Equatorial Palm Oil PLC (LON:PAL) (EPO) said the joint venture agreement with Indian conglomerate, the Siva Group, has been fully implemented. The deal was initially flagged in September 2010.
The JV company has now received US$22.5 million in cash from Biopalm Energy, a wholly-owned subsidiary of Siva Ventures. EPO itself is investing US$7.5 million into the JV.
The deal also includes a US$30m loan facility to accelerate the development of EPO’s palm oil operations in Liberia.
The 50:50 JV controls EPO’s entire 169,000 hectare land position at Palm Bay, Butaw and River Cess in Liberia.
BioPalm is already the EPO’s largest shareholder with a 29 percent stake in the company, after the Indian investor subscribed for £5 million in new equity (33.3m shares) back in May 2010.
In Liberia, EPO plans to develop 50,000 hectares in oil palm plantations within 10 years, the ‘strategic plan’ targets a 250,000 tonnes per annum (tpa) crude palm oil (CPO) operation.
Initial CPO production is slated for Q4 2010, and the first palm oil processing mill is already under construction.
EPO joined the AIM market in February following a £6.5 million IPO. The company aim is to become a sustainable, low-cost producer of crude palm oil in Africa through the reactivation and development of existing plantations and its agricultural land bank in Liberia.
According to EPO, palm oil is the most important and widely produced edible oil in the world, and demand is projected to grow at 5-6 percent per annum over the next five years.
Palm oil is to food production what iron ore is to heavy industry. It is an ingredient found in everything from Galaxy chocolate to Goodfella’s pizza. It even crops up in Persil soap powder. And in common with many basic minerals and hard commodities, demand for palm oil is buoyant and expanding all the time.
Liberia is a politically stable country and is becoming a fast growing investment destination for multi-national corporations, EPO said. Furthermore, the oil palm is indigenous to West Africa and cultivating it in this region avoids the adverse environmental impact the plant has on countries across Southeast Asia, where large areas are affected by a significantly lowered water table as a result of oil palm growing.
EPO believes the application of South-East Asian techniques and the latest seed genetics may enable Africa to become a key player in the world palm oil market again.