Agriterra : Corporate Update

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

23 June 2016

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

Corporate Update

Agriterra, the AIM quoted Africa focussed agricultural company announces that, due to the well documented political unrest in the area around its cattle ranching operations in Central Mozambique, the Company has begun destocking its cattle in order to safeguard and crystallise its considerable livestock capital.

As announced on 21 April 2016, the political and economic environment in Mozambique has deteriorated during the course of 2016 and local Renamo militias are now entrenched in some rural areas in the Manica province, where the Company's three farms are located. The decision has been made to destock these farms in order to protect the value of the herd during a period in which there is an increased possibility of livestock theft and an increased risk in the movement of people and goods in the country.

The Company's three farms, Mavonde, Dombe and Inhazonia, currently hold approximately 4,000 head of cattle, with approximately 2,500 further head of cattle currently in the Company's feedlot facility at Vanduzi. Over the course of the next 10 months the cattle will be delivered to the Vanduzi feedlot for fattening and subsequent slaughter. The feedlot, which the Company will continue to operate, enables Agriterra to produce a well finished, high quality animal for slaughter ensuring premium grade meat is available to supply its butcheries and wholesale operations. Once the farms have been completely destocked, which is anticipated to be by April 2017, the Vanduzi feedlot will exclusively process locally reared animals. The board is confident that suitable quality animals are available in the local market for these purposes, having seen a growth in local commercial cattle farming in recent times, in part as a result of the market generated by the Company's feedlot and abattoir infrastructure.

The Board believes the move to destock the farms will also ease pressure on the Company's operating finances as the significant maintenance and development which were being incurred on an ongoing basis during the ranches' development phase, will now be curtailed. As outlined in the financial results released on 20 November 2015, revenues within the beef division now cover all of the cash operating costs of Agriterra's retail, abattoir and feedlot operations. Once the farms are destocked, and subject to beef sales volumes increasing in line with management forecasts, the Board anticipates that the beef division will be generating positive operating cash flows.

The Company is currently evaluating several opportunities to maximise the value of the ranches including appraising leasing opportunities in order to maintain the farm assets while also generating revenues in the short to medium term. In the longer term, the Board is hopeful that the political situation in Mozambique will stabilise permitting the farms to be redeveloped as cattle ranching farms. Further announcements will be made in due course as appropriate.

**ENDS**

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