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Gunns under fire -

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The controversial Gunns pulp mill suffered another blow this weekend with the Greens gaining the
balance of power in the Tasmanian parliament, but the problems don't end there for Gunns - a group
of rebel investors are demanding the expulsion of various board members.

Transcript

KERRY O'BRIEN, PRESENTER: The Tasmanian election result was hardly reassuring news for the state's
huge forest products group Gunns Ltd and its quest to build the controversial pulp mill at Bell Bay
on the banks of the Tamar River near Launceston. The policy of the Tasmanian Green who will hold
the balance of power in the State Parliament is to stop the $2.2 billion pulp mill from going
ahead. But even before the state election, Gunns was already under intense pressure, besieged by
rebellious shareholders demanding the expulsion of several directors they regard as responsible for
the company's poor public profile and disappointing financial performance. It could come to a head
at a board meeting tomorrow. Business editor Greg Hoy reports.

GREG HOY, REPORTER: Loggerheads. Australia's forests cover 19 per cent of its land mass, 152
million hectares or so of which just two million hectares are plantation timber. And yet the nation
remains a net importer of forest products, both timber and timber pulp used for paper production.
It's a shortfall that's growing as the population rises.

REECE TURNER, GREENPEACE: Australia has a $2 billion trade imbalance in our wood and paper products
sector. And that means a lot of pulp and paper products and other processed timber products like
decking and outdoor furniture is imported to Australia whilst we export the raw unprocessed product
like woodchips.

BOB NEWMAN, AUSTRALIAN FORESTRY CONSULTANT: Almost all of the deficit that's occurring, the $2
billion, has generally been the import of pulp and paper products. So, there needs to be a sense of
confidence for people to invest in Australia in that area.

GREG HOY: Indeed, complex questions hanging over the future of Australian forestry are best
illustrated by problems now besetting the country's largest producer of forest products, Gunns Ltd.
Still heavily reliant on woodchipping and despite its growing plantation interests, the logging of
native forests under the dogged leadership of 66-year-old chairman John Gay, Gunns has stuck to its
guns in its determination to build Australia's largest pulp mill in the Tamar Valley near
Launceston, Tasmania.

Final federal approval is yet to be grant for the mill's effluent outflow into Bass Strait,
delighting protestors, scaring off financiers and annoying foresters who believe environmental
safeguards have been adequately met.

BOB NEWMAN: Australia has lost a lot of money already and will lose more unless they get cracking
with that one.

GEOFFREY COUSINS, ANTI-PULP MILL CAMPAIGNER: With the current chairman and the board in place,
they're so locked into a sort of bunker mentality that they just can't see the light. And that's
where there needs to be a fundamental change.

GREG HOY: Gunns chairman John Gay would not be interviewed. In fact he hasn't been seen much in the
media since selling off $3.5 million of his shares in Gunns just months before its profit and
therefore its share price collapsed. But even before Saturday's election success by the Tasmanian
Greens, who stand opposed to Gunns' pulp mill proposal, John Gay's future as chairman, together
with two other long-serving directors, has hung in the balance since a coalition of two large
institutional shareholders joined forces with protesters, insisting it's time for half the Gunns'
board to stand down to clear the way for a grand compromise on environmental concerns. The
prominent businessman and anti-mill activist Geoff Cousins was involved in negotiation.

GEOFFREY COUSINS: Some of the shareholders, some of the green groups, people like myself, we're all
sitting together, talking about these issues in a positive way. And as a result of those
discussions, it was put very clearly to John Gay that he had to move on because no-one would
believe after all this time that there would be any fundamental change in the company unless there
was a change at the top and in the board.

GREG HOY: Such opponents now say they will accept the pulp mill if it meets higher environmental
standards than proposed so far.

GEOFFREY COUSINS: It isn't world's best technology at all. It doesn't use totally chlorine-free
technology - that's world's best practice. It is going to use native forests, not plantation
timber, certainly in the first period. And it is going to put significant amounts of dioxins into
Bass Strait. Now, if all of those things were cleared away, fine. There are plenty of good pulp
mills operating around the world.

GREG HOY: Indeed, there are eight smaller mills in this country already, but nowhere near enough.
Australia must face reality that its appetite for pulp and paper is rising, already devouring four
million tonnes of paper and paper board a year, or an average 200 kilos per person. The price of
pulp is rising. What pulp we don't produce, we import. And as with the heavy importation of all
timber products into Australia, environmental standards in some of the countries of origin are
often far more lax than our own.

RICHARD STANTON, AUST. PULP, PLANTATION & PAPER COUNCIL: We certainly think that there should be a
requirement on all people who import wood and paper products into Australia to take steps to ensure
that the sources of their product are legal and preferably sustainable as well.

GREG HOY: This timber supplier in outer Brisbane, TLB, imports wood from Papua New Guinean forests.
Throughout South-East Asia there have long been documented allegations that despite protests of
local tribes and traditional land owners, in a hunger for cash, governments like PNG's condone
widespread and unsustainable logging of rainforests by vast Asian logging companies, supplying
countries including Australia.

REECE TURNER: The Australian Government acknowledges that up to half a billion dollars worth of
these products are being sold in Australia right now to make up for our demand, our insatiable and
growing demand, for paper and wood products.

GREG HOY: The importers, TLB Timber, would not be interviewed, though we were later contacted by a
prominent Australian lobbyist for the Malaysian logging company that owns the importing business.
He insisted all logging practices in PNG have been legitimate since the late 1980s.

Others beg to differ, calling on the Federal Government to honour a pre-election promise to clamp
down on illegal timber imports.

REECE TURNER: It really is important now that the Australian Government follow leaders like the
United States to stop the importation of illegally logged timber, especially when rainforest
destruction is right on our doorstep in places like PNG and Indonesia.

GREG HOY: But there'll be strong opposition and more would need to be produced from Australian
forests. Opinions vary as to an action plan. Veteran Forester Bob Newman says more of the nation's
147 million hectares of native forest would need to be made commercially accessible just for
starters.

BOB NEWMAN: The forest services have got to do some planting. They have various arrangements at the
moment with the seven pulp and paper producers in Australia. And those arrangements will need
expanding somehow, otherwise this amount of money of $2 billion dollars' deficit with our imports,
which we've been trying to get rid of, will increase.

RICHARD STANTON: We certainly think that we need significantly more expansion of our plantation
estate to supply wood to an integrated, internationally competitive wood processing industry within
that region, which may include saw mills, panel board plants and pulp and paper plants.

GREG HOY: That would mean giving the green light to big pulp mill mills like Gunns, but for any
chance like that, it now seems the chairman, indeed half of Gunns' board, will be required to fall
on their swords.

GEOFFREY COUSINS: I am absolutely certain of it. As I say, once the shareholders get rolling on
these things, there's no stopping it.

GREG HOY: Gunns' board is expected to meet tomorrow.

KERRY O'BRIEN: Greg Hoy with that report.