A belated Happy New Year to you all. 

Following from my October update… With my apparent abulia cured I had been endeavouring to give myself the ultimate Christmas present. For better, or for worse, an end to this limbo… all assets sold at whatever price and hang the consequences.

I will apologise that my conviction was found wanting when confronted with some of the terms offered in the market. Yes… we are in a weak position. Yes… our oil (we have to now accept) is of a low grade and generally unattractive to the market at large. Yes… the market is generally “soft” at the moment, and with respect to oil produced in Thailand it is borderline hostile. 

We already know all of this.

So…

What to do?

The plan remains the same. I have fought and scrambled and do not accept failure easily. But I do owe you all an apology. With the benefit of hindsight, this could have been handled better. 

The reasons underlying the shortcomings here have already been documented so I will not revisit them. I do not regard the businessman Arron Banks as anything resembling a role model, but something I heard him say resonated with me. I quote:

“When you starve a business of working capital and cash [then] you end up making very, very bad decisions for the wrong reasons.”

With the benefit of hindsight, I have made some judgement calls that one might make differently with the knowledge of today. I can only apologise. It will be of scant consolation to anyone reading this that your interests have always (until very recently) been placed above my own. Managing illiquid assets without the cash required to create a liquid operating scenario is simply so far from ideal it is, to all intents and purposes, a fool’s errand. 

Disposal of assets at any price could have been done two years ago. I did not feel or believe such an action to be appropriate and on we ploughed. As I see things now ending, all we did was prolong the agony and postpone the announcement of the inevitable. Hindsight is a wonderful thing.

I am truly sorry for that, although I maintain that we will have bettered “fire sale” prices and thus – to a limited extent – the delay served a purpose. Was the differential worth it given the time and cost? We will know soon enough but I suspect that looking back to two years past that the bird in the hand would have been the call to make. 

We have to (begrudgingly) now accept, as we now seem to hear frequently, that “it is what it is.” This means that I am now cutting through the smoke and mirrors that are endemic in this opaque and arcane market for agarwood and I am dealing with things in a far more detached fashion. To that end, I undertook to obtain a fresh, independent assessment of appropriate terms for asset disposal. Given the lack of a convincing alternatives I fully expected the independent assessment to confirm my actions as – whilst far from ideal – apposite in the circumstances. 

That said – recognising that a true market value falls significantly short of original intentions does not mean a sale at any price. Any price within the bounds of reason; yes. But not any price. I received offers over the Christmas and New Year that were so out of touch with anything resembling a fair deal for us that I reverted to type and refused to accept them. 

There is now a three-pronged attack in play to wind this up as follows:

I have – in conjunction with an investor in the direct holdings we had – arranged for a suitably decent sample of our pre-processed agarwood to be transported to Pratchinburi Province where it will be processed by a completely new (to us) producer and trader of oil. I have had the collection date confirmed as 12th February. They believe that they can add value to our product by mixing it with their own to give it more market-friendly qualities. They will also give us an assessment (yet another) of our oil as they see it. 

I think we can make a safe assumption as to the likely content of that assessment report but as a belt and braces measure I see no harm in it and it does not slow things down as we will not be waiting on it. 

The processing via a counterparty that can blend our oil is something about which I had spoken in past updates but finding a suitable counterparty in Thailand on terms acceptable to us has proven complex. The processing will be done over the next couple of weeks. The tinkering with oil over the following couple of weeks and then, all being well, we should quickly get market soundings and confirm whether there is extra value to be had down this avenue or otherwise.

 

(2) I am recommencing operations at the original factory in tandem with this. Due to the ever present budgetary issues this will not recommence until March but it means that we will have a second hare running. As part of this initiative we will select small batches to try some of the other “value add” measures previously discussed in these Blogs including civet paste at point of soaking  and also blending.

Should the results of (1) show such significant promise as to warrant it, at that point in time we will divert the remainder of processing activities to that counterparty. Should it be much of a muchness then we will continue to run both initiatives. Should option (2) seemingly represent the greater benefit then all activities will be focussed down that channel. 

 

 

(3) We are continuing to work with existing channels but will now drop prices to ensure sales are accelerated rather than holding out for what we originally believed we should be able to get for produce. 

 

It will take several months for this to come to finality and I will update the Blog as it goes through. The only required potential interaction outside of such updates may be a vote on whether disposal proceeds should be distributed, or whether they should be applied to one or more of the proposed legal actions I have mooted in prior missives with a view to a greater distribution to investors, albeit further down the line, assuming legal success. I dare say that the longevity and uncertainty connected with any legal action would have the majority in favour of taking what we can get now and call it a day. When the time comes the choice will be yours, I suspect, but in the first instance it will be a decision for the Board who are under pressure to wind the funds up once and for all. There are ways to leave a rump of investment pursuing the long game but the appropriateness of such measures will have to be assessed when the time comes. There is a cost to everything.

We are putting a long-stop of 6 months on this. That is to allow time for the processing. Sales will not be delayed as we will be accepting lower prices than I had wanted to hold out for and so the issue of timing comes down to how many decent volume bulk orders we can obtain. As the sales are achieved so the likely final payouts can start to be assessed in cents on the dollar terms and these too can be communicated so that expectations are properly managed all round. 

If we can shut it down in three months flat then it shall be done. Processing should be the longer part of the timeline here (rather than sales and marketing) and all concerned will be working to make that the case. What I will say is that getting this last push in place has been quite stressful but now that it is done, even though I know that this is far, far from an ideal end to matters, I am sleeping much better than previously was the case.

 

I apologise unreservedly that this has all taken so long. When I embarked upon the great rescue of the assets in the ground one could never have envisaged some of the circumstances and scenarios that would have to dealt with and nor could a good many of them been resolved differently given the circumstances. 

As ever I welcome questions / feedback / suggestions as to how I can improve our collective lot via comments on the website and I hope that we will see a productive discussion to such ends. 

As I said… whilst updates have tended to be sporadic on the basis that no news was no news, with the above in place there will at the very least be something to report on month to month if not at more frequent intervals. So the next update should be in just a few weeks as the alternative processing gets underway.

Thank you for bearing with us. 

 

M.K. Simmons

January 2017