Gunns’ Proposed Pulp MillOVERVIEW

May 2009

Gunns Limited (GNS)

Governance

•Lack of Board independence. At the time only one of the six non-executive directors is fully independent.

•Mr John Gay is a substantial shareholder, managing director and chairman.

•Three of the non-executive directors have been on the board in excess of 10 years contrary to ASX best practice guidelines.

•Non-executive director Richard Millar, who joined the Board in 2007 owns a company that has dealings with Gunns.

Corporate Monitor, Decmber 2007.

Gunns Abandons Independent AssessmentGunns Abandons Independent Assessment

“...amounts to critical non-compliance”

“…expert witness statements that fail to satisfy the requirements”

Letter from the head of the Resource Planning and Development Commission (RPDC) Simon Cooper, 2nd March 2007 to Gunns Limited, not sent on request then Premier Paul Lennon’ secretary.

On the 14th of March 2007 Gunns abandons the RPDC.

Fast-track assessments set up by State and Federal Government.

Judicial Review of Federal Conditional Approval Proceeding, judgement pending.

““Only world’s best Only world’s best technology utilising a technology utilising a low impact Total low impact Total Chlorine Free (TCF) mill Chlorine Free (TCF) mill will be looked at..”will be looked at..”

““The pulp mill will focus The pulp mill will focus on processing premium on processing premium plantation timber…”plantation timber…”

Gunns broken promises…Gunns broken promises…

SOCIAL

“FORMER Tasmanian premier and Gunns Ltd board member Robin Gray has threatened to axe or cut back Gunns' support for the crisis and homeless charity, the Launceston City Mission, because of the pulp mill stance of its chief executive.”

July 2007The Mercury newspaper:

http://www.news.com.au/mercury/story/0,22884,22071525-5007221,00.html

“Gunns uses the legal system to confront environmental groups that challenge its business practices. These suits have been either lost or dismissed with costs awarded against the company. The court process is costly and time-consuming and had, reportedly, created public fears about openly challenging Gunns.”

Ethical Investor Magazine, December 2007.

Tasmanian Aboriginal groups oppose the proposed Tamar Valley pulp mill because of its impacts on Aboriginal culture and heritage at the proposed pulp-mill site on the Tamar River and in the forests that will be logged to feed the mill; because of the impacts of the mill's effluent on Bass Strait, particularly in the vicinity of islands that form part of Aboriginal land in Tasmania; and because of the atrocious lack of consulation with the Tasmanian Aboriginal community about the proposed pulp mill and its impacts.

GUNNS PROJECT WOOD SUPPLY FIGURES

Over 20 years the pulp mill will log well over 200,000 hectuares of Tasmanian native forests

Sovereign RiskSovereign Risk: 4 MT of logs every year: 4 MT of logs every year

Reports by scientific experts, commissioned by Forestry Tasmania, have warned that the Tasmanian wedge-tailed eagle faces a 98% chance of local extinction if planned logging goes ahead.

Other wildlife at risk from large scale land clearing and logging needed to feed the proposed pulp mill include the giant fresh water crayfish and the spotted-tailed quoll.

Recently published research by the Australian National University (ANU) shows that Tasmania’s native forests are one of the richest stores of greenhouse gases on the planet, logging releases these store gases driving climate change.

Water Use

Gunns’ proposed pulp mill will use 26 billion litres of water every year.

Plantation establishment will put further pressure on drinking water catchments of the North-east.

Because Gunns have chosen a chlorine dioxide bleaching pulp mill the water will not be recycled.

Every year the pulp mill will dump 30 billion litres of effluent into Bass Strait. This will include around 140 tonnes of organochlorins containing some of the most toxic substances known to science, dioxins and furans.

Other toxic substances contained in the effluent include resin acids and

heavy metals.

EFFLUENT

Not yet approved by Federal Environment Minister Peter Garrett

“In its current form, the pulp mill threatens the entire fishing industry of the north-east.”

John Hammond, Chairman of Tasmanian

Scallop Association

The Fishing Industry

One third of Tasmania’s fishing industry is based in the effluent zone of the pulp mill (Tasmanian Fishing Industry Council)

“The Australian Medical Association (AMA) Tasmania has significant concerns about the potential for adverse health effects resulting from the proposed Pulp Mill”

http://www.amatas.com.au/issues/

FINANCIALLY RISKY

Currently there are major obstacles stopping the mill from proceeding including:

•A challenge in the Tasmanain Supreme Court by Environment Tasmania and three land owners;

•Federal government approval to operate the pulp mill has not been granted. Gunns has been given until March 2011 to complete assessment work related to the impact effluent would have on the marine enviornment;

•A refusal by several Tamar Valley landowners and the West Tamar Council to allow Gunns to build its pulp mill pipeline acrorss their land.

• State approval for Gunns Tasmanian pulp mill is invalid and wide open to legal challenge, according to an analysis to be published by a leading administrative law expert.

FINANCIALLY RISKY

Gunns’ CEO and Chairman John Gay, has revealed that “pulp mill viability figures are based on world pulp price of $US800 a tonne, despite analysts predicting long-term pulp process of just $US550/a tonne.” Currently the world pulp mill is US$360 a tonne.

The Mercury http://www.news.com.au/mercury/story/0,22884,23311236-5016569,00.html

“The mill, we estimate, subject to the treatment of items such as wood costs might be barely profitable at this level.”

Royal Bank of Scotald (equities Australia) 13 May 2009

Innovest (now RiskMetrics) analysis of Gunns financial and ESG performance from 2003 - 2008

Over 40,000 people petitioned CEO of ANZ Mike Smith not to fund Gunns’ pulp mil.

After being Gunns banker for over 12 years ANZ declined to be the Lead Arranger from the pulp mill or provide funding.

“Bank workers welcome move to dump Tassie pulp mill”

The Finance Sector Union, representing bank workers including workers at ANZ, said that move showed that the bank was prepared to put the interests of the environment and local communities ahead of bigger profits.

Rod Masson, FSU National Policy director said that ANZ, in its decision, had set the industry standard for corporate responsibility.

http://www.fsunion.org.au/News-Views/Media/Media-Releases/Bank-workers-welcome-move-to.aspx

Majority of Australians opposed: Independent research by Roy Morgan found that 46% of Australian electors do not approve, 30% can’t say and only 24% approve of Gunns pulp mill: http://www.roymorgan.com/news/polls/2007/4238/

An Essential Research poll, commissioned by GetUp! in June 2008, found 61 per cent of Australians were opposed to Gunns’ pulp mil.

No Social Licence