Amazonas Forestry and Timber Extraction Operations

Amazonas Florestal owns Title for a property denominated Fazenda Jatuarana. This property contains some 36,481hectares or 90,146 acres of rainforest land located in the southern part of the State of Amazonas in Brazil and was appraised in 2011 by EB da Amazonia, a real estate appraisal company that has been credentialed through Banco do Brazil, at a fair market value of more than 77 MM BR Reais or approximately US$46 MM. Along with and completely independent of Fazenda Jatuarana, Amazonas Florestal has also acquired two fully approved forest management projects and their associated permits and licenses. Through these licenses, AMZO is authorized to harvest approximately 14,000 cubic meters of timber. The Company’s forest property and assigned and approved to extract forest land, have been recently audited by a P.C.A.O.B. (Public Company Accounting Oversight Board) certified accounting firm as collateral to fund Amazonas Florestal’s capital requirements needed to develop the properties and bring them into a profitable commercial status. 

The wood products Amazonas Florestal exports require specific governmental approval. Amazonas Florestal maintains the necessary governmental permits for importing and exporting and meet any safety standards set. Yearly licenses and permits are required.

High rates of deforestation in the Brazilian Amazon are the focus of both national and international concern. The Brazilian government heavily regulates the Timber Industry to make sure that all forest management practices are conducted in a sustainable and environmentally friendly way. In the State of Amazonas specifically, the regulatory environmental protection agency is known as IPAAM, or Instituto de Protecao Ambiental do Amazonia, has been granted ample powers by IBAMA, the Federal Environmental Agency to regulate, approve and enforce Sustainable Forest Management Projects. These regulations are so specific that an inventory of the forest resource is taken whereby 100% of the trees existing on a particular property is inventoried and cataloged by species, diametric size, and age.

Each of the harvestable trees found to be more than 60 cm at chest height and in the species of commercial value is tagged using aluminum tags and numbered according to the complete catalog tally. Engineers then come in to determine the environmental impact of felling those trees and the direction that each should be filled in order to minimize the damage to its surroundings and considering potential erosion once that tree is removed. No trees are felled within 50 meters of any stream, lake or river to protect the natural erosion of its bank.

A forest engineer is responsible for laying out an extraction program breaking down the property into 50 x 50-meter sectors and indicating the paths where equipment can be introduced and roads built when needed. Once the project is formulated it goes to IPAAM for approval. An LO – Licencia Operativa, Operating License, is issued and accompanied by an ACOF- Harvest Authorization. Once approved the amounts shown on these approval documents are entered in exact m3 quantities per species and are allocated to the project owners in the IBAMA DOF system.

This federal control and regulative system not only fulfills verification that the timber extracted from each project is of legal origin but controls the transportation 100% from standing tree to finished product shipped locally or exported. This is achieved by the various steps in the system where an original DOF and Invoice need to accompany a log shipment from the project to the mill and contain information on the shipping method, whether by land or water with the license information for the shipper (truck tag, badge number, tugboat registry) Another DOF control the product while shipped from the mill or manufacturing industry anywhere else.

Once brought to market, if done so internally in the Brazilian domestic market, the seller has to show a DOF number on each invoice and send a copy to IBAMA to have that amount removed from the system. In order to export IBAMA reviews the DOF and inspects the product upon shipment at the port of discharge.

These government agencies have the power to immediately halt any and all operations should any impromptu inspection reveal even the slightest discrepancy in size, quantities, species or environmental practices. Furthermore, continued Domestic and International pressure to protect the Amazonian rainforest can lead to more stringent regulations or even the complete banning of all Timber operations in this region.

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