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D1 Oils Plc (NEOS)

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Wednesday 02 March, 2011

D1 Oils Plc

Operational Update

RNS Number : 1429C
D1 Oils Plc
02 March 2011

D1 Oils plc ("D1")


Operational Update


Ahead of the anticipated release of D1's preliminary results for the year ended 31 December 2010, the Board is pleased to provide this operational update.


Sales of Crude Jatropha Oil ("CJO")


D1 has continued to experience demand for greater quantities of CJO than it is able to supply and has over the last 6 months sold all of its production, some 500 tonnes. These sales have been achieved at an average, ex works, selling price of approximately US$975 per tonne. This price is slightly lower than anticipated due to a change in mix between local and export sales and between spot purchases for trial work and repeat purchases from commercial customers (both local and multi-national). The spot price is continuing to firm and D1 now has a strong backlog of orders for ex tank sales in India at above $1,000 per tonne.


The Board attributes this demand primarily to the continued upward trend in global vegetable oil and mineral oil prices, for instance palm oil is currently $1,279 per tonne CIF North West Europe up from $793 per tonne 12 months prior (source: FAO and Oil World).


Sourcing of Jatropha grain


D1 continues to develop proprietary networks to source grain and market CJO principally in Central and North-West India (from both D1's farmers and established third party grain traders in those areas), North-East India (through its joint venture with Williamson-Magor ("D1-WM"), one of India's largest tea plantation groups), Zambia and Indonesia.


In Central and North-West India, late rains during November and December have caused the grain collection period to extend into March/April 2011.  Accordingly, the Board is not yet in a position to confirm final grain collection numbers for the season.  Despite this delay grain sourced from D1's farmers in these areas has already exceeded expectations in many districts and the Board remains pleased with the performance of these regions and expects further significant growth in collection volumes in the next harvest season.


However, North East India experienced the heaviest rainfall, and lowest levels of sunshine, in June and July for thirty years, which led to depressed flowering and in turn reduced weeding and other activity by our partner farmers.   As a result, yield in this region will fall significantly below expectations and consequently D1-WM will not be extracting oil in the North-East this season.


Overall, grain collection in the other regions of activity is on track.


On 24 November 2010, the Board of D1 stated an expectation that 2,000 tonnes of CJ0 would be forthcoming for the 2010/11 harvest season.  The Board believes that purchases from large third party traders (holding significant stocks of Jatropha grain in India) could be more than sufficient to make good this season's shortfall arising from the D1-WM Joint Venture.  However, D1 is maintaining a strict market discipline in the ongoing discussions with these third parties and is only prepared to purchase grain on which it can make a positive margin for its shareholders.  To date D1 has only purchased small quantities of grain from traders.


Accordingly, the Board estimates that D1 will now deliver approximately 1,200 tonnes of CJO this harvest season without material access to these trader stocks or up to 2,000 tonnes or more if grain can be purchased satisfactorily from third party traders.


The Directors are pleased to report that the variable cost of D1's CJO in India (net of biomass sales credits) is currently running at about US$700 per tonne as compared to roughly US$850 a year ago mainly due to achieving high seedcake prices and lower expelling costs which have helped offset the higher transport costs experienced.


The Board notes that, as previously reported, future investment in D1's high protein animal feed technology could further dramatically reduce this CJO cost. D1 intends to implement a small commercial version of this technology during the next 12 months.


Given the successful grain yields delivered in Central & North-West India, Zambia and Indonesia, the Board remains confident that D1 will have both the grain and the supply chain organisation to deliver a substantial increase in CJO during the 2011/12 harvest season and in future years.


Financial update


The Board is pleased to report that annual overhead cash burn has now been reduced to a current run rate of £3.0 million per annum, and that net cash balances at 25 February 2011 amounted to approximately £3.6 million.


Preliminary results


The Board anticipates that D1 will release its preliminary results for the year ended 31 December 2010 in May 2011.




For further information please contact:


D1 Oils Plc                       +44 (0) 20 7936 9104

Martin Jarvis 

Chief Executive Officer         


WH Ireland                      + 44 (0) 20 7220 0470

Chris Fielding


Brunswick Group        + 44 (0) 20 7404 5959

Kevin Byram                  

Rosheeka Amarasekara

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