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    Paper mill group rolls out $800m plan,5936,6381830%255E3122,00.html

    Paper mill group rolls out $800m plan
    Richard Owen

    A QUEENSLAND group is to ramp up an ambitious plan to develop an $800 million state-of-the-art paper mill adjacent to CS Energy's Swanbank power station, near Ipswich, which would replace high-grade imports worth $400 million a year.

    The proposed Swanbank Paper Mill has attracted support from a stellar cast of international players including Swedish pulp and paper trading giant CellMark Inc.

    It has been granted "significant project status" by the Queensland Government, triggering a full environmental impact study.

    Queensland boutique investment bank and mill proponent Infrastructure Project Group has started work on a $7 million feasibility study involving a seconded team of 115 people, including a 45-strong contingent from civil engineering outfit Sinclair Knight Merz.

    Sinclair Knight Merz has been awarded the engineering and design contract together with Canada's SNC-Lavalin Group and is carrying out the EIS.

    Other companies involved in funding the feasibility study include the state-owed generator CS Energy, and state-owned water services group Sunwater, calcium supplier Minerals Technologies and limestone supplier Unmin Corp.

    Orica, Toll Holdings, Mincom, Hassell, Freehills and KPMG Consulting have all committed staff to the project.

    The massive 1000m-long mill and coating plant – taking up most of a 35ha site within the Bremer Industrial Park at Ipswich – would provide 650 jobs during construction and permanently employ 250.

    It would produce 350,000 tonnes of coated wood-free (CWF) paper a year on completion in early 2006.

    The Bremer site is also where Capral intends building its $120 million aluminium extrusion plant.

    Swanbank Paper's development director John Roche said Australia imported about $2.4 billion worth of paper products a year, including 250,000 tonnes of glossy high-quality CWF magazine paper from a variety of suppliers.

    Mr Roche said IPG had been in "stealth planning mode" until now to ensure the project reached critical mass before going public, as it was likely to have a "big impact" on Australia's only CWF paper manufacturer, Paperlinx Ltd. Paperlinx produces about 60,000 tonnes a year and imports 120,000 tonnes to claim about 60 per cent of the market.

    "The key to manufacturing success is to be able to leverage exports off a strong domestic market," Mr Roche said.

    "Australia is the second-largest importer of CWF paper in Asia behind China and we have quite a unique opportunity here because there is huge demand for this paper here and it's been growing at about 6 per cent a year."

    The balance was expected to be sold in South-East Asia and China – generating export earnings of about $200 million a year.

    However, growth in Australian demand for CWF products has stagnated in the past couple of years. Swanbank Paper will also have to counter fierce price competition from low-cost producers in countries such as Indonesia.

    Paperlinx chief financial officer Darryl Abotomey said yesterday he was aware of Swanbank's plans and saw the project as a "potential opportunity" to source domestic production to replace imports sold through its distribution arm.

    "But until it's developed further we still see it very much as a project in its infancy," he said.

    Mr Roche said Swanbank Paper planned to source its supply of pulp out of South America from CellMark, with which the group was negotiating an exclusive off-take contract for the plant's entire output.

    IPG aims to complete its bankable feasibility study by August with a view to reaching financial close by the end of the year.

    Crucially this will involve raising around $320 million of equity in order to lock in another $580 million of debt funding.

    Mr Roche said IPG was about to invite the world's leading paper manufacturers to participate in a "beauty parade" as part of an international search for a credible plant operator prepared to stump up $100 million or so for a 30 per cent share of the company.

    Although there was still significant risk that the project would not proceed Mr Roche said IPG had "assembled a world-class team" to advance the plan which was "moving in the right direction".

    Swanbank Paper plans to build the plant on a part of a 250ha parcel of land owned by New Hope Coal and being developed by Wingate Properties' within a 1300ha precinct surrounding CS Energy's Swanbank power station.

    The site has access to rail and the Warrego Highway, which dissects the site and is one of the busiest freight-carrying roads in Queensland.

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