(AGTA) Agriterra

Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector: Agriculture

7 February 2012

Agriterra Ltd ('Agriterra' or 'the Company')

Operations Update from Cattle Ranching Division

Agriterra Ltd, the AIM listed pan African agricultural company, is pleased to announce that Mozbife Ltd, its 100% owned beef ranching operations in Mozambique, continues to perform well, as the Company fulfils its strategy of becoming a leading beef producer in Southern Africa.

Overview:

·    Aggressive expansion strategy brings total herd size to 3,750 - on course to hit 10,000 head by 2015

·    Prized Beefmaster cattle breeding herd at Mavonde  exceeds 1,000 - achieving average sales of $1,100 per carcass

·    Dam nearing completion at Mavonde - 48 billion litre dam will increase capacity from 1.5 to 7 head per hectare

·    Increase in capacity at Dombe Ranch continues through land clearance and  improvement in infrastructure

·    Successful Beefmaster/Brahman cross breeding programme at Dombe

·    Rolling head capacity at Vanduzi feedlot doubled to approximately 2,000 head every three months - sales of over 200 carcasses per month at an average price of U$835 per carcass

·    Abattoir at Chimoio on track to commence operations in August 2012

·    Butchers shops to open to increase margins achieved on beef operations and complete  'field to fork' strategy

Euan Kay, Agriterra Executive Director said, "The aggressive expansion strategy which we have initiated at our beef operations in Mozambique continues to yield results for the Company and we are now generating significant revenues from cattle sales from the Vanduzi feedlot.  This ramp up in operations will continue during 2012, as we focus on the continued enlargement of our Beefmaster breeding herd at Mavonde, where we are achieving average sale prices of $1,100.  In addition, the cross-breeding programme at Dombe continues to bear fruit, increasing our total herd size to in excess of 3,750.  The continued development of our Vanduzi feedlot and abattoir at Chimoio, in addition to establishing butchers' shops, are the key final elements in our vertically integrated beef business, enabling Mozbife to benefit from the full uplift in value for slaughtered and butchered products.  With this in mind, as we move into the 2012/2013 financial year, I am confident that Mozbife will contribute a further high margin revenue stream, in addition to our maize and cocoa operations.  These, together with the palm oil operations which we are establishing in Sierra Leone, will substantially enhance Agriterra's financial performance and value accretion potential moving forward."

Mozbife continues to successfully develop its vertically integrated beef operations in Mozambique which consist of the 1,000 hectare Mavonde Stud Ranch, the 15,000 hectare Dombe Ranch, the Vanduzi Feedlot and the 4,000 head per month capacity Chimoio Abattoir currently under construction.  The total Mozambique herd size now stands at 3,750 head, the increase being achieved through successful breeding at the Company's ranches and importing prime Beefmaster stock from South Africa.  The Company remains on target to have a total herd of 5,000 head by the end of 2012 and 10,000 by 2015.

The Mavonde Ranch

The 1,000 hectare Mavonde Stud Ranch continues to expand both in terms of cleared land and herd size.  Current herd size exceeds 1,000 Beefmaster cattle, which are prized for their top weight gaining ability and adaptability to hot climates, following the recent arrival of 198 Beefmaster cows and 15 bulls from South Africa.  A further 400 cows have also been purchased with delivery expected this quarter.  The construction of a 48 billion litre dam is near completion with capacity to irrigate in excess of 4,000 hectares and provide 132kV of hydroelectric power for the irrigation pumps.  With full irrigation, the head to hectare ratio at Mavonde will be increased from 1.5 to 7 head per hectare.  Furthermore, negotiations are underway to acquire additional land to enlarge the Mavonde ranch to 5,000 hectares.  Current price per carcass sold from the ranch is in the region of US$1,100.

The Dombe Ranch

The 15,000 hectare Dombe Ranch now has in the region of 1,500 head.  The herd is principally Beefmaster augmented with native cattle, such as Brahman, as part of a cross-breeding programme to create a bloodline with good meat yields and high disease resistance.  Investment in the last three months has focussed on infrastructure and land clearance, including the construction of paddocks, improving road access, erecting 40km of fencing, and the construction of staff head-quarters and accommodation.  Furthermore, seven boreholes have been drilled and fitted with pumps, tanks and drinking troughs, with an additional seven planned.  Holes are also being drilled for the local community to provide clean drinking water for the local residents and their livestock.  A lease on the land, DUAT, granted by Mozambican Government, runs until 2061.

The Vanduzi Feedlot

The Vanduzi Feedlot has an eight pen line with rolling capacity of approximately 1,000 head every three months.  An additional eight pen line has recently been constructed to double the capacity.  Sales have reached over 200 carcasses per month and slaughter dress out weight percentage increases have been between 58% and 63% over the three month period, whilst an average price of U$835 per carcass has been achieved to date.  1,050 hectares of land for pasture and production of feed for the feeding pens has been secured following the recent purchase of an adjoining 350 hectare farm.  Importantly, the Company is ramping up its local buying of cattle to increase the through put at the feedlot and awareness is building amongst the local community.  

The Vanduzi Feedlot has good synergies with other companies in the group, such as using bran, the by-product from the nearby DECA maize processing facility, as a feed supplement.

The Chimoio Abattoir

Construction of the abattoir and office building at Chimoio is complete.  The Company is targeting a 4,000 head per month processing rate, augmented using native animals from the local community, including goats.  The internal processing lines have been ordered and are due to be shipped in March 2012 with operations due to commence in August 2012.  There are also plans to open a number of butchers shops to further increase the margins on the beef operations and fulfil the Company's strategy of becoming a 'field to fork' producer.

** ENDS **

For further information please visit www.agriterra-ltd.com or contact:

Notes

Agriterra Ltd is an AIM listed agricultural company with four divisions: beef, maize, cocoa and palm oil.  Its cattle ranching business, Mozbife, a land holding of over 16,000 hectares, a feedlot and a 4,000 head per month abattoir which is under construction.  In addition to selling meat from its own herds, throughput for the feedlot and abattoir will be supplemented using cattle bought in from local communities.

The Company's maize buying and milling operations, DECA and Compagri, are located in Chimoio and Tete in central and north-western Mozambique respectively.  These collect maize from circa 350,000 farmers using the Company's own vehicle fleet, process it into mealie meal, the African staple, and then sell it back to the local market, into supermarkets and to the World Food Programme.  Combined sales for the year ended 31 May 2011 totalled 28,822 tonnes maize meal generating revenue of US$13.6 million. 

Agriterra's cocoa business is based in Sierra Leone, through its 100% subsidiary TFL, which is currently a buying and trading operation, but provides an ideal conduit to branch out into cocoa production in West Africa.  Its strategy is to establish itself as a secure, sustainable and traceable source of supply to meet the requirements of the major cocoa consumers who are placing increased emphasis in this area.

The Company has expanded its portfolio of agricultural products through the addition of palm oil, and holds a lease over approximately 45,000 hectares of brownfield agricultural land in an area suitable for palm oil production in the Pujehun District in the Southern Province of Sierra Leone.  This area of Sierra Leone, which is close to the Liberian border, receives one the highest levels of rainfall in Sierra Leone, which in itself, receives some of the highest rainfall globally.  In addition, the lease area is located on the equatorial belt, which is the most favourable geographical location for palm oil production.