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The Project
The Project involves the establishment and tending of Tasmanian Blue Gum (Eucalyptus globulus) plantations for the harvesting and sale of timber. The Project is a managed investment scheme registered under the Corporations Act 2001. W.A. Blue Gum Limited ("Project Manager") is the Responsible Entity and manager of the Project. The Project Manager has been involved in forestry operations for over 10 years and currently manages thousands of hectares of eucalypt plantations in Western Australia on behalf of subscribers to previous offer documents.
Pursuant to the Project Agreements the Project Manager will arrange the establishment, tending, felling and harvesting of Blue Gum plantations to be known as the "W.A. Blue Gum Project 2010".
The duties of the Project Manager include the following:
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establishing the
Plantations within the Establishment Period for the
purposes of felling and harvesting; and |
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tending the
Plantations until felling and harvesting take place. |
The Project is to be established on land in the south west of Western Australia between Bunbury and Albany ("Project Land"). The Project Manager seeks to raise approximately $2,750,000 based on the present land availability outlook. The Project Manager may accept oversubscriptions, the amount of which will be subject to the availability of land of the desired quality. Each Grower will sublet a specific and identifiable area of the Project Land from the Project Manager pursuant to a Sub-Lease.
The Project Manager leases the Project Land from various farmers or alternatively, sub-leases the Project Land from W.A. Chip & Pulp Co Pty Ltd or WACAP Treefarms Pty Ltd. In all instances, the head lease between the Project Manager and the farmer, or alternatively, the sub-lease between the Project Manager and W.A. Chip & Pulp Co Pty Ltd or WACAP Treefarms Pty Ltd is to be registered with the Office of Titles, Perth thereby protecting the Project Manager's and ultimately the Grower's interest in the Project Land.
Each Grower will enter into project agreements with the Project Manager. The project agreements consist of a Sub-Lease, a Project Management Contract and a Wood Purchase Agreement.
Where there is no Project Land available for a particular Grower on or before 30 June 2010, the Project Manager may still accept the Grower's Application subject to a Sub-Lease being entered into on behalf of the Grower and lodged for registration by 30 September 2011.
In these circumstances, the Grower will be required to enter into an Agreement to Sub-Lease with the Project Manager.
It is anticipated that the blue gum trees
Established and maintained under this Project will
be available for harvesting as woodchips in about
ten years. However, the timber may be sold at any
time between 2019 and 2022.Under the terms of the Wood Purchase Agreement, W.A. Chip & Pulp Co Pty Ltd ACN 008 720 518 will buy the wood unless the Project Manager can negotiate better terms with a reputable third party after first allowing the Purchaser the opportunity to match the price offered by the other party interested in purchasing the wood (see Section 9.6 of Part B of this PDS). The precise date of purchase will depend upon both the growing conditions that have applied during the term of the Project and an assessment by the Purchaser of the market conditions at the relevant time.
It is a possibility that the whole or part of the wood grown will be suitable for a higher value use such as flooring. If this turns out to be the case then the Growers and the Purchaser will decide together on the best way to deal with the grown wood. It cannot be predicted with any accuracy whether (and, if so, to what extent) it would be wise or necessary to allow a longer rotation in order to take advantage of the higher value. This PDS ignores completely the possibility of a use with a higher value than as woodchips.
All net income on the sale of a Grower's interest in the Plantations (including all carbon and environmental credits) will be paid to the Custodian for distribution to each Grower. The proceeds from the sale of the wood will be pooled and the net proceeds distributed to Growers on a pro rata basis, ie. in the same proportion that the number of hectares held by each Grower bears to the total of all hectares comprising the Project.
If unforeseen expenses in relation to things such as fertiliser and/or insect issues arise, the Project Manager is entitled to convene a meeting of all Growers. The Growers may, by majority vote, agree to meet such expenses, in which case these expenses will be borne between all the Growers in proportion to the number of hectares held in the Project by each Grower.
It is the intention of the Project Manager to terminate the Project upon the distribution of the proceeds from the first harvesting of the Plantations or, in the event that any Growers exercise the Coppice Option (subject to acceptance by the Project Manager), upon the distribution of the proceeds from the second harvesting. The Project will cease at the end of the first rotation for Growers who do not exercise the Coppice Option. The Project may continue for the period ending up to 26 years after the date of the last acceptance by the Project Manager of an Application from an intending Grower unless otherwise determined by the Project Manager or the Growers.
Joint Venture Growers
Two applicants may participate in the Project as Joint Venture Growers. Under this arrangement, the first Joint Venture Grower is responsible for all activities associated with the establishment of the Plantation and the fees payable in respect of those activities and the second Joint Venture Grower is responsible for the provision of land and tending of the Plantation and is responsible for the payment of all rent, tending and insurance fees. The Joint Venture Growers will each be entitled to 50% of the proceeds of sale of the timber from their Plantation.
Each Joint Venture Grower will be responsible for 50% of all harvesting, transportation and supervision costs and incentive fees payable out of the proceeds of the sale of the timber.
Throughout this Product Disclosure Statement, any reference to a Grower includes a reference to Joint Venture Growers.
Benefits
Benefits
Benefits of the Project include:
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(a) |
The soil characteristics and rainfall conditions of the Project Land has independently been assessed as being of superior quality for Blue Gum plantations. |
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The Project Manager has selected improved seedlings which analysis indicates can be expected to produce in the vicinity of over 20% more wood (in dry weight terms) than trees grown from average native forest seed. |
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The Project Manager has negotiated a wood purchase agreement with W.A. Chip & Pulp Co Pty Ltd, another company owned by Marubeni Corporation and Nippon Paper Company.
The harvested timber will be sold to W.A. Chip & Pulp Co Pty Ltd at an agreed price provided that, if the Project Manager is able to negotiate a higher price with a genuine third party, the Project Manager will be free to sell the timber to that third party unless W.A. Chip & Pulp Co Pty Ltd matches the offer. |
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The Board of the Project Manager includes directors with extensive forestry expertise and proven performance in the management of Blue Gum plantations. Two of the directors have over 25 years experience in the growing of softwood and hardwood plantations.
The Project's principal Forestry Contractor, WACAP Treefarms Pty Ltd ACN 009 378 607, is owned by Marubeni Corporation, a Japanese company which is one of the world's leading trading houses and the largest customer for pulpwood from Western Australia since 1976 together with Nippon Paper Company, one of Japan's largest paper making companies. In addition, the Project Manager has engaged URS Forestry, one of Australia's leading international forestry consultancy organisations, to assist in the supervision of the Forestry Contractor. |
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The Project Manager consults with and is advised by leading forestry experts, employs sound silvicultural and environmental practices and engages a leading forestry company to provide forestry services. |
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The pooling of receipts from the sale of wood both spreads the risk to each Grower and, at the same time, results in a more significant market presence at the time of selling the Wood. |
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Possible significant financial gains both before and after income tax is taken into account. |
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Tax deductibility of the costs of the Project. |
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The Federal Government is committed to the support and the expansion of the Australian plantation forestry industry, as confirmed in "Plantations for Australia: The 2020 Vision", which encourages the trees of plantation forest areas in Australia over a 25 year period to 3 million hectares. |
Risks
The Project is long term and, accordingly, speculative in nature and is subject to the risks of such an
undertaking including (but not limited to):
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Market risks such as: |
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changes in demand and price for timber due to economic downturn, global and Australian competition and consumer product requirements and preferences; |
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oversupply of timber products to relevant markets; |
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changes in pulp technologies; |
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distributor consolidation and rationalisation; and |
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changes in price for business inputs such as labour and materials; |
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Regulatory risks such as: |
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obtaining all necessary government and regulatory approvals; |
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access to infrastructure (eg power, irrigation, transport, water); |
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changes in government and regulatory legislation and requirements (e.g. taxation); |
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changes in taxation, levies, duties and imposts; |
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the failure to obtain or the withdrawal of Product Rulings that have been applied for concerning the taxation treatment for the Project by the Australian Taxation Office for non compliance with the terms of the Product Ruling; and |
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withdrawal of the PDS or the Project Manager's Australian Financial Services licence by ASIC for non compliance with the Constitution, Compliance Plan and/or Corporations Act; |
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Agricultural risks such as: |
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natural disasters, climatic variance, fire, windstorms, flooding and other acts of God; |
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insect and vermin infestations and agricultural diseases; |
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quarantine restrictions and regulations in Australia and globally; |
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suitability of seedlings; |
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suitability of forestry techniques; |
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environmental impact and obligations and regulations imposed by the government and other bodies; |
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accessing and adapting harvesting and processing technology and technologies generally; |
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regulatory approval; |
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misinterpreting transportation and harvesting requirements and locations; and |
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(x) |
misinterpreting soil, climatic, water and other site conditions. |
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Financial risks such as: |
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ability to achieve assumed yields and prices; |
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price and cost movements; |
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changes in the Australian exchange rate and foreign currency exchange rates; and |
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interest rate variations; |
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Other risks such as: |
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the solvency of the Project Manager, the Project Manager's associates, subcontractors and other relevant parties; |
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default by the Project Manager, the Project Manager's associates, subcontractors and other relevant parties under the material agreements; |
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loss of key staff; |
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Uncontrolled Events; and |
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the Applicants' ability to pay their annual contributions. |
The Project Manager has endeavoured to minimise these risks as far as possible by arranging particularly appropriate sites for the Plantations and by engaging experts as prominent and independent as the Forestry Contractor and URS Forestry to provide the services mentioned in Sections 2.6 and 2.7 of Part B of this PDS respectively.
This document is a summary only. Please ensure that you read the PDS and Financial Services
Guide in full before deciding to participate in the W.A. Blue Gum Project 2010. This document
contains general securities advice only which does not take into account any person’s investment
objectives, financial situation or particular needs. Before participating you should assess the suitability
of the project to your needs and consult a professional if necessary.
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