Equatorial Palm Oil plc Operational Update (5181D)

TIDMPAL

RNS Number : 5181D

Equatorial Palm Oil plc

26 June 2019

26 June 2019

EQUATORIAL PALM OIL plc

("EPO" or the "Company")

Operational Update

Equatorial Palm Oil plc (AIM: PAL), the AIM listed palm oil development and production company with operations in Liberia, West Africa, wishes to provide an update with respect to operations on Palm Bay and Butaw estates and the construction of the Bulking Station and Export Facility.

Palm Bay Estate

Palm Bay estate currently has 6,470 ha planted of which 5,156 ha is mature enough to be harvested for the extraction of crude palm oil ("CPO") at the palm oil mill recently commissioned in Q3 2018.

Encouragingly, the FFB harvested in the last 3 months has increased from 2,000 metric tonnes ("MT") per month to in excess of 4,000 MT per month. This improvement is a result of the training that has been provided to the harvesters as they now become more experienced and the ease to harvest during the dry season. In the next few months there may be a slight decrease in production of FFB as the wet season is now with us.

The oil extraction rate has increased from 22% to 25%, which is highly encouraging and verifies the Company's choice of the correct breeding material of oil palm to be planted in Liberia.

Butaw Estate

To date, only 1,418 hectares ("ha") have been planted out of a total concession area of 8,011 ha at Butaw estate. As referred to in the Company's interim results released on 10 May 2019, a strategic review of the Butaw estate operations has been undertaken and a conclusion has now been reached to scale down our operations at Butaw.

Recent High Carbon Stock ("HCS") assessments and studies have shown Butaw estate to have insufficient plantable area, therefore making it neither economic nor sustainable to build a long-term oil palm business at Butaw. The international HCS guidelines were introduced several years after we started development operations in Liberia. The guidelines were primarily intended for South East Asia, where there is already a large, established Palm Oil industry making a significant economic contribution, creating huge employment and significantly improving living standards of the communities involved. With the same guidelines being applied to economically challenged countries such as Liberia, it is now, in practice, more difficult to establish sufficient scale to justify continued operations.

In addition, the current crop of fresh fruit bunches ("FFB") produced from Butaw estate are sold to a nearby mill at a loss given the low sales price and high production and transport costs. Furthermore, and after significant consideration, it would not be prudent at the current time to transport the FFB to our new palm oil mill at Palm Bay estate given the poor conditions of roads and bridges between the two estates.

As a consequence of the factors outlined above and following a considered strategic review, one of the main areas of cost reduction will be a reduction in the workforce at Butaw estate by approximately 70 per cent. (155 workers). The Company has always sought to retain its workforce as long as possible in Liberia, and had also hoped to be able to secure additional land suitable for planting at Butaw estate to enable continued employment of its staff. However, this has not been forthcoming and therefore the workforce requirement in respect of the Butaw estate is significantly diminished given it is not economic and/or sustainable to develop the estate in the current circumstances.

As a result of these changes management are assessing the nature of impairment at Butaw estate to be reflected in the full year results ended 30 September 2019.

Bulking Station and Export Facility

As referred to in the Company's interim results released on 10 May 2019, the 3,000 MT storage tank at the Company's export facility at the port of Buchanan has been completed and CPO from Palm Bay estate is now being transported via road tankers to this new facility for storage.

The Bulking Station and Export Facility is not due to be fully commissioned until Q4 2019 and the CPO stored in this new tank will then be exported to customers.

Geoffrey Brown, Executive Director of EPO, commented:

"We are disappointed that we have had to downsize our operations at Butaw estate and let go of so many workers in an area with no other economic activity or job prospects. This is primarily due to international guidelines being imposed that do not always balance considerations of HCS preservation with the socio/economic issues in very deprived areas and communities that are desperate for real and sustainable futures for their people. We are, however, encouraged by the progress made from the mature oil palms at Palm Bay estate. We look forward to the commissioning of the bulking station and export facility towards the end of calendar year 2019 where we will then be able to ship our products using parcel shipping tankers from the port of Buchanan."

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For further information, please visit www.epoil.co.uk or contact:

 
 Equatorial Palm Oil plc                        [phone] 
  Geoffrey Brown (Executive Director)            4874 
 
   Strand Hanson Limited (Nominated Adviser)    [phone] 
   James Harris / James Bellman                  3494 
 
   Mirabaud Securities Limited (Broker)         [phone] 
   Peter Krens                                   3510 
 
 

Notes to editors:

Equatorial Palm Oil plc is an AIM listed crude palm oil developer and producer with palm oil estates in Liberia, West Africa. The Company was founded in 2005 and is focused on becoming a global, sustainable producer of high quality palm oil to regional and international markets.

With a land position in Liberia through its operating subsidiary Liberian Palm Developments Limited ("LPD"), the Company is geographically well positioned to serve the international and regional markets and is committed to making a positive impact on the communities in which it operates through investment in local schools, health clinics, housing and infrastructure.

The Company's largest shareholder and 50:50 joint venture partner in LPD is KLK. KLK is one of the largest palm oil producers in the world and the Company will greatly benefit from their many years of expertise in oil palm development.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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June 26, 2019 07:00 ET (11:00 GMT)