Propping Up a Potential Dead Asset – The Closure/Sale of the Heyfield Timber Mill

A salutary lesson in timber resource management

Gippsland in Victoria is still reeling from the loss of hundreds of jobs following the closure of the Hazelwood Power Station. And then months later the largest hardwood sawmill in Australia, also based in Gippsland, indicates it is closing.

The Heyfield Timber Mill is located in the small Gippsland town of Heyfield which has a population of about 2000. The largest industry in town is the Mill employing 250 workers. The mill is operated by Australian Sustainable Hardwood, owned by the Hermal Group.

The mill’s operator has been locked in a dispute with the Victorian Government and the State-owned logging company, VicForests, over the quantity of timber which could be supplied to the mill.

In March 2017 the company announced the mill’s closure, saying the shutdown would begin in August. This in turn led to a series of workers’ protests at Victoria’s State Parliament.

The dispute arose because of the shortage of timber. VicForests intended to slash the mill’s timber supply from 130,000 cubic metres to 80,000 cubic metres in 2017, and to 60,000 cubic metres in 2018 and again in 2019, because of dwindling log supplies. ASH (Australian Sustainable Hardwood) demanded the 130,000 cubic metres to maintain viability. (The original unsigned contract was to supply between 125,000 and 155,000 cubic metres of timber every year from 1 July 2017, until 30 June 2034.)

The hardwood processed at the mill grew in the environmentally sensitive central highlands. The management of the Victorian forests, like those in NSW, have been characterised by over-logging. Add to that the destruction of 26% (some reports say 40%) of the remaining harvestable supply in the 2009 Black Saturday Victorian bushfires,and it is little wonder there is a supply crisis.

The regeneration rate for mountain ash is over 80 years, and over 110 years for timber in the mixed forests.

To save the 250 mill jobs, the Victorian Government reached an in principle agreement with ASH to buy the Heyfield Mill and keep the sawmill operating and keep the existing workers employed. An initial offer of $40 million was rejected and speculation is that the final price was about $50 million (subject to due diligence)

Commentators have said that despite the Government’s assurances, job losses will be inevitable because the supply of timber simply cannot be maintained.

The mountain ash forests are also home to the critically endangered Leadbeater’s possum, – Victoria’s emblem. Industry maintains that large areas of forest are tied up to protecting the Leadbeater’s possum and in turn have led to the declining timber supply.

However, the Wilderness Society have said that just 3,000 ha (1.2%) of forest, allocated to VicForests for logging ash forest in Victoria’s east, was set aside for the Leadbeater’s possum. It was equivalent to 0.16 % of the 1.82 million hectares of state forest allocated to VicForests for logging all forests across eastern Victoria.

The Wilderness Society is proposing the establishment of a Great Forest National Park, arguing that preserving the mountain ash trees (which are also an endangered species) and facilitating tourism would boost jobs and the State’s economy more than the timber mills.

It has also been suggested to VicForests that they would be far more profitable leaving the trees standing and marketing the forests as carbon offsets.

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