Gunns defiant, analysts say solo a no-go

Gunns defiant, analysts say solo a no-go
Gunns defiant, analysts say solo a no-go

MARKET analysts say that Tasmanian timber company Gunns does not have the means to finance its $2.3 billion pulp mill alone.

But Gunns managing director Greg L'Estrange said yesterday that the company planned to develop the mill on its own if a joint- venture partner could not be found.

Mr L'Estrange said that it was not a matter of "if" the pulp mill would be built but "when".

He said that there would be a complete divestment of all non- core assets including the Green Triangle softwood plantations in Victoria and South Australia, all hardwood sawmilling activities, softwood sawmilling and timber distribution operations and partial sale of hardwood plantation assets to raise the cash.

But there had been no recent asset sales despite speculation for several weeks about an imminent deal on the Triabunna woodchip mill.

Gunns would shut hardwood sawmills that were not sold, Mr L'Estrange said.

Analysts said the fund-raising plan that Gunns took to the Australian Securities Exchange early yesterday was a last-ditch effort from a struggling company to get the project - which has been on the agenda since 2004 - started.

Serious concerns were expressed that Gunns would struggle to make its debt repayments in the next six months.

That was before considering the estimated $20 million required to make a serious start at the Bell Bay site before state government construction permits run out in August.

The company must find $45million for a short-term loan repayment as well as a scheduled $10 million finance repayment by the end of June with $10 million quarterly repayments due again in September and December.

Opposition forestry spokesman Peter Gutwein said that up to 350 jobs were in jeopardy at the company's four remaining hardwood mills if Gunns shut rather than sold them.

Gunns shares jumped from 34.5¢ when they opened yesterday to as high as 44.5¢ before closing at 42¢.

Mr L'Estrange described the market update to the ASX as a "clarification of the path that we are on".

He said that it was developed against a background of expected reduced demand for hardwood chip export volumes, an ongoing adverse effect on hardwood and softwood chip margins and reduced levels of hardwood and softwood timber product sales.

He said that the decision for Gunns to fund the pulp mill on its own if necessary was a serious plan.

"We wouldn't have included it in the ASX update if it wasn't," he said.

He said that he was also confident that the company could meet its loan repayments even though it had been forced to call on a $45million short-term advance that has to be paid back by the end of the month.

Mr L'Estrange rejected suggestions the company was being pushed into action by the August permit deadlines or that a takeover offer would come as a welcome relief in the current climate.

"We are doing everything that we can to meet the deadline but we have been since May last year," he said.

"We are a publicly-listed company so that the takeover question is asked by people every day.

"This is a project that will get across the line and will be a credit to Tasmania."