Gunns pulp mill in fresh doubt after write-down

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Gunns pulp mill in fresh doubt after write-down

By Ben Butler

The future of the controversial Tasmanian pulp mill project planned by Gunns has been thrown into doubt with the company admits its board has has been unable to reach the conclusion it is ‘‘probable to proceed’’.

In a statement to the stock exchange, Gunns said plunging woodchip prices meant it would take an impairment for the year to the end of June of between $700 million and $800 million - at least five times its last available market capitalisation.

The impairment will leave the company in the red when it comes to net tangible assets, which it said will be between negative-$50 million and negative-$150 million.

Costs of the development of the pulp mill, at Bell Bay in northern Tasmania, have to date been carried as an asset on its balance sheet.

But Gunns now says that ‘‘a significant component’’ of the $250 million so far spent will be taken as an expense, directly hitting its bottom line.

It said the board was unable to form a view that the mill was likely to proceed for the purposes of accounting standards.

‘‘The decision taken by the board does not necessarily mean that the mill project will not proceed,’’ it told the exchange.

‘‘Rather, it is an indication of decreased confidence from the company that it has the ability to influence the mill project proceeding’’.

It said its profit for the financial year to June 30, 2012, would be about $26 million, and because of the slumping woodchip price would be worse during the current year.

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