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Trust Tairawhiti buys back Gisborne's Far East sawmill

Working to secure replacement operator.

Dozens of workers at Gisborne's Far East sawmill have been given a temporary lifeline, after Trust Tairawhiti stepped in to buy back the mill.

The community trust took ownership of the mill through a confidential commercial agreement in order to retain the existing workforce, after its owner made the decision to close the mill.

“Prime SPV, a subsidiary of Trust Tairawhiti, reacquired the sawmill plant and buildings at their wood cluster centre of excellence site from Far East Sawmills, to ensure the region remained in control of the assets and to help facilitate an orderly transition to new operators,” Trust Tairawhiti chief executive Gavin Murphy said.

“Far East had faced difficult trading conditions for some time, as experienced by other sawmill operators around the country. As sawmills were not deemed an “essential service” under the current Covid-19 restrictions, the sawmill ceased cutting logs in the week prior to the Level 4 lock down. Far East have been able to facilitate the government wage subsidy for their staff for a period of time. However, these staff face an uncertain future after this support runs out.

“Trust Tairawhiti is working hard to secure a replacement operator, so this skilled team can stay together as a workforce and get back to work.

“The sawmill is an important asset for the region's wood processing aspirations, that aim to diversity log supply options and markets. The Trust considers that the close proximity of the mill to a large supply of prune logs on the East Coast makes it a viable business going forward.”

WET Gisborne Ltd, which also operates at the Gisborne Wood Processing Centre of Excellence site at Matawhero is unaffected by the closure and will continue to operate when a change in the Covid-19 alert level allows.

Trust Tairawhiti had already spent more than $17m on buying the sawmill site and other investments at the site, which is now a regional wood processing centre of excellence.

Trust committed 'at this stage' to retaining asset as a mill

In September 2015, ECT approved the $7.4 million purchase of the Prime Sawmill. In February 2018 it announced that the mill and its buildings, had been sold to Far East Sawmills, with the trust retaining ownership of the 22ha site.

Far East Sawmills was a subsidiary of Spectrum, a fully integrated forest products business, which owns the Tregoweth Sawmill at Te Kuiti, forests in Northland, a forestry harvest company and a transport fleet.

Mr Murphy said the trust would retain a 10 percent stake in Spectrum, which was secured as part of putting additional funds into the sawmill last year.

The Far East sawmill employed staff to produce about 60,000 cubic metres of timber a year.

In 2018, the Provincial Growth Fund (PGF) invested $500,000 to help recommission the mill, with the expectation of establishing a workforce of about 50. The total cost to recommission the mill was more than $3.6 million, with the rest of the funding coming from the Eastland Community Trust and the Far East Sawmills Limited.

Since then the Government has confirmed $20m of support, through the PGF, for establishing a wood centre of excellence at the site. Then on March 20, with the Covid-19 crisis having already made its presence felt in the forestry sector, the Government announced a $12.1m loan to further support the venture.

Mr Murphy said the trust was still committed “at this stage” to retaining the asset as a mill and was in talks with two parties about that.

“We are working with Far East and the government wage subsidy to keep the workforce together as we try to transition, that's what we are focused on.

Gisborne Herald file picture by Liam Clayton

  1. Bob says:

    The mill is a dog of an investment. Name one person who has ever made a profit there? You would be better off cutting and bagging firewood there.

  2. Vince Tay, Singapore says:

    While conditions in NZ are currently not conducive to achieving a profitable sawmill business, this does not mean the whole timber business in NZ is in dire straits. There are real opportunities to explore alternative uses of timber and its by-products, particularly those that involve exporting of activated carbon, charcoal log or ball briquette, etc. A possible venture in the form of a large commercial processing facility obviously needs detailed investigation and analysis as cost, logistics, security of supply and local operational requirements would decide if such a proposal is indeed viable.

    I represent a global conglomerate that is seriously looking into decarbonisation of its environmental and steel production businesses and would very much like the opportunity to explore and carry out a detailed feasibility study of establishing a processing facility for the export market, as its energy demand is currently met by imported coal (in the thousands of tonnage).

    Appreciate if there is someone whom we could approach to explore such an opportunity. Thanks.