LONDON (Alliance News) - Obtala Resources Ltd Thursday said it has agreed heads of agreement with South Africa's Kishugu International Holdings Ltd that will allow Obtala to enter the South American timber market, and said it will work with the same partner in Mozambique.
"These exciting joint ventures give Obtala exposure to a new growth opportunity in the South American timber market and brings in a strong partner, with tremendous timber experience, to assist expansion of our Mozambican projects," said Obtala.
In December, Obtala said it was seeking partners to help it increase timber production and boost the marketing of its products in Mozambique, and said Thursday it has now signed a deal with Kishugu for Mozambique and Brazil.
"The operator is a highly experienced and integrated forest fire management and timberland management business, which has substantial timber-related income with producing operations in South Africa and Chile," said Obtala.
Kishugu also has producing operations in Mozambique and Australia, and are developing new opportunities in Brazil, Argentina, Uruguay, Tanzania, Angola, Indonesia and Malaysia, added Obtala.
In addition, Obtala has entered into a heads of terms agreement with Kishugu to form a joint venture for a timber-related project in Brazil, allowing Obtala to enter the South American timber market.
Obtala will own a 50% stake of the joint venture vehicle for a Brazilian forest management project which the company said will be awarded to Kishugu, as operator, in the third quarter of 2015. The contract is for an initial five-year term, with revenue expected to be around USD3 million per year.
Once Kishugu has been awarded the project, Obtala will invest USD500,000 into the joint venture project for the 50% shareholding.
"The new joint venture allows the company to increase its exposure in the global timber markets and de-risks the business from being a single country producer," it said in a statement.
The project itself includes various elements of forest and land management over an area of more than 200,000 hectares situated in southern Brazil, said Obtala.
"This partnership will also benefit us by providing exposure to other international timber markets and will add impetus to grow the timber business more quickly," it added.
Despite the new partnership, Obtala shares were down 8.1% to 9.77 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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