Agriterra Ld Regulatory News (AGTA)

28 May 2009 07:00



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

28 May 2009

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

Opens Second Operation in Tete, Mozambique

Agriterra Ltd, the AIM listed company focussed on the agricultural sector in central and southern Africa, has opened its second agricultural buying and processing facility in Mozambique. The Compagri operation, located at Tete, was set up to replicate the Company's successful DECA facility at Chimoio, which has been in operation since 2005 and has the capacity to process approximately 50,000 tonnes of maize per annum, collected from approximately 350,000 local producers in the Manica province of Mozambique. The construction of the Tete facility was funded primarily from internal cash flow, delivered under the budget (approximately US$ 8.9 million) and on schedule, to coincide with the advent of the maize buying season in the Tete Province. 

As at Chimoio, operations at Tete are focussed on the purchase of maize from indigenous out-growers, which is then processed into corn flour, a key African food staple. The total storage capacity for maize is currently 12,600 tonnes, consisting of four 1,500 tonne silos and one 600 tonne silo, and an additional two large warehouses with capacity to store 3,000 tonnes each. The average milling capacity is currently 80 tonnes per day, which could be raised to a maximum of 120 tonnes per day when a 24 hour rotational shift basis is utilised.

On the conclusion of the next buying season, which lasts from June until late August/early September, the Company will evaluate whether the total silo storage should be increased. The infrastructure required to increase Compagri to the maximum capacity of 50,000 tonnes has already been developed meaning future expansion can be achieved for the next buying season in 2010, with minimised additional expenditure.

Again, as at Chimoio, the strength of the Company is in its logistics capability. All purchases are effected through strategic buying points serviced by the Company's own trucking fleet.

At Tete, the Company is also evaluating the viability of diversifying its product range to include other agricultural produce such as beans and ground nuts. It is the Board's opinion that the diversification of its product range will strengthen the Company's growth strategy by enabling year round processing of a variety of products, ultimately spreading any potential risk associated with individual commodity production.

Agriterra CEO Andrew Groves said, "The opening of the Tete facility should contribute significantly to our operational and financial performance. By replicating the success of our Chimoio operation we can build on our current position and become a leading agri-operation in southern and central Africa, servicing the local and export markets as well as gaining further exposure to buyers such as the UN Food Programme, one of DECA's major customers. Tete, which was developed to schedule and under budget, has the capability to process additional maize if required, and we will continue to monitor the plant's capacity in order to fully utilise the facility's revenue generating potential. The diversification of our product range will also add a further facet to the Company, one which we believe will reinforce our investment case and deliver additional revenue streams at minimal risk to shareholders."

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