Image for Nothing has changed

A prognosis of a terminal condition is always considered to be a true test for those involved.

Gunns’ undertook a strategic review following its half yearly report in Feb 2010 and report to the market in April. If the recent ASX announcement is in fact the interim report, then maybe Gunns’ woes are worse than expected.

The announcements flag the sale of the non core businesses of hardware retailing, viticulture, and construction.

Furthermore native forests will be sold.

And then the pulp mill and plantation assets will be spun off into a new entity Southern Star(SS), with Gunns as a 51% owner.

So Gunns will be left with only the sawmills plus the share in SS, a business that will be unable to support much debt.

SS will presumably be left with the MIS business, which with Gunns announcement that no MIS’s will be offered for 2010, means that the MIS business will run at a loss for a few years.

The absence of any 2010 plantings following disappointing 2009 sales must cast doubts on the claim that the pulp mill will be 100% plantation based in the future.

Hence SS will have a loss making MIS business together with lots of MIS land mortgaged to the banks for probably $350 million.

Nothing has changed. 

There’s no evidence of a strategic review.

Maybe the corporate doctors have just diagnosed a terminal condition.

The announcements about SS are simply an understandable refusal to accept the prognosis.

John Lawrence’s definitive analysis of the health of Gunns Ltd: HERE

That sinking feeling, HERE

Australian Greens Deputy Leader, Christine Milne on changes to Gunns’ board of directors:

Gunns announcement to the stock exchange today of its restructuring is a “buying time” and “fishing expedition” exercise. The company still has no finance for its mill and needs cash urgently. Having already announced its intention of selling off its wine and hardware assets, it is now selling off its native forest assets but there is no mention of what will happen to its woodchip mills and sawmill and veneer mills. What does Gunns have left?

Gunns has divested itself of its plantation assets and transferred them to Southern Star whilst retaining a 51% interest in the new company. It represents Gunns last attempt to interest foreign investors in the failed pulp mill project. It will fail to attract investment because John Gay is still at the helm and the appointment of Mr Timo Piilonen is no advantage. The pulp mill project he oversaw was so beset by protests and wrangling and that it led to huge tension between Uruguay and Argentina where a bridge is still blockaded three years after the mill started operations. This will not reassure investors. In fact any reading of the history of the South American conflict situation will drive them further away. “We are not going to give up until the last brick of the mill falls” says a protester about a mass march on the bridge this Sunday April 25th.

From Financial Times 2010:

Gunns Last Ditch Try OnPulp mill frays Argentine-Uruguay relations By Jude Webber in Buenos Aires
Published: April 20 2010 21:22 | Last updated: April 20 2010 21:22

Six months ago, football succeeded where years of diplomacy had failed. Argentine protesters briefly lifted their blockade of a bridge into Uruguay, imposed in November 2006 in a fierce row over of a pulp mill, to let fans travel to a key World Cup qualifier in Montevideo.

Such magnanimity seems unlikely to be repeated soon after a court decision on the pulp mill case sparked anger on Tuesday. The United Nation’s highest court rejected Argentina’s claims that the Finnish-owned mill was polluting a jointly-administered river between the two countries, and thus could continue operating.

“This doesn’t end here,” said Evangelina Carrozo, a beauty queen from Gualeguaychú, a riverside tourist town famed for its sequined carnival and thermal spas located across from the mill on the banks of the River Uruguay.

Ms Carrozo propelled the cause into international headlines when she crashed a summit of European Union and Latin American leaders in Vienna in May 2006, wearing a bikini and waving a banner demanding an end to “pulp mill pollution”.

In a ruling which cannot be appealed, the International Court of Justice on Tuesday found that Argentina had presented insufficient proof of contamination. “When there is enough proof, the damage will be irreversible,” Ms Carrozo lamented.

The court ruled unanimously that Uruguay had violated a joint agreement on the administration of the river, which acts as a natural border between the two countries by authorising construction of the $1.2bn pulp mill without consulting Argentina. The mill, built by Botnia in the town of Fray Bentos, formerly better known for making corned beef, began operating in November 2007 and is now owned by UPM after an asset swap with Botnia last year.

However, the court made no mention of the blocked bridge which Tabaré Vázquez, former Uruguayan president, says is now “the only thing that is illegal”. Uruguay says the blockade has caused hundreds of millions of dollars in lost haulage and trade.

The pulp mill row brought relations between the two neighbours to an unprecedented low, though José Mujica, Uruguay’s new president, and Cristina Fernández, the Argentine president, have sought a new, closer relationship and vowed to respect the ruling.

Both countries welcomed the verdict, which came four years after Argentina filed its suit to the world court. “We hope this ruling will enable us to start a new, fruitful, positive stage in relations with Argentina,” said Daniel Astori, Uruguay’s vice-president. Argentina welcomed the moral victory as an important yardstick for the future.

Sergio Urribarri, the governor of the province of Entre Ríos to which Gualeguaychú belongs, declined to say what would happen now with the blocked bridge. “If ever there was a bad time to ask this question it is now,” he told reporters. “Let’s wait for tempers to calm.”

But residents have already announced a mass march to the bridge for this Sunday. “We’re not going to give up until the last brick of the mill falls,” yelled one furious resident after hundreds of protesters had gathered to await the ruling, beamed live from The Hague on giant TV screens. “The court is a joke…it represents money. It was never going to rule in our favour,” he added.

Romina Piccolotti, a former Argentine environmental secretary, said Gualeguaychú’s protest would continue. “This court won’t end the fight by a whole town,” she said.

The World Bank, which provided financing for the project, was “complicit” in Uruguay’s legal violation, she added. “This will be important for future investments. Uruguay wants to build more pulp mills on its coast,” she said.

Other links:
http://www.reuters.com/article/idUSL0941462920071111

http://www.hs.fi/english/article/Controversial+Botnia+pulp+mill+in+Uruguay+yields+profits+for+UPM/1135251926580

http://www.tasmaniantimes.com/index.php/article/millers-tale

And Baikal gets the go:

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A controversial pulp mill on the shores of Lake Baikal will return to full production in May despite large-scale public protests, the Industry and Trade Ministry said on Tuesday.

The Baikal Pulp and Paper Mill ceased commercial production 18 months ago, after its switch to a closed-water cycle to ease environmental concerns proved unprofitable.

Andrei Dementyev, a deputy minister, said Russia’s environmental regulator still had some concerns regarding the plant’s operation but they would be addressed and the pulp mill would reopen in May.

Environmental protests broke out after Prime Minister Vladimir Putin signed a resolution in mid-January excluding the production of pulp, paper and cardboard from the list of operations banned in protected areas around Lake Baikal, which is a UNESCO World Heritage Site.

A public campaign to close or convert the Baikal Pulp and Paper Mill built in 1966 on the shores of the world’s largest freshwater lake became one of the symbols of Glasnost, the “openness” policy proclaimed by Soviet leader Mikhail Gorbachev in the late 1980s.

It involved the nation’s leading statesmen and literary figures and forced the Soviet authorities to promise to halt pulp production by 1993.

The collapse of the Soviet Union in 1991 delayed the plant’s closure, and it was only in October 2008 that the plant switched over to a closed water cycle, preventing the discharge of waste into the lake.

In late December 2009, the Baikal mill started testing new equipment ahead of its expected restart of operations this year.

IRKUTSK, April 20 (RIA Novosti)

Read more HERE

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Woodchip Communities Australia welcomes Minister Green: HERE