Growing strength seen in appeal of pulp mill

A COMPELLING business case would be needed to entice potential buyers of the Gunns pulp mill site to take on the investor-unfriendly environment in Tasmania, according to one financial analyst.

But the economic case for a pulp mill may benefit from the weaker Australian dollar, an affordable supply of resource and a lower capital cost base.

Launceston-based financial analyst Tony Gray said that if someone took on the project, they would have a better chance of turning a profit than failed timber company Gunns.

"It's not the original proponent who makes the money, it's the person who comes in and picks up the pieces because they've been able to buy the project for a lot less money," Mr Gray said.

"If you can secure a cheap supply of woodchips, that would help the economics of building a pulp mill, plus the fact that you've been able to buy the project much cheaper."

Receivers for Gunns extended the deadline for expressions of interest in the pulp mill assets, giving interested parties more time to gather information.

While it is unknown who the potential buyers are, Mr Gray said it was likely to be overseas companies that may create a partnership with an existing pulp mill operator.

The plantations were expected to mature in 2015, meaning a large supply of resource would be available and it may not be necessary to ship supply from interstate, reducing costs for a future buyer.

A spokesman for KordaMentha said earlier in the week that the expressions of interest would be analysed by the receivers before the end of the month and it was likely that a second full due diligence stage would be entered.

Mr Gray said it was hard to gauge whether the project would be an economic goer without seeing other figures.

"Actually knowing the cost of building a pulp mill today, and the cost of buying the resource, nobody outside the due diligence process would know the numbers," Mr Gray said.


Discuss "Growing strength seen in appeal of pulp mill "

Please note: All comments made or shown here are bound by the Online Discussion Terms & Conditions.