13th Oct 2014 09:36
LONDON (Alliance News) - Obtala Resources Ltd said Monday that it has signed an agreement for additional agricultural land in Morogoro, Tanzania.
The emerging agri-processing, farming and timber company said the additional land area covers 204 hectares which nearly doubles Obtala's existing horticulture block.
The site is located on the plot neighbouring the existing tomato, fruit and pepper farm project and associated infrastructure, is adjacent to the main Dodoma to Dar es Salaam tarred highway and is close to an existing power-line, said the company.
Obtala Resources said it plans to build on the initial development made in 2013/2014 and create a series of fruit orchards to offset costs made from buying in fruit from contract farmers.
The company has agreed terms and signed an agreement with a private, non-related Tanzanian citizen to form an operating and management company in which Obtala will hold an 80% interest. The partner will hold a 20% free-carried interest with the company holding the lease over the land for an initial 15 year period renewable for a further 15 years thereafter.
Obtala said the additional land will allow for expanded revenues and cost savings equivalent to approximately GBP1 million per annum by having its own produce and negating the requirement to purchase inputs from contract farmers. The production of the fruits will also dramatically benefit financially from the incentives gained from the recently awarded Export Processing Zone licence.
"We can expand the existing farm infrastructure into the new block and benefit from the cost saving synergies," said Director of Agriculture at Obtala, Grahame Vetch. "With this new block we will look to create fruit orchards that require low upfront capex and have low annual operating costs. The value of the crop will enhance as the trees grow and the concept of the value added packaging and branding under the Mama Jo's label presents an exciting opportunity. In the meantime we are buying in fruit from contract farmers but will be able to harvest our own crop in the near future providing significant additional cost savings."
Shares in Obtala Resources were Monday trading 1.33% lower at 9.25 pence per share.
By Alice Attwood; [email protected]; @AliceAtAlliance
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