HispanicBusiness

Recent developments in the arable operations

As previously noted, the Company's first commercial rice crop of 1,200 ha was sown in October and November 2011 but, due to various reasons including delays in the importation of appropriate equipment and poor rainfall, the crop produced only minimal yields.

In February 2012, 305 ha of rice were planted. Rainfall was adequate and the harvest completed in August 2012. The harvest yielded 525 tonnes of paddy rice at 1.7 tonnes per hectare. The realised yield was negatively impacted by significant losses due to mechanical failures suffered by the Company's combine harvesters.

In March 2012, 60 ha of edible beans were sown and, in April 2012, a further 140 ha as part of the Company's strategy of smaller scale, proof-of-yield plantings. These crops were harvested in September 2012, although the yields were negligible. This was due to the locally sourced seed stock proving to be of poor quality with inconsistent growth which prohibited mechanised harvesting. The Company has elected to trial hybrid seeds from an international supplier for its next planting.

In June 2012, the Company commissioned a review of the arable operation by a firm of independent Brazilian agronomists, including an assessment of the in-ground rice and bean crops. The results of the review, which included a number of recommendations being considered by management, confirm the high potential for large-scale food production in the Bas Congo region of the DRC.

In October 2012, 500 ha of rice were planted. The Company planted NERICA-4® (New Rice for Africa-4), an upland rice variety suited to African soil and weather conditions. Harvest of this crop commenced in mid-February 2013 with mechanized harvesting supplemented through local casual labour.

Results from the trial planting have been very positive with in-field yields believed to be around 4 tonnes of paddy rice per ha. Mechanized harvesting achieved an average yield of 3.1 tonnes of paddy rice per ha over the first 46 ha harvested in February 2013 and 2.5 tonnes per ha from the subsequent 77 ha harvested mechanically by the end of March 2013. Yield per ha declined as the harvest progressed due to in-field losses caused by the protracted harvest period and insufficient harvesting machinery to complete the harvest in the optimum time period. The Company had ordered a second combine harvester to support the harvest but, due to shipping delays unrelated to the DRC, it did not arrive in time to participate in the beginning of the harvest.

In November 2012, the Company's rice mill was completed and commissioned. It is the only large-scale rice mill in the region and allows the Company to process its own crop and that produced by other local small-holder farmers. Earlier in the year, civil works and the drying facilities were completed. Storage of dried paddy rice is currently undertaken using a grain bag storage system which is an acceptable interim solution for storing current volumes and allows the Company to continue to dry and mill crop.

In April 2013, following quality tests and qualifying as an approved supplier to Heineken N.V., the Company commenced selling rice grown on its farm to Bralima, Heineken's wholly-owned DRC subsidiary. Bralima has agreed to purchase 1,100 tonnes of rice during 2013. The Company has also started supplying rice to supermarket chain Ets Kuku which has received an initial shipment of eight tonnes and requires 23 tonnes per month going forward. Fulfillment of both contracts will be made from existing stocks of rice accumulated from the Company's trial plantings, which were harvested, dried and subsequently milled at the Company's rice mill, and from current and expected future harvests. The Company expects that minimal capital expenditures will be required for fulfillment of such contracts.