6th Jan 2016 08:24
LONDON (Alliance News) - African Potash Ltd shares rose on Wednesday after it generated more than USD10.0 million in maiden revenue after shipping out a large amount of fertiliser to a customer in Zambia, the company's first trade under its agreement with COMESA.
African Potash shares were trading up 21% to 2.11 pence per share on Wednesday morning.
The company struck a deal back in August with the Common Market for Eastern and Southern Africa (COMESA) and the Mask Africa Crowd Farm Fund Ltd with a view to creating a production and distribution platform for fertiliser in Eastern and Southern Africa. Through COMESA, African Potash has secured a string of sale deals with companies in several countries to supply 500,000 metric tonnes of fertiliser per year.
The 20,000 metric tonne shipment announced Wednesday partially satisfies the 50,000 metric tonne sale agreement with the Zambian customer signed on the first day of October. COMESA receives a commission fee for introducing the two companies to one another.
The shipment is the company's first actual trade under the deals signed through COMESA, and will generate USD10.2 million in revenue for the company after Zambian officials inspected the produce before it was sold at an average price of USD508 per metric tonne.
Importantly, when the sale agreement was originally announced last year, African Potash said the sale price would be only USD500 per metric tonne. The higher price takes into account other costs such as transport, insurance and credit risk.
In late 2015, African Potash reported its full year results that showed its pretax loss had widened to USD8.8 million from only USD1.0 million a year earlier with no revenue booked in.
"I am delighted to advise shareholders of this landmark trade - our first executed under our agreement with COMESA. We are now starting to gain real momentum as our strategy to generate immediate cash flow from trading begins to reshape our company and its potential future financial performance," said Chris Cleverly, chairman of African Potash.
"I believe we have still only begun to scratch the surface of the potentially enormous market for fertiliser in Africa. We remain committed to exploring new opportunities to expand our market share and geographic reach," he added.
COMESA was formed in 1994 to replace the former Preferential Trade Area which had been formed in 1981. COMESA, as defined by its treaty, was established "as an organisation of free independent sovereign states which have agreed to co-operate in developing their natural and human resources for the good of all their people."
There are 19 member states in COMESA covering a population of 470.3 million including Egypt, Libya, Madagascar, Zimbabwe, Zambia, Uganda, Sudan and Kenya.
The COMESA deal was significant to the company because it enhanced its Lac Dinga project in the Republic of Congo and gave it exposure to the trading sectors of the fertiliser industry as part of strategy to create a vertical platform for the mining, production and distribution of fertiliser.
The idea is to use the exposure to trading fertiliser to generate near-term revenue and to benefit from a first-mover advantage as the deal signed between African Potash and COMESA was "the first agreement of its nature" whilst it advances its Lac Dinga project which will come into play at a later date.
By Joshua Warner; [email protected]; @JoshAlliance
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