CHOC.L Regulatory News (CHOC)

2 December 2014

United Cacao Limited SEZC

("United Cacao", the "Company" or the "Group")

Placing of 5,000,000 new Ordinary Shares to raise gross proceeds of US$10 million and

Admission to Trading on AIM

United Cacao, a cacao plantation company based in Peru, is pleased to announce the admission of its issued share capital to trading on the AIM Market of the London Stock Exchange and commencement of dealings in its ordinary shares at 08.00 GMT under the ticker CHOC. This follows the completion of a placing of 5,000,000 new Ordinary Shares (the "Placing") at 128 pence per share to raise £6.4 million before expenses (approximately US$10 million), giving the Company a market capitalisation of approximately £23 million on Admission. The funds raised will be used to extend the Company's planted operations from approximately 320 hectares today to 2,000 hectares by the end of Q4 2015 and for general working capital purposes.

Highlights

· The Company is seeking to become the world's largest and lowest cost corporate grower of cacao by the end of 2016 when it plans to completes the planting of its existing freehold 3,250 hectare estate located near the city of Iquitos in northern Peru at the headwaters of the Amazon River;

· Admission to the AIM market positions United Cacao as the first publicly listed pure-play cacao plantation company globally;

· Planting of highly productive cacao varieties combined with ethical labour practices and community support;

· Proven management team with strong capital markets track record and global experience in agriculture projects;

· Strand Hanson Limited acted as the Company's Financial and Nominated Adviser, VSA Capital Limited acted as Bookrunner and Joint Broker and Kallpa Securities Sociedad de Bolsa acted as Joint Broker and Peruvian Placing Agent; and

· The Company intends to seek a dual listing on the Lima Stock Exchange sought in 1H 2015.

The Company's Admission Document can be viewed on the company's website www.unitedcacao.com or by clicking on the link below:

http://www.rns-pdf.londonstockexchange.com/rns/5463Y_-2014-12-1.pdf

Dennis Melka, Executive Chairman and CEO of United Cacao, commented: 

"As the first publicly listed pure-play cacao company globally, United Cacao offers investors unique exposure to a global market that has well known and recently publicised supply constraints together with the challenge of rising demand. This has been reflected in the positive response from investors in the UK, Europe and Latin America which allows us to continue our sustainable and ethical planting strategy on our freehold estates in Peru - a country that benefits from an excellent climate and soil conditions for cacao. Admission to AIM is the logical next step towards our goal of becoming the largest and lowest cost corporate grower of sustainable and traceable cacao beans by the end of 2016."

For more information please contact:

Placing Statistics

Company Overview

United Cacao Limited is the holding company for Cacao del Peru Norte SAC ("CDPN"), the Company's wholly owned Peruvian operating subsidiary. The Group seeks to be the world's largest and lowest cost corporate grower of cacao by the end of 2016 when it plans to complete the planting of its existing 3,250 hectare estate, of which the proceeds of the Placing and Subscription will finance the planting of an initial total of 2,000 hectares. The Directors believe the Company will, on Admission, be the first publicly listed pure-play cacao producer globally and the first publicly listed tropical plantation company in Latin America.

The Company, via CDPN, owns approximately 3,523 hectares of freehold agriculture land near the city of Iquitos, the capital of Loreto, Peru's northern region. Iquitos, a city of over 450,000 inhabitants, is at the headwaters of the Amazon River and is serviced by scheduled ocean-going freighters to the Atlantic, via Manaus (Brazil) and onwards to the United States. Iquitos also has regular domestic and international flight connectivity by several regional airlines and is less than two hours flight time from Lima.

The Group is proud to be a member of the World Cocoa Foundation (www.worldcocoafoundation.org), based in Washington D.C., which works to promote a sustainable cacao industry through economic and social development and environmental stewardship in growing communities.

Competitive Advantages

The Directors believe that the Group has the potential to be the world's largest and lowest-cost corporate grower of cacao for the following reasons:

i. cacao is an indigenous tree species to the Iquitos area;

ii. the high recorded yields and low disease incidence of its IMC-67 and CCN-51 variety planting material;

iii. the ample availability of cost-effective agricultural labour in the Peruvian Amazon region;

iv. the Peruvian Amazon is a zero corporate income tax zone until 2048 pursuant to the Law 27037 - Promotion of Investment in the Amazon and there are no agricultural export taxes in Peru;

v. the excellent climatic conditions and rainfall of between 2,500 mm - 3,000 mm per annum with no dry season;

vi. the strategic location in the Amazon Basin in an area well-served by river barge and ocean-going freighters; and

vii. the freehold title of its estates which allows for vastly improved government and community relations in a developing market environment when compared to leased, concession or communal rights land common in Asia or Africa.

The above factors are expected to provide the Group with a significant and sustainable competitive advantage over the traditional cacao growing zones in West Africa, Southeast Asia and other parts of Latin America. This, combined with a more general move by the global confectionary market towards purchasing from reliable, ethical, long-term sources of cacao beans and from suppliers in stable macro-economic regions, is expected to present the Group with the opportunity to become, by the end of 2016 and subject to the availability of future funding, the world's largest and lowest-cost corporate cacao producer.

Reasons for Admission

The Directors' reasons for undertaking the Placing and Admission are as follows:

· to provide the Group with the required capital to plant approximately a further total of 1,680 hectares of the Group's plantation estate;

· to enable the Group to access a wide range of potential investors and broaden its investor base;

· to provide the Group with a flexible financial structure for further development and growth, both organically and via potential acquisitions or joint ventures;

· to improve the Group's ability to access further funding from the international capital markets, to finance the future growth of the business consistent with its stated strategy;

· to maintain a high level of transparency and corporate governance within the Group;

· to raise the profile of the Group and assist in recruiting, retaining and incentivising skilled employees; and

· to enhance the Group's reputation and financial standing with its key partners and suppliers and with potential vendors of additional assets.

Board of Directors

The Group is managed by a team of executives with a combined approximate 50 years of experience in the cacao business. The Board currently comprises of Dennis Melka as Executive Chairman and Chief Executive Officer and Tony Kozuch as Executive Director. Constantine Gonticas and Roberto Tello were appointed as Non-Executive Directors at Admission.

Dennis Nicholas Melka, Founder, Executive Chairman and Chief Executive Officer

Mr. Melka was the Co-Founder, Executive Director and Joint Chief Executive Officer of Asian Plantations Limited, a plantation company quoted on AIM. Asian Plantations Limited was admitted to AIM in November 2009 at 75 pence per share and was subsequently purchased by a strategic acquirer for 220 pence per share in October 2014; during this time period, the market capitalization grew from £22 million (at Admission) to £110 million at the time of acquisition. Since 2006, Mr. Melka has co-founded and launched companies in agriculture, consumer finance, hotels and mobile telecommunications. Mr. Melka started his career as an investment banker with Credit Suisse First Boston in 1995 where he remained until 2005 during which time he was based in New York, London, Prague, Singapore and Bangkok. Mr. Melka graduated magna cum laude from the Edmund A. Walsh School of Foreign Service, Georgetown University in Washington D.C. He is a Czech citizen and resident in the Grand Cayman, Cayman Islands.

Anthony ("Tony") John Kozuch, Executive Director

Mr. Kozuch was born and raised in Mexico City and is a native Spanish speaker. Over the last 13 years, Mr. Kozuch has been the Chief Financial Officer of Communiqué Conferencing, Inc., an international conferencing services company he co-founded in 2001. Prior to Communiqué, Mr. Kozuch served in various channel marketing, program management, and business development roles with voice and data providers in the U.S. and Latin America including Winstar Communications, Concert and Avantel (MCI's joint venture in Mexico). Mr. Kozuch travels frequently to Central and South America and is an Executive Director of United Oils Limited SEZC, a developer of palm oil plantation estates in Peru. Mr. Kozuch graduated from the Edmund A. Walsh School of Foreign Service, Georgetown University in Washington DC. He is a U.S. citizen and resides in Washington, D.C.

Constantine Gonticas, Non-Executive Director

Mr. Gonticas has been a Senior Advisor to the Blackstone Group since 2012. He is also an active investor through Green Square Capital Limited, his personal investment vehicle. Previously, from 2004 to 2011, Mr. Gonticas was the Managing Partner of Novator LLP, an investment company specializing in Central & Eastern Europe. Whilst at Novator, Mr. Gonticas sourced a number of investments, including PLAY (a Polish mobile telephony company which is one of the largest ever start-ups in the region), Netia (Polish fixed line telephony) and Forthnet (fixed line telephony in Greece). He has served as Vice Chairman of the Supervisory Board of PLAY and was also Vice Chairman of the Boards of Netia and Forthnet. Before Novator, Mr. Gonticas was Head of Investment Banking for Central and Eastern Europe, Middle East and Africa for Merrill Lynch and prior to that spent 12 years at Credit Suisse First Boston. Mr Gonticas has a law degree from Oxford University. He is a UK citizen and resident in London.

Roberto Tello Pereyra, Non-Executive Director

Mr. Tello is the principal legal counsel for the Company's wholly owned operating subsidiary, Cacao Del Peru Norte SAC, in Iquitos, Peru. As the founding partner of Estudio Juridico Tello Pereyra Abogados in Iquitos, Mr. Tello advises corporate clients and municipalities throughout the Peruvian region of Loreto. Mr. Tello is a frequent lecturer for legal forums and congresses throughout Latin America with a specialization in administrative law. In Peru, Mr. Tello is at the forefront of Peru's newly instituted legal procedural code and has organized training seminars for government appointed superior justices and prosecutors. He earned his law degree from the Universidad Nacional Mayor de San Marcos and is the President of the Council of Arbitration for the Loreto Chamber of Commerce. Mr Tello is a Peruvian citizen and resides in Iquitos, Peru.

The Project Area

The Company, through its wholly-owned subsidiary, CDPN, holds approximately 3,523 hectares of titled, freehold land approximately eight kilometres by road from the town of Tamshiyacu. The Group maintains excellent relations with the town and is an active sponsor of social programs and community projects. The Group maintains an office in the town limits. The Group is aware of further land that it believes, subject to the availability of further funding, it will be able to consolidate within its operating zone.

The estates are a short speedboat ride to Iquitos, the capital of Loreto. Iquitos (population in excess of 450,000) is acknowledged as being the world's largest city not connected by road. The city is well served by many airlines within Peru and boasts some international connections. There is also a PetroPeru refinery adjacent to the city which produces local diesel. The Directors believe that the close proximity of the estates to such a major city is a competitive advantage for the sourcing of materials and ease of access to the project site. The Directors also believe that the estate's proximity to the Amazon River provides a low-cost river logistics system to move the cacao to market.

The Group began on-site operations in the project area in May 2013. The Group planted its first cacao seedlings in the nursery in July 2013 and its first field planting took place in November 2013; therefore, the Group expects its first cacao harvest in the second half of 2015.

Peru

Peru is an investment grade country (S&P & Fitch: BBB+, Moody's: A3) of approximately 30 million people on a land mass of over 1.28 million square kilometres thereby placing the country, on a land mass basis, as 20th in the world, with a size similar to Alaska and South Africa. Peru is regularly described as a "Latin Tiger" economy and benefits from a rapidly growing private pension fund system established in 1992, low inflation, a stable banking system, positive demographics, low debt levels and fiscal surpluses at the federal level. Peru is also signatory to dozens of free trade and investment agreements and uses global trade to promote the continued success of its commodity, oil & gas and agricultural sectors.

The country has excellent demographic trends as the population is expected to grow to over 33 million by 2020. The median age is 27 years, among the lowest in Latin America.

Peru has benefited from market-orientated policies that have generated real GDP growth rates of 5.6 per cent. since 2000, consistently above the Latin American average of 3.3 per cent. In 2013, while the Latin American region as a whole slowed to 2.7 per cent., Peru maintained a 5.6 per cent. growth rate. Some notable achievements include:

· Over the last nine years, gross debt to GDP has fallen by half to a historic low of 19 per cent.

· Due to the country's high reserves of over US$64 billion (more than doubling since 2008), net debt to GDP has fallen to a historic low of 2.2 per cent. and the country has no requirements at this present time to borrow in the international markets. International reserves now stand at 33 per cent. to GDP; and,

· Uninterrupted, positive economic growth since 1999.

Peru is the highest-ranked major Latin American economy after Chile (which S&P rates as A-) and was positively highlighted in HSBC's "World in 2050" report as one of the world's top twenty six fastest growing economies until 2050. Peru's "Shining Path" communist insurgency ceased to be a major threat in the midnineties and the country no longer suffers from the violence that is still seen in Mexico (S&P: BBB+) or Colombia (S&P: BBB-) today.

Importantly, Peru has a vibrant agricultural export industry in avocados, berries, grapes, asparagus, fish meal and fish oil. There are several foreign publicly traded companies with their principal operations in Peru, including China Fishery Group Limited (fisheries), Maple Energy plc (sugar cane) and Pacific Andes International Holdings Limited (fisheries). There is a tradition of agricultural investment in Peru and a large base of trained labour at cost-effective price points.

The Government of Peru has encouraged the growth of agricultural exports and leveraged Peru's counter-seasonal production capabilities in fruits and vegetables to North America and Asia. Increasingly, Peru is regarded as the global low-cost location to produce sugar cane for ethanol and this has resulted in a surge of investment on the northern coastal area. It is important in Peru to continue to develop further the country's export market, particularly in agricultural goods, and a number of incentives have been put in place, including zero export taxes and Law 27037 (which offers various tax exemptions or reductions to 2048 for businesses that operate in certain parts of the Peruvian Amazon).

Cacao Market in Peru

Peru is the third largest grower of cacao in Latin America, with, in 2013, approximately 80,000 planted hectares. The Directors believe that the largest cacao plantation in Peru is owned by Grupo Romero with approximately 1,000 planted hectares. While there are areas in Peru where some new plantations are grown using the CCN-51 variety, the remainder of the industry predominantly comprises small farmers with approximately 3 to 10 hectares under cultivation.

Commercial cacao cultivation requires skilled estate supervisors and low cost labour (as regular pruning, maintenance, harvesting, etc cannot be carried out mechanically); these two ingredients drive field productivity and costs; in the opinion of the Directors no other cacao producing country has as favourable a combination of these two factors. The Loreto region of Peru is ideally suited for large-scale cacao production as: (i) the climate is extremely favourable, with the ideal amount of rainfall (approximately 2,500 mm per annum), falling evenly throughout the year; (ii) there is a highly skilled technical base of cacao experts incountry; (iii) there is sufficient supply of high quality planting materials such as CCN-51; (iv) low-cost logistics network to the key export markets; and (v) the Group's estates' proximity to Iquitos, the capital of Loreto, allows for reliable supply of fuel, materials, people and equipment to the plantation.

The availability of a skilled managerial workforce positions Peru favourably compared with countries more commonly associated with large-scale plantation businesses, such as Malaysia, Indonesia and West Africa. UCL has hired Mr Ernesto Vega and Mr Roberto Gomez, well-known cacao specialists, as its on-site Field Managers. Mr Gomez in particular has cultivated his own hybrids for large-scale cultivation. Early indications are that the Group is in the fortunate position of being the employer of choice for trained field technicians who are essential for maintaining healthy cacao and high yields. In terms of low cost labour, there is a plentiful supply in the region, due to a lack of alternative formal employment and accompanying high unemployment rates. At maturity, the Group's estate will require the full-time employment of over 800 people.

The Group also expects to benefit from the Peru's zero tax fiscal environment, freehold title and investment grade status of Peru. Cacao production is a zero tax corporate activity in Peruvian Amazon due to Law 27037. This structural tax advantage provides for superior plantation level returns when compared with the dominant producers in West Africa, which for the most part have confiscatory export tax regimes. In terms of land ownership, Latin American countries benefit from freehold land title compared to Southeast Asia or West Africa, where leasehold title provides less security. Land is also held by individuals, rather than communities, making it easier and less controversial to acquire.

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