Victoria has agreed to buy the embattled Heyfield timber mill but workers say "it's a slap in the face" as production will be scaled down because of a lack of timber.
The Victorian government has an in-principle agreement to buy the mill after Australian Sustainable Hardwoods and owner the Hermal Group planned to start a shutdown in August.
Regional Development Minister Jaala Pulford hopes the deal will signed within weeks, but she was less certain about whether all 250 jobs at the mill could be saved.
"We can guarantee there will be no forced redundancies and that management will work closely with the workforce and unions to get the best possible outcome and secure as many jobs as possible," Ms Pulford told reporters on Monday
The government plans to run the mill with a reduced 80,000 cubic metres of sawlogs, despite ASH saying earlier this year it needed at least 130,000 cubic metres a year to continue operations.
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"The mill is very viable at 80,000 cubic metres ... the parent company didn't want to operate the mill at that quantity of timber and we recognise there will be some change," Ms Pulford said.
But Gippsland National MP Tim Bull said large numbers of jobs would go.
"What we have been told by employees at the mill, and in fact government sources, is that one shift will go and that will equate to around 100 to 120 jobs," he told reporters.
Leanne Phillips, whose husband has worked at the mill for 38 years, said "it's a bitter sweet pill".
"It's a bit of a slap in the face because they're not open to keeping the whole staff on," Ms Phillips told AAP on Monday.
"A lot of those people out there are long term employees and they know nothing else. This whole thing has torn our whole township apart."
The government won't say how much it paid for the mill as it wants to keep it from moving to Tasmania, but Hermal did knock back a previous offer of $40 million.
"We know there was another state that was interested in securing this mill's future and we need to be conscious of that," Ms Pulford said.
Tasmanian Premier Will Hodgman says Hermal repeated its interest in a Burnie mill, and he expects a formal proposal within weeks.
The CFMEU says workers at the mill and their families will rest easier about the closure threat, saying the "axe has been lifted".
