QUARTERLY MANAGEMENT REPORT for Cremorne Capital Ltd ATF HVT Land Trust

African Mahogany Australia

QUARTERLY MANAGEMENT REPORT for

Cremorne Capital Ltd ATF HVT Land Trust

2nd Quarter FY18

1 July – 30 June 2018

July, 2018

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Contents 1.

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

2.

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

3.

4

2.1

2017 Age Class ..............................................................................................................................4

2.2

2018 Age Class ..............................................................................................................................4

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

Thinning preparation .....................................................................................................................5

3.2

Grazing............................................................................................................................................5

3.3

Fire Management ...........................................................................................................................6

Environmental, Social and Governance (ESG) activity – April-June, 2018. ..............................................7

Key areas of activity: ........................................................................................................................................7 Fire management and mitigation ...............................................................................................................7 Strategic business development. ...............................................................................................................7

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1.

Operations Summary

This Quarterly Report for the June Quarter is presented in accordance with the requirements of the Management Agreement. It encompasses the period from 1 January, 2017 to 30 June, 2018.

The main operations conducted throughout the first quarter involved fire protection and mitigation (firebreak maintenance, fuel reduction burning), grazing through the agistment program and pre thinning assessment.

Mean Douglas Daly Rainfall (past 20 years)

Month Rain (mm)

Jan

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 2017/18 season YTD: Month Rainfall (mm) Rain days

July 17 0.0

Aug 17 0.0

Sept 17 0.0

Oct 17 19.8

Nov 17 96.4

0

0

0

6

13

Dec Jan Feb 17 18 18 286.8 679.4 228.4 11

25

15

Mar 18 66.4 14

April May June YTD 18 18 18 11.4 1,388.6 3

0

0

87

A long monsoon in January boosted rainfall figures significantly in January, a massive 679.4mm fell across the estate, 240% above average. This event was then followed up by slightly below average rains in February, and a dry March (71% below average). A dry April and May resulted in what was an abrupt end to a slightly above average (by volume) rainfall year. Impact (if any) of the lower rainfall in March April and May will be understood during upcoming annual measurements in early Q3.

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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 Hay paddock Native/utilities Gross Total

Age class 2007 2008 2015 n/a

Area (ha) 996.8 742.9 136.0 1,331.3 3,207.0

Note: these area estimates are subject to review in 2017 when critical works have been completed and a field survey of each block considered for ongoing commercial merit. This will be undertaken using ground truthing and remote sensing (satellite imagery) techniques.

2.1

2017 Age Class

The 2017 age class is generally in good health. Pre-marking for thinning operations was undertaken in the June quarter in preparation for the upcoming dry season. This was undertaken by a qualified forester to ensure form, distribution stocking was considered for the best post-thinning growth.

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

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

2.2

2018 Age Class

Grazing was intensified in the 2008 age class during the March quarter.

Whilst establishment of this age class was inferior to the 2007 age class, there remains stands of good health and vigour, again planned thinning operations will assist in releasing desirable trees to grow on. Initial buffalo damage and intensive grass invasion has supressed some stands, however weed control undertaken early wet season and continued grazing has helped.

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3.

Operational Activities

3.1

Thinning preparation

The thinning regime is to reduce stems at first thinning to between 250-300sph. This approach has been established by applying knowledge gained from a number of 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.

Following management consideration of productivity and costs, a manual thinning contractor has been engaged to commence these works in the September quarter.

3.2

Grazing

The grazing program continued in the June Quarter, with 370 head of mixed northern Australian cattle grazing throughout Whatfor, reducing grass competition during the wet season, increasing nutrient cycling throughout the plantation and optimising land use productivity (timber and beef production).

Month April May June

No. of head

Rate ($/hd/wk)

371 370 370

$1.00 $1.00 $1.00

Total income $1,591.59 $1,639.10 $1,587.30 $4,817.99

Cattle grazing at Whatfor.

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3.3

Fire Management

Fire management is an intensive program following the wet season. AMA plans a number of concurrent programs to reduce the risk of fire losses in uncontrolled circumstances, particularly later in the year when the weather is hotter and the trade winds are stronger.

These activities include: 1. Firebreak grading to allow for easy access in wildfire situations, and make for easier and safer controlled burns 2. Fuel reduction burning 3. Road verge burning 4. Grazing There have been no losses due to uncontrolled fire on Whatfor to date.

Road verge burn, Douglas Daly, May 2018.

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4

Environmental, Social and Governance (ESG) activity – April-June, 2018.

The June 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: Fire management and mitigation: Early dry season in the Northern Territory is a time of high activity due to high fuel loads, dry air and south east winds. Early fuel reduction burning helps reduce losses through fire in uncontrolled situations. AMA is an active participant in regional and community fire protection and has built up a strong local respect through their attendance to local fires and controlled burns. This approach results in goodwill during wildfire events that require additional resources.

Strategic business development.

AMA met with head of Austrade in the NT to discuss the business, the Khaya resource (and the hay business) to increase local awareness of the resource and to explore upcoming opportunities that may increase the value of upcoming commercial harvest operations.

Other meetings on Khaya project awareness efforts included a meeting with AusIndustry (exploring opportunities of funding to develop post-farm gate value) and an on-site tour with the NT Manager for CRCNA (a CRC allocating funding to Northern Australian Industry Research).

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ESG related activities in June Qtr: Fuel reduction burning

Cattle awaiting deployment into khaya plantations in Douglas Daly, May 2018

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