insiders say viable mill sale uncertain

BY RACHEL WILLIAMS
06 May, 2010 08:57 AM
INDUSTRY sources fear the sale of Forest Enterprises Australia's Bell Bay sawmill is doomed to fail.

Receivers for the Launceston timber company have put the $72 million asset on the market as they battle to recoup funds for secured creditors owed $216 million.

In a release to the Australian Securities Exchange on Tuesday, the receivers (Deloitte) gave no indication whether the mill sale included a contract for 290,000 tonnes of state-owned timber sold to FEA annually by Timberlands - the manager of a joint venture part-owned by Forestry Tasmania.


This deal is continuing as FEA operates under receivers, but Timberlands has not made a statement about its plans and has not returned calls for comment on the FEA situation.


One industry insider said that without a secure, long- term log supply the sawmill was worth no more than its land value.


"However, if it is sold as an integrated operation with timber resources and long- term supply contracts from softwood growers etcetera, well that is totally different and the mill would be worth probably more than it cost to build," the insider said.


Forest Industries Association of Tasmania chief executive Terry Edwards said he hoped that the Timberlands deal would flow through to a new owner.


"Selling the mill without a resource will be difficult because all you are doing is selling it to be dismantled, which doesn't make any sense in the context of keeping the (120) workers there," Mr Edwards said.


"Timberlands has a resource to sell and be processed so I guess we need a meeting of the minds, because obviously the mill needs a supply agreement to make it as attractive a proposition the receiver-managers say it is."




The receivers have not put a time line on the sale process nor said how much they want for the "valuable" asset.


Mr Edwards said he had not had been able to confirm that local rival Gunns was investigating an acquisition, but suggested that it was a difficult time for Gunns to raise capital, given it was selling off its non-forestry assets to fund its Bell Bay pulp mill.


"I have an expectation that they would be interested though," Mr Edwards said.