Gunns agrees pulp mill preparation deal

GUNNS is to begin bulk earthworks on its $2.3 billion Tamar pulp mill, saying it is in final financing talks on the long-delayed project.

By InvestSMART · 27 Aug 2011

By InvestSMART ·
27 Aug 2011

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GUNNS is to begin bulk earthworks on its $2.3 billion Tamar pulp mill, saying it is in final financing talks on the long-delayed project.

A seven-month contract was awarded to a John Holland-Hazell Bros joint venture to prepare a platform for the controversial mill, the forestry company said yesterday.

The company said it was engaged in final negotiations for the key terms of the equity financing structure for the project, first unveiled nearly seven years ago.

Gunns has claimed to be near a financial close in the past. But in an update for analysts, it said equipment supply contracts for the mill were to be finalised by December 31 and project finance by March 31 next year.

A beginning on earthworks, and more than $200 million in other spending, is said by managing director Greg L'Estrange to fulfil a Tasmanian environmental permit demand for "substantial commencement" by August 30.

The company is yet to reach a settlement with the state government for giving up future rights to public native forests, a spokesman for premier Lara Giddings said.

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Frequently Asked Questions about this Article…

What has Gunns announced about starting work on the $2.3 billion Tamar pulp mill?

Gunns has announced it will begin bulk earthworks on the $2.3 billion Tamar pulp mill, saying it is in final financing talks for the long-delayed project and has started site preparation activity.

Who won the contract to prepare the Tamar pulp mill site and what will the contractor do?

A John Holland–Hazell Bros joint venture was awarded a seven-month contract to prepare a platform for the Tamar pulp mill site, carrying out the bulk earthworks required for initial construction.

What is the current financing status of the Tamar pulp mill project?

Gunns says it is engaged in final negotiations on the key terms of the equity financing structure. The company also set target dates for equipment supply contracts to be finalised by December 31 and project finance by March 31 next year.

Why is Gunns beginning earthworks now — is there a permit or deadline involved?

Yes. Gunns’ managing director said beginning earthworks, along with more than $200 million in other spending, is intended to meet a Tasmanian environmental permit requirement for 'substantial commencement' of the project by August 30.

Has the Tamar pulp mill been a recent proposal or a long-standing plan?

The Tamar pulp mill is a long-standing plan — the project was first unveiled nearly seven years ago and has been described as long-delayed.

Has Gunns reached an agreement with the Tasmanian government over native forest rights related to the mill?

No. According to a spokesman for Premier Lara Giddings, Gunns has yet to reach a settlement with the state government on giving up future rights to public native forests.

What key dates and milestones should everyday investors watch for in the Tamar pulp mill rollout?

Investors should watch the completion of the seven-month earthworks contract, the company’s stated deadlines for equipment supply contracts by December 31, project finance by March 31 next year, and the August 30 requirement for 'substantial commencement' under the environmental permit.

How could these site works and financing developments be relevant to investors tracking Gunns?

For everyday investors, awarded contracts, visible site preparation, the company’s planned >$200 million spending to meet permit requirements, and progress toward finalising equipment supply and project finance are tangible indicators of project momentum to monitor.