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Obtala Ltd: THE INVESTMENT CASE

Obtala attracts US$3mln from trio of timber investors

One of the investors, Hong Kong-based Basic Materials, has also set up a sales and marketing arrangement for Asia, Russia and the Middle East.
Obtala attracts US$3mln from trio of timber investors
INVESTMENT OVERVIEW: OBT The Big Picture
The money will pay for two new kilns and a sales and distribution centre at Maputo

Obtala Resources (LON:OBT) has received a US$3mln investment into its Mozambique forestry business from three specialist timber investors.

The deal sees the trio taking minority equity interests and off-take rights over specified forest concessions in Mozambique.

One of the investors, Hong Kong-based Basic Materials, has also set up a sales and marketing arrangement for Asia, Russia and the Middle East.

As a result of the investment, Obtala has postponed plans to spin off Argento, its forestry arm.

Some US$1.2mln has been paid already with the remainder of the US$3mln investment due by June. The money will pay for two new kilns, a sales and distribution centre at Maputo and health and community programmes. 

Kevin Milne, Obtala’s deputy chairman, said the investment would allow it to retain a strong balance sheet without having to issue new shares or give up substantial control of the forestry business.

Obtala will receive US$900,000 from Basic Materials, US$1.15mln (C$1.61mln) from George Miller, a private investor, and US$900,000 from Hong Kong-based Global Timber.

All will take stakes in special purpose vehicles (SPVs) that have been set up to manage their investments and concession rights.

Binding commercial agreements have been agreed with the SPVs over the off-take arrangements. 

Meradell Trading, a new company set up for the purpose, will pay each SPV 5% per annum of the aggregate investment and 5% of its profits into a fund to support social programmes to benefit local Mozambique communities. 

Milne added: “We now look forward to bringing forward revenues through access to new international export markets that were not previously open to us.

“More specifically, Basic Materials, an off-taker and investor, which is based in Hong Kong, Shanghai and Russia, affords a route to these valuable markets.”

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