Woodbois Regulatory News (WBI)

16th June 2014

Obtala Resources Limited

("Obtala" or the "Company")

(AIM: OBT)

Forest Valuation Report

Obtala Resources Limited (AIM:OBT), the emerging agri-processing, farming and timber company, is pleased to announce the findings of an independent valuation report on the timber concessions held in Mozambique. The valuation report was undertaken by Honour Capital, an independent consultancy that specialises in providing a comprehensive forestry investment and management services, and regulated and authorised to conduct investment appraisals and analysis of forestry by the Royal Institution of Chartered Surveyors (RICS).

Highlights:

· Valuation considers 11 concession areas located in 3 separate blocks in northern Mozambique

· NPV based on a 10 years cash flow on concessions valid for 50 years

· 10 year operational sales revenues forecast at costs forecast at $395million

· NPV at 8% discount rate: US$197.2; 15% discount rate: US$141 million

The valuation uses the information collected during a site visit in May 2014, and provided by the Company and is based on the determination of the net present value (NPV) of the projected annual net revenue arising from the sale of timber over a 10 year period. Although the valuation only considers the first 10 years of operation a concession is held on a 50 year agreement and the company is expected to operate over at least the first 25 years, if not for the entire duration of the concession.

The NPV of the company's ten year net revenue stream is shown below against a range of discount rates.

This valuation is derived by considering 10 year operational costs ($72million), production levels, CAPEX requirements ($15million over 10 years, year 1 capex is estimated at US$390,000, subsequent expenditure paid out of revenues) and sale values ($395million) attributable to the company's operations across all its concessions. Net revenue averages 78% of total sales and the total CAPEX requirement is 5% of the total net revenue. The valuation is most sensitive to the sales value; a 20% increase in sales value results in a 26% rise in net revenues.

This report considers 11 concession areas of miombo hardwood forest in three locations or blocks within northern Mozambique with a total area of 279,965 hectares. The concessions are granted by the Mozambican Government for a 50 year term once the necessary management plan, community consultation and administrative process is completed, and is renewable thereafter. The company has the secured the rights to the concessions under consideration with the final title pending for some of the applications whilst management plans and administrative paperwork is completed. This process is expected to be complete before the end of 2014.

Harvesting levels are regulated by the annual permitted cut ("APC") (total m3 per species) set in the management plan and approved at Provincial government level, the total annual permitted cut for the company is 71,348m3/year on a 20 year cycle. Predicted production levels used in valuation report average 60% of the annual permitted cut to ensure sustainability. Average annual production of sawn timber is expected to be 23,580m3. Production costs are an average of $308/m3 of product sold. The weighted average sale price of the sawn timber is $1,677/m3, this is heavily influenced by sales of black wood budgeted at $10,000/m3.

The total volume of timber to be harvested has been estimated based on the assumption that;

· not all the APC will be harvested in any one year; and

· the proportion of the APC to be harvested in any one year will increase over the first three years and then remain constant.

This approach accommodates uncertainties over the actual levels of available timber and reflects the variability of the woodland types and content. Over the 10 year period under consideration the average proportion of the total APC to be harvested by the whole company is 60% but never exceeds 67% across all the concessions.

In addition to the valuation exercise, Honour Capital completed an operational review, making a number of recommendations to improve the operational management systems and in-concessions controls which will greatly assist and aide the Company's efforts to increase efficiencies and scale-up productivity levels.

The company will look to make initial capital investments through self funding and investments to scale up production levels based on recommendations provided. The company is actively working a number of orders and will seek to build the order book in line with the valuation model. There are a number of high value timber species identified which produce higher returns and will Company will seek to monetise this opportunity. To support the planned increased production level the company will seek to engage additional personnel on both production and sales.

The contents of the announcement have been verified and checked by Mr Crispin Golding MICFor, the author of the valuation report.

Crispin Golding holds a BSc(Hons) in forest management from Aberdeen University and an MSc in forestry and land use from Oxford University. He is a professional member of the Institute of Chartered Foresters with recognised competence in forest valuations. He is a Director of Honour Capital Ltd, a RICS regulated company. He has 10 years of recent experience as a specialist woodland investment advisor, first for the UK's largest forest investment fund managers then for the UK's largest forest management company. He also has seven years experience in the Commonwealth Development Corporation's expatriate senior management team managing an extensive teak development project in southern Tanzania and an established pine and eucalyptus plantation of 15,000 hectares in Swaziland. He also has three years of professional forest management experience working in Malawi, Nigeria and the Caribbean.

Chairman's comment

Francesco Scolaro, Chairman of the Board, commented: "the conclusions of this report are very encouraging and substantiate our firm belief that the timber assets hold a value that was not previously recognised or appreciated. With the information that we have received and from the operational review it is our intention to focus on turning this into a strong revenue producing business that not only can produce attractive margins but has the ability to scale up in size. The initial production increase can be achieved with a small capital injection which we can fund. We will concentrate on improving and strengthen the management team on the ground to allow us to scale up this great business opportunity. The timing of this could not be better with demand for timber growing and outstripping supply both regional and internationally."