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Rosebank Sawmill staff are devastated, out of work and in shock about the facility's closure.
The Balclutha mill is being closed by the receivers for Southern Cross Forest Products, alongside the company's Australian business.
Overall, 79 jobs at Balclutha, Milton and Mosgiel have been cut in a company restructure, brought about by a lack of profit and fire damage to a Mosgiel processing site.
The Otago Daily Times understands the redundancies comprise 25 at Balclutha, 29 at Milton and 25 at Mosgiel.
Staff were told on Wednesday afternoon and receivers publicly announced their decision yesterday.
Clutha Mayor Bryan Cadogan said Rosebank staff had hoped the company would be able to trade normally through receivership until sold as a going concern.
Southern Cross Forest Products was placed in receivership on March 3.
''Obviously, staff are devastated. The news came as a shock,'' Mr Cadogan said.
He has organised for a ''stock take'' of available Clutha jobs and next week hoped to meet those made redundant.
''It's a stressful time and my heart goes out to the guys and their families. There is robustness in the economy and jobs are here, so over the next few days we'll go to the major employers and find out how we can best mitigate this.''
Some workers had already finished and others had to find alternative employment immediately.
Receiver Brendon Gibson, of KordaMentha, said the Rosebank mill had ''completely closed'' and the April 11 fire in Mosgiel prompted some work to stop then.
The Millstream site at Milton was affected by the restructure, he said.
Receivers had worked hard to prevent job losses but the Australian business had ''never been profitable'' and the fire had ''massively'' reduced the company's timber-drying capacity, Mr Gibson said.
''Unfortunately, we now have no choice but to close one site, the Rosebank Sawmill, to stabilise productivity at the remaining sites.
"However, the restructuring will allow the core business to be maintained while the sale process continues,'' Mr Gibson said.
Receivers are negotiating with several interested parties, from New Zealand and overseas, about the sale and intend operations to continue.
But Mr Gibson said the business had to be constantly evaluated.
''It is no secret that the company has long struggled to secure sufficient log supplies to feed its South Island mills. That issue has continued to compromise trading in the receivership but performance has now been further affected with fire damage at the Mosgiel mill,'' he said.
The fire burnt out an electrical system, which shut down kilns and boilers.
Southern Cross Forest Products is one of New Zealand's largest processors and manufacturers of pine products and has corporate headquarters in Dunedin, as well as sawmills and processing sites in Mosgiel, Milburn, Milton, Balclutha and Thames.
It was listed for sale as one entity but could also be bought in parts.
When placed in receivership, it employed about 400 people, mostly in Otago.
Mr Cadogan said the ''gutting'' restructure was ''not good news for the district'', and Dunedin Mayor Dave Cull said the sawmill's closure, reduction of economic activity and job losses were to be ''lamented''.
Mr Cull said it was a blow for the Otago community as a whole, and another indication of the changing economy.
''There's a number of factors involved in sawmills closing down all over the country. Although the issue isn't constrained to here, it doesn't make it any more palatable,'' he said.
More than 40 New Zealand sawmills have closed in the past decade.
At December 31, 2012, Southern Cross Forest Products had assets totalling $78.8 million and debt of $57.9 million.