REG - Obtala Resources Ltd - New Forestry Joint Venture Agreements and Update <Origin Href="QuoteRef">OBT.L</Origin>

WoodboisAnnouncement

12/03/2015 07:01

RNS Number : 2238H
Obtala Resources Limited
12 March 2015
12 March 2015
Obtala Resources Limited
("Obtala" or the "Company")
New Forestry Joint Venture Agreements
and
Update
Obtala Resources Limited (AIM:OBT), the vertically integrated agri-processing, farming, timber and retail company, is pleased to announce that it has identified an experienced partner to work with to increase production on the concessions held in Mozambique and, with the same partner, agreed Heads of Terms for entry into the South American timber market.
On the 16 December, Obtala announced that it was seeking partners to enable a significant increase in its timber production and an expansion of the related marketing of its timber products. The Company can now confirm that Kishugu International Holdings Ltd ("the Operator") will become that partner to the Obtala projects in Mozambique.
The operator is a highly experienced and integrated forest fire management and timberland management business, which has substantial timber-related income with producing operations in South Africa and Chile (US$60 million for the year ending March 2014), where it manages millions of hectares of wildlands and forest plantations. They have other income producing operations in Mozambique and Australia, and are developing new opportunities in Brazil, Argentina, Uruguay, Tanzania, Angola, Indonesia and Malaysia.
The Company has also entered into a Heads of Terms Agreement with the Operator to form a Joint Venture for an impending timber-related project in Brazil. Obtala has agreed to become a 50% partner in the vehicle for a new Brazilian forest management project which is expectedto be awarded to the successful operator in Q3 2015. The contract is for an initial 5 year term with forecast revenues of US$3 million per annum. It entails various elements of forest and land management over an area of more than 200,000 hectares situated in southern Brazil. The Operator is currently in the final stages of negotiating additional contracts in Brazil to significantly increase its footprint in the region.
Subject to the Operator being awarded the contract, Obtala will invest US$500,000 into this new project for its 50% shareholding. The new joint venture allows the Company to increase its exposure in the global timber markets and de-risks the business from being a single country producer. This partnership has many synergies for both companies through knowledge, land access, technical expertise and in-country forest management.
Commenting on the announcement, Francesco Scolaro, Chairman of Obtala, said:
"These exciting joint ventures give Obtala exposure to a new growth opportunity in the South American timber market and brings in a strong partner, with tremendous timber experience, to assist expansion of our Mozambican projects. Kishugu has a track record of winning long term contracts with stable government entities and private land users globally.
"This partnership will also benefit us by providing exposure to other international timber markets and will add impetus to grow the timber business more quickly. We look forward to working with Kishugu to tap into and realise the earnings potential and value of our forestry assets. We are a company exhibiting revenue growth in areas that are considered countercyclical. Along with strong cash generation we have an extensive portfolio of assets that we expect will hold their underlying value and further appreciate with higher levels of production and sales."
Obtala Resources
Francesco Scolaro - Chairman
Simon Rollason - Managing Director
www.obtalaresources.com
+44 (0) 20 7099 1940
ZAI Corporate Finance Limited (Nomad)
Ray Zimmerman
Richard Morrison
+44 (0)20 7060 2220
Brandon Hill Capital (Broker)
Jonathan Evans
+44 (0)20 3463 5000
Square 1 Consulting (Public Relations)
David Bick
Mark Longson
+44 (0)20 7929 5599

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