7 August 2012 – It had bad vibes from the start but now greenies everywhere will rejoice that Gunns’ proposed pulp mill in Tasmania is almost certainly an idea whose time has lapsed for good.
The company on Monday told the Australian Stock Exchange that it will probably record an impairment in the range from $700 million to $800 million in its financial statements for the financial year ended 30 June 2012.
“The impairment is expected against a range of the Company’s forestry related assets including its Tasmanian land and plantation estate, its interests in Managed Investment Schemes and the development costs associated with the Bell Bay Pulp Mill Project.”
Australian Greens Leader Senator Christine Milne said, “The Tamar Valley pulp mill is dead in the water and is not now or has ever been economically viable.”
Tasmania now faced a Gunns “clearing out sale” as the company tries to salvage some of its assets.
New Greens senator Peter Whish-Wilson, who took over former Greens Leader Bob Brown’s seat said: “For the last eight years the Tasmanian Labor government and Liberal opposition has sold this pulp mill to the Tasmanian people as being a state economic saviour because of its value-add to the timber industry. Gunns’ announcement today makes a mockery of this.”
The company said in its statement that there had been a “sudden and substantial decline in stumpage prices achieved in the export woodchip market.”
It expected its net tangible assets value would range from negative $50 million to negative $150 million as at 30 June 2012.
“The high value of the estimated impairment charge is largely attributable to the substantial decline in stumpage prices achieved in the current woodchip market, a market which is largely denominated in US dollars,” the announcement to the ASX said.
“Woodchip markets have continued to decline over the course of the past three months with both the selling price and sales volumes under considerable pressure.”
Another reason prices had declined is that there was a “significant and growing oversupply” of plantation woodchips available from Australia.
[A recent Green Capital event on wood products flagged this scenario. See our 1 June report ]
- Photos: The proposed pulp mill was bitterly opposed
“In addition, in recent reporting cycles the company has valued key components of its asset base (including Tasmanian land, plantations and interests in MIS) on the basis of a domestic pulp mill being established, which would maximise the value from those related assets.
“The mill project has been progressed by the company over many years and the company has obtained all of the applicable state and federal permits for the mill project to proceed.”
The decline in stumpage prices on the company had led to “material uncertainty” regarding the company’s current financing strategy including for the mill project and the company’s board had been “unable to reach a view for the purposes of the company’s 30 June 2012 financial accounts that the mill project is ‘probable to proceed’ in terms of the concepts defined in relevant accounting standards. “