On 15 August 2008 Gunns Limited (ASX: GNS), Australia’s largest woodchipper of native (including old growth) forests, issued a profit warning. This triggered a 30% share price fall to a 7-year low until on 21 August at its request GNS began a trading halt pending a company announcement. Gunns, I’ve mentioned, proposes a A$2b financially marginal and environmentally destructive pulp mill at Bell Bay, about 100km north-east of Mole Creek. Stephen Mayne has called Gunns ‘Australia’s most ethically challenged company’ and has asked: ‘How on earth can a company now capitalised at just A$681m and already saddled with more than $1 billion in debt, finance a A$2b pulp mill?’ I doubt the proposed 1:1 rights issue will succeed, so the only solution will be a sellout or joint-venture. Even then, the pulp mill may not be built because its water needs a 50km pipeline from near Launceston, and several farmers reportedly won’t sell Gunns a pipeline easement. And as well as not yet having secured finance for the mill, Gunns won’t meet the deadline for submitting its environmental documentation to the federal government which thus has not signed off on its environmental impact (and shouldn’t, because the mill would generate 2% of Australia’s greenhouse gases). Apparently even the Tasmanian Premier doubts the mill will be built. Stay tuned for the next episode, folks.
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