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Presentation on the business overview of Montara
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A Subsidiary of Obtala Resources Plc Page 1
July 2012
A Subsidiary of Obtala Resources Plc Page 2
Summary of investment potential
• Long lead time activities such as acquiring initial land rights have been completed
• Significant land resources in areas which are favourable for agricultural production
• Pipeline of new projects which will substantially increase development potential through
2012 and 2013
• Montara’s forestry operation has already moved to processing raw materials into high
value, high specification finished timber products
• Montara’s agricultural operation has already demonstrated potential through trial plantings
• Experienced management team in place, with high quality support teams
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 3
Montara Continental: The Opportunity
• Income generating, scalable business models with low up-front costs
• Commercial production and revenue generation commenced
• Multiple revenue streams with short term positive cash flow
• Agricultural productivity in expanding markets
• Potential to reduce costs through centralised processing operations
• Increase profitability through vertical integration, control of supply chain
• Adding value to co-products through post processing
• Socially responsible investment opportunity
• Strong government (Local and National) support
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 4
Strategy & Objectives
Strategy
Be a profitable, leading producer and trader of food crops and forestry products in
East Africa, growing year on year over the next 5 years.
Objectives
• Develop sustainable and profitable forestry and agricultural trading & investments
• Build a leading profitable position in East African agro-forestry within 5 years
• Become a leading producer of soft commodities in East Africa
• Be a leader in transforming the East African forestry sector from raw material
supply to a manufacturer of high value products
• Maintain high standards of sustainable practices and environmental management
• Operate in a socially responsible manner that meets the needs of our
communities, employees, customers and shareholders
• Increase areas of production through acquisition and trading
• Optimise shareholder return
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 5
Land Holding Value Comparatives
Agriculture
43,662 Ha
Montara Continental
Limited
Forestry
367,618 Ha
Country Land Use CurrencyUSD/ha
SourceAverage
Argentina 2nd quality arable USD 6,000 1
Australia What AUD 1,336 1
Grazing AUD 2,830 1
Brazil Farmland R$ 2,562 1
Malaysia Greenfields USD 3,000 2
Plantation USD 25,000 2
New Zealand Arable NZD 27,639 1
Romania Farmland Euro 3,920 3
Russia Lease USD 800 1
Source 1. International Farmland Markets 2009, Savills Research
2. Asian Plantations Limited
3. DGC Asset Management, Farmland Investment Report 2012
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 6
Forestry Concessions
Concession Area (Hectare)Montara %
Interest
Angoche ** 63,653 Ha 100
Gile 50,000 Ha 100
Purpletown* 200,000 Ha 75
Pemba ** 53,965 Ha 100
TOTAL 367,618 Ha
•Under MoU Due Diligence ** Pending Ministerial Sign-off
•*** JV agreement finalising title deeds
Forestry
Agriculture
Concession Area (Hectare)Montara %
Interest
Tanzania -Songea 19,787 Ha 70
Tanzania –
Nambendo***14,000 Ha 70
Mozambique –
Namuno**9,875 Ha 100
TOTAL 43,662 Ha
Agriculture Concessions
Areas of Operation
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 7
Forestry Business Strategy
• Current production
6,000/month
• Aiming to double Q4 2012
• Major supplier to government
backed projects
• Large export potential
• Order placed by major
international buyers
• Aiming to build up buyers list
with target of 10-20
containers/month
Railway SleepersSawn Timber
ExportsHardwood Flooring
• Currently selling strip
flooring blocks locally
• Q4 2012 will be
producing high spec
solid and engineered
flooring
Montara Forestry
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 8
Forestry as an Investment
• Timber presents a two-fold opportunity for investment growth:
1.Unlike other commodities (e.g. gold), trees grow in size as well as value per unit
2.Growth can be realised through harvesting, or option to store on-stump when
demand or prices are depressed – as values appreciate over time
• Forestry investments are also underwritten by the value of underlying land assets
• Substantial added value to underdeveloped timber properties through
development of on-site infrastructure to allow for future harvesting
• Global timber prices have increased by 6% annually for over 100 years, Global
timber market is estimated to currently be worth over $600 billion/annum
• Primary drivers underpinning consumption of forest products are economic
growth, personal income, and population growth
• Forestry investments offer stable long-term growth throughout any set of
economic conditions
• Consistent long-term portfolio growth that does not share any correlation with
the performance of traditional investment assets such as equities
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 9
The different species we supply
High Value Timber, High
Margin Model
• Main products: Sawn timber,
semi-finished flooring,
sleepers, furniture
• By products: Strip flooring,
construction timber and
biomass
• More than 10 commonly
traded species including:
• 3 species of Precious
Class,
• 7 Species of 1st
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 10
Our Forestry Concessions – Mozambique
• Within well established exotic hardwood concessions
• Standing stock immediately available for harvesting
• Active and regulated industry
• Concessions located with good access to export road
and port facilities – 200km from major ports
• Concession licences allows Montara to act as a trader
• Buy from ‘simple’ domestic licences holders at
heavily discounted local market rates
• 10 commercial and a number of less commonly traded
exotic hardwood species on our concessions
• Montara implementing a re-forestation program,
supporting biodiversity redevelopment
• No elaborate management practises required
• Project considered a model for forestry in Mozambique
by local government
• Our projects are major suppliers to government backed
development projects
Forestry Concessions
Operations Head Office Central Depot
Port Facility
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 11
Montara Forestry Operations
Sawmill in operation
Sleeper TransportLogs at Gile campWooden railroad sleepers
Chamfuta Logs in GileLocal Consultation
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 12
Montara’s Nampula Timber Yard
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 13
Sawmill
Harvested timber - Gile
Sawmill facility in Angoche
Forestry Growth Strategy• Logging operational in Angoche and Gile forestry concessions
• Sawmill and machining equipment in Angoche
• 7 mobile sawmills and secondary processing equipment in Gile
• Sawn timber storage facilities constructed in Nampula
• Grow from c.300m3/month sawn timber to 400m3/month by Q4 2012
• Increase profitability by building drying ovens and post processing
• Orders and enquiries from a number of major international buyers
currently being processed – with follow on orders expected
• Evaluating local manufacturing centre and European supply markets
• Evaluating opportunities to expand sleeper supply business
• Management & Inventory Studies on Purpletown and expansion of
Gile concessions underway
• Discussions underway to increase land holding and increase
production capacity
• FSC Certification in progress to expand market opportunities
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 14
Montara Agriculture
Agriculture as an Investment
• Farmland as a safe, long-term investment asset that generates income and is
unlikely to depreciate when the value of other investments fall
• Farmland has repeatedly outperformed mainstream assets including stocks,
bonds and commercial real estate
• Primary drivers underpinning current and future farmland values are economic
growth, personal income, and population growth, all of which ultimately dictate
global demand for food, feed and fuel
• Long term - demand for agricultural commodities is therefore expected to
increase in line with growth in these key drivers
• Demand for productive land is resultant of demand for agricultural commodities,
and as demand rises, so too do values
• Increasing demand for agricultural commodities in the face of a finite stock
• Supply of productive land cannot be increased, this creates the potential for
exponential growth in value as capital competes for the most productive assetsPrincipal source DGC Asset Management Forestry Investment Report 2012
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 15
Food demand is growing
*Source: Macquarie Commodities Research May 2012
Global food production is struggling to keep up with demand
• World population growth and intensification of food
consumption as diets switch from grain to meat based (see
graphs) means food demand increases
• China is the epitome of this situation
– over the last two decades moving from importing nearly
no soybeans, to being the worlds biggest importer*
– Imports are expected to continue to grow as China has
insufficient land and water to support sufficient food
production growth*
• Agricultural productivity growth from traditional major
producers (USA, EU, Aus) is too slow to meet demand growth*
• Declining world food stocks means greater price volatility
• Use of crops for biofuels has increased demand and provides a
support for global food prices
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 16
Investment in Africa targets local demand
• Growth in demand from the emerging markets drives higher food
prices as traditional local producers cannot respond.
• Africa has some of the fastest growing populations coupled with
declining per capita food production
• Tropical Africa has unused agricultural land and good climates
offering greater agricultural productivity than temperate latitudes
• Despite favourable productivity growth conditions, food imports
continue to grow:
– Africa lacks modern farming methods and crucially infrastructure to
store and transport foodstuffs
– Limited large scale commercial enterprises but large land areas
appropriate for commercial farming
• Opportunities for low production costs and high margins
• Local support for inward investment as investment in commercial
operations supports local farmer productivity and development
and reduces food import dependency
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 17
Groundnuts March 2012: $1,900/tonne167% price increase
Sunflower oil March 2012: $1,444/tonne155% price increase
Soya Beans March 2012: $512/tonne190% price increase
Long term global pricing follows
increasing demand
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 18
Our farms will focus on oilseed production
Groundnuts, Sunflower, Sesame
• Oil extraction for crops uses similar processes – press and filter
• Crops produce valuable and stable co-products (store and sell at best prices)
• Co-products enhance cash flow
• No elaborate management practises
• Little irrigation required and grow well in soils found on Montara’s farms
• Some crops are Nitrogen fixing and enhance the soil characteristics
• Tanzania is short vegetable oil – producing c. 90,000 metric tonnes (te)/annum
of vegetable oil, around half of what it is conservatively consumed (FAO 2008)
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 19
Montara Agriculture: Tanzania
• Songea Farm – 19,787 hectares in
Southern Highlands of Tanzania
• In addition JV for 14,000Ha on the
Mozambique border under application
• 99 - year Title Deed Leases
• Majority interest (70:30) in operating
company for both farms
• Multiple perennial rivers on properties
• High to moderate rainfall
• Fertile soils
• Two crops per annum with irrigation
• Local village and administration support
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
Songea Farm
Port Facility
A Subsidiary of Obtala Resources Plc Page 20
85 Ha “Proof of Concept” Trial Farming
• Bush Clearing completed Aug - Nov 2011
• Ground preparation Nov-Dec 2011
• Planting Jan-Feb 2012
• Crops planted: Sunflower, Groundnut,
Sesame, Soya, Canola, Cassava
• Harvesting April 2012 onwards
• Local off-take for seeds being finalised
• Can expect 2.5–3.0 tonnes per crop type
per hectare from 1 harvest per annum as
soils develop
• Small scale oil seed press and filter
ordered
• Irrigation will double the harvest per
annum
Land clearing in Tanzania
Songea Farm
Land preparation
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 21
Soya seed plantingLutukira field camp
Sesame seed planting
Land contouring
Land preparation at Songea Farm
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 22
Large scale crop trials on Songea (2012)
Sunflower
Soya
Soya
CanolaSunflower
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 23
c.100km2
Agriculture
Mozambique - Agriculture
• 9,875 Ha agricultural concession in Namuno District
• Located within well known groundnut growing region
• Virgin farm land
• 280km east of the port facility at Pemba
• Flat lying topography
• Located along the perennial Lurio River
• Project well supported by district administration and
local communities
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 24
• We strive to be an agent of change for the better in the areas we operate.
• Our project development activities raise living standards and economic wellbeing
in the areas around our operations.
• We are committed to operating within high standards of sustainability in all our
operations, equally valuing social, economic and environmental impacts. This
means that we:
• Obey the laws of the countries in which we operate, and go beyond them
whenever ethical judgment requires.
• Comply with independently produced environmental management plans
• Strive to gain relevant external sustainability accreditation in the areas we
operate
• Invest in community development projects such as schools and civic
infrastructure projects.
• Recruit and train local people for long term skilled employment
Our sustainability commitment
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 25
FAIRTRADE “Farm to Market”
• Adopt socially responsible and market-based approach
• Helps producers in developing countries and promotes sustainability
• Improved social and environmental standards
• Provide market access to otherwise marginalized producers
• Helping producers develop knowledge, skills and resources to improve their lives
Corporate Social Responsibility
FOREST STEWARDSHIP COUNCIL
• Mozambique a new member of the FSC
• Independent, non-governmental, non-profit organization established to promote
the responsible management of the world’s forests
• Initiative to promote responsible forest management worldwide
• FSC is a certification system providing internationally recognized standard setting,
trademark assurance and accreditation services
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 26
• Focus on groundnuts, sunflower & sustainable
hardwood forestry
• Near term focused growth through increased
land holding and partnership base
• Establishing processing and storage operations
− Capture value addition
• Expand into neighbouring countries
• Expand to trading
• Build export markets
• Acquisition and investment into existing
operational projects
• Evaluate strategic options:
− List/IPO
− Sell
− Continue asset development
− Partnerships
Groundnuts
Sunflower
Groundnuts
Sunflower
Timber
Timber
Regional
Growth
Targets
Export Markets
Montara’s Strategy For Growth
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 27
Summary of investment potential
• Long lead time activities such as acquiring initial land rights have been completed
• Significant land resources in areas which are favourable for agricultural production
• Pipeline of new projects which will substantially increase development potential through
2012 and 2013
• Montara’s forestry operation has already moved to processing raw materials into high
value, high specification finished timber products
• Montara’s agricultural operation has already demonstrated potential through trial plantings
• Experienced management team in place, with high quality support teams
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 28
Management Team
Grahame Vetch (Manager: Agriculture), is an agricultural economist with over 30 years of
large-scale farm management experience. He was previously the Country Director for
Dominion Farms Ltd; a 17,000-acre start-up irrigated rice and fish farm in Kenya. Grahame
graduated from the Royal Agricultural College, UK in Farm Management and is a fluent
Swahili speaker
Patrick Green (Manager: Forestry) has extensive experience in the field of Forestry, having
been involved in several ventures in Africa and the Baltic states, ranging from the initial
infrastructure set-up to the conclusion of the project. Patrick also brings considerable
experience in the marketing field, being able to find an appropriate client base for a
particularly product, gained from working for several years for one of the worlds’ biggest
producers of wooden garden furniture
Dominic Fava (Manager: Sales) has over 10 years Sales and Marketing experience in the
natural resources sector, which has involved identification and management of strategic
customers, development of markets for new products and supply chain management.
Previous experience has also included evaluation of agribusiness investment opportunities,
market analyses and set-up of new agribusiness operations in East Africa
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 29
Appendix
Country Facts
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 30
Republic of Mozambique
• Independence from Portuguese colonial rule in 1975
• Civil war 1977 – 1992
• Multi-party democracy under the 1990 constitution
• SADC member, Commonwealth State
• 2002-2010, average annual GDP growth 7% (Worldbank)
• Population – 24 million (2010 WorldBank)
• 88% of arable land still uncultivated
• Tropical climate with two rainy seasons
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 31
Republic of Tanzania
Page 31
• Independence gained 1961
• Multi-party democracy
• SADC and Commonwealth member
• 2010 GDP growth 7% (Worldbank 2010)
• Population – 45 million (Worldbank 2010)
• Years of failed agricultural policies
• Agriculture accounts for 26.5% of the GDP
• Cultivated land only accounts for 10% of the total
land area of Tanzania
• Food and cash crops account for 70% of rural incomes
• Agriculture at present dependent on hand tools (only 10% of
operations use motorised power (tractors e.g.); 20% use draft
animals; 70% manual)
• Recent economic reforms have accelerated economic growth but
slow in agriculture sector
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 32
Mtwara Development Corridor (MDC)
• A Spatial Development Initiative (SDI)
• Rail links planned to cross Southern
Tanzania
• Development of the Mtwara port as a
second major port facility, after Dar Es
Salaam
• The seaport of Mtwara on the Indian
Ocean to provide a gateway for
international trade
• Create an economic growth zone of trans-
border trade and investment linking
Tanzania, Malawi, Mozambique and
Zambia
• The MDC project in Tanzanian is being
steered and promoted by the National
Development Corporation of Tanzania
(NDC)1-Mwtara Port, 2-Dar es SalaamMontara Farms in Tanzania
1
2
Tanzania
Mozambique
Zambia
Malawi
Introduction : Forestry : Agriculture : Sustainability : Summary : Background
A Subsidiary of Obtala Resources Plc Page 33
• Email enquiries:
• Business address:
2nd Floor, Martin House, 26-30 Old Church Street, London SW3 5BY
• Telephone enquiries:
• +44 (0) 20 7099 1940
• Fax
• +44 (0) 20 7351 5600
Contacts
Introduction : Forestry : Agriculture : Sustainability : Summary : Background