Gunns says Bell Bay pulp mill still on

Gunns Ltd has rejected reports its controversial proposed Bell Bay Pulp mill was not proceeding, saying construction will go ahead once financing is secure.

Gunns chairman John Gay said media reports claiming the Tasmanian mill was not proceeding were inaccurate.

"Contrary to the reports, the company is continuing to progress with the project - we are continuing to work hard to satisfy federal government environmental approvals and to secure financing," he said.

Mr Gay said final federal government approval is expected in January 2009, with construction to commence on financial close.

Mr Gay said in the past weeks Gunns has continued to progress discussions with potential joint venture partners for the mill.

"Our discussions have been positive and are continuing on a basis which is consistent with our objective of reaching agreement on key terms early in the 2009 year."

Last month, Mr Gay told the company's annual general meeting in Launceston the project - initially costed at $1.4 billion - had blown out by a further $200 million to $2.2 billion and now was effectively on ice.

Project funding was at the mercy of an improvement in global financial markets and an easing of the international credit squeeze, he said at the time.

Mr Gay also told that meeting Gunns was working on a financing structure that would not require additional equity to be raised from shareholders.

On Tuesday, fervent mill project supporter, former Tasmanian premier Paul Lennon, told a parliamentary inquiry it appeared the $2.2 billion Tamar Valley pulp mill project "may not be alive".

The company's shares plunged on Wednesday, with Aequs Securities institutional dealer Ric Klusman speculating Mr Lennons' comments may have been behind the drop.

"That's probably what it is," Mr Klusman said.

Gunns shares were down 13.5 cents or 12.86 per cent at 91.5 cents at 1438 AEDT.