Great Southern Ltd's 50 per cent owned Bunbury chip mill has entered into a $150 million, six-year purchase agreement to buy timber from Intergrated Tree Cropping Ltd.
Chip mill Hansol PI Pty Ltd will purchase about 1.8 million tonnes of timber from ITC starting from next year.
Great Southern chief executive Cameron Rhodes said the contract will help in reducing operating costs and allow the operation to reach its full potential.
The ASX-listed Great Southern acquired the 50 per cent stake in HPI in March this year.
Below is the full announcement:
Great Southern's 50% owned Bunbury chip mill, Hansol PI Pty Ltd (HPI), has entered into a Timber Purchase Agreement for approximately 1.8 million tonnes of timber from Integrated Tree Cropping Limited (ITC) over a six year period commencing in 2009.
At today's mill door prices, this contract will secure about $150 million of wood for delivery to HPI's Japanese customers.
This agreement represents a beneficial outcome for both companies. HPI secures additional resources, while ITC has achieved competitive stumpage prices for its growers.
ITC CEO Vince Erasmus said: "We are delighted with the results of this tender process which relates to ITC managed plantations in the Bunbury region. We have achieved an excellent stumpage price for our growers and shareholders."
The acquisition of 50% of HPI in March 2008 was a strategically important milestone for Great Southern and it is very pleasing that ITC, as a third party grower, has been prepared to commit wood to this processing facility.
Great Southern CEO, Cameron Rhodes said: "This contract will assist greatly in reducing operating costs and allow the operation to reach its full potential."
Great Southern's intention is that in the future it will be able to derive similar revenues from infrastructure that it owns, or has the opportunity to build over the next three to five years.
