A company cutting 50 jobs as it closes a Victorian timber mill says the state government failed to supply enough logs and made an "insulting offer" to buy the business.
Australian Sustainable Hardwoods announced it will shut its Green Mill at Heyfield in August, ending green log saw milling at the facility.
ASH's owners Hermal says the shutdown will "technically" cost 50 jobs but the actual number is not known as it will seek to redeploy people "as far as possible".
"It is uneconomic, uncommercial and most unrewarding dealing with the Victorian government and in terms of ASH I don't want anything further to do with them," Hermal boss Ron Goldschlager said in a statement on Monday.
But a spokesman for Premier Daniel Andrews said negotiations were continuing.
"The Andrews Labor government has provided a fair and reasonable offer to the Hermal Group, which would keep the mill open and secure local jobs," he said.
It's unclear what will happen to 200 other employees at the mill as ASH looks to get logs from international suppliers to continue some production.
The company said apart from the "insulting offer provided in May, there have been no further discussions or any form of offers made".
"We purchased the mill under a promise of a new 20-year supply agreement. This wasn't provided, " Mr Goldschlager said.
"Mr Andrews wanted to offer less for the mill than we have invested in it and far less than would be returned through closure."
It's understood the Andrews' government offered more than $20 million to buy the mill - which the company said fell far short of its true value.
ASH said there had been "no movement" from the government to address its policies to allow VicForests to provide the mill with the log supply it needs.
The government originally offered a three-year contract of one year's timber supply at 80,000 cubic metres, and two years at 60,000 cubic metres, which was rejected by ASH.
It maintains it needs at least 130,000 cubic metres of saw logs a year to continue operations - a number the government says is not sustainable.
VicForests did not meet its agreed wood supply total in four out of the past five years but has offered to make up the under-supply in July and August.
ASH has also started negotiations with the Tasmanian government about a move to Burnie.