Operational Update

RNS Number : 4560A

Obtala Resources Limited

20 February 2014

 

20 February 2014

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 a group operational update.

Highlights:

·     Washing plant and drying unit on the Morogoro tomato farm in Tanzania operational with 60 hectares now under drip irrigation (phase 2 completed)

·     Development and production on the Morogoro tomato farm continues to progress well with sale invoices to date for US$226,250

·     Timber supply contract awarded by Vale to Obtala in Mozambique for US$650,000

·     Morogoro tomato farm phase 3 - 30 hectares to be developed in Q2 2014

·     20,000 mango tree saplings being planted

·     Successful drying trials conducted on bananas, pineapples and mangoes for an increase product range

·     100 hectares of cassava planted in southern Tanzania

·     Launch of branded range of glass bottled tomato ketchup, chilli and spicy sauces

·     Establishing an out-grower scheme in Lesotho with local farmers producing crops for cannery feed stock

Agriculture Update

Development and production on the Morogoro tomato farm in Tanzania continues to progress well with the washing plant and drying unit now operational. Additional facilities such as a dedicated 400m³ cold storage and packing facility, staff ablution and change house will be completed by this month end. On-site offices have been completed and the main processing house is being extended to provide additional operating space to cater for additional dried fruit lines. Sales proceeds and purchase orders received from product resulting from drying trials and start-upon, together with fresh product sales prior to plant commissioning, total US$226,250 in January 2014.

On the farm, six water boreholes have been drilled with a scheduled two further wells in progress. The additional water supply will allow the farm to advance the growth strategy. which includes the development of a fruit tree orchard and the planting of chilli and peppers. The main irrigation pipe work for the second phase of 30 hectares has been installed with tomato planting on this block underway. This development allows for 60 hectares of surface irrigated land with the third 30 hectare phase scheduled for development in Q2 2014. The Company currently employs over 200 workers in Tanzania and 100 in Mozambique.

In December 2013, 20,000 grafted dwarf mango tree saplings where purchased and are in the process of being planted on the farm. Test work indicates 14% of the fruit is recoverable as a dried product with initial yields of 5-7 tonnes per hectare expected in years 2-4, rising to +15 tonnes thereafter. The productive lifespan of the tree is in the order of 30-35 years. In the interim, the Company is buying fruit from local farmers.

Chilli and pepper seeds have arrived on site with a plot of land identified to begin initial planting. Predicted yields from the crop are in the order of 40 tonnes per hectare and can be exported as a vacuum packed wet or as a dried product into the European market place where demand is high.

During January, successful drying trials were conducted on bananas, pineapples and mangoes. A high quality product was obtained for all fruits trialled and samples have been sent to Europe. Although mangoes and pineapples are seasonal in Tanzania, bananas are produced on a year-round basis, providing an excellent opportunity to increase the product range and achieve high values with high margins. An agreement is in place with a local commercial banana and pineapple farm to provide raw material for the drying process.   

The Global.GAP certification process is on-going. The final audit inspection is expected to take place before end of Q1 2014, which would then complete the application process.

On the Songea project in Tanzania, the Company has planted over 100 hectares of cassava as an alternative to groundnuts. The sale of last season's peanuts into the local market has covered all farm costs for this season. Cassava is a low cost, low maintenance crop that readily grows in the region, allowing the Company to continue its focus on building the year round horticultural business in Morogoro, whilst continuing to generate revenues in Songea. The cassava market is rapidly growing from a subsistence based crop to a commercial cash crop in Africa, with demand being driven by international food and beverage companies for bread and beer production. The opportunity also exists to produce a dried product for export to Europe.   

Branded Goods Entry

The Company is pleased to announce that it is launching its own branded range of glass bottled tomato ketchup, chilli and spicy sauces with a view to targeting the Northern Europe and Northern America catering market in mid-March 2014. Sauces will be distributed under our new "Mama Jo's" brand name. Manufacture of the sauces and bottling is being processed under a private label arrangement with an established, non-related organisation, allowing the Company to facilitate rapid entry into the branded goods market and increase the product range. The Company is actively recruiting a sales/marketing team to help develop a custom-based solution in northern Europe and within the local region.

Lesotho Cannery

Preparations are underway to establish an out-grower scheme with local farmers producing crops that can be fed into the cannery once the Company assumes management and operational control this April. Local farmers have 20 hectares of land for immediate cropping to support the 17 hectares that the Company has under its control. Additionally the Ministry of Trade, Industry, Cooperatives and Marketing in Lesotho has initiated a small holder greenhouse scheme funded by the World Bank, where they are issuing up to 150 8 x 24-metre greenhouse tents, fertiliser, seed, irrigation systems and protective clothing. Discussions have been held with the project coordinator with a view to involving the greenhouse participants in our out-grower scheme.

The initial programme is to provide seeds and inputs to the local farmers, supported by training of extension offices to grow plum tomatoes which can be canned for export and sold into the local regional market under the recently created "Mama Jo's" brand. At present the cannery is starting to process canned peaches for which the organic certificate has been issued.

Forestry Update

The company has received an order with a value of US$650,000, with Vale; the Brazilian mining conglomerate, who is investing more than US$1.2-billion in the rehabilitation of existing, and construction of new, railway lines through Malawi and Mozambique to link Moatize coal mines to the Port of Nacala-a-Velha. It is anticipated that this order will be delivered within the next few months and negotiations are underway for further supply contracts as the Company continues to align itself with the national development plans in Mozambique.

Paragon Diamonds

Paragon continues to provide steady positive news flow on progress being made on its projects. The Government of Lesotho awarded the mining licence for the Lemphane project in November 2013 with final negotiations regarding Government participation and royalty on-going at this time. A Memorandum of Understanding ("MoU") to acquire a 75 tonne-per-hour processing plant to significantly increase the production capacity at the Lemphane Kimberlite has been signed, and Paragon expects to produce some 800-1,000 carats per month during Stage I production.  Based on preliminary size frequency distributions, the recovery of up to 2,000 carats of "special" stones (i.e. 9.8+ carats) is anticipated, including diamonds of up to 100 carats in size.

An independent audit of the bulk sampling program completed in December 2013 reporting grades of up to 4.5 cpht and the main "southern" domain (comprising 65% of the pipe at surface) reporting an average grade of approximately 2.2 cpht. The results confirm the potential for Lemphane to contain large valuable diamonds and further demonstrate that processing of larger volumes of kimberlite will improve proportionally the recovery of additional larger diamonds.

Chairman's comment

Grahame Vetch, Director of Agriculture, commented: "The Morogoro project has progressed very well since the initial land clearing started in May last year. In only 9 months, we have taken an undeveloped parcel of land and turned it into a fully functioning horticultural business. Over 100ha have been cleared and we have fully operational surface drip irrigation covering 60 hectares with phase 3 expected to commence in Q2 2014. The tomato crop performs well with a high quality product. The recent developments of additional fruit product lines provide a great opportunity to establish ourselves as a top dried fruit producer in Tanzania."

Francesco Scolaro, Chairman of the Board, commented: "I am very pleased to provide this update to our shareholders. It is very clear that our objective to build a vertically integrated agricultural company is well on track and the entry into the branded sauce market represents an extremely exciting opportunity for additional near term revenues in addition to building up a diverse product range which compliments farm development projects. With the development of the Morogoro farm nearing completion, the initiation of activities in Lesotho marks the next step in further building up near term revenue streams, which will undoubtedly provide benefits and rewards to both our shareholders and the communities in which we operate. "

Please see our website for updated photographs.

Obtala Resources Francesco Scolaro - Chairman Simon Rollason - Managing Director www.obtalaresources.com	[phone]
Macquarie Capital (Europe) Limited (Nomad and Broker)
Nicholas Harland	[phone]
Steve Baldwin

 

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