Pacific Plywood acquires HK$310mn harvest rights for 65,800 hectares of forest

The company signs strategic collaboration deal with Longjiang Forest Industry Group to developa Papua New Guinea forest.

Pacific Plywood Holdings Limited (“Pacific Plywood”) announced Sunday that it has signed a sale and purchase agreement with a member company of I-Sky Group (Holdings) Limited (“I-Sky Group”) to acquire 30% equity interest of a member company of I-Sky Group which holds the rights to harvest logs in the Vabari Timber Authority Area covering approximately 65,800 hectares (“PNG Forest Project”) in Papua New Guinea (“PNG”) (“Target Company”). It involves an investment of approximately HK$310 million, and the rights last for 99 years. Upon completion, Pacific Plywood and the member company of I-Sky Group shall enter into the option deed and the shareholders’ agreement. Pursuant to which, member company of I-Sky Group will unconditionally grant to Pacific Plywood the option to purchase the option shares representing 70% of the entire issued share capital of the Target Company and grant the control over the board of directors of the Target Group and extra 21% of the voting rights in the general meetings of the Target Company. The Group has also signed a strategic cooperative agreement with China Longjiang Forest Industry (Group) General Corporation (“Longjiang Forest Industry Group”) to jointly operate and manage the lumbering business. 

The PNG Forest Project involves a 65,800-hectare virgin forest in the Central part of the southern coastal area of Papua New Guinea, Pacific Islands. The area is sparsely populated and mostly covered by forest, of which 68% or 44,504 hectares is dense forest. It has abundant quality lumber which has yet to be exploited, and it is estimated that 24,885 hectares of forests can be developed (around 38% of the total area). Under proper management, more forest resources can be developed within the area. Most of the trees in the area are Hopea, Rongmao Fanlomgyan, Water Tupelo, Beech, Sloanea, etc. which can be used in a great variety of construction projects and furniture. The PNG Forest Project has a yield capacity of 105.5 m3 of lumber per hectare, including 82.2 m3 of lumber with the diameter at breast height of 40cm or more, per hectare. The total lumber available for development is projected to be 2,626,000m3.

Mr. Huang Chuan Fu, Deputy Chairman and Executive Director of Pacific Plywood, said, “Asia-Pacific is an important hardwood production region with a production volume of 95,000,000m3 or above between 2007 and 2010. The Asia Pacific region has become the region with the fastest growth in demand for timber in recent years. Demand for tropical timber from China constitutes 23% of the total production volume in Asia-Pacific region. With the huge market demand and growth potential, we are set to achieve new heights in the hardwood business through the PNG Forest Project.” 

Mr. Bi Weixing, Deputy General Manager of China Longjiang Forest Industry Group said, “Longjiang Forest Industry Group is the largest and experienced forest industrial group in China. We are pleased to collaborate through this agreement with Pacific Plywood to form a forestry expert team for the PNG Forest Project, providing professional advice and assistance in development and operation. We have strong confidence in the prospects of the PNG Forest Project.” 

Longjiang Forest Industry Group is one of the top 57 large enterprises in China and the largest state-owned forest region and forest industrial group in the country. Its production and operation system integrates technology, forestry, industry and trading to provide one-stop production as well as supply and sales services to fully exploit forest resources. With more than 15 years of experience, the R&D and design team of Longjiang Forest Industry Group boasts expertise providing a solid foundation and professional ancillary services. It has completed many domestic and overseas large forestry R&D projects and other research, design and construction projects such as forest research, operations planning and infrastructure engineering, according to a Pacific Plywood report. 

Mr. Huang added, “With the view to enhancing the management efficiency and technology of PNG Forest Project, we will strengthen the technical and professional team running the project. The Group is pleased to enter into a strategic alliance with Longjiang Forest Industry Group today. We believe the professional guidance and advice provided by Longjiang Forest Industry Group will significantly enhance our management and development capabilities in forestry projects.”

Ms. Aira To, Chairman of I-Sky Group said, “PNG has very abundant forestry resources and is one of the important hardwood sources in the world. According to the statistics of International Tropical Timber Organisation, PNG recorded an output of 3,720,000 m3 of wood products including industrial logs, sawn timber, veneer, plywood, etc, in 2010, with an export volume of 2,940,000 m3 and a total export value of US$374,000,000. The resources in Vabari Timber Authority Area have not been exploited yet. The large reserves and top lumber quality within the area dovetail with the favourable national policy and give us very promising prospects in the export to Australia and Asia markets”

Mr. Huang concluded, “The Group has been identifying opportunities to develop the forestry business and actively seeking business partners to expand into related plywood business. Therefore, the acquisition of the PNG Forest Project is of great significance to us. Looking ahead, the Group is leveraging our own strengths to develop and penetrate different segments of the forestry industry, such as lumbering, processing, and sales. Our aim is to grow into a leading international forestry company. Meanwhile, the Group is also continuing to explore other acquisition opportunities and potential projects, so as to diversify our business and generate fruitful returns to our shareholders.”