Agriterra Ld Regulatory News (AGTA)

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

13 July 2011

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

Acquisition of Cocoa Business in Sierra Leone

Agriterra Ltd, the AIM listed company focussed on the agricultural sector in Africa, is pleased to announce that it has entered into an agreement to acquire the entire issued share capital of Tropical Farms Ltd ('TFL'), a cocoa company based in Sierra Leone. This acquisition will provide the Company with a platform to expand into cocoa production through TFL's regional expertise and established buying operations and represents the first stage of establishing a substantial cocoa business in West Africa. The Board is focussed on achieving security of supply through the forging of long term relationships with farmers and out-grower schemes, in addition to the implementation of farm management initiatives and eventually, the development of the Company's own cocoa plantations. 

TFL's business model complements Agriterra's established and profitable maize buying and processing operations in Mozambique and is in line with the Company's strategy of building a pan-African agricultural company with other divisions already including maize farming and milling, cattle ranching and feedlot facilities and imminently abattoir services.

TFL was established in 2008 to provide a high quality, sustainable and traceable cocoa buying operation head quartered in Kenema in the eastern region of Sierra Leone. With four buying centres currently in operation and a direct buying register of approximately 2,000 farmers across Sierra Leone, the Board of Agriterra believes that TFL has established a valuable base of 'out-growers' which can now be rapidly expanded under the Agriterra umbrella. It is the Company's intention to develop additional community buying centres across the district, whilst also providing additional solar drying and fermentation facilities, in order to increase total buying capacity and guarantee sources of supply. This model will provide TFL with security of supply at farm level with traceability without the need for local agents.

The Board of Agriterra also intends to implement additional initiatives to help increase yields for its out growers and subsequently improve the margins and profitability for its operations in Sierra Leone These initiatives, including implementing modern farm management techniques and farmer incentive schemes, have proved extremely successful in Agriterra maize production and process facilities in Mozambique, and the Company is confident that similar results can be achieved with cocoa production in Sierra Leone and the wider region.

As immediate cash flow from cocoa sales to the established major international cocoa buyers increases, it is the Board's objective to expand the buying operations into Liberia and also to develop its own cocoa plantations in the region, effectively establishing a "tree to market-place" business model for rapid growth and expansion. The Company is currently evaluating additional acquisition opportunities from which to expand its activities. 

The Board believes that cocoa represents an exciting opportunity for the Company. Global demand is strengthening and security of supply and traceability is becoming increasingly important. Cocoa production in Sierra Leone is improving at farm level, with new techniques being applied and yields and cultivation expected to increase. This provides TFL a significant opportunity to leverage its first mover advantage, both through its existing base of out growers but thereafter through its own plantations.

Importantly, through the acquisition of TFL, the Company will also acquire the skill and knowledge base of Mr. Adrian Simpson, Managing Partner of TFL. Mr. Simpson has 25 years experience in the commodities and risk management trade globally including nine years at E D & F Man where at he spent four years running a large cocoa buying operation in the Cote D'Ivoire and six years at Drum Resource Ltd, a London based company which Adrian founded that focussed on the trading of and international risk managing for the commodity trade.

Agriterra Chairman Phil Edmonds said, "TFL has an established operation in Sierra Leone and is based on quality, traceability and sustainability, all the major themes in the expanding cocoa market. Its acquisition provides us with the ideal platform to expand both into the cocoa market, and West African agriculture in general, as we look to build on our already successful maize and beef operations in Mozambique. 

"Our focus is now to support the development of TFL, replicate its success regionally and leverage this to secure our own plantations. By combining our experience and strong understanding of the agricultural sector with Adrian and his team, we will look to build a significant presence in the cocoa industry initially focussing on Sierra Leone and subsequently other countries in the region."

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