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Tree change as KI firm reveals 'global' sheep plan

Business

The company seeking to bulldoze 14,000 hectares of plantation forest on Kangaroo Island and convert it into grazing land for up to 270,000 sheep has launched a $32 million capital raise to fund the project.

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Kiland, formerly known as Kangaroo Island Plantation Timber, yesterday detailed plans to turn its estate into a “sheep meat farming enterprise of global significance” with up to 270,000 animals.

The listed company owns 18,662ha of potential farmland on the island including 14,433ha of forestry land, the overwhelming majority of which was severely impacted by bushfire in early 2020.

KIPT received more than $60 million in insurance compensation payouts following the fires.

But it announced plans to walk away from the forestry industry last August, days after the State Government rejected its proposal to build a $40 million port at Smith Bay on the island’s north coast.

Since changing its name to Kiland in November, the company has bought back more than 10 million shares at an average cost of $1.26 each to provide liquidity to shareholders following the change of strategy.

Yesterday it announced the $32.4 million entitlement offer to fund the forestry to agriculture transition.

“We are pleased to announce this significant share offer that will finance the development of the Kiland agricultural land portfolio of high rainfall, high production assets into an industrial grade estate,” chief executive James Davies said in a statement to shareholders yesterday.

The company’s property manager AAGIM Investment Manager will now develop the land with an indicative timeline showing the first 55,000 sheep to begin grazing on the land from the beginning of next year.

Those numbers will ramp up to 125,000 in 2024 and 213,000 in 2025 before topping out at 270,000 in 2026.

If the number is reached it will increase the island’s sheep flock by almost 50 per cent.

It also comes at a time when the SA Forestry Products Association is calling for the planting of 50 million trees in the next four years to address industry shortages in South Australia.

Agriculture is Kangaroo Island’s largest industry with sheep – meat and wool – its major contributor.

Primary Industries and Regions South Australia figures had sheep stock losses during the Kangaroo Island fires at more than 51,000 – almost 10 per cent of the island’s pre-fire flock of 600,000.

The Kangaroo Island fires began on December 20, 2019, and burnt 210,000ha – almost half of the island – across a 612 km perimeter before being declared contained on January 21, 2020.

The Kiland modelling, included in a presentation to shareholders yesterday, assumes a Dry Sheep Equivalent (DSE) of 14.5 sheep per hectare across the estate, which has at least 750mm in average annual rainfall.

Set to begin in July this year, the remediation on the western side of the island includes the harvesting and grinding of timber, sourcing of livestock water, fencing, fertiliser application and pasture planting before stocking can begin.

Fire-damaged logs harvested by Kiland awaiting export. Picture: Kiland

The company has valued its land at $50 million and estimates further land development costs of $65 million and additional costs of $26 million for heavy machinery, stock and initial operating expenses associated with sheep meat enterprise establishment.

In its investor presentation yesterday, Kiland said discussions were being held with Australian banks regarding term funding to support reversion activities.

“Kiland currently expects to raise approximately $50 million in term funding incrementally on an as-needed basis,” it said.

“Initial non-binding indications have been received in respect of expected initial term debt funding of $25 million and equipment finance of $5 million.”

The $32.4 million offer will allow existing shareholders to purchase up to seven shares for every 11 owned at a cost of $1.10 per share.

Eligible retail shareholders will have the ability to apply for additional new shares up to 50 per cent of their entitlement, up to a maximum of $5 million under a top-up facility.

The offer is fully underwritten by Aitken Murray Capital Partners and will result in about 29.4 million new shares being issued, representing approximately 64 per cent of Kiland’s existing issued capital. Kiland’s market capitalisation yesterday was $54 million.

Kiland shares were placed in a trading halt ahead of yesterday’s announcement at $1.17.

The company was ranked No.82 in InDaily’s 2021 South Australian Business Index of the state’s top 100 companies, down from No.69 in 2020.

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