DECA

US$50 Million Sale of 20% interest in South Omo

RNS Number : 7729N
Agriterra Ltd
03 October 2012
 

Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector: Agriculture

3 October 2012

Agriterra Ltd ('Agriterra' or 'the Group')

Sale of 20% interest in South Omo Block for up to US$50m and

Summary of Agricultural Operations and Other Legacy Interests

 

Agriterra Ltd, the AIM listed pan African agricultural company, is pleased to announce that it has entered into an agreement with Marathon Ethiopia Limited BV, a subsidiary of Marathon Oil Corp ('Marathon'), for the sale of its 20% legacy interest in the South Omo Block ('South Omo') in Ethiopia, for a cash consideration of US$40m on completion and a further US$10m on Marathon's participation in a "Commercial Discovery" (the 'Agreement').

 

Completion of the Agreement is conditional on the consent of the Ethiopian Ministry of Mines as well as the waiver of pre-emption rights by Tullow Oil plc and Africa Oil Corp. (which have now been given).

 

Agriterra will utilise the funds to implement its growth strategy of capitalising on the rapidly growing agricultural market in sub-Saharan Africa to become a leading food provider.  The Company already has four key divisions: cattle ranching; maize farming and milling in Mozambique; cocoa trading; and palm oil operations in Sierra Leone.  This multi-commodity focus gives Agriterra a strong commercial footprint as it looks to continue to enhance its financial performance and value accretion potential.

 

Agriterra CEO Andrew Groves said, "The sale of our legacy South Omo interest provides us with a dramatic cash injection.  As a result, the current market capitalisation of just over £50m does not fully reflect the considerable value of our growing agricultural businesses.

 

"The funds from this sale will enable us to realise our rapid expansion plans across all our agricultural businesses, effectively enabling the Company to become a significant pan-African food producer and processor.  In Mozambique, our ambitious growth objectives include expanding our current beef herd from 4,000 to 10,000 head by 2015, and building a vertically integrated beef operation through the continued development of a feedlot operation, 4,000 head per month capacity abattoir and butcher shops.  In Sierra Leone, we will focus on growing our cocoa trading operations, in addition to establishing cocoa plantations with the aim of becoming a significant regional producer for the growing international markets.  I look forward to providing further news on this front over the coming weeks and months.

 

"Finally, as shareholders will be aware, we are also awaiting the payment of £11m relating to our remaining legacy oil asset in South Sudan."

 

Agricultural Interests

 

In Mozambique, Agriterra is focussed on the expansion of its "field to fork" vertically integrated cattle division, a high margin business underpinned by significant domestic and export demand for quality beef.  The Company's primary objective is the growth of its beef herd which is currently in excess of 4,000 head across the Company's two ranches, covering 16,000 hectares.  In particular, the Company is focussed on rapidly expanding its breeding herd at the Mavonde Stud Ranch, through the purchase of high quality breeding stock from both local sources and through import from South Africa.  The aim of this buying programme is to improve the quality of the offspring and create a bloodline with good meat yields and high resistance to disease compared to native animals.  In line with Agriterra's development objectives for its breeding herd, the Company is expanding its irrigated pasture capacity at Mavonde to approximately 600 hectares, enabling a high head-to-hectare ratio.  The Company remains active in seeking to acquire additional land.

 

The Company is also focussed on the expansion of the Company's Vanduzi feedlot project where slaughter dress out weight percentages range between 53% and 55% with prices in excess of US$1,000 per carcass.  The construction of the abattoir in Chimoio, with an ultimate capacity of 4,000 head per month, will service both the Company's slaughter needs and the region as a whole.  In addition, the opening of retail butcher shops initially in Chimoio and Tete will be a key facet of the Company's growth strategy to maximise exposure to the entire value chain through a fully integrated meat division.

 

The Company plans to expand its grain buying and milling operations and diversify its product range.  In this regard the Company plans to commence production of animal feed, building on its current product range of mealie meal, an African staple, and the bran by-product which is used in part at the Company's Vanduzi feedlot.  Planning of the animal feed plant, including feed line and shed, will commence immediately.  

 

Agriterra is also aggressively expanding activities in Sierra Leone, building its cocoa buying and trading operations, acquiring additional land and establishing a plantation business.  The board recognises significant potential in the cocoa market and has assembled a team capable of delivering on its strategy of becoming a significant regional producer for the growing international markets.  A principal objective for the Company is to establish an "end to end" logistics solution, and with this in mind, the development of a 2,000m2 processing and management facility in Kenema is underway.  This is part of its strategy to become a leading buyer, trader and producer of high quality, sustainable and traceable cocoa in Sierra Leone.  In order to further the Company's ambitions to become a cocoa producer, additional investment will be made in plantation acquisition and development.

 

The board has also identified palm oil, the most important and widely produced edible oil in the world, as an attractive complementary commodity for the Agriterra group.  The group has acquired 45,000 hectares of prime land in Sierra Leone which is suitable for palm oil production. The Company intends to initiate development of this plantation in order to capitalise on the growing global demand for palm oil.

 

Legacy Interest

 

As announced previously, Agriterra continues to await payment of £11m, being partial recompense for work already undertaken and the substantial investment made by the Company on the Block Ba oil concession area in South Sudan, during its previous incarnation as White Nile Limited.

 

**ENDS**

For further information please visit www.agriterra-ltd.com or contact:

Andrew Groves

Agriterra Ltd

Tel: +44 (0) 20 7408 9200

Jonathan Wright

Seymour Pierce Ltd

Tel: +44 (0) 20 7107 8000

David Foreman

Seymour Pierce Ltd

Tel: +44 (0) 20 7107 8000

Andy Cuthill

MC Peat & Co LLP

Tel: +44 (0) 20 7104 2332

Susie Geliher

St Brides Media & Finance Ltd

Tel: +44 (0) 20 7236 1177

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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