### GWM - Eucalyptus Project: Target Returns of 8 - 12%

We forecast our returns using the following method: First, we take the charcoal prices from a poor performing year such as 2009 and add 3.3% annual inflation for 7 years. This gives us a target price of R$ 107 per cubic metre of charcoal. We obtain our charcoal prices from the AMS who update the average prices for charcoal in each region of Brazil on a monthly basis.

**Growth and Yield Data:**

Average timber production in Brazil is between 30 to 45 m3 per hectare. We commissioned an independent forestry consultancy, Bio4Met to gauge how much timber we should produce, at a minimum. Bio4Met examined the local climatic, environmental and soil conditions as well as growth rates obtained by other growers in the area to calculate the expected growth rates of our trees. They concluded that we should make at least 32.36 m3 of timber from each hectare of eucalyptus plantation.

Using Bio4Met’s report, the expected production of timber per hectare should be at least 226.48 m3, which will produce 102.95 m3 of solid, compacted charcoal. However, when charcoal is produced it has air gaps which means it is considered ‘stacked’, which means our expected stacked charcoal production is 154.07 m3 per hectare.

**Table 1: Projected production per hectare**

**Charcoal Price Data:**

Charcoal price data has been collected and published independently by AMS [Associação Mineira de Silvicultura] between 1997 and 2010 [ www.silviminas.com.br ]. The prices of charcoal in stacked cubic meters [MDC] are published on this website for the north of Minas Gerais, the nearest area to our plantation. The rate for the price of charcoal at harvest [year 7] is projected to be R$107.98 MDC (using a base rate of R$ 86 MDC and using an inflation rate of 3.3% per year over the seven year investment term).

**Therefore the calculation used for the projection is:**

154.07 MDC x R$107.98 = R$16,636.48 per hectare

**Sources:**

**Bio4met Assessment
AMS numerous de sector
ABRAF Statistics 2008
ABRAF Statistics 2009
ABRAF Statistics 2010
**