BACKGROUND

In 2008, GWD Forestry (formerly Greenwood Management ApS) put forward the proposal to develop a number of barren land sites situated within the Western region of the state of Bahia, Brazil and located approximately 30km from the city of Barreiras.

The sites identified and focussed on for development included –

  • Fazenda Tropical, Esmeralda, and Buriti, (Now referred to collectively as Fazenda Tropical) – 1,020 hectares
  • Fazenda Barrinhas 1&II – 585 hectares
  • Fazenda Sanata Maria I – 368 hectares
  • Fazenda Vale do Buriti – 365 hectares

The project was officially launched in 2009 and carried on for a further 2 years until it was announced closed in 2011. In November 2016 after a number of initial delays GWD Forestry was finally granted the required licences by INEMA to cut and transport timber from the sites in line with the agreements signed between the company and IFU holder/s at the start of the project.

Nearly a decade on from the initial inception of the projects GWD Forestry has now progressed with its first phase of harvesting operations in line with those directions received by individual IFU holders. Over the years and in the interest of providing greater clarity for our clients a number of those sites proposed for development of the projects have subsequently received independent valuations at various stages of growth whilst further farm sites are expected to receive independent valuations prior to harvest.

Currently valuations have been received on the following farm sites, and based upon the value of the semi mature forestry established on those sites at time of valuation.

  • Fazenda Tropical, Esmeralda, Buriti,
  • Fazenda Vale do Buriti, and
  • Fazenda Santa Maria I.

All valuations were commissioned by GWD Forestry and its Brazilian subsidiary operating company and conducted by registered professionals from 2014 onwards. Currently the valuations received in relation to those projects established with eucalyptus crops show a total asset value of R$7,948,094.77, whilst the valuations received are expected to be lower than the actual valuations at harvest based on mature eucalyptus forestry crops.

This website explains the background of the project proposal, providing information received by IFU holders at the start of the projects and explains the rational behind that proposal, projected rates, alongside reporting on the development of the project as a whole accompanied with external sources for easy reference.

This website also provides up to date information related to harvest results and schedules relating to further harvests as the project reaches its final phase.

SITE DEVELOPMENT

Over the years a number of years images have been provided by the company showing the continued growth of forestry crops established on those sites included in the initial proposal. The image below was taken on a commercial flight from Barreiras to Salvador, and shows Fazenda’s Tropical, Buriti, and Esmeralda cleared and ready for planting in the foreground with Santa Maria I, Santa Maria II (Acacia), Poco do Porto (Acacia), and Vale do Buriti visible in the background.

FAZENDA TROPICAL, BURITI, AND ESMERALDA

The map from Google earth below shows the locations of the farms in relation to the city of Barreiras alongside the scale of the projects in relation to the size of the city.

LOCATIONS OF GWD FORESTRY FARM SITES

The project proposal put forward by GWD Forestry Ltd suggested that based upon the successful establishment of the eucalyptus crops on individual FSPU areas harvest would occur within an 8 year period. Harvest would be determined largely by both marketability of the crops established on the site alongside market conditions. Harvest would therefore be timed based upon the companies recommendations and the client direction given.

The purpose of the project would focus on producing eucalyptus crops primarily to supply plantation grown charcoal for domestic resale focussed on buyers within the Brazilian pig iron industry.

At the start of the project, reports at the time indicated that the state of Minas Gerais held a total of ten out of Brazil’s 27 pig iron producers whilst Bahia itself was independently reported as supplying approximately 11% of the total charcoal produced in Brazil. The merchant pig iron industry was noted as consuming approximately 68.46% of all charcoal produced in Brazil and as such it was decided (and based on prices received by other producers in the region at the time) that the production of charcoal would be the primary focus for IFU’s at harvest.

In addition to this primary market, a number of secondary markets also existed: it was reported that approximately 50% of the eucalyptus grown in the region was established to supply the areas three largest wood consumers Bunge, Cargill, and Galvani located either in or within close proximity to the city of Barreiras.

Further to this the area was expected to provide additional opportunities due to the proposed development of the new rail link that was expected to link Barreiras to both the city of Jequie and the location of the regions first pig iron facility (Ferrobahia) which was being constructed at the time.

As the projects developed so did the construction work on this new train link whilst completion was scheduled to coincide with the first phase of the companies harvesting operations. In addition it was announced at the Cop15 summit and on the Brazilian government website at the time that the Brazilian steel industry would be required over a number of years to phase out the use of coking coal in favour of charcoal produced from “exotic species” (eucalyptus).

PROJECTIONS (2009)

In 2009 the company commissioned independent growth and yield projections to be produced in the interest of providing clarity in relation to expected yields at harvest. These projections used site specific growth and yield data and were independently produced by Bio4met.

Alongside independent growth and yield projections market price data produced by both AMS and ABRAF was provided by the company on the projects mini-site located at www.gwm-tv.com.

Based upon all independent data received by the company prior to project establishment the company projected that a reasonable rate of return at rates at the time would be between 8% to 12% per annum. Whilst the project projected as an illustration that over a 7 year period (assuming harvest at year 7 after establishment)  yields of approximately 32.36 m3/ha/yr of timber could be achieved producing a total charcoal crop (based on Bio4met data) of approximately 154.07 MDC (cubic meters of charcoal).

This charcoal was then expected to be sold on to the pig iron industry who at the time were purchasing large quantities of plantation grown charcoal from the region. Based on charcoal price data at the time reported by AMS (Associação Mineira de Silvicultura), it was expected that an achievable rate to be received would be at least R$107.98, per cubic meter of charcoal (MDC).

By late 2009 the prices independently reported by AMS as received by other producers in the region was confirmed to be approximately R$200 (MDC). As such price projections were felt to be conservative and as shown on the projects mini site it was expected that per hectare (assuming harvest over a 7 year period) the total amount received per hectare would equate to approximately R$16,636.48 based on current market prices at the time, alongside both independent growth and yield projections, regional grower information, and confirmed average growth rates within Brazil based on the specific clones established by GWD Forestry at the time. In the interest of clarity all original projections published by the company at the start of the project can still be viewed  at www.gwm-tv.com/financial_projections.html