Long Term Pulpwood Supply Agreement

Statement by Bob Gordon, Managing Director Forestry Tasmania

There are no surprises in Gunns Limited's statement to the Stock Exchange.

We note the statement by Gunns that construction is unlikely to commence before the first quarter 2009.

The Long Term Pulpwood Supply Agreement contains a clause which would allow either Gunns Ltd or Forestry Tasmania to give notice to terminate or re-negotiate the contract if construction of the proposed pulp mill was not underway by November 30.

Forestry Tasmania does not intend to exercise that right for the following reasons;

1. Forestry Tasmania supports the construction of a pulp mill using world best practice and the certainty it would bring for FT, its contractors, Tasmanian sawmillers and the wider industry.
2. It is in Forestry Tasmania's commercial interest to retain the current prices and arrangements under the LTPSA, which has now been in effect since January.
3. Forestry Tasmania supports downstream processing because of its capacity to provide jobs for Tasmanians.

If Gunns chooses to exercise its right to terminate or re-negotiate the contract, Forestry Tasmania will deal with that if it arises.

The Sovereign Risk Agreement is a matter for Gunns and the Tasmanian government and does not affect the wood supply contract between Gunns and Forestry Tasmania.

In the longer term, if it was to become clear that the pulp mill would not proceed, Forestry Tasmania would review its position with a view to maximising value adding of the timber resource.

ENDS