Re Agreement

RNS Number : 4287U

Obtala Resources Limited

02 December 2013

 

02 December 2013

Obtala Resources Limited

("Obtala" or the "Company")

(AIM: OBT)

Fruit and Vegetable Cannery Update, Lesotho

Obtala Resources Limited (AIM:OBT), the natural resource investment and development company, is pleased to announce that formal agreements with the Lesotho National Development Corporation ("LNDC") were concluded on Friday 29 November at an official signing ceremony held in Maseru, Lesotho with members of government and local media present.

As announced on 19 September 2013, Obtala had previously been identified by the LNDC as its partner to manage and operate the only existing cannery within the Lesotho Kingdom. A new holding company is being registered in Lesotho with Obtala holding a 70% interest, the LNDC holding 20% and the Lesotho Defence Force ("LDF") holding the remaining 10%. Funding of the new management and operating company will be in proportion to the respective percentage shareholdings, in accordance with agreed budgets and working programmes. The contract is for an initial 15 year term renewable thereafter for a further 10 years.

Formal operational control over the cannery begins on 1 April 2014. Work will however begin immediately on the ground to develop a "home" farm which will provide consistent supply to the cannery. Historically the cannery has suffered from underperformance due to a lack of constant supply and the intention of the project with LNDC is to address the supply issue through a combination of own-farm production and working in partnership with local farmer associations. The LNDC has provided a parcel of land covering c. 17 hectares, located some 6km from the cannery premises, and it is expected that a groundwater study will be completed before the 2013 year end. This area is considered sufficient to develop a horticultural enterprise sufficient to supply 100 tonnes of product per week.  Additional land opportunities are being appraised. Discussions have taken place with representatives of farmers' associations and the Company is looking to work closely with a recent government initiative to provide local farmers with small scale greenhouses and input start-up kits which is being funded by the World Trade Organisation.

The "home" farm will target high margin high yielding crops, such as plum and cherry tomatoes, chillies, peppers and mushrooms, providing guaranteed raw material supply to maximise production and thus optimising revenues. Planning is in progress to source and construct heated greenhouses that will allow crop production to continue during the winter period ensuring the cannery runs for 12 months a year. Once the cannery achieves its optimum production capacity of c. 100 tonnes per week, the Company will benefit from the downstream revenue of selling branded value added products in either cans or glass containers.

There will be no transfer of assets from the Cannery or LNDC, as previously disclosed, to the new company as this is a government asset, and therefore it cannot be transferred from the government into a private company.

Commenting on today's announcement, Francesco Scolaro, Chairman of Obtala, said: "I am very pleased to announce the signing of this agreement with LNDC and we look forward to working with an active partner who has the shared goal of developing the agro-processing sector within Lesotho. The cannery presents an excellent opportunity for the Company to significantly increase its monthly production output, supplementing the tomato farm project in Tanzania; where we will be reporting on progress shortly.

The Lesotho project will have a significant positive impact upon the social and economic conditions of the rural and farming community with the project providing an incentive for farmers' associations to produce more inputs to boost commercial agricultural production. Importantly this venture takes us another step towards to our goal of creating a fully vertically integrated business, allowing the Company to enter into the branded goods market, significantly increasing our production levels and revenue projections."

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.

 

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