Victoria's Heyfield timber mill is to close, putting 250 people out of work, after the owners rejected a government lifeline.
Australian Sustainable Hardwood chief executive Vince Hurley says the Gippsland-based mill will close in September 2018 after the state government cut its timber supply.
The mill, Australia's largest hardwood mill, is now looking to relocate to northwestern Tasmania to process plantation hardwood, he told AAP.
The company rejected Victoria's offer of a three-year contract of one year's timber supply at 80,000 cubic metres and two years at 60,000 cubic metres as well as a $4.75 million, three-year operational subsidy.
ASH maintains it needs at least 130,000 cubic metres of saw logs a year to continue operations - a number the government says is not environmentally sustainable.
Premier Daniel Andrews offered to buy the mill if ASH didn't want to run it any longer because he said the business had a strong future.
Mr Andrews said the government would offer a reasonable price if another buyer could not be found.
"This is a fair offer and a reasonable offer as we have had a look at the books of the company and we believe it is viable even at those lower volumes," he told ABC radio.
But Mr Hurley says ASH hadn't heard of the offer until the premier's statement was released on Friday morning and is "disgusted" staff had to find out through the media.
"We were expecting the premier to honour a commitment that things should have been heard from us first," he said.
If the government did buy the mill, it would have to substantially change operations to be viable on just 60,000 cubic metres of logs, Mr Hurley said.
"Not only would you have to buy it, you would have to refit it. It would be a huge risk," he said.
The company is backing a CFMEU and Committee for Gippsland campaign to get the government to change its mind about timber supply.
The CFMEU says it does not accept VicForest's decision on the availability of wood.
Nationals leader Peter Walsh said there was enough supply to give ASH the timber it wants and he doubted the government's ability to buy the mill.
"As I understand it the mill's not necessarily for sale and it doesn't matter who owns the mill, it still needs timber," he told reporters.
ASH says it will now restart negotiations with the Tasmanian government about moving the mill to the island state.
