Updates: Gunns Optimism; Macarthur Bids Extended until 20 Sept 2011

It was a bit of a crazy first day back on the boards for Tasmanian company Gunns, with the shares up and down like a timber fellers' convention.

The shares fluctuated wildly after the company emerged from a six-week trading suspension yesterday, which meant the troubled group missed the surge in market volatility at an opportune time.

The shares dropped by 17% at one stage to a low of 17c, jumped by a third to a high of 27c, and ended the day unchanged at 20.5c (The low value for the shares made the percentage moves look extreme).

The company's shares had been put in a trading halt on August 4 when they plunged to a then historic low of 20.5c.

The halt was to allow the company more time to talk to the Tasmanian Government over a settlement for its exit from native forest logging on the island.

By the time the halt was introduced on August 4, Gunns shares had shed around 66% of their value since the start of 2011 as investors went off the company and sold, allowing hedge funds, who love volatility, to build up stakes.

Gunns claimed in a statement to the ASX yesterday that it is making progress in finalising equity investment for its controversial $2.3 billion Tamar pulp mill project.

It said it is still trying to secure a joint venture partner for the Tamar Valley mill. "Negotiations are now well advanced but not yet complete," the statement said.

Once the partner has been secured, Gunns will look at further sales of its Tasmanian forestry assets.

"This will materially change the underlying nature and structure of the group business and operations."

The company needs to retire $340 million of debt before January, 2012 and will attempt to fund the requirement through asset sales, the statement says.

Gunns was last week awarded $23 million of Commonwealth money in exchange for its forfeiture of native timber contracts.

The settlement also includes $11.5 million to be paid to state-owned manager Forestry Tasmania.

Meanwhile, the Tasmania Environmental Protection Authority is yet to rule on whether the company's pulp mill permits are still valid.

The permits, issued in 2007, require work at the mill to have substantially started before August 31.

The authority is expected to hand down its decision at any minute and could sink the project if it is a negative ruling.

Gunns says it has provided a detailed submission to the Authority about the status of the project.

"The company has undertaken substantial investment and works on the project.

"Expenditure of over $200 million to date has been incurred to finalise approvals, complete site roading and vegetation clearing, prepare construction, operation and monitoring plans and procure equipment."

Elsewhere in the statement, the company said the 2012 trading update was "consistent" with the company exiting the Tasmanian native forests hardwood logging and moving to plantations.

"The company has current market guidance of underlying earnings before interest and tax for the 2012 financial year based on the current business structure in the range of $40-50 million.

"Whilst forecast underlying earnings is consistent with the 2011 results, significantly it reflects the completion of the transition of the company's hardwood woodchip business from its historical native forest base to a plantation resource.

Based on the current market outlook plantation hardwood woodchip sales volume for the 2012 year is forecast at 2.4 million tonnes.

"This supply will be largely sourced from mainland based operations."

So no deal (and presumably, no Tamar mill permits) and the guidance will have to be recast.

And if the permits are not renewed, then investors can expect to see more losses and write-downs by Gunns after this statement in yesterday's update.

"The status of the pulp mill permit is a significant and material matter for consideration by the Directors in determining asset values in finalising accounts for the year ended 30 June 2011.

"The company's announcement of 25 August 2011 included a revaluation of the company's core assets to reflect fair market value and a valuation of assets related to the pulp mill based on the view of Directors that it is probable that the pulp mill project will be completed on the assumption that the existing regulatory framework for the project remains effective.

"These assets include the Tasmanian land and standing timber estate, valued at approximately $680 million and capitalised investment in the pulp mill project valued at approximately $217 million."

The shares will continue be a dangerous and volatile trading proposition until the Tamar mill issue is sorted out and the agreement to restructure the hardwood business confirmed and in place.

And Peabody Energy and ArcelorMittal have extended their $5 billion takeover bid for Macarthur Coal until October 14.

Macarthur last month accepted a sweetened $16 per share bid from Peabody and Arcelor after failing to find a rival bidder.

The bid had been due to expire on September 27.

Peabody and ArcelorMittal hold 17.3% and 16.6% stakes, respectively, meaning they only need a further 16.07% of shareholders to sign over their holdings to achieve a majority stake in the company.

Macarthur shares closed at $15.96, down 4c.