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Agriterra (LSE:AGTA) is a Mozambique based multi-commodity focussed agricultural business. It owns cattle, ranches, abattoirs and plans to open local butchers, alongside Maize milling, again in Mozambique, and Cocoa & palm oil operations in Sierra Leone. Like the Chairman, Phil Edmonds, these aren’t the only feathers in Agriterra’s cap – they also have a meaty 20% holding in the 30,000 sq km Ethiopian South Omo block, which is being fast tracked to spud, by Tullow (LSE:TLW), due to its on-trend relationship with recent finds in Kenya’s Lake Turkana region, and has just netted the Company 540mmbbl’s of prospective resources after Africa Oil’s (TSX:AOI) competent persons report this morning.
Sitting at the helm of Agriterra (LSE:AGTA) is Phil Edmonds, a Northern Rhodesian, Lusakan born, English test cricket player, who has been somewhat mired in controversy. Firstly, when India were playing for a draw in the 80’s, he proceeded to open and read a copy of the Daily Telegraph whilst fielding at square leg, secondly in 2005, after stumping Total’s advances for a concession in South Sudan by, to put it bluntly, not playing cricket with the Sudan People’s Liberation Movement. Apart from this he seems to be a man with his eye on the ball – an all rounder.
Agriterra (LSE:AGTA) has four main divisions and is a thematic play on rising meat consumption and increasingly volatile & tight food supplies.
Beef: The Company has 4,000 head of cattle and is on target to reach its 2015 goal of 10,000. They are importing beefmasters (a hardy cross of Brahman, Herefords & Shorthorns) from South Africa, alongside buying up local cattle to augment their cross breeding program. At present they have two main properties – the 1,350 ha Mavonde stud ranch and 48 billion litre dam providing ample irrigation for the property, and secondly, the 15,000 ha Dombe Ranch. With their policy of ‘field to fork’, they have a downstream abattoir facility of 4,000 head per month, to be supplemented by native cattle, alongside a 2,000 capacity feedlot where synergies, with their nearby maize facility, mean there is plentiful, low cost feedstuff.
Maize: The Company owns two facilities where the Company has bought and milled over 28,000 tonnes in 2011. Agriterra (LSE:AGTA) buys the produce from over 350,000 local producers and which is then sold back to the local market.
Cocoa: Agriterra recently bought Tropical Farms limited, currently a Sierra Leone based buying and trading operation, and is assessing the potential to move upstream in to Cocoa production.
Palm Oil: The Company owns a lease of 45,000 ha of brown field agricultural land in the rainfall rich Pujehun District of Sierra Leone.
Last year the Company pulled in revenues of $13.5m from the Maize operations alone and only using 60-70% of its capacity. With the opening of the abattoir this year and a relatively firm pricing environment, the other revenue streams coming online, there should be an increase in the top and bottom lines as the Company moves up to its full potential.
So what about the Oil? The legacy investment, from when the Company was White Nile Petroleum, means a 20% holding in the 30,000 sq km Ethiopian South Omo block. This is shared between Africa Oil and Tullow at 30% and 50% respectively.
The story rides on the back of Tullow’s (LSE:TLW) superior appraisal work with a 2010 CoS of 83%, 2011 CoS of 74%, and 2012 Cos of 77% so far. After opening up the Ugandan Basin, and contingent resources of 900mmbbl in 2006, Tullow farmed down its interest to 33% with CNOOC taking the helm and an $5bn dollar investment plan. They followed this up with a discovery earlier this year at the Kenyan Ngamia-1 well in block 10BB, just on the western northern tip of Lake Turkana and the border with Ethiopia.
This is on trend with the South Omo block, where there is a drill planned for Q4, and two for 2013. Africa Oil (TSX:AOI) released their CPR report today which estimated the gross prospective resources at 2,700 mmbbl, or net to Agriterra of 540mmbbl.
With a market cap of £45m, the Company looks to be fully reliant on the growth prospects of its core businesses, but underlying that, the kicker of the Ethiopian oil could be significant. But TIA, therefore the revival of Rhinderpest (highly unlikely) or a bout of East Coast fever, and more importantly political instability especially after the death of the Ethiopian Prime Minister yesterday, adds risks to the downside. Buy and a Punt.
Very good article, and up 10% since the article was written!
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