Obtala Resources, a natural resource investment and development company, announced Monday that its agricultural subsidiary, Montara Continental, has entered into an exclusive buy and sell agreement with a European-based vegetable and fruit trading company.
As such, the trading company now has the exclusive rights to sell Obtala's products in the European market, except for the UK.
It will increase its purchased quantity from an initial 1,600 tonnes of mixed sundried tomato products per year to 5,000 tonnes of mixed products per year by the end 2014.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The agreement is for a renewable five-year term with prices up to $5,000 per tonne for certain crop types. The trading company has additional crop requirements which Obtala will work to fulfil, and it will evaluate the merits of establishing in-country processing to provide for increased revenues through product value adding, it said.
Francesco Scolaro, Chairman of Obtala, commented: "The [...] agreement provides a guaranteed market and importantly a significant revenue stream guaranteed over the next five years for our produce. The partnership with the purchaser will allow us to expand our activities and strategically plan our cropping cycles to feed into their expanding demand.
"We will target those crops that allow us to optimise our margins per hectare and will also seek to achieve value added production by establishing an in-country processing facility to tie in with the requirements of our purchasing partner.
"We continue to be extremely optimistic with our development plans to re-position the company as a self-sustainable, profitable, African focused agribusiness and timber trading company with our current land holdings providing the platform for the development of a vertically integrated company. Our group of companies remain debt free and continue moving to cash generating, highly attractive margin producing businesses."
Obtala also said that groundwork has continued on the recently acquired Magole Farm near Morogoro in Tanzania, where a hyrogeology survey has been completed with water well drilling expected to begin after the current rains finish.
A tomato washing and inspection line is being manufactured in South Africa and expected on-site towards the end of May.
The share price rose 6.78% to 7.88p by 08:45 Monday.
NR
