Decline in Gunns' share price likely to affect its ability to finance its AU$2B pulp mill in Tasmania, say analysts; Australia-based forestry company's worth is about AU$82M, about one-20th of what it was five years ago

LOS ANGELES , January 12, 2012 () –

Gunns Ltd. will find it difficult to finance its pulp mill project in Bell Bay, Tasmania, because of the decline in its share price, which has reduce the company’s worth to about one-20th of what it was five years ago, say analysts, reported ABC News on Jan. 11.

The Australia-based forest products company is worth about AU$82 million (US$84 million) now, with its share price having fallen to an all-time low of AU$0.095 per share on Jan. 10 before closing at AU$0.097 that day.

Any joint-venture partner will likely have to take “a fairly big stake now,” while Gunns might wind up with a minority holding, said Matthew Torenius, a financial analyst with Shadforths, ABC News reported.

However, it’s going to be difficult for Gunns to find a majority stakeholder, said timber industry analyst Robert Eastment, noting that “the business case for the pulp mill hasn’t changed.”

At its annual general meeting in November, Gunns declined to reveal any of its potential partners in the AU$2-billion Tamar Valley pulp mill, reported ABC News.

It has been speculated that the partner is based in Europe, where there is “some financial stress pressure,” said Eastment. Any major European company would find it difficult now to make a significant investment in building a new mill, he said.

When asked for comment, Gunns declined, ABC News reported.

The primary source of this article is ABC News, Australian Broadcasting Corp., Sydney, Australia, on Jan. 11, 2012.


 

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