Gunns to acquire FEA's Bell Bay sawmill in Tasmania, Australia, close Scottsdale sawmill; aims to process softwood sawlog volumes of both mills, about 450,000 tonnes/year, at one facility

HOBART, Australia , October 18, 2010 (press release) – Gunns’ future operation in the Tasmanian softwood sawmilling industry is based on owning and operating a modern and efficient softwood mill with a sustainable wood supply volume with throughput and scale to operate in a competitive market. Our existing operations at Scottsdale have been significantly limited by the available wood supply, which does not provide the scale of operations necessary to support continued investment.

In this context, Gunns has today agreed with the Receiver and Manager of FEA to acquire the Bell Bay softwood sawmill, a modern and low cost production facility.

Gunns has identified significant synergies and production cost savings that would be obtained through processing the combined FEA and Scottsdale softwood sawlog volumes through one modern and efficient mill.

The combined facility will process approximately 450,000 tonnes of sawlog annually with projected annual revenue of $85 million.

The acquisition is conditional on the ACCC not taking steps to restrain completion. Gunns notes that the ACCC is continuing to evaluate this transaction. However, Gunns is expecting an outcome from the review in the next few weeks. Whilst the ACCC will make its own assessment, Gunns is confident that the proposal does not contravene the Trade Practices Act.

Gunns also announced today its plans to close the Scottsdale (Ling Siding) softwood sawmill within 4 months, with progressive decommissioning of the mill (including disposal of inventory and assets).

The Scottsdale closure will occur regardless of whether Gunns acquires the FEA mill. Gunns has assessed the softwood sawlog volume available to the Scottsdale mill, as well as the mill’s operating cost structure, as unviable in both the short and long- term and unsustainable as a continuing business.

Gunns Limited CEO Greg L’Estrange said: “While the decommissioning of the Scottsdale sawmill is inevitable, with or without the acquisition of the Bell Bay mill, we are pleased that an efficient, competitive and sustainable Tasmanian industry will emerge, with an opportunity for retention of some of our Scottsdale employees at the Bell Bay facility.”

Gunns will work closely with our Scottsdale employees and other stakeholders to assist those who cannot be transferred to Bell Bay to either relocate or transition to other industries.

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