INVESTOR RELATIONS PRESENTATION August 2011 Private & - - PowerPoint PPT Presentation

INVESTOR RELATIONS PRESENTATION

August 2011

Private & Confidential | Greenheart Group

DISCLAIMER

Disclaimer

This document and subsequent discussion may contain certain forward-looking statements with respect to the financial conditions, results of

• perations and business of Greenheart Group Limited and its subsidiaries (“the Group”). These forward-looking statements represents the

Group’s expectations or beliefs concerning future events and involving known and unknown risks and uncertainties which could cause actual results, performance or events to differ materially from those expressed or implied in such statements. This document does not constitute, or form any part of, and is not to be construed as an offer, invitation or solicitation to buy or sell any securities of any of the companies referred to herein and any opinions expressed are subject to change without notice. The value of any investments referred to herein and the income derived there from may fall or rise against the investors’ interest and past performance is not a guide to the future. No representation or warranty, express or implied, is given by the Group or any of its directors, partners, officers, employees or professional advisers as to the accuracy, completeness or fairness of the information or the opinions contained in this document and no responsibilities or liabilities is accepted for any such information or opinions or errors or omissions. This document is being supplied to you solely for information and may not be reproduced or redistributed in whole or in part to any other person for any purpose. In addition, this document is being provided to you on the basis that it is kept confidential any information contained herein or otherwise made available in connection with the Group must remain confidential.

Private & Confidential | Greenheart Group 2

TABLE OF CONTENT

1. Executive Summary 1. Greenheart History 2. Ownership & Current Assets 3-1. Suriname - Tropical Hardwood 3-2. New Zealand - Softwood Plantations 4. Market Dynamics 5. Operating Strategy A. Appendix 4 - 5 4 5 6 8 10 13 14

3 Private & Confidential | Greenheart Group

1988

• 1. GREENHEART AT A GLANCE

Sino-Forest acquires

majority stake in company

— Appoints Judson Martin as

Chief Executive Officer

— Appoints Allen Chan as Non-

Executive Chairman Issues convertible

debenture to GEMS

— Appoints Simon Murray as

Non-Executive Director Company rebranded to

Greenheart Group to better reflect its single focus on forestry

 Company’s IPO on

Stock Exchange of Hong Kong (HK:00094) 4 Private & Confidential | Greenheart Group

2010

 Company

acquired 60% of a tropical hardwood concession in Suriname, South America

 Company divests

all non-forestry related assets to focus on Suriname concession

Acquires 60% of Vista

Marine Services N.V.

— 128,000 ha. tropical hardwood

concession in Eastern Suriname

— Total concessions under

management in Suriname now 312,000 ha. Acquires 13,000 ha. of

freehold land in New Zealand

— Includes 11,000 ha. of

softwood plantation Appoints Andrew Fyfe as

Chief Operating Officer

2011

2007 2008

Strategy To acquire, harvest and manage sustainable and profitable forestry assets from markets

• utside China

Key Markets To serve the increasing wood deficit in China and other global markets as price and demand dictate

Greenheart History

• 2. OWNERSHIP & CURRENT ASSETS

5 Private & Confidential | Greenheart Group

Greenheart Group Limited HK: 00094 West Suriname: (184,000 ha.) Greenheart Resources East Suriname: (128,000 ha.) Vista Marine Services N.V. New Zealand: (13,000 ha. ) Mangakahia Forest Freehold land Cash for Investment Approximately US$70 million as at 31st March 2011 Tropical Hardwood & Softwood Plantations

Tropical Hardwood Concessions Softwood Plantations Cash Growth Pipeline

60.4% 60% 100%

1 2 3 4

Greenheart Today: Four Assets

Greenheart Ownership

0.9% 63.6% 35.5%

Basic

11.9% 56.5% 31.6% GEMS Sino-Forest Float

Fully Diluted

Note: US$25 million Convertible Debenture issued to GEMS on 17th August 2010

3-1. TROPICAL HARDWOOD

6 Private & Confidential | Greenheart Group

Suriname Headquarters East Suriname Concessions Harvesting rights 128,000 ha. West Suriname Concessions Concessions 184,000 ha.

KEY STATS GDP (2010) US$ 3.7 billion Key Resources Bauxite, gold, oil, iron ore Population 500,000 Capital Paramaribo Official Language Dutch FOREST STATS

• Ha. (millions)

Total Area 16.4 Water Area 0.8 Forested Area 14.8 Total Forest Concessions Available 2.2 (or 15% of total forested area) Greenheart Concessions 0.3 (14% of total concessions available)

• Over 90% covered in dense

primary tropical rainforest

• Largest forestry operator in

the country with 312,000 ha.

• f tropical hardwood

concessions

• Operations follow a strict

selective harvesting regime developed to sustainably increase the growth of the forest

• Greenheart’s objective is to
• nly export FSC certified

high value lumber from Suriname

Tropical Hardwood – 312,000 ha. in Suriname

3-1. TROPICAL HARDWOOD

7 Private & Confidential | Greenheart Group

• Harvesting sustainable

tropical hardwood for export to China and other markets around the world

• Using precise scientific

techniques of selective harvesting

• Objective: log to lumber
• Aiming for full FSC

certification for our assets and operations

Tropical Hardwood – Operations

Asset Description

• Largest tropical hardwood concession owner and
• perator in Suriname with concession and certain

harvesting rights to approximately 312,000 ha. of tropical hardwood forests

• Managed by on the ground team of international

forestry veterans (US/British/Dutch/New Zealand)

• Currently 100 people in workforce with skilled labor

from Suriname, Brazil, Guyana, Malaysia, Philippines Key Operations

• Key operations include managing, harvesting, sales

and marketing of tropical hardwood logs and lumber for export to key markets around the world

• Tropical hardwood from Suriname is often used for

high quality furniture, ship-building, high-end flooring and paneling

• Building two world-class processing facilities in each

concession to convert all logs into lumber Selective Harvesting Strategy

• Greenheart only harvest according to the maximum

Annual Allowable Cut (AAC) of 25 m3 per hectare per every 20 year cycle (equivalent of harvesting

• n average 6 trees per every two football fields and

then leaving the area for 20 years)

• Using Geographic Information System (GIS), each

tree is individually inspected, inventoried and marked before harvesting and all exported logs have chain of custody from initial harvest

• Process all logs into lumber, providing greater social

and sustainable developments for Suriname as well as higher margins and profitability for the products

• Greenheart is making preparations to obtain FSC

(Forest Stewardship Council) certification for all its

• perations and assets
• Objective is to significantly increase both concession
• wnership and AAC through applications to the

Government and private transactions

3-2. SOFTWOOD PLANTATIONS

8 Private & Confidential | Greenheart Group KEY STATS GDP (2010) US$ 117 billion Key Resources Diary farming, Forestry Population 4.4 million Capital Wellington National Language English FOREST STATS

• Ha. (millions)

Total Area 26.9 Total Forest Area 1.76 Radiata Pine Area 1.57 Northland Forest Area 0.2 Export to China 6.7 million m3 (2010) 4.3 million m3 (2009)

• New Zealand has a long and

established forestry industry

• Located in Northland region,

2nd largest forestry region in New Zealand

• 13,000 ha. of freehold land

with 11,000 ha. of high quality radiata pine plantation

• Exporting high grade

softwood to China as well as the domestic market

Softwood Plantation – Mangakahia Forest

3-1. TROPICAL HARDWOOD

9 Private & Confidential | Greenheart Group

• Standing stock of 5.6 million

m3 ready for immediate conversion into cashflow

• First cycle will generate a

total 8 million m3 of timber

• Prices at historic high as

demand increases from China and other Asian markets

• Allows Greenheart to

diversify its wood supply and generate immediate cash flow

• Opportunities to expand

plantation size in New Zealand

Softwood Plantations– Operations

Asset Description

• A mature softwood radiata pine plantation (trees

averaging 25- 30 years) in the Northland region of New Zealand

• Radiata pine is valued for its high density and

structural stiffness characteristics, which are particularly valued by the wood products and sawn timber sector

• Standing stock approximately 5.6 million m3 with a

full first cycle (15 years) of 8 million m3

• Located 75 km from major log export port with

excellent transport links and facilities Key Operations

• Harvesting conducted by experienced local

subcontractors who have prior experience in forest

• Majority of harvested logs are exported to China

while remaining logs are sold domestically to sawmills, pulp mills and other wood manufacturers

• China has significantly increased its demand for

New Zealand radiata pine

• 44.5% increase in exports to China in Q1

2011 compared to Q1 in 2010

• Prices at historic highs – averaging US$85

per m3 (FOB New Zealand) Synergy

• Diversification of wood supply
• Immediate cashflow from New Zealand can

relieve Suriname’s ramp-up period in short- term

• Access to an immediate supply of stable supply of

radiata pine with the equipment, people and knowledge to harvest effectively

• Increasing demand from China and other Asian

countries has increased prices to historic high Strategy

• Greenhearts will continue to ramp up its harvesting

scale to fully leverage the historic high prices and increasing demand from China and other Asian economies

• Continue to expand footprint in New Zealand with
• pportunities that provide additional synergies with

existing asset as well as additional stability to wood supply

3-1. TROPICAL HARDWOOD

10 Private & Confidential | Greenheart Group

• Global demand for timber

has shifted from the US and Europe to Asia and Middle East

• South American and New

Zealand playing larger roles in global supply of timber

• China’s growing economy,

mass urbanization and exponential demand for timber has created a wood deficit that is estimated to reach 182 million m³ by 2015

• Other Asian economies such

as Japan, India as well as the Middle East are now increasingly seeking imported timber supplies

Changing Market Dynamics

China’s Urbanization

• China GDP growth and personal income is expected

to grow at 7% per year until 2015

• There has also been a demographic shift in China’s

population from rural to urban areas

• Between 1995 to 2007, residents in rural areas

dropped from 71.4% to 57% It is estimated that between 2005 to 2025, 350 million people will move into urban areas Increasing wood deficit

• Between 2000 and 2007, wood products

consumption in China increased by 274% driven by the growing demand for infrastructure, homes / residential construction and furniture

• China’s Ministry of Housing & Urban Development

have subsequently increased their construction plans to build 36 million housing units over the next five years and to build 200+ new rural cities by 2025, each with over one million people Changing global dynamics in timber demand

• Global reduction in timber supply due to tighter

regulations on tropical hardwood and higher prices from Russia, the world’s largest source of softwood

• China’s own supply of timber (268 million m3) is not

enough to satisfy the demand (400 million m3 )

• South America and New Zealand becoming

increasingly important in global supply of timber Changing global dynamics in timber supply

• Demand for timber has shifted from US and Europe

to Asia and Middle East

• China’s increasing timber deficit has led to a globally

higher prices as well as a dramatic shift in the supply

• f timber
• Canada now also competing for China market
• Increasing demand for tropical hardwood lumber

has introduced South American timber into the China market

China’s rapid urbanization and need for housing

50 100 150 200 250 300 350 400 1995 2000 2005 2010 2015 2020 2025 0.5-1 mn 1-5 mn > 5 mn

4-1. MARKET DYNAMICS

11 Private & Confidential | Greenheart Group

100 200 300 400 500 600 700 800 900 1,000 1995 2005 2025E

• Over 350 million people

expected to migrate from rural to urban areas from 2005 to 2025

• China’s New 12th Five Year

Plan focuses on bridging the gap between rural and urban residents

• The UN estimates that China

will have nearly 350 cities by 2025, with over 100 new cities to be constructed in the next 15 years

• This has led to an increase in

demand for new housing, construction of new housing and wood related products

Source: RISI China Timber Supply Outlook/Wood Markets

Growth in China’s Urban Population, 1995-2025 (mn) Growth in China’s Cities (number of cities)

+ 350

Source: United Nations (World Urbanization Prospects: The 2009 Revision Population Database)

Forecasted Forecasted + 100 City Population

China’s increasing wood consumption and deficit

50 100 150 200 2002 2004 2006 2008 2010 2012 2014

Log Consumption Lumber Consumption

4-1. MARKET DYNAMICS

12 Private & Confidential | Greenheart Group

Source: RISI China Timber Supply Outlook/Wood Markets

• China’s wood consumption

has increased dramatically and is expected to generate an increasing wood deficit

• China currently consumes

approximately 400 million m3 of timber and timber products per year

• China’s annual allowable cut

as per the 12th Five Year Plan is only 268 million m3

• This leaves a deficit of

approximately 132 million m3

• This is expected to increase

to 182 million m3 by 2015

50 100 150 200 1995 2000 2005 2010 2015E

Logs Lumber Wood Panels Pulp Woodchips

Source: State Forestry Administration & WOOD MARKETS

Forecasted Forecasted

Consumption of Logs and Lumber (million m3)

Nearly half

• f the log

and lumber required by 2015 will need to be imported

Total wood deficit (million m3)

100 200 300 400 500 600 700 800 2002 2006 2010 2014 Hardwood Lumber Hardwood logs Softwood Lumber Softwood logs Guyanas Lumber

4-2. MARKET DYNAMICS

Opportunity for Greenheart

13 Private & Confidential | Greenheart Group

China’s wood deficit is estimated to reach 182 million m³ by 2015 Increasing demand for timber from other Asian and global markets

• Timber prices have been

steadily increasing over the last decade with a slight drop during the financial crisis

• Recent change in dynamics

from China demand has led to renewed increase in timber prices

• China and other Asian

markets increasingly interested in New Zealand radiata pine and South American hardwoods

• Greenheart is well

positioned to benefit from the increasing demand and prices

5 10 15 20 25 30 35 40 2002 2004 2006 2008 2010 2012 2014 Volume (million m3) Log Import Lumber Import

China Import: Volume (million m3) China Import: Price(US$ m3)

Source: China Customs / WOOD MARKETS Note: Imports based on average prices, CIF

Forecasted Forecasted

Source: RIS, ITTO, Company Estimates Note: Guyana (neighboring Suriname) used as proxy for lumber export prices, FOB

Opportunity for Greenheart

4-3. MARKET DYNAMICS

14 Private & Confidential | Greenheart Group

Areas with timber deficit Major Softwood Exporters Major Hardwood Exporters

Tropical Hardwood Region

Source: ITTO, Company Estimates

• Shift in global demand as

Asia emerges as the biggest importer of global timber

• Tropical hardwoods only

exist within the tropics and are decreasing in supply and tighter regulations

• Russia’s increasing tariffs on

log exports has led markets to seek alternatives, namely New Zealand

• Other Asian economies and

Middle east now competing for timber

Global Demand and Supply of Timber

• 5. OPERATING STRATEGY

15 Private & Confidential | Greenheart Group

Growth Targets

• Continue to develop existing Suriname hardwood concessions and New Zealand softwood

plantations

• Construction of new wood processing facilities with aim of exporting high value lumber and other

high value processed products from Suriname commencing 2012

• Build bio-fueled power plants fed by sawmill waste – allows Greenheart to reduce diesel

consumption and CO2 emissions and generate its own power and provide excess power back to Suriname’s national power grid

• Suriname – Expand concession footprint
• Explore and acquire new concessions in Suriname from the Suriname Forest Control

Foundation, Stichting Bosbeheer en Bostoezicht (SBB) or other third parties

• Explore forestry concessions in neighboring regions – Guyana, Brazil, Peru
• New Zealand - Expand plantation footprint
• Continue New Zealand expansion of radiata pine plantations that have synergies with our

existing operations

• Prudent management of consolidated debt/total capital
• Greenheart is an

international growth vehicle actively seeking sustainable and profitable forestry assets outside China

• Greenheart aims to import

its products to China to serve the growing wood deficit and other markets around the world as price and demand dictate

Current Assets

APPENDIX

16 Private & Confidential | Greenheart Group

A. Historical Financial Results B. Board of Directors & Senior Management C. Key Biographies

15 16 17

• A. HISTORICAL FINANCIAL RESULTS

17 Private & Confidential | Greenheart Group

HK$’000 Q1 2011 Q1 2010 2010 Revenue 40,237 3,265 16,714 Cost of Sales (20,579) (1,647) (7,906) Gross Profit 19,658 1,618 8,808 Other income and gains 2,575 24 2,288 Fair value gain on plantation forest assets 9,214

• Selling and distribution costs

(13,862) (1,036) (6,519) Administrative expenses (21,777) (10,878) (50,043) Other operating expenses (5,181) (3,637) (36,502) Non-cash share option expenses (4,519)

• Finance costs

(5,248) (2,338) (14,778) Share of results of associates

• (600)

(1,667) Loss Before Tax (19,140) (16,847) (98,413) Tax Credit (746) 111 587 Loss and total Comprehensive Loss for the Year (19,886) (16,736) (97,826) Loss attributable to Shareholder (13,578) (12,655) (78,784) HK$’000 Q1 2011 2010 2009 Non-current Assets 1,444,991 1,363,371 797,751 Cash & Cash Equivalents 572,196 620,416 40,916 Current Assets 595,250 637,461 52,096 Current Liabilities 55,883 448,305 28,778 Net Current Assets 539,367 189,156 23,318 Non-current Liabilities 582,965 267,509 310,807 Net Assets 1,401,393 1,285,018 510,262 Less: Non-controlling interest 275,931 256,231 275,273 Net Assets Attributable to Equity Holders in Company 1,125,462 1,028,787 234,989 NAV per share $1.44 $1.51 $0.74 Total Shares Outstanding (million) 779 681 314

Income Statement Balance Sheet

• B. BOARD OF DIRECTORS & SENIOR MANAGEMENT

18 Private & Confidential | Greenheart Group

Focused on strong corporate governance Experienced and diverse Board with international and local directors Experienced Management Team Management is a mixture of Chinese, Canadian, New Zealand, American and British nationals

Name Title Allen Chan (Hong Kong resident) Chairman & Non-Executive Director Judson Martin (Canadian, Hong Kong resident) Chief Executive Officer & Executive Director Hui Tung Wah, Samuel (Hong Kong resident) Executive Director Simon Murray (British, Hong Kong resident) Non-Executive Director Wong Kin Chi (Hong Kong, Shanghai resident) Independent Non-Executive Director Wong Che Keung, Richard (Hong Kong resident) Independent Non-Executive Director Tong Yee Yung, Joseph (Hong Kong resident) Independent Non-Executive Director Judson Martin (Canadian, Hong Kong resident) Chief Executive Officer Executive Director Andrew Fyfe (New Zealand, Hong Kong resident) Chief Operating Officer (Global) Daphne Tse (Hong Kong, Hong Kong resident) Chief Financial Officer (Global) Paul Westbrook (American, Suriname resident) Chief Operating Officer Greenheart Resources – Suriname Ty Wilkinson (American, Suriname resident) Chief Executive Officer (Greenheart Forest Technologies) Suriname Regional Manager (Greenheart Group) Gary Clarke (British, Suriname resident) Chief Forestry Engineer (Suriname) David Wu (British, Hong Kong resident) Vice President Corporate Development & Investor Relations

Board member Biography

Allen Chan

• Mr. Chan is Chairman and non-executive director of Greenheart and joined the Board in August 2010
• Mr. Chan co-founded Sino-Forest in 1992 and has been the chairman, chief executive officer and a director of Sino-Forest, with

responsibility for Sino-Forest’s overall strategic planning and management

• Before cofounding Sino-Forest, Mr. Chan worked for 12 years as a management consultant and project manager in China. He has also

worked for the Hong Kong government in new town development and management programs

• In December 2010, Mr. Chan was appointed as a vice president of the China National Forestry Industry Federation

Judson Martin

• Mr. Martin is the president, Chief Executive Officer and an executive director of Greenheart
• He joined the Board in August 2010
• Mr. Martin is the vice-chairman and an executive director of Sino-Forest since June 2010 and had been an independent nonexecutive

director of Sino-Forest since 2006 and its lead director since 2007

• Before joining Sino-Forest Corporation, Mr. Martin was executive vice president and chief financial officer of Alliance Atlantis

Communications Inc. from 1999 to 2002 and senior executive vice president and chief financial officer from 2003 to 2005 and consultant to 2007

• Mr. Martin began his career with PricewaterhouseCoopers in 1979. In 1982 he joined Trizec Corporation LTD., a TSX listed commercial real

estate company then controlled by the Brascan Group. During his thirteen-year tenure with the Brascan group of companies, Mr. Martin held several senior positions, including Vice President, Finance and Treasurer of Trizec, Executive Vice President and Chief Financial Officer

• f Brookfield Development Corporation, and President and CEO of Trilon Securities Corporation. Mr. Martin also served as Executive Vice

President and Chief Financial Officer of Brookfield Development Corporation

• Mr. Martin is also Chairman of SWEF Terrawinds Resources Corp. and Chair of its audit committee
• Mr. Martin is a Canadian citizen now resident in Hong Kong since 2009

Simon Murray

• Mr. Murray is a non-executive director of Greenheart and joined the Board in August 2010
• Mr. Murray is the Chairman and Director of General Enterprise Management Services Limited and is an independent non-executive

Director of Sino-Forest and is also Chairman of Glencore International plc

• Prior to this, Mr. Murray was the group Managing Director of Hutchison Whampoa Ltd. from 1984 to 1993 and the Executive Chairman in

Asia Pacific for the Deutsche Bank group from 1994 to 1998

• Mr. Murray is also a member of the board of directors of Cheung Kong (Holdings) Ltd., Orient Overseas (International) Ltd. and Wing Tai

Properties Limited (formerly known as USI Holdings Ltd.)

• C. KEY BIOGRAPHIES

19 Private & Confidential | Greenheart Group

Board member Biography

Richard Wong Che Keung

• Mr. Wong is an independent non-executive director of Greenheart and joined the Board in June 2000
• Mr. Wong is the Honorary Consul of The Republic of Tunisia in Hong Kong and a fellow member of the Canadian Institute of Bankers
• He is also the Chief Executive of Regency Investments & Management Co., Ltd. which engages in direct business investments both locally

and overseas Joseph Tong Yee Yung

• Mr. Tong is an independent non-executive director of Greenheart and joined the Board in May 2001
• He graduated from Southern Illinois University in the USA with a Bachelor of Science degree and obtained an MBA from the University of

East Asia

• Mr. Tong has over 20 years of experience in corporate finance and management for different listed companies in Hong Kong
• Currently, Mr. Tong is an executive director and partner of Kelston Holdings (Hong Kong) Limited

Samuel Hui Tung Wah

• Mr. Hui is an executive director of Greenheart and joined the Board in June 2005
• Prior to this, he was an executive director of the Company from July 2001 to May 2003
• After serving 2 years as Senior Vice President for Sino-Forest, Mr. Hui rejoined the Company as Deputy CEO from 1 May 2005
• Mr. Hui has over 30 years working experience in senior management of major international and local banks, and companies in Hong Kong,

Australia and Canada

• He is currently a non-executive director of Cafe de Coral Holdings Limited and WLS Holdings
• Mr. Hui holds a Bachelor Degree in Social Sciences from the University of Hong Kong and a Master Degree in Business Administration from

the Brunel University in the UK Wong Kin Chi

• Mr. Wong is an independent non-executive director of Greenheart and joined the Board in Sep 2004
• He is a fellow member of the Hong Kong Institute of Certified Public Accountants and an associate member of the Chartered Institute of

Management Accountants of the United Kingdom

• Mr. Wong is currently running a company rendering financial and educational management services
• He had over 20 years of experience serving as financial controller and senior executive in a number of multi-national corporations and as

an auditor in an international accounting firm

• Mr. Wong is a non-executive director of Omnitech Holdings Limited
• Mr. Wong has an MBA degree from the University of Durham of United Kingdom
• C. KEY BIOGRAPHIES

20 Private & Confidential | Greenheart Group

www.greenheartgroup.com

21

Contact: David Wu, Vice President of Corporate Development & Investor Relations davidwu@greenheartgroup.com

Private & Confidential | Greenheart Group