On March 17 the unexpected announcement was made that the Heyfield Timber Mill, owned and run by Australian Sustainable Hardwood (ASH), would be forced to close.

Words: Erin Stobie
Photography: Australian Sustainable Hardwoods Facebook, The Herald Sun, ABC, The Gippsland Times.

The Mill, located in the town of Heyfield in the Gippsland region of Victoria, employs more than 250 workers. The main employer in the small rural community, the Mill has been operating in the area for decades.

As it stands, the Mill, which is the largest hardwood mill of its kind in Australia, processes roughly 150,000 cubic metres of native regrowth timber per year. As per an agreement with the government, the wood processed at the Mill is supplied by state-owned logging company VicForests.

Issues with supply arose recently during contract renegotiations with VicForests. In January, the government proposed a supply cut from 150,000 cubic metres per year to 80,000 for the period of 2017-2018, and 60,000 each year for the two years following.

That proposal was rejected by ASH, citing the fact that the offer was well below standard levels for the Mill, and would not allow the business to operate viably. Owners then advised staff that the Mill was likely to close.

According to VicForests, who are required by law to manage Victoria’s forests sustainably, timber supply in the area is dwindling to the point that current levels of production at the Mill have become unsustainable. The Wilderness Society of Victoria have backed VicForests’ claims regarding sustainability, and have further stated that change affecting the logging industry is inevitable due to bushfires and decades of persistent logging.

Further complicating matters, is the issue of reserves, national parks and exclusion zones, which have been set up in the area to protect threatened species, including the critically endangered Leadbeater’s possum. The proposed Great Forest National Park would include 500,000 hectares of forest in and around the towns of Healesville, Kinglake and Marysville, east of Melbourne.

ASH insists that the government needs to reassess the non-peer reviewed science that underpins the protection zone listing. They have also suggested that the government has a responsibility to intensify efforts in the 94% of the protected forest to look for the possum—which would have been possible, ASH say, had the government considered the proposal provided late Friday to keep the Mill open for a further 12 months.

Following the announcement of the closure, the government requested a four-week delay from ASH in acting on the forced closure. The board agreed, going on to allow the government five weeks for consultation. At the end of the five-week waiting period, the government then requested a further seven days to come up with a viable proposal to keep the Mill open. The ASH board agreed to provide a further ten days.

During this period, ASH granted the government access to all areas of the company’s confidential financial and operational modelling. ASH claims that the Mill’s board and management were blindsided to hear the government provide a public commentary on their private and confidential financial runnings, and have suggested that the conduct may serve as a warning to other companies asked to trust the government with such information in the future.

ASH have stated that the minimum supply needed for the Mill to remain viable under current tooling is 130,000 per annum. On the afternoon of the 14th, the government provided ASH with a proposal containing the same supply offer as in January, plus $4.75m over three years as an operational subsidy, and a further $250,000 to assist in working up a retool arrangement.

ASH estimated that under the government’s proposal, the business would suffer losses of more than $12m per annum with a government operational assistance of just over $1.5m. With subsidies factored in, the Mill would be set to run at a loss of over $10.5m per year. It is ASH’s belief that the government understood this capacity for loss, due to having been allowed access to financial modelling information, but still chose to provide the company with an offer which was not sustainable.

Following on from discussions on Tuesday, ASH put forward two alternative proposals to the government on Thursday afternoon. It was ASH’s belief that these proposals would have allowed the government time to work up a solution which would enable staff at the Mill to keep their jobs.

The second of the two options proposed to use the 80,000 cubes offered but would have delivered it by July 1, 2017, as opposed to January 31, 2018. ASH believes this would have kept staff in work until March 2018 at least, allowing the government a further 12 months to find a resolution without costing the state any money.

The Andrews government rejected both this proposal and the first alternative.

The ASH board met for an extended period on Thursday, following developments in the discussions with the government, to explore if there were any options left that would allow the business to remain open. Finding no such resolution, ASH decided that they would begin the 18-month closure process, after which time the Hayfield Mill will close permanently.

After advising the government of the outcome of the board meeting, ASH asked the government not to announce the decision until they’d had an opportunity to inform staff at the Mill of the closure. ASH claims this request was all but ignored, as evidenced by the Premier releasing the decision on the morning of the 17th—before management had had the chance to speak with staff.

Having written to the CFMEU in regards to working through a support programme for staff and opening discussion around processes for redundancies, ASH has said that they will do everything possible to support staff during the closure.

Despite declarations by Daniel Andrews that the government would consider the “unconventional” step of taking over operations of the Hayfield Timber Mill, ASH has stressed that such a plan isn’t an option. The owners and operators of the Mill have stated that the Mill is not and will not be offered for sale, detailing rather their plans for operations to be relocated to Burnie, Tasmania.

ASH are reportedly confident a deal could be struck to shift operations to Tasmania, and have said that they would look at relocating staff from Hayfield to Burnie should the plan go ahead. Despite this, the government have maintained their offer for a potential buyout.

The closure process is expected to begin in April, with the most significant reduction upon closure to be that of the Green Mill in August. Complete closure is expected by late 2018.