Operational Update

RNS Number : 3242V

Obtala Resources Limited

12 December 2013

Obtala Resources Limited

("Obtala" or the "Company")

(AIM: OBT)

Operational Update

Obtala Resources Limited (AIM:OBT), the natural resource investment and development company, is pleased to provide an operational update on activities in Tanzania.

Highlights:

· Tomato harvest yields 90 tonnes fresh produce per hectare from Phase 1 anticipated to generate revenue in excess of $500,000 per month

· Predicted monthly production of dried product c. 150 tonnes across Phase 1 of Morogoro Tomato Farm, 50% higher than originally anticipated

· First export shipment before year end of 20 tonnes of dried product

· Fully funded and cash generative to complete Phase 2 by Q2 2014 and Phase 3 by Q3 2014, taking gross revenue to in excess of $1 million per month

Agriculture Update

Since the last update in July 2013 four water boreholes have been completed, with a fifth well starting shortly. The water from the wells feeds into a 5,400m³ reservoir which in turn supplies the drip irrigation system installed over Phase 1 which covers 96 hectares. A second 6,500m³ water catchment dam has also been developed. Mainline power has been connected to the processing house and additional power lines have been strung to service the boreholes, manager's camp, workers accommodation and workshop area. A back up 465KVa generator has been purchased and expected on site within the next week to maintain constant power in the event that any shut downs on the main line are experienced. The wash plant imported from South Africa and main drying unit have been installed and commissioned.

Planting Programme Phase 1

Tomato plant seeds are planted and germinated within 4 nursery tunnels with mist irrigation applied daily and fertilizer twice during a 3 week period. After 3 weeks the seedlings are moved to a hardening off area for a week to 10 days where no water is applied. This allows the plantlet to advance its root development prior to moving to the open field. The plantlets are then manually transplanted onto the open field where imported surface drip line irrigation has been installed. On average 24,000 plantlets are distributed within each hectare with current yields of fruit being in the order of 60 per plant.

The development of the sun-dried tomato farm in Morogoro, Tanzania has progressed into a substantially better project than originally anticipated, with the first harvesting (Plot 1) covering 4 hectares, estimated to yield 90 tonnes of wet product per hectare (360 tonnes per 4 hectare plot). A total of 6 plots, comprising 4 hectares each has been planted in the irrigated fields, with a further 4 plots hardening in nursery tunnels ready to transfer. The farm will continue to plant 4 hectare plots of tomatoes weekly on a total area of 96 hectares under Phase 1.

At any given time during operation, 32 hectares of tomatoes will be under cultivation. As weekly harvesting is effected through Phase 1, the process of crop rotation will commence, with the free irrigated plots being re-planted with rotation crops of a different species to satisfy demand under our off-take agreement. This process of crop rotation alleviates and reduces the incidence of plant disease and pestilence.

As the crop is harvested it is fed into the on-farm conveyor driven drying oven implanting variable speed drives which will reduce energy consumption by approximately 35%. The oven is a bespoke unit developed in-house, with initial capacity of 45 tonnes per day of fresh tomato, which dries the washed, split tomatoes. The moisture content of the final product reduces by 90% thereby producing 10 tonnes of dried product for every 100 tonnes of wet and after final sorting and selection is vacuum packed and stored on site in refrigerated containers prior to transporting to the port and exporting. The Company will export its first container to our offtake company before the year end (20 tonnes of dried tomatoes) increasing weekly output thereafter from Phase 1. This production is expected to generate a gross revenue of in excess of $500,000 per month.

Planting Programme Phase 2

Ground preparation and clearing has been completed over an area of a further 100 hectares with planting of Phase 2 peppers - a variety of the species called Capsicum Annum commencing in Q1 2014 under the same model as Phase 1. Predicted yields from the crop are in the order of 40 tonnes per hectare and can be exported as a vacuum pack wet product into the European market place where demand is very high. It is anticipated that production harvest will commence in Q2 2014 which will increase production from our farm in Tanzania.

The Company's farm management team have been undergoing training from a Kenyan based consultancy to ensure that the project is GLOBAL G.A.P. compliant and achieves certification. GLOBAL G.A.P. is the internationally recognized standard for farm production and is the most widely accepted private sector food safety certification in the world and important for the export market. The on-site team has been strengthened with the recruitment of an irrigation manager and processing manager, who has cannery experience.

Dried Fruit

The Company is in final negotiations with the landowner as per the announcement on 14^th October 2013. In the interim the Landowner and the Company have submitted fresh mango samples to the local university for test work the results of which show mangoes producing a 13.5% recoverable dried product. Local retail prices for dried mango are USD15-20 per kilogram. In the initial years, expected yields are 5-7 tonnes per hectare of fresh fruit rising to +15 tonnes per hectare as the trees mature, after year 3. An order has been placed with a local supplier for 20,000 grafted mango saplings which will be planted out over an area of approximately 70 hectares in Q1 2014, and a further 30,000 saplings during the course of 2014.

Chairman's comment

Francesco Scolaro, Chairman of Obtala, commented: "Our agriculture farms in Tanzania are now moving toward an attractive level of production which are cash generative to the Company. I believe we have a growth strategy in developing and expanding production on a weekly basis through to Phase 2 and 3 production levels in 2014. This will enable us to continue on our growth path supporting investment in our cannery project in Lesotho further increasing revenue streams to the Company, with a target to complete our goal of 4 phases in production by 2014/15 and working to higher attractive margins."

Obtala Resources Francesco Scolaro - Chairman Simon Rollason - Managing Director www.obtalaresources.com	+44 (0) 20 7099 1940

Macquarie Capital (Europe) Limited (Nomad and Broker)
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Steve Baldwin