A Victorian government lifeline for the beleaguered Heyfield timber mill has been rejected, but the premier has vowed to keep the mill open even if a buyer can’t be found.

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, has been rejected by Australian Sustainable Hardwood.

ASH maintains it needs at least 130,000 cubic metres of saw logs per year in order to continue operations – a number the government says is not sustainable.

Australian Sustainable Hardwood chief executive Vince Hurley said the Gippsland-based mill would close in September 2018 after the state government cut its timber supply.

“The owners will also now explore options of relocating the manufacturing plant to Tasmania,” Mr Hurley said in a statement on Friday.

The government had asked the mill’s operator to begin negotiations to sell it, but if a buyer couldn’t be found Premier Daniel Andrews says his government would step in.

“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,” Mr Andrews told ABC radio on Friday.

“There has never been any question about the quality of the product that is produced out of that mill. It is a viable business.”

The government said in a statement that the majority of Victoria’s mills currently operate with timber supplies significantly below the levels offered to ASH.

Mr Hurley said the board was “disgusted” with how Mr Andrews revealed the deal had been rejected in the media before management had time to tell staff.

“We had also asked government not to announce our decision until we had a chance to tell our staff first, when we advised them last night of the outcome of the board meeting,” the ASH statement said.

A supervisor at the mill said the morale of the 250 workers was low as negotiations began on the future of their jobs.

“Everyone is a bit down in the dumps,” ASH supervisor Andrew Wilkes told ABC radio on Friday.

“There’s a lot of negativity getting around at the moment because we’re having a meeting later today to let both shifts know what the outcome is.”

The company announced its decision to workers at the mill at 2pm on Friday.

He said there are 250 direct jobs at the mill, but it supports up to 10,000 other jobs in various industries.

– AAP