Tasmanian Times


Gunns last days…?

The AFR reported last Thursday that Gunns was still trying to sell its remaining assets acquired as part of the Auspine purchase to GMO but price was a sticking point. It had also moved to sell all its Tasmanian forest assets, approximately 150,000 hectares by appointing Macquarie Capital as its advisor.

The latter have a book value of $826 million but fetching that price “seems remote given recent transactions”, referring I guess to the 30% discount to book value paid by Canadian pensioners via Alberta Investment Management Corporation and its junior partner Australia New Zealand Forest Fund to acquire the timberland assets of Great Southern Plantations.

Initially Gunns’ plan was to “vend the plantations into the pulp mill joint venture, Southern Star Corp”. But this is obviously too hard, and in any event the other asset realisations haven’t been as fruitful as expected and a lot of the proceeds have been spent keeping Gunns afloat rather than paying off debt.

Both of the mooted deals might clear the current debt of $630 million leaving Gunns with some sawmill assets and a pulp mill work in progress amount of $220 million which is worth next to nothing given there aren’t too many JV takers.

Selling the Tasmanian forest assets will be difficult.

The trees are needed to feed the mill so a buyer will have to agree to sign up to provide feedstock for the mill over the next 30 years. Gunns is not exactly in a strong bargaining position when it comes to the small matter of price. And who’s going to sign if the identity of the mill operator is not known as yet?

The AFR further reported that Gunns was “investigating the possibility of taking a cornerstone investor onto its share register”. Rather than using Southern Star Corp it seems. Which may be why the forest assets have to go? No one in their right mind is going to come onto the register when the heavily encumbered assets are leased to thousands of grower investors.

But that too is fraught with problems. People more knowledgeable than me say ASX Listing Rules usually mean only 15% additional shares can be issued without shareholder approval. That means about 120 million shares. But you’d be lucky to be able to place them at any more 40 cents. And furthermore the 42 million share issue to fund FEA’s sawmill will need to form part of the 15% limit as it occurred within the last 12 months.

Not a lot can be raised with a private placement at short notice. To raise more requires shareholder approval.

Are they going to approve? Most of them seem to be short sellers and traders from the prop desks contrary to the stories from Jarvis’ mates, the astute analysts at the Examiner ( Misguided enthusiasm at The Ex ). The traders seem to be loving the ups and downs of the share price. As long as Greg keeps talking about the mill as a goer there’s always a steady stream of punters bringing more uneducated money to market. It’s money for jam. The boys are hoping Andrew Wilkie doesn’t go looking for another crusade.

Greg is certainly leaving it to the last minute to do a placement.

If the private placement is too high I’m told it becomes a takeover, so more rules apply. And even more FIRB rules if the takeover is by a foreigner, Nine Dragons Paper as was mentioned by AFR.

But maybe it’s all just AFR gossip. As one wag said, Gunns isn’t searching for a “cornerstone investor”, it’s looking for a “corner store investment”.

Know any good milk bars or take-aways for sale?

Gunns Ltd share price: HERE

• Garry Stannus: The Pro-Pulp Mill Vandals


Dave Groves: The Burning Question:





• But wait, there’s more …






By the look of the map it is the one between D’Port and Lonnie…the green dot…..G’Town should cop some smoke today as the wind is blowing straight to them…….

Pictures shot from South Lonnie looking across the Gorge and Trevallyn (north west).

• Gunns feels weight of currency pressure
09 May, 2011 10:05 AM

BELEAGUERED forestry company Gunns has been dealt an extra blow by the strong Australian dollar, on expectations that earnings from international sales of its woodchips will shrink if the currency’s recent high levels are sustained.

Shares have fallen 13.5 per cent since the dollar broke the $US1.09 mark, to 48¢, within a whisker of its 2011 low of 45¢.

The company is already facing a number of hurdles in the near term, including various asset sales, which are an attempt to ease its $200.5 million debt burden, reports The Australian Financial Review .

The latest effort to sell 150,000 hectares of forestry assets in Tasmania has just begun, though there are doubts that a sale close to the assets’ book value of $826 million will be achieved.

Stock and Land online HERE

Mercury: Market cuts into woodchips

THE Triabunna woodchip mill is facing unfavourable market conditions, a Legislative Council hearing in Launceston heard yesterday.

Gunns Ltd managing director Greg L’Estrange told the committee the high value of the Australian dollar had made the sale of native forest woodchips from Triabunna extremely difficult.

Gunns closed the mill for eight weeks in mid-April after the Japanese earthquake and tsunami.

Woodchip plants at Long Reach and Hampshire had already been closed.

Mr L’Estrange’s comment came after CFMEU secretary Scott McLean told the hearing yesterday that a total of eight shiploads of woodchips from Triabunna had now been cancelled. Mr L’Estrange said Gunns was actively exploring a whole range of potential markets.

“At $1.10 or $1.07 it is an extremely difficult marketplace, we certainly haven’t given up,” he said.

“But again the market destination for these products is smaller than for ones with the right certification and the Australian dollar and our distance from those markets is certainly not heading in our favour.”

He confirmed Gunns would exit native forests partly because the sawmills needed millions of dollars of investment to be competitive.

Launceston chartered accountant and timber industry figure Bob Ruddick said that without the Triabunna mill thousands of sawmilling jobs would be lost because there would be no …

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  1. john hawkins

    May 10, 2011 at 11:48 am


    Thank you for the line chart,The trading volumes to the base are indicative of the speculation taking place in Gunns shares.

    Violent swings up and down provide good profits for speculators and now have little or no relevance to the value of the Company.

  2. Murk

    May 10, 2011 at 5:46 am

    Thanks Max (#16)
    The ‘deal’ I’m referring to is the Statement of Principles where eNGOs agree to ‘a’ pulp mill in return for an end to logging HCV forests. When Bill Kelty put it on the record that A mill meant THE mill, and Lala talked about it the mill being the cake, not the icing, the industry called bluff on the eNGOs.

    This devastatingly simple wedge separated the principled eNGOs from those willing to make a deal at any cost. SWST and HVEC walked away from the talks (and quit Environment Tasmania!) at this time, in response to the failure of FT to implement the moratorium, and their loss of faith with the peace process.

    Predictably (since they staked their claims of political relevance on their ability to secure historic environmental outcomes in agreement with industry), ET, TWS and The Greens rolled over and stayed at the table. They’re still there today, clinging to their fantasies of parliamentary gifts of vast tracts of forest, free from logging, for all eternity!!

    So no, I don’t have faith in the government, but I do have faith in the survival/self-preservation instincts of politicians. I know from Tasmanian history that a sustained campaign dedicated to stopping an environmentally destructive project will succeed, despite significant costs to protesters. I also know that a grassroots protest movement aiming to protect Tasmania’s ancient wilderness from rampaging industrialists – especially CHINESE industrialists – will win high-profile support, interstate and overseas.

    Any politician (eNGO, Greens, Lib/Lab) who wants to stay in politics in the emerging post-Gunns era needs to stop drinking the pulp mill KoolAid and realise the threat posed to their re-election by being on the losing side of a sustained campaign of civil disobedience!

  3. William Boeder

    May 10, 2011 at 12:17 am

    Amazing how both John Gay and Robin Gray were able to dynamite the share price by way of their greedy highly (non)-sustainable views into Tasmania’s future?
    Of particular note here, is that these same (2) old fossils are somehow sitting comfortably in shelter of the Horn of Plenty!

    Quickly now, bring in the auditors, the prudential regulators, also ASIC and the ACCC, to trace back along the selfish and poorly maintained pathway of their achievements.

  4. Russell

    May 9, 2011 at 11:42 pm

    Re #20
    Here’s the 10 year graph, John.


    You can clearly see the demise of their shares alongside the Pulp Mill proposal push and the decline really starts after the PMAA was rammed through in 2007.

    A pretty sorry saga for shareholders from about $4.50 down to $0.435.

  5. john hawkins

    May 9, 2011 at 11:10 pm

    The moment any shareholder attempts to sell Gunns shares the share price falls dramatically.

    The big shareholders are as a result locked in to the hold of the now sinking ship.

    To see this Google GNS ASX then press Google finance and then the 5 year graph.

  6. max

    May 9, 2011 at 10:58 pm

    # 16 Murk. You have lost me with the ET Inc/TWS/Greens deal, all I know is that Gunns have all the approvals for a pulp mill. They got these approvals despite the protests, marches and electoral backlashes and both the Liberal and Labour parties are convinced that the pulp mill is the savior of Tasmania. They are that convinced that they have given the mill an exemption for rotten egg gas and have removed all rights with section 11 of the pulp mill act. These approvals, exemptions, wood supply agreements and cheap water are all part of the Gunns pulp mill that can be sold or be taken over with a share buyout.
    In the past Gunns have raped and pillaged our forests, aided and abetted by Forestry Tasmania and the police have locked up protesters, what is the difference. The relevant parts of Section 11 stipulate that “a person is not entitled to appeal to a body or other person, court or tribunal; or no order or review may be made under the Judicial Review Act 2000; or no declatory judgment may be given; or no other action or proceeding may be brought – in respect of any action, decision, process, matter or thing arising out of or relating to any assessment or approval of the project under this Act.”
    Let’s hope that your faith in our government will stop another company taking over Gunns and continuing to threaten our health, wealth and environment because they have done nothing so far.

  7. Russell

    May 9, 2011 at 10:43 pm

    “He (L’Estrange) confirmed Gunns would exit native forests partly because the sawmills needed millions of dollars of investment to be competitive.”

    Noooo, you can’t be competitve as a business if you rely on charity forever, Greg.

    “Launceston chartered accountant and timber industry figure Bob Ruddick said that without the Triabunna mill thousands of sawmilling jobs would be lost because there would be no outlet for sawmill residue, which was critical to viability.”

    Wrong, Bob. The sawmilling industry doesn’t need Gunns. In fact, they will be so much better off without them and able to expand into the high end market.

    Gunns and Triabunna have no customers.

    No point even GIVING the residue to them. Best to cook and sell it as compost or mulch.

    The low end “residue” should be the left-overs, the main game is the high value TIMBER.

  8. Barnaby Drake

    May 9, 2011 at 10:36 pm

    Gunns mill was estimated to cost $2.5 Billion in January. They also stated as a reason for withdrawing from the RPDC assessment process that delays would cost them about a $1 million per day.

    Another four months have passed!

    Now they want a redesign of the process which will include a hydrogen peroxide manufacturing plant – more cost!

    At their current share value, it would be cheaper to buy the entire company than just be a JVC in a dubious pulp mill.

    Incidently, hydrogen peroxide is an explosive which once sunk the Russian nuclear submarine Kursk. Let’s hope it has the same effect on the good ship Gunns!

  9. Murk

    May 9, 2011 at 10:02 pm

    1. Re #9
    I understand that the argument you present lies at the heart of the ET Inc/TWS/Greens deal to run silent on the Pulp Mill Project – ‘better the devil you know’.

    But what politician in their right mind (indulge me..) would allow a situation to develop where Gunns’ mill project is sold to China, resulting in local conservationists being thrown into prison for protesting against *Chinese* corporate rape and pillage of Tasmania’s ancient wilderness?? The media attention would be intense and could go global – not a good look!

    Is it too much to expect of ET, TWS and the Greens, that they come to grips with the fact that Pulp Mill opponents will protest loudly and proudly (and be jailed if necessary) irrespective of their support? Their silence and inaction while their grassroots ‘constituents’ are being hauled off to the cells will speak volumes of their sheer moral bankrupcy in allowing Gunns to speak openly of a social license to build the mill.

    I look forward to TAP/PulpTheMill/TCT/CodeGreen – the ‘real eNGOs’ – filling the moral vacuum that has developed at the top of Tasmania’s environmental conservation movement!

  10. Rocky

    May 9, 2011 at 12:02 pm

    William #13, Gunns = no bush = no bird!

  11. Dave Groves

    May 9, 2011 at 11:34 am

    #12…yes Karl…a freebie, but still bulging with spin…..are you sure this isn’t a pisstake site?

    I was having a right ole chuckle at “GLS”…

    I mean he really needs to get a better spinmeister if he wants to even raise a shadow of doubt….still I’d be doing something similar for the dosh…keep that job as long as possible.

    Shares at 45 cents…..not many straws now.

  12. William Boeder

    May 9, 2011 at 2:50 am

    Presently Gunns Ltd has little more to sell than a bird in the bush!
    By way of comments already made on this topic there are few in defence of Gunns Ltd continuing along as a robust respected business operation!

    (My description of Gunns Ltd as a robust respected business operation, is not my personal view, however, there may be some small number of persons whom may believe this to be so?)

    Yet when a practical look into what the Gunns Ltd presently consists of there is little to show that this company can offer much at all in the way of benefits to Tasmania.

    As to the continuation of this rogue anti-the-people resource exploiting public company that has cost our State a huge chunk of its natural resources, then of their intrusion in the processes of this State government, (let’s not forget the financial burden of constant begging for funding- as thrust upon the Tasmanian people,) Tasmania can certainly live without Gunns Ltd and whatever future exploitations they have in mind to unleash upon our Tasmanian State’s resources?

    No certainly not!

    Mr Greg LÉstrange can leave off with his fluffy statements of how great Gunns Ltd will be to this State in and by its presently unknown futures, particularly so at the present moment as Gunns Ltd are even under attack by a group of very their own shareholders!

    Time to let this wallowing leaky ship find a new home among the many failed entities now retired into anonymity within the ASX de-registered (quite possibly by way of insolvency,) company listings.

  13. Karl Stevens

    May 9, 2011 at 1:20 am

    Gunns blog site here: http://gunnsblog.com/
    At least by using the free WordPress service they can do it for nothing. How about paying some of your debts now Gunns?

  14. Michael Swanton

    May 9, 2011 at 1:12 am

    #9. Don’t you mean ” Our government with their bend over blackwoods for a pulp mill at any cost have left Tasmania in a very vulnerable position “?
    Michael Swanton.

  15. Russell

    May 9, 2011 at 12:42 am

    Re #9
    They don’t have a mill to sell.

  16. max

    May 9, 2011 at 12:03 am

    It is hard to see how Gunns can survive, but they have one asset that they can sell and if they do could destroy Tasmania. The pulp mill is their only real asset and if sold to some one like Nine Dragons Paper has the potential to destroy the Tamar Valley. If the mill was sold to a Chinese firm it would be built in China, possibly erected by a Chinese construction crew and staffed by Chinese workers. The mill comes with a 20 year wood supply agreement that could allow the stripping of our forests and no need for FSC. The sale of the mill is a complete package, wood supply agreement, section 11 agreement and every thing else that the government have given to Gunns and the pulp mill. Our government with their bend over backwoods for a pulp mill at any cost have left Tasmania in a very vulnerable position.

  17. David Obendorf

    May 8, 2011 at 8:26 pm

    Barnaby Comment #2 – the repeated story of Tasmanian shytsering – ‘the Snark was a Boojum after all!’

    Russel comment #4 – ‘Three things have kept Gunns alive to date, Dave [Groves] – the Tasmanian Government, the Australian Government and the NGOs.’

    I would’ve loved to have been a fly on the wall at the forests roundtable the day Julian and Terry brow-beat ET Inc, ACF and TWS into accepting the Statement of Principle that included that last-chance-of-rescue phase – “a pulp mill”.

  18. John of Howrah

    May 8, 2011 at 5:25 pm

    Hard to see how Gunns can survive if the Aussie dollar keeps rocketing along and Japan struggles to get over the earthquake. Both factors must be impacting on woodchip sales and, by extension, Gunns cashflow. If they can’t get asset sales away soon to pay down debt it could be all over.

  19. David Mohr

    May 8, 2011 at 5:14 pm

    Share price at $0.46 heading towards the level achieved in John Gay’s final days.

  20. mike seabrook

    May 8, 2011 at 2:55 pm

    i thought that the trees were owned by the mis tax punters.

    i can see a trade off

    high price for the big stinker project if the tax punters trees are contracted on a “cheap” price which effectively benefits gns & gnspa holders.

    please tell me again who is the sre looking after the tax punters trees.

  21. Russell

    May 8, 2011 at 2:30 pm

    Re #1
    Three things have kept Gunns alive to date, Dave – the Tasmanian Government, the Australian Government and the NGOs.

    If it was left purely and simply to the market, as it should be, Gunns would be long gone, FT would have to be re-structured, the Tasmanian Government Budget would be in balance and the state’s economy would be moving upward.

  22. John Day

    May 8, 2011 at 2:14 pm

    How much does Gunn’s Limited owe FT, DIR and other government organisations? FT aged debtors list was 89 days about three weeks ago – what is it now. Minister Green and this government is really open, clever and transparent.
    Also remember that Greg and two Directors have 12 month contracts, with just the last two months to go. Interesting times ahead. Gunn’s Limited is still two directors short of complying with its own company rules.

  23. Barnaby Drake

    May 8, 2011 at 11:09 am

    I think it is probable that Greg is waiting to see if Paul Lennon’s bit of non-lobbying is going to get a lifeline from Tony Burke, but I do feel that the horse is actually dead.

    I think they will find that ‘the Snark was a Boojum after all’!

  24. Dave Groves

    May 8, 2011 at 10:12 am

    Only one thing amazes me about this story…..

    How has Gunns been able to survive this long?….they should have been gone a long time ago, so well done to all concerned for keeping it together for so long.

    Its ok to let go Greg….you will still have made more money from the Gunners than most people ever dream of and all you had to do was place a few adverts in the Zadgies “Under $100” section…

    Back ta Noosa ole bean….relax, drop a line in the river….ooops forgot about the 3 headed fish…just grab a pizza instead…forget about the woes in Tassie…

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