Re Agreement

RNS Number : 2490O

Obtala Resources Limited

18 September 2013

 



18 September 2013

Obtala Resources Limited

("Obtala" or the "Company")

(AIM: OBT)

Fruit and Vegetable Cannery Partnership with

Lesotho National Development Corporation

Obtala Resources Limited (AIM:OBT), the natural resource investment and development company, is pleased to announce that it has signed a Heads of Agreement ("HoA") with the Lesotho National Development Corporation ("LNDC"), after being selected by the LNDC to enter into a partnership to manage and operate a fruit and vegetable cannery operation and supporting farm services within the Kingdom of Lesotho, which will be held in a new holding company. LNDC is a fully owned subsidiary of the Government of Lesotho.

Highlights:

·     LNDC has selected Obtala as its preferred partner to manage and operate a fruit and vegetable cannery and develop an associated farming enterprise

·     Selection made after LNDC completed a site visit to the Obtala farm operations in Tanzania

·     Obtala will hold a 70% equity interest in the new asset holding company

·     Transfer of asset by LNDC free of any encumbrances or debt

·     Cannery fully operational to maximise production

·     Operation will be supported by local farmers' associations

·     Presents an opportunity to enter the branded goods market

Obtala has been selected by the LNDC as its preferred partner to manage, operate and own the only existing cannery and related farm services within the Kingdom. A new holding company will be registered in Lesotho with Obtala holding a 70% interest and the LNDC holding 30%. No consideration is being paid. Formal agreements are expected to be concluded in October 2013 with completion of the transfer of assets by LNDC on 1 April 2014. Obtala and LNDC will fund the partnership in proportion to their percentage shareholdings, in accordance with agreed budgets and working programmes. The selection was made after a site visit to the Obtala agricultural operations in Tanzania by LNDC directors and management where the ability to rapidly develop a supply chain to the cannery was demonstrated and applauded.

At present the cannery produces 2.5 tonnes of final product per day on a single 8 hour shift and is severely under-utilized owing to restrictions within the supply chain. Obtala will address this issue by developing a "Home" farm, with access to land being facilitated by LNDC. This farm will target high margin crops, providing guaranteed supply to the cannery allowing operations to be maximised and later expanded, thus optimising revenues. This will be supported by the existing relationships with farmers' associations within the Kingdom that have served the cannery in the past, albeit with low volumes. Recently the LNDC entered into an agreement with the Lesotho Defence Force who will provide manpower and logistical support to local farmers' associations facilitating greater volumes delivered to the cannery.

Work will begin in October 2013 to identify suitable agricultural land and optimum crop selection based in local climatic and soil conditions. Logistics and additional requirements will be evaluated to establish a contract farming programme with local farmers' associations to ensure that sustainable, high quality products are produced. The cannery and its existing holding company are currently being re-structured by LNDC with upgrades being implemented to the cannery. Once this process is complete the assets of the cannery will be transferred into the new holding company on 1 April 2014, at the end of the LNDC financial year. Until that time revenues from any production will be considered assets and will also be transferred to the new holding company.

Joshua Setipa, Chief Executive Office of the Lesotho National Development Corporation commenting on today's announcement said  "As the Corporation actively diversifies its investments into various sectors such as agro-processing, the resuscitation of the cannery will not only meet this strategic objective but will also provide an incentive for Lesotho's farmers' associations to produce more inputs to boost agricultural production.  Our partnership with the Armed Forces will further enhance the efforts of the farmers' associations to ensure adequate and consistent supplies for processing at the Cannery enabling it to operate at maximum capacity levels at all times. We are very excited about this partnership with Obtala and their extensive experience in the Agro sector will provide a much needed boost to the Lesotho Agro sector  ."

Commenting on today's announcement, Simon Rollason, Managing Director of Obtala, said: "An optimised cannery working at full capacity, supported by a modern farming operation will have a significant positive impact upon the social and economic conditions of the rural and farming community and it is our intention that a sustainable, profitable enterprise is created that will provide a stepping stone to addressing immediate issues of unemployment. The Lesotho National Development Corporation selected Obtala after a number of discussions and a site visit to our operations in Tanzania. This opportunity takes us another step towards to our goal of creating a fully vertically integrated business and allows us to enter the market for branded goods and significantly increase our production levels with immediate effect."

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

Additional Information

The Lesotho National Development Corporation (LNDC) is the main parastatal body of the Government of Lesotho charged with the implementation of the country's industrial development policies. The mandate of the Corporation is to initiate, promote and facilitate the development of manufacturing and processing industries, mining and commerce in a manner calculated to raise the level of income and employment in Lesotho.  LNDC is wholly owned by the Government of Lesotho and falls under the Ministry of Trade and Industry, Cooperatives and Marketing which is responsible for providing overall policy direction on industrialization

The Corporation was established by an Act of Parliament known as Act No. 20 of 1967. It was amended as Order No. 13 of 1990 and again as Amendment Act No. 7 of 2000 which became effective on 25th October, 2000.

Link to Photos:

http://www.rns-pdf.londonstockexchange.com/rns/2490O_-2013-9-17.pdf

 

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