W.A. Blue Gum

Excerpt of letter from Tom May, Director W.A. Blue Gum Limited dated 17th May 2022
 

"I am pleased to inform you that my company is proposing to again offer a Project for subscription. We have for many years been involved with the growing of Tasmanian Blue Gum trees in Western Australia, being the major plantation hardwood species grown in Australia for papermaking.
 

This year's Project will include establishment by way of coppicing which will constitute two-thirds of the trees.  Planting will make up the other one-third. Coppicing is the technique whereby a standing tree is cultivated after harvesting. This technique is significantly cheaper than planting new seedlings. As a risk mitigation strategy, planting will make up the other one-third. The minimum initial contribution (including GST) will be $29,000 which will secure 5 hectares. Further contributions can be made at the rate of $5,800 per hec (including GST).


It is important to recognize the vast difference in the business model of this company compared to many others such as Timbercorp and Great Southern. In particular, we have never departed from a recurrent fee offering which means that it is not necessary to rely on attracting new subscribers each year to fund previously established projects.

That is, the financial viability of each project is self-sustained as annual payments for tending and rent are made by all the Growers


Also, this company has never been involved in any other agricultural enterprise which can be a very heavy drain on financial resources.


WA Blue Gum has never bought land and thus has avoided the need to incur substantial debt. We always lease the land. Therefore, the burdensome repayment requirements of borrowing are not relevant to our operations.


The Project will operate on high quality land chosen to meet strict criteria. As a result, the yield to Growers at the time of harvesting is expected to be significantly higher than any other past or present competitor. It is this aspect of the quality of the land which ensures that the Project will remain "niche" and "premium", as it is not possible to obtain large parcels of land of the quality acceptable to the Project.


Quality seedlings will be used exclusively in the one-third of the Project that will be planted.


Forestry is one of the very few carbon positive industries.


Any carbon and other environmental credits which may be received will be treated as equivalent to the sale of the wood and will be paid 100% to Growers.


The forestry management is contracted to Ents Forestry, whose principal has had vast experience in establishing and growing blue gum plantations. I have the greatest confidence in the professional skills that will be brought to the planting, coppicing and tending of the trees. The trees will be harvested in about 10 years.


A company in the Marubeni group of Japan will enter into a forward purchase agreement of the whole of the timber grown in the Project as has been the case in previous projects.


A finance package is available, being 80% of the total Application Amount (including GST) at 12.15% per annum interest. This is equivalent to 88% of the Application Amount, once the GST payable on the Application Amount is refunded by the Australian Taxation Office. The loan is repayable by way of direct debit by equal monthly instalments ending on 15 June 2027. Each instalment is of both principal and interest, with interest charged on the reducing principal. There is no loan establishment fee or other charges payable in respect of this finance package, and no break fees should a Grower wish to refinance with another source of finance.


There is the ability for you to subscribe jointly with another entity associated with you (e.g. your Self-Managed Superannuation Fund) whereby you make the first payment of fees (using, if you wish, the finance package) and the other entity makes all subsequent payments. The proceeds of harvest will be shared between you and the associated entity.


All fees (including the Application Amount and the annual fees and rent) should be eligible for a 100% immediate tax deduction in the year they are paid. Subject to land availability subscriptions can be accepted until 29 June 2022."
 


Finance available

Project term: Approximately 10 years

Offer closes: 30 June 2022