Kangaroo Island Plantation Timbers Ltd (ASX:KPT) is buying an additional 173-hectare coastal site at Smith Bay in Kangaroo Island, located off the mainland of South Australia.
This is in addition to the 12-hectare site that the company purchased in 2014 at Smith Bay.
Ongoing development activities at proposed timber export facility
KPT is currently completing the approval processes for the construction of a wharf at Smith Bay for export operations.
The company has 25,000 hectares of land in Kangaroo Island of which 15,000 hectares are planted. The plantation contains 80% eucalypts and 20% pine, with the trees at or near maturity.
The additional land provides the company with greater flexibility in the layout and capability of its onshore facilities at Smith Bay.
It also gives room for the facility to expand in the future, should this be required.
READ: Kangaroo Island Plantation Timbers bags $20 million via oversubscribed share placement
In December 2017, the company raised $20 million via an institutional share placement at $2 per share, to commercialise its timber products.
Following the completion of the placement, KPT is well funded to undertake ongoing development activities in relation to its proposed export facility at Smith Bay.
Shortage of quality hardwood in Asia
KPT entered into a marketing arrangement last year with a subsidiary of Mitsui & Co Ltd (TYO:8031).
The arrangement provides that Mitsui will purchase up to 500,000 tonnes per annum of woodchip from KPT following the construction of its Smith Bay wharf.
It is worth noting that there is an emerging shortage of quality hardwood woodchips available to Asian markets, due to growing demand for fibre-based consumer goods, and significant supply constraints.