Economic Analysis & Forecasts

NO RELIABLE MARKET DATA IS AVAIALBLE ON THE GOLDEN TEAK THAILAND TEAK VARIETY (TECTONA GRANDIS JATI EMAS THAILAND) BECAUSE THIS IS A NEW VARIETY FOR WHICH THERE IS NO ESTABLISHED MARKET YET.

PRIORLY PUBLISHED FORECASTS REFERRED TO THE PURCHASE PRICES GUARANTEED BY CERTAIN BALI GROWERS YAYASANS BUT BTF HAS DETERMINED SUCH PRICES NOT RELIABLE BECAUSE OF THE LACK OF PROPER FUNDING OF THESE LOCAL YAYASANS

BTF SUPPORTS THE PLANTING OF GOLDEN TEAK IN BALI AS A MEAN FOR CREATING A VIABLE ALTERNATIVE TO ILLEGAL LOGGING

For a comparison of similar teak planting programs offered in other coutries, we have found information on this website, www.tropicalhardwoods.com. This reference is only for general information purposes, and BTF does not know whether the data published in this website is reliable.

IMPORTANT NOTES REGARDING THE BTF THAI GOLDEN TEAK (Jati Emas Thailand)

(*): all pricing data available applies to the teak currently on the Indonesian market, NOT to the Golden Tak (Jati Emas) variety for which no established market price is available yet, given it is a new high-growing variety only recently introduced. Therefore, the figures noted below are only theoretical and only for providing a reference;

(**) Prices per log from small independent growers in Indonesia vary greatly, from place to place and from time to time, depending on many different factors such as quality, supply and demand conditions of the market, individual growers' conditions, etc. The price of Rp. 5-10,000,000 per unprocessed log with 25-30 centimeter diameter does not refer to the new Golden Teak (Jati Emas) variety, for which there is to date no established market; all figures are based on interviews with teak furniture manufacturers and buyers in Bali and Java in May, 2007; the market prices reported in Bali for unprocessed logs with G3 (Grade 3) quality in May 2007 was in the range of Rp. 5-10 million per cubic meter (highest price reported is from Lemba Jati, Jl. Iman Bonjol, of Rp. 8-10 million per cubic meter for teak logs under 10 years; price for older teak logs, 15-20 years old, is reported considerably higher, up to Rp. 16-18 million per cubic meter). The "guaranteed" purchase prices of Rp. 7 million per 10 year log advertised by some of the Bali Teak Growers Cooperatives may not be fully reliable, and the cooperatives many times lack the funds for making the purchases; the analysis and forecast of teak prices should consider the normal yearly price increase of teak, which historically has been in the range of approximately 4% per year in the period 1945-2005.

The calculation of Rp. 4 million per log was made as follows, in line with standard logging industry practice in Indonesia:

log = diam 28 cm; hight 14 meters.

V = R x R x 3.14 x H = 0.14 x 0.14 x 3.14 x 14 = 0.8616 cubic meters x Rp. 5 million = Rp. 4,308,000

Additional Considerations

•(1) Both Kyoto Treaty and Voluntary Schemes are being developed worldwide, and will become a key for all sustainable forestry management projects. More information may be found, e.g., at www.gfsinc.biz. At the investor's request, BTF may arrange separately for a specific study of these programs, and the possible financial impact on the Lovina and/or other BTF forestry projects. The availability of emission trading credits for plantations on leased land, as opposed to freehold land, needs to be verified.

•(2) Additional cash crops, such as vanilla and cacao, may be planted together with the teak trees, resulting in an optimal forestry management performance. Such crops normally start generating positive cash flow from the third year from planting, and are an important source of income which may be optimally combined with the teak farming. A detailed cost analysis of the expected costs and revenues of such additional crops may be done separately, upon the investor's request.

•(3) Additional revenues may be generated through establishment of agri-tourism programs, which would include initially day tours of the plantation and surrounding sites, with the possibility of generating high-margin sales of the plantation products to visitors. The local Government is eager to promote the development of such agri-tourism oriented projects in the area, and will provide strong support, including for obtaining agri-wisata licenses. This would allow the establishment of an independently functioning agri-resort, with overnight accomodation facilities. As a reference, similar agri-tourism day tour projects in Bali currently are priced at around Euro 50-60 per day per person. For example, see www.jed.or.id. BTF would be available to manage such programs for the investor.

•(4) Certification of soil conditions - available upon request by investor -from Natural Sciences Department of Udayana University - cost to be reimbursed by investor

•(5) Analysis of Market Price for Teak (Unprocessed Logs and Boards) - available from Professor of Udayana or Bogor University - cost to be reimbursed by investor

 
 
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