Important Grower Update — Delays
Hello all,
As most of you are aware, we have gone from having 1 Ha of Sandalwood through the Quintis scheme, to ~700Ha that we have to decide what to do with. We have committed to maintaining the plantations as best we can, but this is causing a severe drain on our cash assets. Particularly as they were neglected by Quintis and their Administrators over the past 9 months. On top of this, Quintis failed to pay the outgoings from September 2023, and we had to meet these liabilities to be able to get water from Ord Irrigation to irrigate the plantations.
Regardless, we are happy to recognise MIS grower interests in these plantations, providing they help meet the costs of management, plus the land costs and responsibilities as per our previous lease agreement with Quintis. Regardless of what comes, the plantations must be managed through to harvest, or they will be worth nothing. According to the original lease agreement, this needs to meet good commercial plantation management practice.
The Court proceedings in October, may affect ISF, SGC and your interests as an ex-scheme growers. Some growers still have the PPRS, and ISF wishes to avoid infringing on these Growers' rights and causing larger issues. It is very possible that the upcoming court case may clarify what growers are entitled to with or without the PPSR, but as of right now the outcome is speculative. However, if Growers have a continuing interest in the plantation, and the respective landowners recognise this, it would seem reasonable that they still will need to pay lease & outgoings.
Furthermore, we have been warned by our accountant that the proposed contract is likely to be viewed as a defacto MIS Scheme by ASIC. While they have been a paper tiger regarding the likes of Quintis and their subsidiaries, they are likely to see us as an easier target and take legal action. This puts us in a difficult position:
- We want to recognise ex-scheme growers' rights to the trees by providing them with a way to maintain their position in sandalwood plantations.
- The sandalwood will not maintain itself, and the required operations are intensive and costly.
- Growers likely cannot manage the sandalwood on their own.
- We apparently cannot manage & grow the sandalwood on their behalf for a fee, as this constitutes a defacto MIS Scheme.
So how do we find a business structure that enables us to contract with MIS growers to facilitate their ownership of the plantation assets?
I am loath to spend any more money on lawyers at this point. Instead, I wish to ask all growers with an interest in their sandalwood or the offer to get their own advice on this, and share it with me. Perhaps then we can come up with a reasonable outcome that is not so expensive it destroys value in the sandalwood.
The best possibility we have come up with so far is that our family agree to rent a similar area of plantation to the ex-MIS Growers, granting tenure over a portion of the plantation. I believe that this shows our respect of your rights, whether covered by PPSR or not. The prices will not change from the original contract, it will just be handled slightly differently and will have different names.
This rental agreement would be for $2k/Ha/yr (plus GST), until harvest, which at latest be 2028. This would include a requirement to rehabilitate the rented area at the end of the rental period — i.e. return it to standard farming country as it was when yourselves (through Quintis) took control of the land at the start of the MIS agreement. Under this rental agreement, the plantation would be required to be managed at current best practice of sandalwood forestry management.
In parallel with this, we would expect growers to contract my farming business, Bosh Farming, to manage the plantation for $5k/Ha/yr for year 2024 — this pays for the work I have, and I am doing this year to bring the plantation back into shape. We would contract manage the plantation for $2k/Ha/yr up to the year of harvest. To harvest and rehabilitate the area, we would contract to a maximum of $10k/Ha for harvest and $7.5k/Ha/yr for the rehabilitation. These latter costs will be taken out of the harvest proceeds. Therefore, the prices will have not changed from the original contract, they will just be called different things.
The leased plantation areas would be managed and harvested as one lot, and the proceeds shared between Growers proportionally to their holding area. Rental and management costs would need to be paid on an annual basis up to harvest, with harvest and make-good (rehabilitation) costs taken out of harvest proceeds before distribution to growers. So this is really the best offer I may be able to make. However, I am still being advised by my accountant.
I want to assure you that we are not idle or neglecting the plantations. We have all but completed the second irrigation cycle in the plantations and have contacted AGFO to proceed with inter-row spraying as they dry out from the irrigation.
Until we have decided upon a reasonable solution & the court proceedings are over, we are delaying the commencement of the share farming until after the outcome is decided.
We are not formalising the contracts until after the hearing, therefore deadlines, invoice releases & payments are delayed until this situation is resolved.
I am sorry to have to put you all through this rigmarole. Again, I am asking for you all to assist by asking your advisory teams if you can come up with a kosher model that doesn't put us at legal risk.
Meanwhile, I will take my long-suffering spouse back to Germany to see her family and friends. I will still be contactable by email, and will respond to the best of my ability.
Rebecca will still be in Kununurra manning the fort, and contractors will be undertaking Plantation management activities. Once again, we have been and are committed to giving you the best chance of gaining a return on your investment. The costs we are charging are reasonable charges — we aren't making anything out of it, we will just be lessening our unintentional investment in Sandalwood Plantations.
Over the coming weeks, we will be renewing our website to reflect the new reality. We look forward to continuing to journey the path forward with you.
Regards,
Rob Boshammer
