mozambique agriculture investment overview

Strictly Confidential

GEP Mozambique

Agriculture Investment Overview

January 2013

GEP Mozambique Agriculture – MZ-AG-C7-001

Platinum Club Exclusive STRICTLY CONFIDENTIAL | PAGE 2

1. Introduction:

Mozambique is uniquely situated on the African continent. The country was for many years one of the

world’s top food exporters. The cotton, coffee, grains, sugar, nuts and fruits grown there were exported all

over the world until the 1970’s when the country was plunged into a long and bitter civil war. Peaceful since

1992, the country has now emerged to be one of the fastest growing economies in the world and provides a

unique opportunity to again take advantage of an ideal climate for agriculture.

Good Earth Power (GEP) is an international organisation with interests in the construction, energy,

communications and land development sectors in Africa and the Middle East. Its primary purpose is to

leverage unique technologies to drive forward self-sustaining growth and economic prosperity through the

provision of food security, energy security and infrastructure.

GEP’s holding company in Mozambique “ZR Energies Mozambique Limited” (ZREM) has recently secured a

540,000 Hectare land concession in central Mozambique, near the town of Sena, on the edge of the

Zambezi river. The 99-year concession has existing timber operations on site, as well as excellent potential

for a large-scale commercial farming operation.

ZREM has secured the right to use and profit from the land - Direito de Uso e Aproveitamento da Terra

(DUAT) – including planting, growing, harvesting and exporting agricultural crops and timber. To implement

& deliver the agriculture programme, ZREM has set up a commercial farming business called GEP

Mozambique AgriCo Limited (“AgriCo”).

AgriCo has employed very experienced farmers across Africa to roll out its operations using proven farm

management systems and state-of-the-art technology with irrigation, machinery, seed selection, soil

rejuvenation, and plant husbandry to match the global best practises and yields from places like the US,

Brazil, Argentina and Europe. Agricultural commodities grown will initially include Maize & Soy, followed by

Rice and Sugar at a later stage. Insurance will be obtained to cover site and crop risk.

AgriCo expects to generate significant long-term financial returns by selling 100% of the crops produced to a

long term farm gate off-taker. ZREM is in advanced discussion with Bunge Limited [NYSE:BG], one of the

world’s leading Agri-businesses and other major international off-takers such as Cargill.

As part of an initial funding round, AgriCo has contracted with The Ideas Factory (TIF) as its UK master

funding partner. TIF is seeking investors for 50 x individual 15-hectare plots at GBP£10,000 per plot.

Investors can choose to independently operate and manage the plots themselves or appoint AgriCo (through

TIF) to do it on their behalf. If AgriCo is appointed by the Investor, AgriCo is offering a secured, fixed 14%

per annum return (+RPI) for a 25 year term. Investors are free to sell their fully assignable plots whenever

they choose.

2. Key Concession / Project attributes:

• The 540,000 Hectare (ha) site is to be utilised as:

o 200,000 ha Wildlife Reservation

o 200,000 ha Sustainable Timber Plantation



o 140,000 ha Agriculture (120,000 ha is currently Timber, which will be cleared, and 20,000 ha of

grassland that needs very little work to clear and can be planted imminently)

• Unique location – a climatic region of Mozambique which has:

o High average monthly temperatures above 25 °C and average daily sunshine of 8 hours per day

which creates high amounts of photosynthesis

o Situated next to the Zambezi River (40% of the fresh water flow in Southern Africa) allowing for

an exceptional irrigation infrastructure, and a minimum of 2 crops per annum per hectare

o Low annual monthly rainfall of 64mm per month, which means very little diseases (rainfall brings

disease) and a realistic year round operation

• DUAT (local planning permission attached to the land) has been secured for farming and exports

• National, Regional and Local support for the commercial operation is very positive, as it will be a

significant employment generator for the local community, as well as a major contributor to

improvements in local infrastructure

• No new concessions over 1,000 ha were made between the end of 2009 to the end of 2011 – large land

concessions, with the necessary permits to commercialise them, are difficult to obtain, meaning little

immediate competition

• A very experienced operating team with an extensive track record in large scale farming across Africa

• An Off-take agreement with Bunge is being finalised

3. Site Location:



4. AgriCo Crop Selection:

AgriCo has chosen as its primary field crops Maize, Soya and Sugar. These are three of the most widely

grown food crops on the planet with a wide range of uses and a large group of buyers in the market.

Maize – Maize is the largest grown cereal with close to 1 Billion MT being produced and eaten each year. It

is the main staple food crop for all of Southern Africa, meaning that the market for the products will be local,

year round and dependable. Additionally, it is one of the main raw materials of feed for chickens and cattle,

the main farmed protein sources in the region. The crop requires heat, sunshine, water and good soils – all

of which are available on the land chosen in Mozambique by the AgriCo.

Soya – Soya bean is an oilseed produced for its oil, seedcake, and used in various foods around the world,

the largest producers being the US, Argentina and Brazil. The seedcake is also main component of animal

feed (the Mozambique Government expects poultry demand to triple in the next 10 years). Soya has

excellent nitrogen fixing qualities in soils, and when grown with Maize and Wheat, and can help to increase

the yield of those crops, while lowering the requirement for fertilizer, thus saving costs.

Sugar – In time, AgriCo will produce Sugarcane, which is a crop that is widely, successfully grown

throughout Mozambique and the coastal regions of South Africa. Over 1.7 billion MT of sugarcane is grown

globally. Sugar is a constant, large, global market and is traded in London and New York, as well as on

many regional exchanges. Sugarcane is a crop planted once, and harvested repeatedly over a five year

period before it is replanted.

AgriCo is finalising the off-take agreement. Bunge or Cargill will purchase direct all of the crops from the farm

gate, meaning AgriCo has no delivery risk.

5. The Financial Proposal:

A 750-hectare parcel (from the initial, cleared 20,000 ha) has been identified in a prime part of the concession for immediate plantations. This initial 750 hectare investor parcel will be a sub-concession to the Investors. ZREM reserves the right to extend this to 1,500 hectares. Investors can buy leasehold 15-Hectare plots of land in this 25-year project. A 15-Hectare plot lease is priced at £10,000, with multiple plot purchases allowable and providing for 20% pa returns. The investor has total freedom to sell, reassign, exploit the land themselves; appoint a third party to do the farming on their behalf or let the plot to AgriCo. Investors are given the choice to enter into a tenancy agreement where Investors become the landlord and AgriCo the tenant. AgriCo can pay such rental returns when they utilise each rented plot for the management and exploitation of your leasehold-land’s produce. It is envisaged that the investment will be a long-term, secured income play per plot, but as there is no requirement to appoint AgriCo, Investors are free to self-manage their plot, sell whatever they produce to their own trading partners and sell or assign their sub-lease at any point in time. TIF will have first right of refusal to purchase the land back from the Investor at the proposed sale price. If an investor was to appoint AgriCo to operate and manage on their behalf, AgriCo commits to pay 17% per annum (+ RPI) for 25 years. This would yield around £62,000 on a £10,000 investment. (assumes 3% RPI). Alternatively, investors can sell at any point, including back to TIF if desired. See the tables below which outlines the potential returns and options, based on a £10K investment and a £20K investment.



Mozambique Agri Investment scenario

Investment Amount £ 10,000

Lease Term (years) 25

AgriCo Yield (per annum) 17%

Forecast RPI (per annum) 3%

Year Investor Holds Investor Sells to TIF Investor Sells to TIF

for 25 years at par after 5 years at par after 10 years

1 1,700 1,700 1,700

2 1,751 1,751 1,751

3 1,804 1,804 1,804

4 1,858 1,858 1,858

5 1,913 11,913 1,913

6 1,971 1,971

7 2,030 2,030

8 2,091 2,091

9 2,154 2,154

10 2,218 12,218

11 2,285

12 2,353

13 2,424

14 2,497

15 2,571

16 2,649

17 2,728

18 2,810

19 2,894

20 2,981

21 3,070

22 3,163

23 3,257

24 3,355

25 3,456

Total Return 61,981 19,026 29,489

Return on Investment 620% 190% 295%

Profit 51,981 9,026 19,489

Return on Investment scenarios



Mozambique Agri Investment scenario

Investment Amount £ 20,000

Lease Term (years) 25

AgriCo Yield (per annum) 20%

Forecast RPI (per annum) 3%

Year Investor Holds Investor Sells to TIF Investor Sells to TIF

for 25 years at par after 5 years at par after 10 years

1 4,000 4,000 4,000

2 4,120 4,120 4,120

3 4,244 4,244 4,244

4 4,371 4,371 4,371

5 4,502 24,502 4,502

6 4,637 4,637

7 4,776 4,776

8 4,919 4,919

9 5,067 5,067

10 5,219 25,219

11 5,376

12 5,537

13 5,703

14 5,874

15 6,050

16 6,232

17 6,419

18 6,611

19 6,810

20 7,014

21 7,224

22 7,441

23 7,664

24 7,894

25 8,131

Total Return 145,837 41,237 65,856

Return on Investment 729% 206% 329%

Profit 125,837 21,237 45,856

Return on Investment scenarios



6. Additional Security from ZREM

As a double form of protection and security, in addition to agricultural insurances taken out, AgriCo has agreed to underwrite the return on this investment for TIF from large scale forestry assets owned by its parent company in Mozambique. This effectively means that if the crops are blighted one year, and income from agriculture is not available, AgriCo will still pay the offered return to TIF investors from other income producing assets owned.

7. Buyback Option

If an investor wants to sell their plot after 5 years to recoup their capital, TIF will buyback or on-sell any plots at the original price paid. Investors must give TIF notice at the end of year 4 if they wish to take up this buyback option.

Notwithstanding this offer, Investors are free to sell or assign the plot at any time during the life of the agreement for whichever price they can achieve.

8. Legal structure:

Investors will enter into one or two agreements through FPA

a) A Sub-Concession Agreement with ZREM, and:

b) A Services Agreement with AgriCo where AgriCo operates, manages and commercialises the land

and off-take sales on behalf of the Investor for 25 years at a fixed return of 14% per annum (+ RPI)

9. GEP Mozambique AgriCo Management Team:

1) Clay Taber, Agricultural Director, GEP

Clay has spent the last 21 years working in finance and development in emerging markets. For the last six

years he has been focused on creating opportunities in the agri-business sector throughout Africa, and has

worked on projects in Mozambique, Malawi, Tanzania, Ethiopia, Sierra Leone, Guinea, Namibia, DRC,

Nigeria, Ghana, and South Africa. Clay and his team have advised on over 200,000 ha of agricultural

investments, as well as many different processing operations. Former employers include BNP Paribas,

Raiffeisen ZentralBank Austria, the European Privatisation and Investment Corporation and JC Bradford &

Company (now part of UBS).

Crop development experience: Maize, Wheat, Soya, Tomatoes, Cassava, Beans, Cotton, Potatoes and

Sugar.

2) Luhan Swart, Technical Director, AgriCo

Luhan has provided his expertise on over 150,000 ha throughout Africa. Prior to joining GEP, he advised on large scale farm projects all over Africa, and prior to that he was for 13 years the Technical Director for Hygrotech SA, a major African seed and varietal specialist company. He has worked in South Africa, Mozambique, Namibia, Nigeria, Ghana, DRC, and Zimbabwe.



Crop Specialties: Wheat, Maize, Soya, Cassava, Tomatoes, Sunflowers, Cabbage, Seed Maize, Beans, Cotton and Chilies.

3) Brian Morkel, Operations Director, AgriCo

Brian has managed and advised on over 120,000 ha of farmland globally, growing grains and oilseeds in Europe and Africa. He has worked in Zimbabwe, Zambia, Russia, Romania, Tanzania and South Africa.

Crops grown in scale farming operations : Wheat, Maize, Soya, Sunflowers, Barley, Beans, Sorghum, Asparagus, Carrots, Baby Corn, Green Beans, Runner Beans, Courgettes, Fresno and Jalapeno chillies for local and export markets.

10. Schedule of supporting Documentation to be provided:

1. 540,000 Hectare Concession Agreement in Portuguese, outlining ZREM’s ownership 2. Certified English translation of the Concession Agreement 3. Copy of the DUAT (commercial agricultural growing license) in Portuguese 4. Certified English translation of the DUAT 5. Copy of the agriculture export license in Portuguese 6. Certified English translation of the agriculture export license 7. Copy of the ZREM security offered to TIF 8. Draft of Investor Sub-Concession Agreement 9. Draft of Investor Services Agreement

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