Mozambique Agreement & Operations recommencement

RNS Number : 7049G

Woodbois Limited

19 March 2020

 

19 March 2020

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

Woodbois Limited

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

(AIM: WBI)

· Recommencement of operations in Mozambique

· Three year management agreement with no cash requirement from Woodbois

Woodbois, the African focused forestry and timber trading company, is pleased to announce the signing of a management agreement (the "Agreement") with Future Earth II LLC ("Future Earth"), a US company with substantial concessions in Mozambique, creating a relationship under which Future Earth will fund, manage and operate Woodbois' Mozambique concessions, employees and equipment, in order to produce sawn lumber and veneers to be sold by Future Earth on a profit share basis.

The Woodbois concessions have been on a care and maintenance basis for over two years, partly due to an industry export ban in 2018 and due to the quantum of investment required to restart and to enlarge the operations to be able to earn an acceptable return on capital comparable to the Group's other business segments. Management have been seeking the optimum way to recommence operations and believe the agreement with Future Earth provides material benefits to both parties, not least from the economies of scale arising from Woodbois' approximately 300,000 hectares and Future Earth's approximately 620,000 hectares of concessions.

Since 2006, Future Earth has built sustainable industry programmes in Mozambique. EAFP, its local subsidiary, processes timber into lumber and finished products through its sawmill and veneer manufacturing facilities in Mozambique. By operating these facilities in-country rather than shipping semi-finished timbers, the business captures a greater portion of the value chain locally, creating more employment and reducing the carbon footprint of finished goods. The business has multiple times received the Presidential Award for "Best Exporter of Value-added Timber Products" as well as the award for "Best Rural Industrialization Project in Mozambique".

The Agreement is for 3 years, with optional breaks after 12 and 24 months at Future Earth's discretion.  All costs during the term of the Agreement will be funded by Future Earth with a 50:50 post-cost profit share from products sold from Woodbois' concessions. Should Future Earth proceed with years 2 and 3 they will pre-pay Woodbois $1 million each year, to be deducted from the Woodbois share of profits for each respective year. Profits will be distributed quarterly.

Woodbois CEO Paul Dolan said: "Woodbois and Future Earth share strong sustainability values and I'm delighted to announce this agreement which I believe will prove beneficial to both parties. The agreement will allow Woodbois to start realising value from our substantial assets in Mozambique without diluting management focus or financial resources, which can now be fully concentrated on bringing our operations in Gabon to optimal capacity and on our international timber trading business. I hope that this signals the start of a long and fruitful relationship between our respective companies as well as our hardworking and dedicated teams on the ground in Mozambique."

Lenny Shibley, industry veteran and Chief Operating Officer of Future Earth, said: "In 30 years in the industry, I have seen no better opportunity to deliver economic value, coupled with step-change social uplift for local communities, than through the environmentally responsible use of Mozambique's timber resource. We very much look forward to further developing our relationship with Woodbois as we add the management of their timber resource to our operations."

Enquiries:

Woodbois Limited

Paul Dolan - CEO

www.woodbois.com

[phone]

Arden Partners Plc (Nominated adviser and broker)

Richard Johnson

[phone]

 

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