epo presentation 030910
TRANSCRIPT
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Company Presentation
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Mission Statement
To be a low-cost producer of sustainable crude palm oil in Africa through thereactivation and development of its plantations and agricultural land position in
Liberia
PRESENTATION TEAM
Michael Frayne Executive Chairman
Equatorial Palm Oil (EPIC: PAL)
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Key Data
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The Siva Group
DirectorsJP Morgan
Henderson
Mirabaud
Blackrock
Other
43.2%
29%
12.3%
6.8%2.9%2.6%
3.2%
Significant Shareholders
Share Price 11.5p
Market: Ticker AIM:PAL
Market Capitalisation 13.2 million
Cash 6.5 million (No Debt)
Ordinary Shares 114.75 million
NOMAD & Joint Broker Shore Capital
Joint Broker Mirabaud Securities
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Investment Overview
Company offers early cash flow with high capital growth
Land position of c.169,000 hectares suitable for sustainable crude palm oil (CPO)
10 year target of over 50,000 hectares of new plantings producing 250,000 tpa CPOincreasing to over 100,000 hectares
Liberia as a newly politically stable country is a fast growing investment destination formulti-national corporations (Arcelor Mittal, Sime Darby)
Highly favourable valuation compared to listed peer group
Recently secured 5 million investment by Indian conglomerate The Siva Group
Highly experienced management with proven track record in oil palm developments
Palm oil is the most widely produced edible oil in the world, with demand increasing
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Board & Senior Management
Michael Frayne
Executive Chairman
15 years of experience in the resources sector, successfully establishing several UK and Australianlisted companies - founding director of Asia Energy plc
Peter BaylissManaging Director
Over 20 years of experience in the oil palm sector, including 8 years in PNG with New Britain Palm OilDevelopment Ltd. Significant experience in large scale plantation development, particularly inIndonesia with SA SIPEF NV
Geoff Brown
Plantations Director
Former Chairman of New Britain Palm Oil & Plantations Director of Harrisons & Crosfield plc. Over 40years of experience in plantation management, including 10+ in Malaysia and 20+ in Indonesia asManaging Director of P.T. London Sumatra Indonesia
Joseph Jaoudi
Non Executive Director
A qualified engineer who owned and operated the Palm Bay plantation in Liberia for over 10 years. He
also managed other significant businesses in Liberia and USA including biomass power generation
Anthony Samaha
Non Executive Director
Chartered accountant ex Ernst & Young, experience in due diligence, capital raising, valuations, andmergers and acquisitions. Anthony is a director of AIM listed, Altona Energy plc
Tim Daniel
Chief Financial Officer
Qualified Chartered Accountant ex KPMG. Tim subsequently worked as an investment analyst with aLondon-based hedge fund, focusing on the high yield bond market
Alan YancyManager Corporate Affairs
30 years extensive experience of Liberian business and politics and held senior positions in theLiberian Sugar Corporation for 7 years
Gilbert Netto
Group ManagerOver 30 years experience in the oil palm sector. Experienced in all aspects of the oil palm productioncycle from the planning and establishment of new estates through to the management of matureplantings particularly in West Africa
The right team in place to manage growth
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Palm Oil Products
Brand Manufacturer
Warburtons Warburtons
Hovis Premier Foods
Cadbury Dairy Milk Cadbury
Kingsmill ABF
Persil Unilever
Flora Spreads Unilever
Galaxy Mars
Youngs Frozen Fish Youngs
Kit Kat Nestle
Mr Kipling Cakes Premier Foods
Wrigleys Extra Wrigley
Birds Eye Poultry Birds Eye
Maltesers Mars
Mars Mars
Kelloggs Special K Kelloggs
Ginsters Ginsters
McVities Digestive United Biscuits
Comfort Unilever
Goodfellas Pizza Northern Foods
Top Selling Products Containing Palm Oil
7Essential to the food industry, food and consumer goods
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Project Locations
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Plantations have excellent access to infrastructure and ports
Coastal location close to ports and good infrastructure
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Liberia Ideally Situated
Substantial land position of 169,000 hectares highly suitable for sustainabledevelopment of oil palm plantations
New stable political regime under Ellen Johnson Sirleaf (US backed)
Significant private direct investments over the past 24 months include: Arcelor Mittal US$1.5bn iron ore mine development
Firestone Rubber renewal of rubber estate concessions with expansion investment
China Union 25 year US$2.6bn mineral development agreement
Sime Darby 63 year oil palm/rubber agreement with development plan for 220,000ha
Golden Agri-Resources Ltd announces large scale oil palm investment plans
2010 GDP forecasted to grow at 11.2%; large agricultural sector
Political risk remains but international initiatives in place to mitigate
Developed in tandem with active out growers programme; generating local support
...China and the United States are investing in Liberia in a big way... We cannot wait until
everything is perfect and then decide to invest. By then it will be too late.Ahmad Zubir Murshid, Chief Executive of Sime Darby (November 2009)
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Initial 12 Months
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Reactivation of 3,000 hectares of existing plantations at Palm Bay
Placed initial order of 220,000 oil palm seeds with Unipalm the seeds have been specificallycultivated for the West African palm
First palm oil mill (5tph) ordered from Malaysia for the Palm Bay Plantation delivered in Julyand currently under construction
Expand workforce - current workforce of circa. 200 people to implement strategy 5 million finance from The Siva Group secured to accelerate development programme
Establish nurseries at Palm Bay and Butaw
Prepare first 1,200 hectares of land for planting 600 ha each at Palm Bay and Butaw
Commission palm oil mill and sales of CPO
Creating value through rapid progress
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Palm Oil Processing Mill
First palm oil processing mill from Modipalm Engineering in Malaysia
Now on site
Mill being constructed and commissioned under turnkey contract with manufacturer
CPO production from fruit harvested at Palm Bay
Throughput of five tonnes of fresh fruit bunches per hour
Modipalm has more than 30 years experience manufacturing plant and machinery,equipment and parts for palm oil mills
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Mill Construction
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Seed Nursery
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Social Contribution
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Development Milestones
12-24 Month Targets
Field plant first oil palms out of nurseries
Expand nurseries
Commence operations at River Cess, the third plantation site
Further land preparation for field planting
Continual harvesting from reactivation
Further develop associated & downstream infrastructure
Detailed surveys of expansion areas
Commence out grower programme
15Strategic targets: 50,000 hectares of oil palm planted within 10 years & CPO production of
250,000 tpa increasing to 100,000 ha planted - (current palm oil price $US900 CIF Rotterdam)
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Sustainability
Estimated that only 3% of the worlds palm oil production is sustainable
Committed to developing projects in a sustainable manner and is a member ofRoundtable on Sustainable Palm Oil
Existing plantations are based on previously logged land so will not causedegradation to primary forested areas in Liberia.
Several large companies, including Sainsburys and Unilever, are now looking todevelop sustainable palm oil and are active with RSPO
It is increasingly difficult to acquire arable plantation land in Asia and thus it is imperativethat new frontiers be sought to meet increasing demand.
Chief Executive of Sime Darby, 2009
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Peer Comparisons
17Potential re-rating considering peer group valuations?
Source: Mirabaud Securities LLP & London Stock Exchange
Name Ticker Mkt CapUS$m
EVUS$m
Plantation Locations MatureHectares
EV/haUS$/ha
FFB Prod.tonnes
FFB yieldtonne/ha
Otherassets
Production
New Britain PalmOil
NBPO LN 1,329.8 1,398.1 Papua New Guinea 66,304 21,087 1,525,150 23.0 Refinery
REA Holdings RE/LN 318.5 393.3 Indonesia 18,736 20,994 490,178 26.2 Coal
Anglo-EasternPlantations
AEP LN 348.5 321.4 Indonesia/ Malaysia 28,133 11,426 506,417 18.0 Rubber
MP Evans Group MPE LN 306.6 292.8 Indonesia 15,368 19,054 258,740 16.8 Beef,rubber
NarboroughPlantations
NBP LN 12.4 9.0 Malaysia 555 16,218 12,835 23.1 -
Weighted Average 18,705
Development DevelopmentHectares
Asian Plantations PALM LN 66.6 94.8 Malaysia 15,645 6,060 - - -
Equatorial Palm Oil PAL LN 20.5 11.5 Liberia 168,947 68 - - -
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Share Price Chart
26.02.10Price atlisting17.5p
26.02.10First DayofDealingson AIM
04.03.10JP Morgandiscloses15% holding
23.03.10Commencementof Reactivation atPalm Bay andinitial seedsorder
13.05.10BlackRockdiscloses3.08%holding
27.05.10 Cornerstone Investmentof 5m by Indian Conglomerate,The Siva Group for 29% of theCompany
02.06.10
Shipmentof Mill
04.06.10
FinalResults
08.07.10MirabaudSecurities40ptargetprice
04.08.10Mil arriveson site
An undervalued opportunity?
01.04.10Article fromInvestors Chroniclepublished
26.08.10Proactive
Investors?
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Investment Case
Extensive land position (c.169,000 hectares) with proven suitability for sustainable cultivation of oilpalms for the production of palm oil in Liberia
Low cost production environment with immediate access to sizeable West African palm oil market
Rapid development programme:
Commenced reactivation of existing estates - creates early cash flow & demonstrates business scalability
Expected to immediately enhance land valuations - current valuation range per hectare of developed palmoil is $15,000 to $22,000 (up to $30,000 in 2008)
Palm oil majors including Sime Darby now operating in Liberia reaffirms potential of the region
Price of CPO expected to remain robust in the short and medium term
Experienced management team with expertise in developing large scale oil palm plantations
Dramatically undervalued in comparison to others operating in the oil palm sector
Register has range of large institutional shareholders and the Siva Group strong balance sheet
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Contacts
Michael FrayneChairman
Equatorial Palm Oil Plc
94 Jermyn Street
London SW1Y 6JE
Tel: +44 (0)20 7766 7500
Fax: +44 (0)20 7766 7599
Mobile: +44 (0)7788 724 010
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APPENDIX
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Recent Press
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Recent Press
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Recent Press
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Recent Press
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Recent Press
As US deadlines for the banning of restaurant use of cooking oils containing trans-fats approaches, palm oil producers' confidence is rising that 2010 will deliver higherprices. Major grower IOI Corp Palm last week announced plantation expansions.Palm has been steady around US$715 a tonne for the past month or so, a stabilitywhich is attracting strong Pakistan and Middle East buying.
Source: Agriprods Nov 2009
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Agreements
Rehabilitation Period (7years)
Regular Term
(43 years)
Land Rates - Developed $2.47 per Ha
($25,205 per annum)
$4.94 per Ha
Land Rates Undeveloped $1.23 per Ha
($14,795 per annum)
$2.47 per Ha
Corporate Tax Rate (capped) 30% 30%
Carried forward losses Full recovery Full recovery
GST Exempt Applicable Law
Import Tax Exempt Applicable Law
Withholding Tax 10% 10%
Turnover Tax (% of gross sales) 2% (prepayment) Applicable Law
Oil Palm Development Fund (% of gross sales) 0.5% 1%
Community Development Fund (% of gross sales) 0% 1%
ECOWAS Levy (% of capital imports) 1% 1%
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Why Agriculture? Why Palm Oil?
Import of CPO into West Africa is currentlyover 800,000 tonnes per annum anddemand continues to grow
Palm oil has recently overtaken soya as the
most produced edible vegetable oilworldwide
In 2007, for the first time in history the globalurban population exceeded the ruralpopulation
If the same amount of food were to be
produced today, with the yields of 1961,then the world would require an additional970 million ha, or more than the total landarea of the United States
In the last 40 years, the area of globalagricultural land has grown by 10%
It is increasingly difficult to acquire arableplantation land in Asia and thus it isimperative that new frontiers be sought tomeet increasing demand - Ahmad ZubirMurshid, Chief Executive of Sime Darby
0
0.1
0.2
0.3
0.4
0.5
0.6
1950 1960 1970 1980 1990 2000 2010F 2020F
PerCapitaArableLandforAgricultureSource:FAO,PotashcorpHaArableLandperPerson
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World Palm Oil Demand
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
70,000
75,000
80,000
AnnualGrowthRate,%
Consump
tion,mT(000's)
DevelopedEconomyFoodDemand,mT(000s) Industrial&ResidualDemand,mT(000s)
DevelopingEconomyFoodDemand,mT(000s) AnnualGrowthRates Source:USDA,FirstCapitolRiskManagement
Source: First Capitol Risk Management, LLC October 28, 2009
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Palm Oil Demand in Africa 1996-08
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
mT(1000's)
PalmOilDemandinAfrica19962008
FoodUseConsumption IndustrialConsumptionSource:USDAFAS
Source: First Capitol Risk Management, LLC October 28, 2009
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Stocks to Use & Price Forecast
$0
$75
$150
$225
$300
$375
$450
$525
$600
$675
$750
$825
$900
$975
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
Price
,USD/mT
StockstoUse,%
StockstoUseRatio,% LowPrice,USD/mT BasePrice,USD/mT HighPrice,USD/mTSource:USDA,FirstCapitolRiskManagement
Source: First Capitol Risk Management, LLC October 28, 2009
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A Low Cost Producer
EPO expects to be among the lowest cost producers of edible oils in the world
in terms of USD per tonnes
Source: ASI Global, Oil World
230
240
165
460
Indonesia
P alm Oil
EP O Internal
Est .
B razil So y Oil
M alaysia n
P alm Oil
USA S o y Oil
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Out-grower Programme
Dev Banks/Agencies
Liberia
Company
Access to alternate sources of funding via development banks Technical support & lobbying also available
Provides additional benefits to local communities
Increases project momentum & support (Gov & local community) Broadens tax base & participation
Increases rates of land under production
Additional feedstock to complement company owned estates Low relative capex & opex to company owned estates
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Liberia Risk Mitigation
Liberia has worked hard to create favourable economic conditions that is attractingincreasing levels of foreign investment
However given history, risk mitigation is prudent protect such an investment
The Multi-lateral Investment Guarantee Agency (MIGA), www.miga.org, a division ofthe World Bank provides comprehensive political risk insurance for foreign investmentinto Liberia
Overseas Private Investment Corporation (OPIC), www.opic.gov, an independent USgovernment agency will provide similar cover as well as providing significant debtfinance to investments
OPIC has a specific directive to actively pursue investment opportunities in Liberiahowever typically require the investment vehicle is majority owned by US entities
Managers from both MIGA and OPIC are available to discuss their stated interest inbeing involved in Equatorial Palm Oils project in Liberia
A NUMBER OF RISK MITIGATION OPTIONS AVAILABLE FOR INVESTOR