Obtala Resources Limited Timber Strategy Update (0382Q)

TIDMOBT

RNS Number : 0382Q

Obtala Resources Limited

15 June 2015

15 June 2015

Obtala Resources Limited

("Obtala" or the "Company")

(AIM: OBT)

Timber Strategy Update

Obtala Resources Limited (AIM:OBT), the vertically integrated agribusiness, timber and retail company, is pleased to provide the following update on its timber operations:

Key Points

   --     Timber acreage in Mozambique to be increased by 13% 
   --     New forestry asset valuation commissioned 
   --     Board agrees strategy for realising value of forestry assets 

Two new timber concessions to be acquired

The Company is, subject to Government approval, completing the acquisition of 50 year leases for two new timber concessions totaling 35,000 hectares in Mozambique to bring the total forestry area to 314,965 hectares. This provides for a 13% increase in its current land holdings. The new blocks are situated adjacent to our main operational centre and, together with the existing holdings, provide a critical mass in terms of approved annual permitted cut. The Company has commissioned Honour Capital, a specialist forestry advisory and management Company, to undertake a valuation review of the new blocks. Honour Capital prepared a valuation report in June 2014 which attributed a NPV to the timber business of US$161 million at a 12% discount based on a 10 year cash flow model.

Plant investment

The Company intends to make a cash injection of $300,000 for additional capital equipment to increase the operational productivity and improve on-site capability to produce value-added end products; such as traditional decking, decking tiles, window and door frames. The supply of these products will provide additional value uplift to the revenues generated from the concessions and will provide for additional employment and training for the local population.

Operations

The Company resumed field operations at the start of the logging season in April and is supplying processed timber to Mozambican based construction companies for the rapidly expanding housing market throughout Mozambique which is forecast to grow over the next few years. Due to strong local demand for timber, the Company is not planning on exporting timber this year. Mozambique's GDP is forecast to grow on an annual basis at 7.5% between 2015-19 (Source: Economist 2015) with demand for timber products and timber sales prices increasing. Negotiations continue with respect to the potential participation of the timber opportunity in Brazil and contract logging in Mozambique.

Commenting on today's announcement, Francesco Scolaro, Chairman of Obtala, said:

"We are dedicated to making the timber operations a great success in Mozambique where we have built a highly efficient operational platform over the past few years. The additional land holdings provide security that we can achieve higher production levels. In tandem, we are making a capital injection to increase and improve our operational capacity and offer a wider range of timber products to the growing local market.

"The Board of Obtala has also agreed a strategy to divest the forestry division thereby recognizing its true value and to grow the business in Mozambique more expeditiously. We will provide further updates to shareholders in due course."

 
 Obtala Resources 
  Francesco Scolaro - Chairman 
  Simon Rollason - Managing 
  Director 
 
  www.obtalaresources.com         [phone] 
 
 ZAI Corporate Finance Limited 
  (Nomad)                         [phone] 
 Richard Morrison 
  Irina Lomova 
 
 Brandon Hill Capital (Broker)    [phone] 
 Jonathan Evans 
 
 Square 1 Consulting (Public 
  Relations)                      [phone] 
 David Bick 
  Mark Longson 
 

Notes:

Information on Honour Capital

Honour Capital is an independent consultancy that specialises in providing a comprehensive forestry investment and management services, and regulated and authorised to conduct investment appraisals and analysis of forestry by the Royal Institution of Chartered Surveyors (RICS).

This information is provided by RNS

The company news service from the London Stock Exchange

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