities Exchange statement the Launceston-based timber company said the pulpwood would come from managed investment scheme plantations formerly controlled by Great Southern.

Gunns this week completed the acquisition of the failed investment company's timber resource, which includes more than 40,000 hectares in the Green Triangle area of Victoria and South Australia.

Gunns is building new port loading facilities at Portland in western Victoria.

Its Bell Bay pulp mill was originally to use all Tasmanian timber, with 60 per cent coming from plantations and 40 per cent from native forests. It said that after five years the mill would move to 80 per cent plantation timber.

Yesterday's announcement meets one of the key requirements of Swedish company Sodra, which is widely tipped to be Gunns preferred equity partner for the controversial $2.5 billion project.

Sodra said in June it would only become involved if the Tasmanian mill used all plantation timber and was chlorine free. The mill has been designed to be only partially chlorine free.

Gunns chairman John Gay told the ASX that discussions with equity partners and bankers for the mill were "continuing positively".

"The Bell Bay mill has always been planned and designed as a plantation-based mill.

"However, with Gunns' existing resources, it was not possible for Gunns to guarantee supply to the mill of 100 per cent plantation timber until five years after commencement of mill operations," Mr Gay said.

"Securing the Great Southern resource is an exciting new development for Gunns that allows us to accelerate our plantation strategy to supply the Bell Bay mill with 100 per cent plantation from mill start-up."

Mr Gay said the move to 100 per cent plantation timber would make the Bell Bay mill consistent with other bleached kraft pulp mills in South America and "should mitigate any concerns of stakeholders regarding fibre supply to the Bell Bay mill".

Both the State Government and Liberals welcomed the announcement.

The Tasmanian Greens and The Wilderness Society and lobby group Our Common Ground said more needed to be done to protect Tasmania's native forests.

Wilderness Society pulp mill campaigner Paul Oosting called on Gunns to renegotiate the pulp mill wood supply deal with Forestry Tasmania to exclude any native forest woodchips.

Gunns has said the pulp mill could be expected to consume more than four million tonnes of pulpwood a year to produce about one million tonnes of paper pulp.

The company says its Green Triangle resource is expected to generate an annual woodflow of up to one million green metric tonnes a year.