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July 13, 2011

Agriterra acquires cocoa business in Sierra Leone

Agriterra Ltd, the AIM listed company focussed on the agricultural sector in Africa, has entered into an agreement to acquire the entire issued share capital of Tropical Farms Ltd (TFL), a cocoa company based in Sierra Leone.

This acquisition represents the first stage of establishing a substantial cocoa business in West Africa. The board is focussed on achieving security of supply through the forging of long term relationships with farmers and out-grower schemes, in addition to the implementation of farm management initiatives and eventually, the development of the company’s own cocoa plantations.

TFL’s business model complements Agriterra’s established maize buying and processing operations in Mozambique and is in line with the company’s strategy of building a pan-African agricultural company with other divisions already including maize farming and milling, cattle ranching and feedlot facilities and imminently abattoir services.

TFL was established in 2008 to provide a cocoa buying operation head quartered in Kenema in the eastern region of Sierra Leone. With four buying centres currently in operation and a direct buying register of approximately 2,000 farmers across Sierra Leone, Agriterra believes that TFL has established a valuable base of ‘out-growers’ which can now be rapidly expanded under the Agriterra umbrella. It is the company’s intention to develop additional community buying centres across the district, whilst also providing additional solar drying and fermentation facilities, in order to increase total buying capacity and guarantee sources of supply. This model will provide TFL with security of supply at farm level with traceability without the need for local agents.

As immediate cash flow from cocoa sales to the established major international cocoa buyers increases, it is Agriterra’s objective to expand the buying operations into Liberia and also to develop its own cocoa plantations in the region, effectively establishing a “tree to market-place” business model for rapid growth and expansion.

The board believes that cocoa represents an exciting opportunity for the company. Global demand is strengthening and security of supply and traceability is becoming increasingly important. Cocoa production in Sierra Leone is improving at farm level, with new techniques being applied and yields and cultivation expected to increase. This provides TFL a significant opportunity to leverage its first mover advantage, both through its existing base of out growers but thereafter through its own plantations.

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