TIDMOBT
RNS Number : 2967C
Obtala Resources Limited
15 October 2015
15 October 2015
Obtala Resources Limited
("Obtala", the "Group" or the "Company")
(AIM: OBT)
Proposed listing of the forestry division
Obtala Resources Limited (AIM:OBT), the vertically integrated
agribusiness, timber and retail company, is pleased to provide the
following update with respect to its timber assets in
Mozambique.
The Board of Obtala has commenced a process to list the forestry
division in a separately quoted company to be listed on the AIM
market during the first quarter of 2016. The Board has reviewed a
number of opportunities for the forestry division and believe it is
in the best interest of Obtala shareholders to "spin out" the
forestry division in order for the significant inherent value to be
recognised and to attract investors focused on the forestry
sector.
The Company has commissioned Honour Capital, a specialist
forestry advisory and management Company, to undertake a valuation
review of the new blocks. Honour Capital prepared a valuation
report in June 2014 which attributed a NPV to the timber business
of US$161 million at a 12% discount based on a 10 year cash flow
model. The 2014 valuation was based on 11 concessions with a total
land area of 279,965 hectares.
The Company is, subject to local Government approval, completing
the acquisition of 50 year leases for two new timber concessions
totaling 35,000 hectares in Mozambique to bring the total forestry
area to 314,965 hectares. The new blocks are situated adjacent to
our main operational centre and, together with the existing
holdings, provide a critical mass in terms of approved annual
permitted cut.
Timber Markets
Global demand for high quality timber is increasing whilst
supply is constrained as sustainable harvesting practices in the
world's major timber producing centres cannot meet the current or
predicted demand. The concessions owned by the Company give access
to a large and environmentally sustainable supply of over 20
different types of hard wood and are well placed to supply a wide
range of markets both domestically and internationally in addition
to those which we currently supply.
Business Plan
Investment through the re-structuring will allow for the
delivery of the following short-term objectives:
-- Continued investment in operational growth and efficiency to
achieve the 2014 valuation production levels.
-- Investment in drying facilities for higher quality, higher
margin timber.
-- Expansion of harvesting across all held forests in
Mozambique.
-- Enhance the management team.
-- Increase marketing.
-- Evaluate opportunities for development of other income from
plantation forestry.
Reasons for Listing on AIM
The Board believes the separately listed entity will
improve:
-- Visibility on the value of the division,
-- Improve ability to add specialist management to drive the business plan,
-- Raise awareness of the assets within the forestry sector and capital markets, and
-- Ability to raise funds from highly specialist investors that
may want to invest in forestry only.
The Board is now working with its advisers to complete the AIM
listing process and capital raise with the intention to list the
new company in Q1 2016. The Board is reviewing the proposal of
distributing shares in specie at an amount/ratio to be finalised at
the time of listing.
Board of Directors
The Company is currently interviewing potential candidates who
will add value through dedicated expertise.
Reorganisation of the Group
The timber portfolio has steadily grown over the past few years
with selective concession acquisition to provide a critical mass of
harvestable timber on an annual basis. The quality of timber
concessions which have been independently audited and indicate
standing stocks which can supply high quality hardwood timber for
many years to come with concessions granted for an initial 50 year
period, renewable thereafter.
The main strategy will be to achieve the production goals as
outlined in the 2014 valuation report. To achieve this additional
equipment and personnel are required. The current operation
consists of a main field camp using a labour based, motor-manual
harvesting and extraction system which feeds a series of small
scale mobile sawmills. Various satellite camps are set up as the
harvesting teams move around the concession, these camps contain
the mobile sawmills. The field camp is supported by an
administrative office and sales depot in Nampula.
The 2014 valuation was derived by considering 10 year
operational costs ($72million), production levels, CAPEX
requirements ($15million) and sale values ($395million)
attributable to the company's operations across all its
concessions. The CAPEX requirement is scheduled over 10 years, with
year 1 capex estimated at US$300,000, subsequent expenditure is
expected to be paid out of sales revenues.
The Company has recently concentrated on supplying cut timber
into the local Mozambican market targeting the construction
industry. A number of discussions have been held with an
international timber company with a view to exporting timber out of
Africa. The opportunity to increase operational productivity and
improve the on-site capability to produce value-added end products
such as traditional decking, decking tiles, doors, window and door
frames exists and will form part of the forward looking strategy.
The supply of these products will provide additional value uplift
to the revenues generated from the concessions and will provide for
additional employment and training for the local population. To
increase sales the Company is seeking premises in Maputo to create
a retail/wholesale route to market for its products. The Company is
currently assessing the market for low to medium cost timber
housing which can service the needs of a number of sectors both
locally and internationally.
To increase production and grow sales as envisaged in the
independent valuation determined by Honour Capital in 2014, the
Group will need to:
1. Invest in additional capital machinery and internal company
development to grow existing operational capacity.
2. Establish two additional harvesting campaigns so that
harvesting can take place within all the concessions
simultaneously.
3. Develop good links to a range of local markets so that the
company can execute its production plan efficiently with such
measures as harvesting a range of timbers in one pass.
The company will establish its enlarged operational, management
and marketing systems based on sales into local markets before it
launches into servicing high specification markets, whether they
are export markets or not.
Kevin Milne, Executive Deputy Chairman of Obtala commented,
"Over the last 5 years we have successfully created one of the
largest sustainable natural forestry concession holders and
operators in Northern Mozambique. This has been a great achievement
and an extremely valuable asset has been developed. The Board has
reviewed how best to crystallise and maximise the inherent value of
this business for the Company and our shareholders. Placing these
assets in a newly formed and listed entity with its own board will
allow for the required focus on the execution of the growth plans,
the expansion and further development of its supply chain and
create a highly attractive and relevant opportunity for new
investors."
Obtala Resources
Kevin Milne - Executive Deputy Chairman
Simon Rollason - Managing Director
www.obtalaresources.com +44 (0)20 7099 1940
ZAI Corporate Finance Limited (Nomad)
Ray Zimmerman
Richard Morrison +44 (0)20 7060 2220
Brandon Hill Capital (Broker)
Jonathan Evans +44 (0)20 3463 5000
Square 1 Consulting (Public Relations)
David Bick
Mark Longson +44 (0)20 7929 5599
This information is provided by RNS
The company news service from the London Stock Exchange
END
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