Obtala Resources (LON:OBT) is seeking an independent stock market listing for its timber operations that it hopes will highlight the hidden value of this particular asset.
The division, one of the largest concession holders in northern Mozambique, currently sits within a portfolio spanning farming, food and processing.
The spin-out onto the junior AIM market is expected to take place in the first quarter of next year.
Work carried out by Honour Capital, a specialist forestry advisory and management company, highlighted the huge potential of Obtala’s timber holdings.
It ascribed a net present value to the timber business of US$161mln, at a 12% discount and using a 10-year cash flow model. The 2014 study was based on the company owning around 280,000 hectares.
However it is close to adding a further 35,000 hectares to that portfolio.
It is envisaged the company will require capital investment of US$15mln and will incur operational costs of US$72mln over ten years to achieve sales of around US$395mln.
The costs may look big and scary; however, Obtala reckons the upfront capex will be relatively modest US$300,000, with subsequent spending paid out of sales revenues.
Deputy chairman Kevin Milne said: "Over the last five years we have successfully created one of the largest sustainable natural forestry concession holders and operators in northern Mozambique.
“This has been a great achievement and an extremely valuable asset has been developed.
“The board has reviewed how best to crystallise and maximise the inherent value of this business for the company and our shareholders.
“Placing these assets in a newly formed and listed entity with its own board will allow for the required focus on the execution of the growth plans, the expansion and further development of its supply chain and create a highly attractive and relevant opportunity for new investors."