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Gunns Pulp Mill: what is credibility worth?

By Mike Bolan - posted Wednesday, 27 August 2008


A future

If the points above are even close to accurate, then the future of plantation forestry could be very bleak indeed. The state could be left with thousands of hectares of stumps on unrecoverable land all owned by one corporation.

So is Gunns idea of a partial sale to an overseas (?) partner an option?

But why would an overseas buyer want to build a $2 billion-plus pulp mill in a country where there is no one skilled enough to operate it? Why not just ship the trees directly to Asia and pulp them there? OK, the pulp is a higher value shipping proposition but Asians can work well with whole timbers so the trees could be worth more as … well … timber.

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Gunns has landed themselves in this mess by becoming a one-trick pony that relies excessively on public largesse for its ability to post profits.

As the credit crisis unfolds, more US banks fold and the globe sinks into recession, the demand for paper will decrease along with any enthusiasm for borrowing billions to process wood from a slew of one rotation plantations plus native forests with expensive access (remember diesel costs).

Gunns’ best hope might be to shift gears into the kind of multiple high value business described by others like Dave Groves on this site.

That’s unlikely to happen with the current directors and, in any case, would require significant new investments that Gunns can ill afford right now.

With its almost total reliance on subsidies and its narrowing focus on chips and pulp as commodities, Gunns has painted itself into a corner and appears to have left itself little room to manoeuvre. Get ready for the sob stories to government.

Their stock exchange announcement on August 28 of their plans to raise capital should be most illuminating. Will they act to build their credibility or will they lapse into past practice?

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Watch this space. 

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This article is intended to demonstrate the use of logic and should not be relied upon for investment purposes. First published in the Tasmanian Times on August 25, 2008.



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About the Author

Mike Bolan is an independent complex systems and business consultant. Mike worked for the Tamar valley community and others to prepare materials for the RPDC in which he spent about a year visiting Tasmanian communities, businesses and individuals to learn the impacts of forestry operations and the implications of a pulp mill on them. The lessons learned from that period are still relevant today and are used in this story, which is told to inform not to gain income.

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Creative Commons LicenseThis work is licensed under a Creative Commons License.

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