Agriterra Ld Regulatory News (AGTA)

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

17 June 2010

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

Agreement to Assign Oil Concession to Africa Oil Ethiopia B.V.

Agriterra Ltd, the AIM listed company focussed on the agricultural sector in central and southern Africa, announces that it has entered into a farmout agreement with Africa Oil Ethiopia B.V., a subsidiary of Africa Oil Corp, the Canadian oil and gas company listed on the TSX Venture Exchange ('Africa Oil') relating to the Company's legacy interest in the South Omo Block oil concession in the Federal Democratic Republic of Ethiopia. The transaction will allow the Company to participate in any future value uplift realised from the exploration work being carried out by Africa Oil, whilst maintaining its focus on its agricultural activities in southern Africa.

Under the terms of the farmout agreement, which are subject to the approval of the Government of Ethiopia, Agriterra has agreed to assign 80% of its interest in the concession to Africa Oil. In return, Africa Oil will fund 100% of the costs of carrying out 500 kilometres of 2D seismic acquisition and processing, a field geology programme and a surface geochemistry programme ('the Work Programme'). Africa Oil estimates that its total cost exposure for the Work Programme is approximately US$6.5 million with the majority of the expenditure to be incurred in the first half of 2011. As part of the farmout agreement, Agriterra will also receive a credit of up to US$2.517 million from Africa Oil, to be set against future costs relating to the concession (other than in respect of the Work Programme) in recognition of the past costs incurred by Agriterra, prior to its strategy change to focus on agricultural development. In addition, the current guarantee given by Agriterra in favour of the Government of Ethiopia will be replaced by a guarantee from Africa Oil. Accordingly, US$784,000 in cash will be released to the Company.

Agriterra Chairman Phil Edmonds said, "This transaction with Africa Oil allows us to participate in any potential uplift in value related to the development of the South Omo Block, while remaining focussed on our grain processing and cattle ranching operations in Mozambique. In addition, the replacement of the guarantee given by Agriterra will also strengthen our cash position, increasing our flexibility to invest and expand our current operations in Mozambique. This cash injection will also facilitate the identification of complementary investment opportunities in the sub-Saharan agricultural industry, without the need to raise finance on the equity markets." 

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