Agriterra Ld Regulatory News (AGTA)

Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector: Agriculture

1 December 2011

Agriterra Ltd ('Agriterra' or 'the Company')

Acquires Palm Oil Operation in Sierra Leone and

Raises US$15 million to expand African Agricultural Operations

Agriterra Ltd, the AIM listed company focussed on the agricultural sector in Africa, is pleased to announce a corporate and operational update, which includes an acquisition and the raising of US$15 million via a placing of new ordinary shares at 3p, a 32% premium to the current share price.

Overview

·; Raises US$15 million (before expenses) by way of a placing of 320,328,016 new ordinary shares of 0.1 pence each in the Company ('the Placing') to fuel expansion across pan-African agricultural operations

·; Palm oil identified by the board as an attractive commodity to complement Agriterra's current agricultural portfolio of cattle ranching, cocoa buying and trading and maize farming and milling operations 

·; Acquires a lease of approximately 45,000 hectares of brownfield agricultural land in an area suitable for palm oil production in Sierra Leone

·; Placing proceeds to be applied to fund beef ranching business with the objective of increasing the total herd size to 5,000 head by 2012 and to 10,000 by 2015

·; Beef business to become "field-to-fork" producer - completion of a 4,000 head per month capacity abattoir on schedule for commissioning in Q2 2012

·; Intention to expand cocoa buying and trading operations through establishment of a plantation business

·; Objective to become a major regional producer for the growing international cocoa markets

Agriterra Director Andrew Groves said, "We are a rapidly expanding pan-African agricultural group centred on ranching and maize processing in Mozambique and now palm oil and cocoa in Sierra Leone. The US$15 million dollars raised at a significant premium underpins the potential our investors see in the business and endorses the progress that we have made. These new funds will be allocated to rapidly expand our vertically integrated high margin cattle business, in particular to increase the total herd size to 5,000 head by 2012 and to 10,000 by 2015, as well as complete the expansion of our feedlot and abattoir projects. In addition, we see huge potential in the cocoa market and have assembled a team capable of delivering on our strategy of becoming a major regional producer for the growing international markets through our trading operations and the development of plantations. We feel that with our experience of operating in Sierra Leone, the expansion into palm oil through the acquisition of approximately 45,000 hectares of brownfield agricultural land suitable for plantation, is a natural step in our development, widening our commodity focus and potential. 

"We are extremely excited about the prospects of the Company as a multi-project and multi-commodity group with financing in place to achieve our rapid development plans as we remain focussed on capitalising on the growing agricultural market in sub-Saharan Africa and becoming a leading food provider. The potential upside in our sector is considerable, supported by forecast global demographic changes, and we believe we have a business that will deliver value for its shareholders."

Further Information and Placing Details

Agriterra is a pan-African agricultural company with current operations including cattle ranching, cocoa buying and trading and maize farming and milling operations. The Company is broadening its portfolio of agricultural products through the acquisition of Shawford Investments Inc ('Shawford'), which in turn owns Red Bunch Ventures (SL) Limited ('Red Bunch').

Red Bunch is a Sierra Leone company which holds a 50 year lease (with an option to renew for a further 21 years) over approximately 45,000 hectares of brownfield agricultural land in the Pujehun District in the Southern Province of Sierra Leone. This area of Sierra Leone, which is close to the Liberian border, is suitable for palm oil production. The region receives one the highest levels of rainfall in Sierra Leone, which in itself, receives some of the highest rainfall globally. In addition, the lease area is located on the equatorial belt, which is the most favourable geographical location for palm oil production. The Company intends to monetise this landholding in the short term and clearing and planting is expected to commence shortly. The Board believes that as the most important and widely produced edible oil in the world, demand for palm oil is projected to continue to grow, driven by demand in Africa, India, China and the US, making it an important new target of for Agriterra's ambitious investment strategy. 

The consideration payable for the acquisition of Shawford will be satisfied by the allotment 37,800,000 new ordinary shares of 0.1 pence each in the Company ('the Red Bunch Shares') which will be issued contemporaneously with the Placing. A deferred consideration of a further 37,800,000 may be issued in due course, subject to certain planting targets being achieved.

The acquisition of Red Bunch complements Agriterra's wider portfolio of established beef operations in Mozambique through Mozbife Limitada ('Mozbife'), Tropical Farms Limited ('TFL'), the Company's cocoa business in Sierra Leone and Desenvolvimento E Comercialização Agricola Limitada ('DECA') and Compagri Limitada ('Compagri'), the Company's maize farming and milling operations in Mozambique.

The raising of US$15 million will enable Agriterra to maintain its aggressive expansion plans across its portfolio, with particular focus on Mozbife and TFL. Mozbife is rapidly expanding into a vertically integrated beef business. In particular the proceeds of the placing will be allocated to the expansion of its breeding herd which currently stands at approximately 1,000 head of prime Beefmaster cattle, and the completion of the 4,000 head per month capacity abattoir, which will service both the Company's slaughter needs and the region as a whole. Additionally capital will be used to aggressively expand TFL's activities in Sierra Leone, expanding the cocoa buying and trading operations, acquiring additional land and building an extensive plantation business. The board recognises the significant potential in the cocoa market and the Company has assembled a team capable of delivering on its strategy of becoming a major regional producer for the growing international markets.

In addition, the Company announces that following the successful integration into the group structure and the expansion of business activities of its subsidiary, TFL, deferred consideration of 8,333,334 new ordinary shares of 0.1 pence each in the Company ('the TFL Shares') will be issued contemporaneously with the Placing

The Placing is raising monies from existing and new investors, including Beyond Africa Fund Limited, which will hold 10.08% of the enlarged issued ordinary share capital following completion of the Placing, and CIR Group, which will hold 8.06% of the enlarged issued ordinary share capital following completion of the Placing. Additionally and in tandem with the Placing, the Company has granted Beyond Africa Fund Limited and CIR Group certain conditional co-investment rights whereby the two parties may provide finance, on a case by case basis, for the acquisition of assets that the Board believe would enhance the Company's development strategy. Companies controlled by trusts, the beneficiaries of which include relatives of the Company's directors Phil Edmonds and Andrew Groves, have subscribed for shares in the Placing which will on completion of the Placing represent 5.04% of the Company's enlarged issued ordinary share capital. Messrs Edmonds and Groves are not themselves beneficiaries of the trusts and as such their respective notifiable interests in shares in the Company are unaltered.

The Placing Shares will represent 30.23% of the enlarged issued ordinary share capital after completion of the Placing (and the issue of the Red Bunch Shares and the TFL Shares), which will then comprise 1,059,716,239 ordinary shares of 0.1p each.

The Placing is conditional on the admission of the Placing Shares to trading on AIM ('Admission'). Application has been made to the London Stock Exchange for the Placing Shares, the Red Bunch Shares and the TFL Shares to be admitted to trading and it is expected that Admission will occur, and dealings in such shares will commence on 2 December 2011.

The Placing Shares, the Red Bunch Shares and the TFL Shares will, when issued, rank pari passu in all respects with the existing issued shares of Agriterra, including the right to receive any dividends and other distributions declared following Admission.

** ENDS **

For further information please visit www.agriterra-ltd.com or contact:

Notes

Agriterra Ltd is an AIM listed agricultural company with three divisions: beef, maize and cocoa. Its cattle ranching business, Mozbife, currently has a 2,350 strong herd, a land holding of over 16,000 hectares, a feedlot and an abattoir which is under construction but will have a capacity of 4,000 head per month. In addition to product from its own herds, it is anticipated that throughput for these facilities will be supplemented using cattle bought in from local communities.

The Company's maize buying and milling operations, DECA and Compagri, are located in Chimoio and Tete in central and north-western Mozambique respectively. These collect maize from circa 350,000 farmers using the Company's own vehicle fleet, process it into mealie meal, the African staple, and then sell it back to the local market, into supermarkets and to the World Food Programme. Combined sales for the year ended 31 May totalled 28,822 tonnes maize meal generating revenue of US$13.6 million.

Agriterra also has a cocoa business based in Sierra Leone, Tropical Farms Limited, which is currently a buying and trading operation, but provides an ideal conduit to branch out into cocoa production in West Africa. Its strategy is to establish itself as a secure, sustainable and traceable source of supply to meet the requirements of the major cocoa consumers who are placing increased emphasis in this area.