Tasmanian Premier Lara Giddings says the decision by New Zealand-born billionaire Richard Chandler not to invest A$150 million ($193 million) in woodchipper Gunns is a bitter blow to the state.

Gunns shares were placed in a two-day trading halt on Friday, after it announced that the Singapore-based Richard Chandler Corporation had decided against investing in Gunns.

Gunns has been trying to secure co-investors for its controversial A$2.5 billion pulp mill project at Bell Bay.

Giddings said she was disappointed with the decision by RCC.


"This news will come as a bitter blow to all Tasmanians who want to see jobs created at a time of considerable uncertainty," Giddings said.

"Despite [the] decision by the Chandler Corporation, I remain hopeful that the pulp mill project will be realised, bringing with it the promise of 3000 jobs in the construction phase alone."

Gunns said that it had been advised that RCC did not intend to proceed.

RCC had been undertaking a process of due diligence to assess the possibility of investing A$150 million in Gunns.

The investment was to have been part of a proposed A$280 million capital raising for Gunns that would have given RCC a cornerstone stake in the woodchipper.

Gunns had announced the A$150 million placement of securities to RCC and the A$130 million rights issue on February 8.

At that stage, the commercial terms of the placement and the rights issue were non-binding, and RCC's subscription was subject to completion of due diligence.

Gunns had said last month that the share placement and the rights issue would introduce significant new capital to the company and would help reduce the company's debt.


Shares in Gunns last traded at 16c.

Giddings said she would be extremely disappointed if the "orchestrated and well-funded" campaigns of conservation groups had led to RCC's decision.

The Tasmanian Greens said RCC's decision was "entirely predictable, and further proof that Gunns was a shell of a company with no business case".