The company's business development manager, Mark de Lautour, during a seminar for job seekers at the Otago Careers Festival at Work and Income in Dunedin, confirmed the company was investing in expanding its milling operations in Milton.
A specific site for the mill is still to be confirmed, but equipment for the mill was already starting to arrive at Port Otago, he said.
Construction was expected to begin in the next two months and it was hoped the mill would be commissioned in the middle of next year.
The company employs 290 people nationally, and the new mill in Milton could employ up to a further 40 people.
The expansion would also create employment in many of the mill's ancillary operations, such as trucking and shipping, he said.
Because operations at the new plant would be automated and controlled by computers, fewer staff would be needed to run the operation, but Mr de Lautour said it would be one of the highest-producing sawmills in the country.
The mill would initially be used to mill logs into about 500cu m of timber a day - the equivalent of about 10 to 12 truckloads.
The mill was designed to handle double that amount, he said.
Clutha Mayor Juno Hayes was delighted with the news.
He said the possibility of 40 new jobs being created would be a "big boost" to Milton.
"It's got to be good for the district. We welcome development.
"We've got a great forestry resource out there, and if we can get added value by processing it and creating employment opportunities here, that's what it's all about.
"And it stands to reason that there will be significant flow-on effects from the activity in the area."
Southern Cross Forest Products encompasses five wholly owned subsidiary companies.
The cornerstone company is New Zealand Wood Moulding, in Mosgiel, which was purchased by the company's shareholders in 1998.
Millstream Lumber (Milton) was established at the same time to ensure timeliness and quality of supply to New Zealand Wood Moulding.
Mr de Lautour said Millstream would continue to operate alongside the new mill.
Mr de Lautour said a second mill in the area was necessary to keep up with demand for wood.
"It's also a perfect location, relative to the forest. It means we don't have to truck logs long distances for milling."
Southern Cross Forest Products also operates Rosebank Forest Products, in Balclutha, which also supplies New Zealand Wood Moulding.
The addition of Thames Timber, in Thames, to the group in 2004 doubled the size of Southern Cross Forest Products.
The purchase elevated the company to being a significant player in the New Zealand timber industry.
