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Kangaroo Island Plantation Timbers returns to trading with recovery plans progressing

Reconstruction following the bushfires is progressing well, including a revised business plan and detailed post-harvest plan with the restoration of infrastructure underway.

Kangaroo Island Plantation Timbers Ltd - Kangaroo Island Plantation Timbers returns to trading with recovery plans being enacted
A KIPT fire truck on West End Highway, Kangaroo Island, on January 3 (Photo: Tim Wilson)

Kangaroo Island Plantation Timbers Ltd (ASX:KPT) has hit the ground running in response to the summer bushfires that impacted 95 per cent of its plantations and with recovery plans being enacted, today ends its trading suspension.

A series of fires on the west of Kangaroo Island in December and early January affected the company’s hardwood and softwood plantations but KPT remains committed to the timber plantation business.

Twelve weeks on the reconstruction process is progressing well, including a revised business plan and detailed post-harvest plan with the restoration of infrastructure such as fencing underway.

“Land bank and cashbox”

In a presentation today, KPT said: “Post-fire, KPT is a land bank and cashbox.

“The NTA backing of $1.86 per share in 1H20 accounts is real and productive, with an added infrastructure play.”

Total extent of the fires with the line pointing to the location of the fire truck photo and the darker areas being KPT plantations.

Ongoing assistance in the recovery work is coming from insurance policies with initial progress payments received and completion of final payouts advancing while KPT is also preparing a submission for government bushfire inquiries.

Insurance payments

The company has received $10 million from the insurer with the outstanding $50 million virtually certain and this has been included in KPT’s first-half accounts for 2020.

There are other insurance components that are possible but not included in the accounts, including for incidental expenses, houses and various sheds, and a December 2018 fire.

An inspection of a fire-damaged eucalypt plantation.

KPT is also seeking discussions with the Federal Government in regard to support from the National Bushfire Recovery Fund and if successful these funds may assist in realising full multi-user import/export potential.

Seaport is key

An important component of the reconstruction process and the company’s future will be the proposed KI Seaport at Smith Bay on the island’s north coast.

This facility will maximise the value of the company’s investments for the benefit of KPT, the island and the community.

The final EIS for the port was submitted to the South Australian Government for approval on March 23 taking into account a number of recommendations resulting from extensive public consultation processes.

Artist impression of proposed KI Seaport.

Post-fire salvage operations are capable of supporting construction of the KI Seaport, at zero or nominal return to forest.

If approval is granted, KPT is targeting an immediate start to the facility and the pontoon which has been refitted in Vietnam will be deployed to Australia for wharf construction.

Government recognition

Although any approval conditions remain uncertain, KPT said the SA Government recognised the importance of the project, both for the company and for the island’s recovery, freight access and economic resilience.

The pine plantations affected will die but the trees will have recoverable value while some fire-affected eucalypts may survive but future growth is likely to be uneconomic.

Some timber could be felled and stockpiled as logs prior to sale, to facilitate replanting, or left on the stump.

Reinstatement of boundary fences expected to take four years at $6 million cost.

KPT said the land must be cleared, even if at a loss, but post-fire harvest cannot proceed at scale without a deepwater port.

Most, if not all, timber will be exported in log, chip or pellet form via the port, once approved and built as the volume of about 3.5 million tonnes is too great for alternative methods.

Building shareholder wealth

The company is committed to building shareholder wealth:

  • Immediate investment upside from upward revaluation of timber to market value has been eliminated by the fires.
  • Licence to build and operate deepwater port remains a source of value, based on timber alone, especially as approval nears
           - profitable third-party port usage difficult to predict but likely to materialise
           - agricultural land values likely to rise once port approved.
  • High rainfall KI land is demonstrably among the best timber country in Australia. KPT owns approximately 15,000 hectares plantable and is well-positioned to acquire more
           - KI timberland is a long-term stable cash-generating asset
           - timber market fundamentals are highly favourable and likely to remain so.

No lasting COVID-19 impact

The company said that the COVID-19 pandemic was not having a lasting impact on business prospects with employees following government advice.

New policies and procedures have been implemented to protect employees, stakeholders and the wider community.

Off-island employees and consultants are avoiding travel to Kangaroo Island while on-island day-to-day work continues.

Quick facts: Kangaroo Island Plantation Timbers Ltd

Price: 0.875 AUD

ASX:KPT
Market: ASX
Market Cap: $49.37 m
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Kangaroo Island Plantation Timbers' Keith Lamb updates on insurance payouts

Kangaroo Island Plantation Timbers Ltd's (ASX:KPT) Keith Lamb tells Proactive they've received a further insurance payout in the wake of the summer bushfires. He says $4.2 million has been received to cover the replacement cost of fire-damaged houses. The fires in December 2019 and January...

on 6/4/20

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