Embattled Tasmanian timber group, Gunns has cleared a big hurdle in its plans to turn itself into a pulp company with the $2.3 billion project cleared to proceed by the state’s Environmental Protection Agency.
The approval came yesterday in a statement from EPA director, Alex Schaap.
There had been doubt about whether the state permit for the construction and operation of the $2.3 billion project was still legally valid two years after its issuing.
Under the permit, Gunns had until August 30 this year to complete "substantial commencement" of the project or have the approval lapse.
Anti-mill groups had argued that without construction underway by August 30, the permit had lapsed, while Gunns said it had spent more than $200 million on readying the project which amounted to "substantial commencement".
After considering a submission from Gunns and solicitor-general legal advice, EPA director Alex Schaap announced that it was his belief that Gunns had done enough to keep the permit alive.
“I have considered the evidence presented to me by the company and have obtained additional documentary substantiation of that evidence. I have also taken advice from the office of the Solicitor General,” Mr Schaap said.
Mr Schaap said: "Even on my most restrictive interpretation of the progress already made in the project, I conclude that an amount in excess of $120 Million has been invested in the project.
"In my view the evidence is consistent with substantial commencement having occurred."
“I do not therefore feel obliged to seek an order or declaration from a court on the question.
“I will continue to regulate the site on the basis that a valid permit exists unless a court determines otherwise.”
With this assurance, the company will now have ton come up with a partner/partners for the pulp mill in a timely manner to convince investors it still has a future.
It has failed to find partners on previous occasions and the uncertainty in global markets will make the task difficult.
In a market updated released on September 19, Gunns said that once it had found a partner or partners for the pulp mill, it would look at further sales of its Tasmanian forestry assets.
"This will materially change the underlying nature and structure of the group business and operations."
The company said it needs to retire $340 million of debt before January, 2012 and will attempt to fund the requirement through asset sales.
Now the company can prepare the June 30, 2011 accounts on a more certain basis.
In the September 19 update they said
"The status of the pulp mill permit is a significant and material matter for consideration by the Directors in determining asset values in finalising accounts for the year ended 30 June 2011.
"The company’s announcement of 25 August 2011 included a revaluation of the company’s core assets to reflect fair market value and a valuation of assets related to the pulp mill based on the view of Directors that it is probable that the pulp mill project will be completed on the assumption that the existing regulatory framework for the project remains effective.
"These assets include the Tasmanian land and standing timber estate, valued at approximately $680 million and capitalised investment in the pulp mill project valued at approximately $217 million."
Gunns’ shares ended steady on 18c.
