Obtala Resources Limited Agriculture Update (8532G)

TIDMOBT

RNS Number : 8532G

Obtala Resources Limited

25 November 2015

25 November 2015

Obtala Resources Limited

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

(AIM: OBT)

Agriculture Update

Obtala Resources Limited (AIM:OBT), the vertically integrated agribusiness, timber and retail company, announces today that it has signed Heads of Terms, with a private, non-related Tanzanian entity ("Partner") to form a joint venture to develop a commercial farming operation over an additional 1,265 hectares in Tanzania. A formal shareholders agreement, land lease agreement and the incorporation of a new Tanzanian registered joint venture company will be concluded shortly.

Highlights:

   --       Land area covers 1,265 hectares 

-- River frontage on the northern boundary with approved water extraction rights. Land is partially irrigated with pump house and surface irrigation canals

   --       250 hectares of land already cleared, ideally suited for fruit tree cultivation 

-- Located only 15km from the Company's existing horticultural project - allowing for significant synergies of manpower, management control, technology and logistics

   --       Good infrastructure, only 220km from the export sea port and airport at Dar es Salaam 

-- Existing buildings and power on site - readily convertible to housing processing and packing facilities

-- Fruit trading partner will fund the seeds for banana plantation and will send plantation experts from their Central American operations to assist in the project start-up

   --       Total land held under lease agreements in Tanzania will increase to c.1,800 hectares 

Obtala has entered into a Heads of Terms with a private, non-related Tanzanian company to form a new commercial farming operation in which it will hold a 70% interest. The Partner will hold a 30%, free-carried interest in the joint venture, which will lease the land from the Partner at nominal value. Future dividend payouts will be made once capital and operating expenses have been recovered. The land is held in two contiguous blocks, one with 75 years remaining on the lease the other 10 years. Both titles deeds are renewable. There is no consideration to be paid.

The land is adjacent to the Dodoma - Dar es Salaam highway, and has approximately 250 hectares of land cleared and ready for development and planting. There are a number of buildings on the site, which will be upgraded to house a processing and packaging facility, staff quarters and offices. The northern boundary is defined by the Wami River and the Partners have secured water abstraction rights for irrigation purposes.

The Company recently announced on the 6th November that it had entered into a Memorandum of Understanding ("MoU") with a highly experienced international exotic fruit trading company (the "Trader"). Under the terms of the MoU, Obtala will work in partnership with the Trader, who is part of the agricultural division of Grupo Cabal, a Mexican group with a long standing tradition in the sector as former owners of DEL MONTE FRESH, to establish fruit plantations in Tanzania.

As agreed, in partnership with the Trader the Company will establish an initial 150 hectare, scaling up to 500 hectare, banana plantation on the farm. This new land and operating agreement provides the land platform for this partnership to grow. Typically bananas take between 9-12 months from planting to harvest with 1,800 banana trees per hectare yielding +40 tonnes per hectare, achieving $1,000 per tonne, with costs of $5,000 per hectare. In addition the Company will develop a mango plantation, covering 180 hectare and a 100 hectare Persian Lime tree orchard. The Trader has agreed to fund the cost of the banana seeds, which is equivalent to $110,000 per 100 hectares and will further provide plantation experts from their Central American operations to assist the project start up and training.

Simon Rollason, Managing Director of Obtala, commented, "This joint venture will allow us to significantly increase our land holding and provides a strong foundation to work with our partners in establishing a significant mixed fruit plantation in Tanzania. The existing infrastructure, water availability and close proximity to the export facilities at Dar es Salaam makes this an exciting opportunity. The land is close to our existing operation thus creating synergies in terms of manpower and expertise. The funding of the seed stock and provision of highly trained plantation experts by our fruit trading partner provides significant cost savings at the start of this new enterprise."

 
 Obtala Resources 
  Francesco Scolaro - Chairman 
  Simon Rollason - Managing Director 
  www.obtalaresources.com                 [phone] 
 ZAI Corporate Finance Limited (Nomad) 
  Ray Zimmerman 
  Richard Morrison                        [phone] 
 Brandon Hill Capital (Broker) 
  Jonathan Evans                          [phone] 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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November 25, 2015 02:01 ET (07:01 GMT)