02/06/2010 - 09:30

TFS signs deal for sandalwood

02/06/2010 - 09:30

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TFS Corporation has signed a deal with private forestry company WA Sandalwood Plantations to establish a plantation project for Australian sandalwood.

TFS Corporation has signed a deal with private forestry company WA Sandalwood Plantations to establish a plantation project for Australian sandalwood.

In a statement TFS said it had executed an agreement with WA Sandalwood Plantations to be a plantation contractor for the project.

The company has denied reports that it is making an investment in WA Sandalwood Plantations, nor in any of the company's Australian sandalwood plantations.

TFS expects the plantations will be established in the Wheatbelt.

TFS Corporation is an owner and manager of Indian Sandalwood plantations in the east Kimberley.

Australian sandalwood is complementary to Indian sandalwood. Indian sandalwood is used in high end cosmetics and luxury fragrances.

Australian sandalwood has typically been used for incense in China, Taiwan, and south-east Asia. It sells at a significant discount to the premium Indian sandalwood.

Statement from Sandalwood below:

WA Sandalwood Plantations and TFS in A$16M agreement for new Australian sandalwood project

Highlights:

WASP signs Heads of Agreement with Indian sandalwood grower and processor TFS Corporation,
Under the agreement TFS will raise up to A$16M to fund land acquisition, establishment and management of a new Australian sandalwood plantation to be project managed by WASP,
Project is expected to be approximately 1,000 hectares in size and will be located in the Wheatbelt region of Western Australia
Perth-based WA Sandalwood Plantations ("WASP" or "the Company"), one of the largest privately funded growers of Australian sandalwood in WA, has further enhanced its plantation portfolio by signing a Heads of Agreement (HoA) with Indian sandalwood grower and processor TFS Corporation (ASX: TFC).

Under the terms of the binding agreement WASP will source appropriate land and manage a new Australian sandalwood project in the Wheatbelt region of Western Australia, subsequent to TFS achieving financial commitment of A$16M. The project will be approximately 1,000 hectares and will have an estimated 20 year project lifetime.

The agreement represents a substantial growth opportunity for WASP and is part of a broader strategy to further grow the company's existing portfolio. The aim of this strategy allows WASP to manage a plantation under a separate entity for TFS whilst offering WASP the ability to book build future prospects.

WASP's Managing Director, Mr Keith Drage, believes the investment in Australian sandalwood by TFS Corporation will play a significant role in achieving the Company's plantation success in 2010 and beyond.

"Securing a long-term project agreement with TFS plays a significant role in our Company's growth strategy going forward. "This agreement will represent 40% of our planting capacity for 2011," said Mr
Drage.

WASP currently manages 12 commercial native sandalwood plantations across 1570 hectares of private property in the Wheatbelt area of Western Australia.

TFS Chief Financial Officer, Mr Quentin Megson said, "The WASP agreement provides us with a great opportunity into the Australian sandalwood market and enables some positive synergies with our Mt Romance business".

Mr Drage commented that whilst the market for Indian sandalwood is well established in the high-end cosmetics and fragrance houses of the world, the global demand for Australian sandalwood has steadily increased since India has banned the export of its native sandalwood supplies and is increasingly looking to secure supplies for Australian sandalwood.

"We believe the future is bright for Australian sandalwood plantations to meet this growing demand," said Mr Drage 

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