Woodbois Regulatory News (WBI)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014.

17 April 2018

Obtala Limited

("Obtala", the "Group" or the "Company")

(AIM: OBT)

Mozambique Forestry Update

In Mozambique last week, The Ministry of Land, Environment and Rural Development (MITADER) issued a ruling on the exploitation and export of endangered species of timber, under which the exploitation and collection of timber of Pterocarpus tinctorius, (Nkula), Swartzia madagascariensis (Ironwood), Combretum imberbe (Mondzo) is forbidden.

Obtala has never owned licences to extract any of these species.

In addition, the export of Chanfuta, Umbila and Jambire will not be allowed, those three species being licensed only for the domestic market. Obtala has previously exported both Chanfuta and Umbila from Mozambique. Exports of these species made up less than 5% of total Group sales in Q1 2018.

According to the new rules, the export of native species of wood can only be carried out by operators certified by MITADER, applicants having met specific criteria, such as the presentation of an annual export plan and compliance with established industry criteria.

Following earlier announcements by the Mozambique authorities this year regarding increases in export duties (which were subsequently rescinded), we appear to be seeing a shift in policy in Mozambique, with a stronger attitude taken against illegal logging, and a movement towards in-country processing and the development of a domestic market. We must now wait to see whether or not the government of Mozambique decides to uphold the MITADER ruling, since the ruling is not automatically adopted into law.

CEO of Obtala, Paul Dolan, commented,

"We will fully review the potential financial implications of these measures to the Group, but since Argento's operations in Mozambique are certified by MITADER, if they are adopted into law they should, in the long term, benefit the Group from both an operational and pricing perspective. In the short term however, until we have more clarity regarding the specific path that the government expects the timber industry to take, and any other measures that it may implement, it is clearly prudent for us to minimise risk by deploying financial resources towards expanding capacity at our production facilities in Gabon rather than Mozambique."