Gunns chairman John Gay responded in a statement to the ASX that the project was “continuing to progress”, and that Lennon’s statement was inaccurate. The project’s construction is slated to commence once financing is finalised.

“We are continuing to work hard to satisfy federal government environmental approvals and to secure financing,” said Gay.

The share price fell to 86.5c, down 17.62 per cent, signalling shareholders’ scepticism of the viability of the project.

Gay told the ASX that final federal government approval for the project is expected in January 2009, adding that the company is continuing discussions with potential joint venture partners and is securing a financial structure not dependent on additional equity from shareholders.

Originally costed at about $1.4 billion, the Bell Bay project is now costed at about $2.2 billion, roughly $200 million higher than the last estimate.

With the current financial climate, analysts have suggested that the Gunns pulp mill project will have little chance of attracting funding, at least until the squeeze has eased.

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