Obtala Resources (LON:OBT) outlined plans to increase its timber land holdings by 13% in Mozambique through buying two new licences and revealed it plans to divest its forestry division there.
The two 50 year leases, subject to government approval, total 35,000 hectares and will bring the group's total area in the country to 314,965 hectares.
Obtala has hired Honour Capital, a specialist forestry advisory and management company, to carry out a valuation review on the new blocks.
Last summer, the group attributed a NPV (net present value) to Obtala's timber business of US$161mln at a 12% discount based on a 10 year cash flow model.
Obtala chairman Francesco Scolaro said: "We are dedicated to making the timber operations a great success in Mozambique where we have built a highly efficient operational platform over the past few years.
"The additional land holdings provide security that we can achieve higher production levels. In tandem, we are making a capital injection to increase and improve our operational capacity and offer a wider range of timber products to the growing local market.
He added: "The board of Obtala has also agreed a strategy to divest the forestry division thereby recognising its true value and to grow the business in Mozambique more expeditiously. We will provide further updates to shareholders in due course."
The logging season started again in April, said Obtala, and the group is supplying processed timber to Mozambican-based construction companies for the rapidly expanding housing market, which is forecast to grow over the next few years; therefore, the firm does not plan to export any timber this year.
Negotiations continue with respect to the potential participation of the timber opportunity in Brazil and contract logging in Mozambique, Obtala added.