Sandalwood Movements in the Ord Valley

ISF

November 22, 2024

Release of the plantation condition report & recent legal notices distributed by SPL.

Updates on Quintis Plantations

The situation regarding sandalwood in the Ord Valley has been evolving quickly since the Federal Court mandated the wind up of MIS Schemes. Quintis has forfeited all of their leases to local landowners and seems to be focused on harvesting what they can of the sandalwood as soon as possible.

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The landowners that have reclaimed rights to their land back from Quintis are now charged with the care or clearing of thousands of trees. Clearing and rehabilitating the land for the next crop cycle will take thousands of dollars per hectare or, on the other hand, they may try to maintain & harvest the sandalwood. None of the landowners were prepared to inherit this much sandalwood suddenly, and it is not to their benefit. Some farmers left with blocks in poor condition have cut their losses and have taken to clearing the sandalwood in preparation for the next crop cycle. ISF is fortunate enough to have most of its blocks in good condition, except for a few signs of neglect due to spending six months in legal limbo.

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The sandalwood that remains, particularly that of Quintis, is being rapidly auctioned at extremely low prices to international and domestic buyers. A review of Quintis plantations has most buyers realising that there is much lower quality sandalwood than Quintis had previously indicated, especially in the NT, where plantations are in poor condition. Some international buyers (and possibly some domestic) seem to be putting downward pressure on prices by obfuscating the valuation of sandalwood and spreading uncertainty about the market among farmers.

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According to the receivers “the net proceeds of sale of the ex-Scheme trees on the Voyager Land (after deducting marketing and selling costs) in an interest-bearing escrow account, to be distributed as determined by the Court (or as otherwise agreed with parties who establish an interest or right in the ex-scheme trees).” Seeing as the recent legal document distributed to growers is reiterating that ex-scheme investors have “no interest” it is doubtful any of this will be distributed back to growers willingly.

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Keep in mind, many of these buyers want to secure as much of the Ord Valley sandalwood for the lowest price possible to secure as close to a monopoly on the supply as they can. After meeting with some Quintis/Santanol buyers touring the Ord Valley, many of the local farmers believe that these buyers are putting as much downward pressure on the prices as they can.

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Quintis has sold approximately 500ha of land to Ron Greentree and Ron has given Quintis until October 31st to harvest the remaining sandalwood from the land, after which he will bulldoze what is left.

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Ron Greentree has purchased ~500 ha of farmland from Quintis with the sandalwood still on it. He has given Quintis until October 31st to harvest the remaining sandalwood. Thereafter, he will clear the rest and rehabilitate the land for crops.

Rob and I recently checked the state of sandalwood blocks involved in the 2008–2013 projects.

Condition of the former Quintis plantations varies from good to poor.
A few of the Ivanhoe Rd blocks, which were part of the 2008 project, have been harvested.
Quintis Voyager and Farm Hill Road blocks are well into their harvest.
Santanol’s farms on Research Station Road have commenced harvesting. Ivanhoe blocks close to Kununurra have been completely harvested and cleared.

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Recent court documents from Sandalwood Properties Ltd.

If you were a grower between 2008 and 2016, you may have received a set of legal documents with the following title:

“The Interlocutory Process for declaratory relief and for directions pursuant to section 424 of the Corporations Act 2001”

If you are a grower with an interest in ex-scheme trees & haven’t received legal documents from SPL/Quintis receivers, you can view & download them below:

ISF is investigating the claims made by SPL and will keep the website & those on our mailing list updated as the situation develops. As it stands, it appears that the receivers have no intention of claiming the Airport farms (Lot 1), which is where our share-farming allotments will be. Therefore, this is unlikely to affect current or future contracts with ISF.

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Why do lessors now own the trees?

As of May 2024, Indian Sandalwood Farming has undertaken the exhaustive task of restoring plantations back into an acceptable state and preparing our land for irrigation. Much of these plantations have been neglected for the better half of a year by both Quintis and, later, the administrators. ISF remains committed to maintaining these trees, and will continue to do so regardless of whether any share-farming contracts.

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Quintis and its subsidiaries have failed to pay ~$1,000,000 in outstanding lease fees to Ord Valley landowners. The Federal Court has decided that the land rights & trees are to be handed over to the landowners. This is not to the benefit of the farmers, it is more that Quintis has no realistic way to pay for removal & rehabilitation of thousands of hectares of land. As stated above, we are continuing to grow all 750ha of ex-scheme trees that are on ISF and partnered lessors' land. 300ha of this sandalwood was planted in 2009, which is the Airport Plantation offered to Growers. The remaining 450ha is still a few years off full maturity, which ISF will continue to grow after the harvest of the Airport Plantation.

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We understand that MIS Growers paid and covered much of the costs of these trees for most of their growing cycle, so we are offering them the option to maintain their position in their investment by contracting to ISF.

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Contract Information

As stated in our FAQs, ISF is making this offer to all growers regardless of year, site, and condition of their previous sandalwood lots. We will provide an equivalent area of sandalwood on an allocated section of the former 2008 Project Airport Plantation. This is done on a first come, first served basis, with priority given to those that have proof of their former lots being on the Airport Plantation (aka Lot 1). We are expecting less than a 20% uptake by MIS Growers, which is reasonable given the fallout of the Quintis debacle. Therefore, we do not expect to exhaust this allocation. Should we find that we are receiving more interest than expected, we will expand the Grower allotment. We may also ask MIS Growers to form groups in which they undertake a contract as a shared entity, this will be optional.

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ISF is not concerned about the age or location Growers had with Quintis, we will amalgamate the growers onto one or more of the airport blocks regardless. As of right now, ISF has no interest in undertaking a prospectus to refute the claims made by the KPMG, as this would be a costly legal undertaking. We believe these funds will be better spent on restoring & maintaining the plantations rather than lining lawyers’ pockets.

ISF will grow an equivalent area of the Airport Block trees on your behalf (like Quintis did) in exchange for annual management fees. At harvest, which will be 2028 at the latest, we will process and sell the trees on your behalf, take the cost of processing and harvest out of the sale proceeds and return the remainder to you.

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ISF will organise subcontractors to harvest the plots, but some prospective buyers have offered to handle harvest for a reasonable fee.

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Why wait until 2026-2028 for harvest?

There is a major glut in the price of sandalwood, which will likely persist for the next 2 years with many older plantations being prematurely harvested resulting in inferior quality product. There is a surplus of farmed sandalwood being sold at record low prices & with the news that Quintis was likely inflating the sandalwood value & demand, market sentiment is very negative right now. Buyers are vague about valuing the wood and are hunting for a secure supply of sandalwood in the upcoming years for the lowest possible cost.

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It is likely to that sandalwood prices will remain depressed for a few years, and we foresee a rebound in the midterm. Over the past few months, major buyers have been expressing interest in Ord Valley sandalwood, particularly the auctions, and some have opted to tour the Valley. ISF itself has been approached by some buyers with interest in securing our supply, however we do not intend to harvest and sell while prices remain this low. As of right now, we are waiting until the market settles once Quintis & Santanol are fully liquidated.

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2026–2028 harvests allows ample time for ISF to rehabilitate the plantations, the trees to develop more heartwood and the market to rebound. Growers should plan around a 2028 harvest as the trees will be close to 20 years old, which is better for yield and quality. The harvest year will only be bought forward if a good price for the heartwood is received before 2028.

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ISF Plantation Condition

Share farming with ISF means the tree profile of your allotment may be different from your original scheme allotment through Quintis. All Airport Plantation trees are between 14–15 years old and the plantations are in good condition. More detailed information about ISF's blocks can be found in the Plantation Condition Report.

This report was provided by Paul Mock, an experienced Sandalwood farmer in the Ord River Irrigation Area. The report was provided in June, shortly after landowners received access to their land. The actions recommended in the document are already underway.

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View the Plantation Condition Report here.

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There is now a FAQ page for Growers, which can be found here.