Forestry Update - Award of CPI

RNS Number : 5441N

Obtala Limited

26 October 2016

 

26 Oct 2016

Obtala Limited

("Obtala", the "Group" or the "Company")

(AIM: OBT)

Forestry Update - Award of CPI

Highlights

·     Forestry subsidiary awarded Centro De Promocao de Investments (Investment Promotion Centre - CPI) status within Mozambique, conditional on $3 million phased investment plan

·     Exemption from VAT and customs duties chargeable on goods/machinery needed for production expansion for a five year period

·     IRPC (Corporation Tax) offsets for 5 fiscal years of up to 10% inward investment with further available allowances in those fiscal years relating to local training costs, public use building construction and cultural heritage protection

·     Freedom for repatriation of profits outside of Mozambique

·     Equitable compensation rights against assets being expropriated and arbitration through World Bank's International Centre for Settlement of Investment Disputes and/or ICC.

Obtala Limited, the African focused agricultural and forestry company, is pleased to announce that its forestry subsidiary, Argento Mozambique Lda ("Argento"), has been awarded CPI status by the Mozambican authorities entitling it to various tax benefits and protections in return for inward investment from the Company's subsidiary Argento Continental Corporation.

CPI is a government institution with a mandate to attract and facilitate the establishment of private domestic and foreign direct investment in Mozambique.  Companies operating under CPI status also have the advantage of non-tax benefits including insurance services specifically to offset investment risk, VAT exemption on domestic acquisitions, and importantly, legal protections and compensation against expropriation with international bodies.

In order to satisfy qualification for CPI status Argento is required, amongst other things, to implement a phased investment plan of $3m over a 5 year period.  If this investment were not made, CPI status would be revoked rather than this amount constituting a debt. 

This award covers all operations within Mozambique and allows Argento to apply for Industrial Free Zone (IFZ) status with Mozambique's Office for Accelerated Development Economic Areas (Gazeda).  Gazeda established a duty free zone located in the district of Nacala, Nampula province in 2007 which services the export of our timber to international markets via Nacala Port.  Achieving IFZ status in Nacala would lead to further enhanced tax incentives.

The Company is in continued talks with investors regarding inward investment via the previously announced Argento Preference Share.  Investor due diligence trips are scheduled to our African operations in November with regard to this matter. 

Miles Pelham, Chairman of Obtala commented "The award of CPI status by the Mozambican authorities is a highly significant and welcome development as we seek to bolster our production capabilities within the country.  We anticipate that the forestry division will drive revenue expansion and as such CPI tax benefits should have material future impact on our bottom line.  The exemption from VAT will reduce the level of Capex required to bring our Forestry assets into full production.

This award underlines our already strong commitment to Mozambique.  As well as providing inward investment we anticipate that our activities will have significant positive social impact through job creation, training and upskilling of local labour and a sustainable approach to forestry operations."

More details on the Special Economic Zones and their benefits can be found on the Gazeda website at:

http://www.gazeda.gov.mz/m/index.php?option=com_content&view=article&id=127&Itemid=144&lang=en&limitstart=1

Obtala Resources Miles Pelham - Chairman Paul Dolan - CEO www.obtala.com	[phone]
ZAI Corporate Finance Limited (Nomad)                 Ray Zimmerman/ Peter Trevelyan-Clark / John Treacy	[phone]
Brandon Hill Capital  (Broker)      Jonathan Evans	[phone]

This announcement contains information that qualified or may have qualified as inside information for the purposes of article 7 of the Market Abuse Regulation (EU) No. 596/2014.

 

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