QUARTERLY MANAGEMENT REPORT December 2019 for Cremorne Capital Ltd ATF HVT Land Trust

African Mahogany Australia

Land preparation for Hay Crop at Whatfor Station

QUARTERLY MANAGEMENT REPORT for

Cremorne Capital Ltd ATF HVT Land Trust

December Quarter FY19

1 October 2019 – 31 December 2019

Jan, 2020 CC/HVT Quarterly Management Report – Oct-Dec, 2019

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Contents 1.

Operations Summary ...............................................................................................................................3

2.

Area Statement ........................................................................................................................................4

3.

2.1

2007 Age Class ................................................................................................................................4

2.2

2008 Age Class ................................................................................................................................4

Operational Activities...............................................................................................................................5 3.1

Thinning ..........................................................................................................................................5

3.2

Grazing............................................................................................................................................6

3.3

Hay operations ...............................................................................................................................7

4.2 Timber processing and market development ........................................... Error! Bookmark not defined.

3.2 4.

Silviculture and nutrition R&D ......................................................................................................8

Other Activities ......................................................................................................................................10 4.1

ESG activity – October-December, 2019. ....................................................................................10

Key areas of activity: ......................................................................................................................................10 Community Support ..................................................................................................................................10 Strategic business development. .............................................................................................................10 Environment:.............................................................................................................................................10

CC/HVT Quarterly Management Report – Oct-Dec, 2019

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1.

Operations Summary

This Quarterly Report for the December Quarter is presented in accordance with the requirements of the Management Agreement. It encompasses the period from 1 October, 2019 to 31 December, 2019.

The main operations conducted throughout the reporting period was grazing, thinning of selected stands of mahogany, fertilising the newly thinned stands of mahogany, land preparation of hay crop, planting and fertilising of hay crop.

Mean Douglas Daly Rainfall (past 20 years)

Month

Jan

Rain (mm)

Feb

Mar

282.7 288.5 229.6

Apr May Jun Jul Aug Sept

Oct

49.5 10.4 2.1 2.5 1.3

36.4 121.4 213.7 1245.8

5.4

Nov

Dec Annual

Rainfall recorded in the Douglas Daly shows the following measurements for 2018/19 season YTD: Month

July 19

Aug 19

Sept 19

Oct 19

Nov 19

Dec 19

Jan 20

Feb 20

Mar 20

April 20

May 20

June 20

Rainfall (mm)

0

0

0

10.2

57

105

172.2

Rain days

0

0

0

3

6

16

25

YTD

Q4 saw well below average conditions with prolonged dry conditions persisting throughout the quarter, this placed stress on some stands in drier areas and increased interest in agistment country due to diminishing feed across the entire Top End.

After typical dry conditions in the 3rd qtr, rainfall was well below average throughout the first three months of the wet season (Oct/Nov/Dec).

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2.

Area Statement

The area of the Whatfor property is 3207 ha. Land use is summarised in table 1 below

Table 1: Landuse summary, Whatfor Station.

Landuse Mahogany Plantation Mahogany Plantation Cavalcade hay paddock Native/utilities Gross Total

Age class 2007 2008 2019 n/a

Area (ha) 1104.0 415.4 136.0 1,551.6 3,207.0

Note: These areas are as per the Margules Groome valuation undertaken in August, 2018.

2.1

2007 Age Class

The 2007 age class is generally in good health.

Planned thinning works will assist in allocating site resources to the most desirable, retained trees.

The high stocking of these stands has resulted in minimal weed growth within the stands. Pruning will be required following thinning.

2.2

2008 Age Class

Intensified grazing continued in the 2008 age class during the June quarter.

The most significant activity within the age class was the commencement and completion of thinning a selected area of 235ha for non-commercial thinning. These areas were fertilised to enhance growth response following the removal inferior plantation trees.

New areas have been assessed for thinning to commence in early FY20 (September qtr).

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3.

Operational Activities

3.1

Thinning

The thinning regime is to reduce stems at first thinning to between 250-300sph. This approach has been established by applying knowledge gained from several research trials undertaken throughout the mahogany estate by AMA. Pre-thinning selection and marking is undertaken to assist in selection quality – this is a critical operation which will determine which trees will grow on to be final crop trees. This operation also serves to increase the speed in which manual falling crews can complete thinning in any given area.

249ha have been completed in the H1 of FY20. Fertiliser was applied to these areas in November and stands have responded well after some rain.

Property Name What For What For What For What For What For What For What For

Block Name

Planting Year

3a 3b 3c 5a 5b 8a 9a

2007 2007 2007 2007 2007 2007 2008

Stocked Thinning Area Completed (ha) 41.3 41.3 28.5 28.5 36.8 10 12.8 12.8 56.6 56.6 181.2 75.0 24.9 24.9 423.9 249.05

Table1: Thinning program FY20

Thinned area on left and yet to be thinned on right, Whatfor dry season 2019.

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3.2

Grazing

The grazing program continued in the Dec Quarter, with 300 head of mixed northern Australian cattle grazing throughout Whatfor, reducing grass competition and fire risk in the dry season, increasing nutrient cycling throughout the plantation and optimising land use productivity (timber and beef production). Some of this income has been invested into cattle infrastructure to increase holding capacity.

Cattle grazing at Whatfor.

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3.3

Hay operations

136ha of cavalcade hay (higher grade legume hay) was established and grown in the wet season.

This activity is undertaken to generate cash to contribute toward essential value adding plantation management activities such as thinning and fertilising.

AMA have negotiated a pre sale for 500t of the hay prior to harvest and will sell the remainder (approx. 400t) following harvest.

Baling cavalcade, 2018/19 hay season

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3.4

Silviculture and nutrition R&D

Leaf water potential monitoring work continued in Q4 as part of the silvicultural and nutrition research being undertaken by AMA and John McGrath. As seen in the graphs below, it is well illustrated of the elasticity of Khaya senegalensis to respond from a water stressed state to a nonstressed state immediately after the first rain of the wet season. It is also apparent from this study of the variability of water stress depending on soil type. Kumbyechants, with higher water retaining potential than Stray Creek and Gypsy Springs, displays little sign of water stress even during the dry season.

It is evident a reduction in stocking and addition of fertiliser alleviates water stress on the drier properties.

Dr John McGrath taking pre-dawn leaf water potential readings using pressure bomb.

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The follow are some self-explanatory graphs that illustrate the merits of intervention (thinning and fertilisation) in the Douglas Daly).

Graph 1: Illustrating the response of growth with reduced site resources competition – note the interception of growth curves whereby 33sph + fert surpasses 500sph without fert.

Graph 2: Illustrating the value added through reduction in stocking through increased piece size (a doubling of per tree volume).

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4.

Other Activities

4.1

ESG activity – October-December, 2019.

The December quarter was another active quarter and below is an excerpt from the AMA ESG database. It encompasses all funds and properties under management and where “All” of “Multiple”, is mentioned, this relates to areas of engagement that are relevant to all Properties under management.

Key areas of activity: Community Support: Chris Oliver continued close community interactions in the Douglas Daly with attendance to fires around the district, attending the Douglas Daly Community Development Association AGM, and supervising an intensive wild dog/feral animal program in conjunction with other land owners for the benefit of the district.

Strategic business development.

Frank Miller continued to drive the development of the NT Forestry Association – this will give a stronger voice for the mahogany project into government when lobbying for key infrastructure such as roads and power in the Douglas Daly.

Frank Miller flew to China as part of a small delegation to meet prospective manufacturers of the mahogany resource. This was a first initial trip and it was deemed successful in understanding the current market in China and the needs of the manufacturers. They were certainly interested in the samples we provided.

Chris Oliver and Frank Miller visited Kimberley Timber Corporation’s (KTC) small plantation in the Ord Irrigation Area to assess and discuss marketing options with the head of the project, Max Correy. This resource maybe strategically useful to use in market development as it is more advanced. KTC are keen to work together on this effort.

Environment: Feral animal control program continued with mandatory but highly controlled program for controlling wild dog populations in the Douglas Daly.

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Date 1/10/2019

Environment

01/10-20/12/19 Feral Animal Control Feral Animal Control 01/11-20/12/19

Social

Recreational Hunting Recreational Hunting

Governance

Entity (where relevant)

Suppier/Contractor All relations STA PTT PTT PTT

Fire management Community Fire and mitigation Protection Business Development

1/10/2019 11/10/2019

STA

Government/ Regulatory

Other

STA

All

All

All

Business Development Community Fire Protection Community Volunteering Community interaction

1-15/10/19 23/10/2019 25/10/2019 20-22/10/19 24/11/2019

Details reference (doument title)

N/A

Mentabie

Kumbyechants

Stray Creek

Gypsy Springs

Mentabie

Multiple

Chris Oliver

Chris Oliver

Chris Oliver

Chris Oliver

Chris Oliver

Chris Oliver

Chris Oliver

Chris Oliver

CJO attended committee meeting of the DDVBB CJO received a visit from the Dripstone Clontarf Academy - with students staying at KBC and being shown operations and resource management across the estate.

CJO assisted DDVBB with wildfire at Douglas Station

CJO assisted in fire control measures on Blackbull Station adjoining Stray Creek Station CJO met with Michael Deeth and Peter Schubert to discuss potential agistment on KBC - FM to continue discussions.

CJO met with Sam McBean (Northern Livestock and Agriculture) to define areas and timing for agistment at Mentabie and produce maps

AMA Representative

N/A

Chris Oliver

Access for DNER to the Daly River via Mentabie

Property

N/A

Chris Oliver

CJO hosted a BBQ with local contractors and their workers to farewell AA Access to MTB was given for local contractors (Thomson Forestry, Blackbull Station) to undertake hunting activities for feral buffalo and feral pigs.

Local hunter (Joe Williams) to undertook hunting activities for feral buffalo and feral pigs on Gyspsy Springs.

Mentabie

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CC/HVT Quarterly Management Report – Oct-Dec, 2019

Date 3-4/12/19 16-17/12/19 18/12/2019 19/12/2019 20-27/10/2019

15/11/2019

Environment

Social

Fire management Community Fire and mitigation Protection Community interaction

Governance Business Development Business Development

Business Development Other

Entity (where relevant) All All PTT All AMA

Frank Miller

FM and CJO visited the African Mahogany Plantations of Kimberley Timber Corporation at Kunanurra WA. CJO accompanied Damian Walsh (Margules Groome) during the forestry evaluations for PTT, STA and FLO.

Details reference (doument title)

N/A

Chris Oliver

CJO assisted Ceres Downs to conducy fuel reduction burns adjoining KBC

AMA Representative

Multiple

Chris Oliver

Property

Kumbyechants

Chris Oliver

CJO attended TDDCDAI AGM. China visit to prospective manufacturing plants - relationship building exercise and scoping of interest in mahogany from AMA Frank Miller driving the development of an NT Forestry Association - this will attract more serious infrastructure investment from Governement needed for the Khaya estate.

N/A

Frank Miller

Frank Miller

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CC/HVT Quarterly Management Report – Oct-Dec, 2019

Chris Oliver (AMA) and Max Correy (KTC) in the Ord plantation, December 2019.

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