Obtala Limited MOU to Promote Legal & Sustainable Processing (3860B)

TIDMOBT

RNS Number : 3860B

Obtala Limited

09 January 2018

9 January 2018

Obtala Limited

("Obtala", the "Group" or the "Company")

(AIM: OBT)

MOU to Promote Legal and Sustainable Processing of Timber in Mozambique

-- Non-binding MOU signed with FundInvest SA, an investment company established by the Ministry of Land, Environment and Rural Development (MITADER) to combat illegal logging and promote timber processing in Mozambique

-- Obtala's subsidiary Argento (48%), Obtala (1%), and FundInvest (51%) to set up a joint venture company by Q1 2018 to own and operate a timber harvesting, purchasing, processing, export and distribution business in Mozambique

-- Company has mandate to source sustainable timber from regional small-holders in Northern Mozambique to be processed in country then exported

Obtala Limited (AIM: OBT), the African focused agricultural and forestry company, is pleased to announce that its Board has approved the signing of a Memorandum of Understanding (MOU) with FundInvest SA ('FundInvest') with a view to establishing a new joint venture company by the end of Q1 2018 to promote timber processing in Mozambique.

FundInvest was established by the Mozambique Ministry of Land, Environment and Rural Development (MITADER) in 2017 in response to the continuation of the illegal export of raw logs (unprocessed timber). Obtala's opposition to illegal logging and business as a value-added processor of timber, as evidenced by the construction of our new sawmill in Nampula, is strongly aligned with the goals of FundInvest and the Mozambican government.

Following months of talks, an MOU has been reached to set up a joint venture company whose business shall be to own and operate a timber harvesting, purchasing, processing, export and distribution business. The joint venture company will be 51% owned by FundInvest, 48% by Argento and 1% by Obtala. The activity of the joint venture company will consist of purchasing logs primarily from small concession holders (that are otherwise illegally exported), delivery and processing of timber at sawmills within Mozambique, and the export of the resulting wood products to international markets.

FundInvest's primary responsibilities will be to assist with purchasing timber harvested by concession holders, managing the transport of wood to sawmills, arranging export processes, and obtaining government and regulatory approvals, permits and licenses. Obtala does not plan to invest directly into the joint venture company but will be responsible for arranging preferential rate financing from socially impactful funders and government entities and will make its sawmill in Nampula available for processing the joint venture's timber at market competitive prices. Obtala and FundInvest will work jointly to sell the joint venture's processed timber.

Miles Pelham, Chairman of Obtala, comments: "We were delighted to have been approached by FundInvest last quarter with a view to cooperating on the fight against illegal logging in Mozambique. Our view has always been that a sustainable business model must be built around extracting the highest dollar value recovery from each and every log we take from the forest rather than simply exporting raw unprocessed logs. FundInvest clearly share that vision and are eager to form a joint venture company that will rapidly advance to higher value-added processing such as MDF, HDF, and veneer. It is a strong signal from the government that they intend to support legal operators and is perfect timing for us as our new sawmill comes online this quarter."

 
Obtala Limited 
 Miles Pelham - Chairman 
 Paul Dolan - CEO 
 Martin Collins - Deputy Chairman 
 www.obtala.com                                           [phone] 
Northland Capital Partners Ltd (Nomad and Joint Broker) 
 Tom Price 
 David Hignell                                            [phone] 
Brandon Hill Capital (Joint Broker) 
 Jonathan Evans                                           [phone] 
 
 Beaufort Securities Limited (Joint Broker) 
 Jon Belliss                                               [phone] 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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January 09, 2018 09:21 ET (14:21 GMT)