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Timber millions eyed in rainforest felling

News Room - May 24, 2022

Melanie Reid and Bonnie Sumne – Documents tabled in a New Zealand court case show how a Kiwi developer and a company which has cut down Papuan rainforest intend to make around $110 million from the timber to make floors and decks – in stark contrast to statements made in a recent Newsroom investigation.

Newsroom has secured the documentary evidence that lays out in detail how an Indonesian company linked to a New Zealand property developer intends to make close to A$100 million from clearing trees in an area of primary rainforest in Papua.

Digoel Agri Group is an Indonesian company with three subsidiaries, two of which have permits to deforest approximately 80,000 hectares of Papuan rainforest to plant palm oil as part of Tanah Merah, a mega-project involving companies from around the globe that, if completed, will release 104 million tonnes of Co2 – more than most nations emit in a year.

Newsroom investigated the major shareholder in Digoel Agri Group, Kiwi property developer Neville Mahon, in a story late last year.

At the time, Mahon made a series of claims about his involvement in the project to Newsroom at a sit down meeting in a Newmarket cafe – claims that are now shown to be contradicted by court documents obtained by Newsroom Investigates, including that Digoel Agri Group had "no interest" in the timber.

Dual realities

The Newsroom story was published following an extensive international joint investigation by Gecko Project, Mongabay, Malaysiakini and Tempo laying out the murky and complex history of the Tanah Merah project, exposing a web of multiple concessions, shell companies, mystery investors, court cases and claims of permit falsifications.

The project is divided into seven concessions – parcels of land – of around 40,000 hectares each in Boven Digoel, a regency in Papua's southeast.

Papua is the Indonesian controlled half of New Guinea – the other half of the island is Papua New Guinea. It is the world's largest tropical island, with 83 percent of Indonesian New Guinea supporting old-growth forest, and the third largest rainforest after the Amazon and Congo.

At our meet-up with Mahon, he claimed the Indonesian company, Digoel Agri Group, had "no interest" in the timber that was being cut down, just the bare land for growing "food crops" for Indonesia.

"We have nothing to do with the forestry at all, nothing to do with it. This is just regrowth, which hasn't even got a lot of value because it's not, for example, mahogany. What you've got to remember is I, or my shareholders, have got no interest in that side of it at all," Mahon told Newsroom.

However court documents provided as part of an affidavit signed by Mahon in 2020 include an "agribusiness debt opportunity" set of investment slides for Digoel Agri Group looking for A$3m in bridging finance to help with the setup of the forestry operation, including a jetty, sheds, timber taxes and permitting.

It states Digoel Agri Group was established for "utilising the lumber resource and developing a significant agricultural operation," and, "this material will be processed into lumber products – flooring, decking, door jambs and frames, shiplap and woodchips for worldwide sale." The timber would be transferred to Java to be finished before being shipped to "destination markets in Asia, Europe, Australia and the USA".

The investment deck includes a 32-month production forecast that predicts more than A$96m in cashflow before tax by the end of the period from a combination of sawn timber and woodchips, with the aim to achieve "steady state monthly revenues of A$7m with profits before tax of A$3.9m".

A letter attached to the affidavit from Mahon's longtime associate Nithan Thiru lays out the expected forecast payments directly to Mahon for 2021 totalling more than A$3m, as well as his shareholder loans to the company of around A$1m.

At our meetup back in July 2021 Mahon was also adamant the timber in question was not primary rainforest.

"There's no virgin rainforest in there whatsoever. That's actually just complete and utter bullshit. That area was cleared out by Malaysians 35 years ago. I mean, it's just a stupid allegation to start with. If it was a rainforest, I can assure you my partner and my children wouldn't even want to walk out the door," he told Newsroom.

But once again Mahon's claim is contradicted by his own affidavit, which says the two concession areas of "exceptional natural resources" contain 7.6 million cubic metres of standing timber, and comprise 94 percent mixed tropical species and meranti hardwood (rainforest species) and that they are well established with individual tree sizes being "high with diameters greater than 40cm representing 53 percent of total".

According to the document, a feasibility report for potential logging was commissioned by energy consulting firm Poyry, "a global leader in forest industry consulting" which found that "84 percent of the forest concessions are dominated with dense high quality forests".

The document goes on to state this wood is sold as timber boards in building supplies stores for more than $4k per cubic metre – the same wood used to build the decks in our homes.

The affidavit also says Digoel Agri Group had entered into a joint venture agreement with Galion Resources, a Chinese timber group, to undertake the processing, sales and logistics of finished timber products.

Mahon removed from document

Mahon has been linked to a string of controversial property developments, including the Fiji Hilton, plans for luxury apartments in Queenstown, and an old hotel in Parnell, Auckland. Since April 2017 Mahon has faced at least a dozen court cases here in NZ, some of which are ongoing.

In April this year, the Court of Appeal issued a judgment dismissing an appeal from Mahon over a personally guaranteed loan in relation to the Auckland hotel and awarded costs to the company of his former funder, Tim Edney, who has filed against him for bankruptcy.

Following the publication of our investigation into his involvement in Digoel Agri Group and its removal of primary rainforest in Papua, Mahon's name no longer appears on the shareholding documents.

Instead, two Australian-registered entities, JDK Nominees and Myra Nominees, now hold the majority shareholding, and two new Australian names also appear on the document, an "agribusiness specialist" from Perth is listed as the director, and a Western Australian businessman linked to the energy sector is listed as commissioner (neither are listed as holding any shares).

Former business associates who wish to remain anonymous are speculating that Mahon could still benefit through a blind trust.

We sent a list of questions to Mahon, including why his name no longer appears on the company documents and why there was such a discrepancy between what he told us last year and what he presented in his affidavit. He has not responded to our repeated requests.

Permit problems

Three years ago the bulldozers first arrived in the Digoel Agri Group concession areas, but were halted after they logged just 230 hectares, due to alleged non-payment of staff salaries.

In March last year the forest clearing resumed, as can be seen on the satellite imagery from Nusantara-Atlas.org below.

But while it seems Covid has delayed the original timeline for production, since the Newsroom story there are also fresh questions over whether the Digoel Agri Group subsidiary companies still retain the concessions to log and plant palm forests at all.

Media company Earthsight reported in January that the Indonesian government had cancelled almost 200 permits – however there was concern the permits will simply be reissued.

The latest satellite imagery from Nusantara-Atlas.org shows no new deforestation has occurred in the two Digoel Agri Group concession areas since January.

Franky Samperante, director of a local Indigenous rights NGO, is hopeful it will remain this way. "We are still investigating these cases and monitoring in the field," he told Newsroom.

Indonesia, the world's largest producer of palm oil, last week reversed a recently introduced ban on the export of palm oil.

New research shows forests play an even bigger role in climate change than previously thought. The study from the International Centre for Tropical Agriculture says forests don't just soak up carbon, they also help keep the earth at least half a degree cooler.

[Melanie Reid is Newsroom's lead investigations editor. Bonnie Sumner is part of the Newsroom Investigates reporting team.]

Source: https://www.newsroom.co.nz/timber-millions-for-kiwi-in-rainforest-fellin