Perth company Auswest Timbers is seeking to negotiate a secure long-term log supply in the South West with the state government so that it can proceed with the purchase of Gunns’ mothballed timber mill at Manjimup.
Auswest struck an agreement with Gunns on 1 August, but was unable to settle the acquisition because various pre-conditions were not satisfied.
Managing director Gary Addison said the key issue was the long-term log supply, and the proportion that needs to go into value-added products.
"We need to finalise these before we can re-enter negotiatons," he said.
Mr Addison said Auswest wanted less timber than the volume allocated under Gunns current supply agreement.
“But there are only two years left under that agreement, we want to understand the volume that will be available in the longer term,” he told WA Business News.
Mr Addison said Auswest also wanted more flexibility in the way it processed the timber, for instance by producing structural timber.
Gunns was required to convert 95 per cent of its output to value-added products, and Mr Addison said that was no longer appropriate because of declining log quality.
Auswest is planning to invest up to $6 million in the Manjiump mill, which was shut down early this year after Gunns decided it was no longer commercially viable.
Mr Addison said he was in the process of writing to Forestry Minister Terry Redman, to formally present the company’s proposal.
Mr Redman said in a statement the State Government will await Auswest’s final business proposition before it can make any determination on forestry issues relating to the purchase.
“Once a formal finalised proposal is received then the State Government and, if necessary, State Cabinet will be able to formally consider any requests or undertakings in relation to issues such as log sales, investment guarantees and site leases,” Mr Redman said.
“While not all of these issues come under my Ministerial responsibilities, I have made it my business to ensure all parts of Government involved are aware of the importance of a sale and are working together.”
The Minister said work was also being done on the necessary Cabinet process to ensure a timely Government response once it had been presented with the necessary parameters.
However, Mr Redman said, at its core, it was a commercial arrangement between two companies that had to stack up financially.
“The role of Government in these situations is to respond promptly and clearly to both Gunns and Auswest as they put forward their purchase proposal. This has been done diligently from day one and continues to be done,” he said.
Auswest, which operates three timber mills in Pemberton, Victoria and the ACT, was founded by Mr Addison in 1996 and sold to national building products company Brickworks in 2005.