Lignor project off after $350m funding fails, MD resigns

Plans to build a $400 million lumber project at Albany have effectively come to an end after Subiaco company Lignor Ltd said it had failed to raise $350 million, triggering the resignation of its managing director Glyn Denison.

Lignor, which has gained multi-million dollar support from the federal government, said it hoped to proceed with the project in future but in the meantime will try to licence its technology to companies in China.

The company plans to wind down its current operations in WA and "streamline" its cost base.

Graeme Black, a non-executive director of Lignor and representing the company's biggest shareholder, will become acting executive director.

Lignor said the "postponement" was the result of difficulties in securing funding for the Mirambeena project on an acceptable basis due to current volatility in global debt and equity markets.

Lignor has deferred the major capital raising for at least 12 months and will instead, concentrate its efforts in the short term on exploring joint venture opportunities in China using Lignor's patented technology.

Lignor came close to finalising funding for the project in July 2007 in obtaining commitments for $210 million from investors in convertible bonds, conditional on a further $130 million in equity being raised in an Initial Public Offering.

Tightening of global credit markets in July created unease in equity markets and resulted in Lignor being unable to complete its planned IPO.

Lignor attempted to fund the project development through alternative means but encountered significant difficulties in the current market environment.

Mr Black said Lignor remained optimistic that the Albany plant would be developed once conditions and financial markets improve.

"In the meantime, we will explore opportunities to use Lignor's technology in other markets, particularly China, with joint venture partners."

For the past two months, Lignor has been in confidential discussions with an international group with significant commercial forestry operations in China, including major plantations in a number of provinces.

The opportunity under consideration is the use of Lignor's technology in an Engineered Strand Board plant, tapping into China's domestic resources of wood, resin, wax and labour.

However, this is not the only opportunity that has been presented to Lignor.

A feasibility study on the market and project possibilities will be completed by Lignor for the international group during the March 2008 quarter.

Lignor said it intended to launch a rights issue to existing shareholders early in 2008 to raise $5 million to fund the Chinese feasibility study and for general working capital.

Part of the proceeds from the rights issue will be used to continue with Lignor's option to acquire for $1.4 million the 30.8 hectare site at Mirambeena north of Albany which is the designated site for the WA plant.