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South of Brazil: A Potential Woodchip Export Market Otávio Decusati, Otávio Decusati, Managing Director Managing Director Osmar Graff, Osmar Graff, Commercial Director Commercial Director TANAC S.A. TANAC S.A. March 16th, 2010 March 16th, 2010

Acacia Woodchips In Brazil VersãO 2010 Og Tanac

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South of Brazil: A Potential

Woodchip Export Market

Otávio Decusati, Otávio Decusati, Managing DirectorManaging Director

Osmar Graff,Osmar Graff,Commercial DirectorCommercial Director

TANAC S.A.TANAC S.A.

March 16th, 2010March 16th, 2010

Focus of PresentationFocus of Presentation

Acacia mearnsiiAcacia mearnsii Plantation in Plantation in South of BrazilSouth of Brazil

Principal Uses for Principal Uses for Acacia mearnsiiAcacia mearnsii

Evolution of Brazilian Woodchip Evolution of Brazilian Woodchip MarketMarket

Acacia MearnsiiAcacia Mearnsii Plantations Plantations

• Acacia tree plantations dates back Acacia tree plantations dates back 19081908

• Nowadays 35,000 families plant it , in Nowadays 35,000 families plant it , in more than 200 cities in Rio Grande do more than 200 cities in Rio Grande do Sul stateSul state

• More than 80% of the plantations are More than 80% of the plantations are held by small farmers that vary in size held by small farmers that vary in size from 3 to 10 ha. from 3 to 10 ha.

Acacia mearnsiiAcacia mearnsii Plantations in The Plantations in The South of Rio Grande do SulSouth of Rio Grande do Sul

1968 – Plantation in Ouro Verde farm (2,034 ha)1968 – Plantation in Ouro Verde farm (2,034 ha)

1989 - TANAC started plantations, in its own farms, in 1989 - TANAC started plantations, in its own farms, in Piratini City (150 km from Rio Grande port)Piratini City (150 km from Rio Grande port)

1991 - The first development program started with 1991 - The first development program started with small farms in Canguçu Citysmall farms in Canguçu City

2000 - Some big acacia tree plantations started in 2000 - Some big acacia tree plantations started in Bagé City with partnership TanacBagé City with partnership Tanac

2010 - There are more than 15.000 ha that were 2010 - There are more than 15.000 ha that were planted through incentive program from Tanac in the planted through incentive program from Tanac in the south of Rio Grande do Sul State.south of Rio Grande do Sul State.

Acacia MearnsiiAcacia Mearnsii Plantation Plantation

• There are 150,000 ha of Acacia tree plantations There are 150,000 ha of Acacia tree plantations in Rio Grande do Sul.in Rio Grande do Sul.

• TANAC has 30,000 ha of own plantations, FSC TANAC has 30,000 ha of own plantations, FSC certified, average distance from the woodchip certified, average distance from the woodchip facilities approx. 200 km.facilities approx. 200 km.

• TANAC has the handling of its forests certified TANAC has the handling of its forests certified by FSC since 2004, confirming that its activities by FSC since 2004, confirming that its activities are are

economically viable, economically viable, environmentally compatible and environmentally compatible and

socially responsible. socially responsible. The Quality System of Forest Unit is also The Quality System of Forest Unit is also

certified by the NBR ISO 9001.certified by the NBR ISO 9001.

TANAC Nursery Farm

Testing Seed Germination

TANAC FOREST UNIT

TANAC Forest UnitHerd of cattle intercropped with forest

TANAC Forest Unit

END-USES OF PRODUCTS END-USES OF PRODUCTS FROM ACACIA TREES FROM ACACIA TREES

PLANTATIONSPLANTATIONS

Main Uses for Acacia Main Uses for Acacia

From Bark : Tannins (vegetable extracts from From Bark : Tannins (vegetable extracts from bark) mainly used for leather tanning, water bark) mainly used for leather tanning, water treatment clarifying agents , petroleum drilling, treatment clarifying agents , petroleum drilling, adhesives for wood panels.adhesives for wood panels.

Wood Wood Woodchips , particleboard industries, Woodchips , particleboard industries, charcoal, firewood, drying grain and tobacco, charcoal, firewood, drying grain and tobacco, pulpwood and etcpulpwood and etc

In 1995, TANAC starts exporting woodchips from In 1995, TANAC starts exporting woodchips from Rio Grande portRio Grande port

Acacia Woodchips Production in Rio Grande

do Sul State

The woodchips production started in 1995, when TANAC established its mill facilities in the city of Rio Grande.

TANAC Woodchip Production

Rio Grande City

Woodchips FacilitiesWoodchips FacilitiesLocationLocation

TANAC woodchip plant is located TANAC woodchip plant is located along side Rio Grande Port and its along side Rio Grande Port and its forest plantations are approx. 200 forest plantations are approx. 200 Km distant.Km distant.

BR 386

BR 392

BR 116

BR 290Alegrete

Arroio Grande

Bagé

Livramento

Passo Fundo

Osório

Piratini

Encruzilhada do Sul

São Lourenço do Sul

ACACIA

FORESTS & WOODCHIPS AND TANNIN MILL FACILITIES

TANAC – Tannin Unit- Montenegro

TANAC – WoodchipsRio Grande

TANAC Woodchip Unit

Rio Grande City

Source: RISI

Brazil: Hardwood Chip Exports, 1998-2008E Thousand BDMT

0

200

400

600

800

1000

1200

1998

1999

2000

2001

200

2

2003

200

4

2005

2006

200

7

2008

Hardw ood

WOODCHIPSWOODCHIPSPRODUCTION CAPACITIESPRODUCTION CAPACITIES

TANAC 520,000 BDT/YEARTANAC 520,000 BDT/YEAR

PORT OF RIO GRANDE – BIANCHINI TERMINAL

TANAC´S WOODCHIPS EXPORTS

LOADING LOADING FACILITIESFACILITIES(Rio Grande port)(Rio Grande port)

BIANCHINI(TANAC)BIANCHINI(TANAC) 10,000 GMT/DAY10,000 GMT/DAY

DEPTH 44 FEETDEPTH 44 FEET

COMPACTATION FACTORCOMPACTATION FACTOR ≤133 CF/BDT≤133 CF/BDT

EXPORT VOLUME (BDT) EXPORT VOLUME (BDT) TANAC TANAC

YEARYEAR TANACTANAC

20052005 360,000 360,000 20062006 378,000 378,000 20072007 475,000 475,000 20082008 420,000 420,000 20092009 320,000320,000

100% JAPAN

DESTINATION OF EXPORTSDESTINATION OF EXPORTS

FUTURE TRENDSFUTURE TRENDS

The Acacia tree plantations will increase The Acacia tree plantations will increase in the Rio Grande do Sul State due to the in the Rio Grande do Sul State due to the following reasons:following reasons:

4.4. New buyers are entering in the market New buyers are entering in the market MDF/MDP producers;MDF/MDP producers;

6.6. A consistent demand of wood will give A consistent demand of wood will give guarantee of ROI of forest owners;guarantee of ROI of forest owners;

FUTURE TRENDSFUTURE TRENDS

2.2. The charcoal market will grow The charcoal market will grow through the stable economic situation through the stable economic situation in Brazil ,provoked by an increase in in Brazil ,provoked by an increase in the domestic consumption;the domestic consumption;

4.4. TANAC will continue its incentive TANAC will continue its incentive plantation program : plantation program :

3,000,000 seedling/yr to be distributed 3,000,000 seedling/yr to be distributed within 5 years-time;within 5 years-time;

TANAC Nursery Farm

Montenegro City

FUTURE TRENDSFUTURE TRENDS

2.2. Increase on the wood procurement Increase on the wood procurement from small farmersfrom small farmers

4.4. World energy market becomes a real World energy market becomes a real option for the wood exports from Rio option for the wood exports from Rio Grande do Sul State.Grande do Sul State.

Planted Forests Planted Forests Environmental ContributionEnvironmental Contribution

• No competition with traditional No competition with traditional agricultureagriculture

• Restores degradaded land Restores degradaded land

• Prevents soil erosion Prevents soil erosion

• Protects biodiversity Protects biodiversity

• Protects water resourcesProtects water resources

In Rio Grande do Sul StateIn Rio Grande do Sul State

100% of woodchips produced 100% of woodchips produced are originated from planted are originated from planted

forests, which are renewable forests, which are renewable resources. resources.

Preservations is a must : Preservations is a must : Protected areas of native forests Protected areas of native forests

and local fauna are preserved.and local fauna are preserved.

Sunset – Ouro Verde Farm - Tanac

THANK YOU!

TANAC S.A.TANAC S.A.

Otávio Decusati Otávio Decusati [email protected]@tanac.com.br

Osmar GraffOsmar [email protected]@tanac.com.br

Phone: +55 51 3632 4055Phone: +55 51 3632 4055Fax : +55 51 3632 2863Fax : +55 51 3632 2863

www.tanac.com.brwww.tanac.com.br