Concordia investment in Pearlside bolsters DekelOil investment in cashews

The AIM-traded firm said the equity proceeds would be used by Pearlside's wholly-owned subsidiary Capro to assist with the development of a large-scale 10,000 tonnes per annum (tpa), and expandable to 30,000 tpa, raw cashew nut processing project at Tiebissou in Côte d'Ivoire.

Capro was now embarking on the construction phase at Tiebissou, with first production to commence within 12 months.

Once operational, Tiebissou would be DekelOil's second producing project in Cote d'Ivoire, alongside its Ayenouan palm oil project.

The company said the Concordia Investment was based on an implied €6m pre-money valuation, with the investment being completed on the same valuation of Pearlside as undertaken by DekelOil in December.

However, as a result of DekelOil issuing consideration shares at a “significant” premium to their actual value in that transaction, the actual effective consideration paid by DekelOil was a €4.2m valuation, implying a 42.8% uplift for DekelOil in the new investment round.

In settlement of the Concordia investment and associated broking fees payable, Concordia had been issued with 717 new ordinary shares in Pearlside, representing 14.9% of its enlarged issued share capital, increasing its aggregate shareholding to 32.8%.

At the same time, DekelOil said it had elected to receive repayment of a €0.32m short term bridge loan it advanced to Pearlside while the Concordia Investment was completed, by receiving €0.24m in cash and converting €0.08m cash into new shares in Pearlside, also based on a €6m pre-money valuation.

Following those equity issues, DekelOil was now interested in 37.8% of Pearlside’s total issued share capital.

DekelOil said its option to acquire a controlling interest in Pearlside remained in place, and currently stood at 17% of shares in issue.

The total cost to build and commission the initial 10,000 tpa plant was estimated at $15m, which would be made up of $6m for working capital and $9m for the construction of the processing plant.

In addition to the Concordia investment, the debt structure had been advanced with the main benefit being obtaining a two-year principal grace period on all key project development loans, whereas previously it was only certain on the BIDC loan, the board explained.

That debt structure consisted of a seven-year $7.5m plant development from BIDC and NSIA, at a rate of 8.5% with two years principal grace.

It also contained a seven-year local bank loan for $1.7m at an 8% interest rate, with two years principal grace in the process of legal drafting, as the intention was to deploy those funds at construction completion, and a $7.5m RCN stock financing loan with an interest rate of 8.7%.

DekelOil explained that Tiebissou was to be developed in line with the collaborative model it had successfully deployed at its producing palm oil project at Ayenouan.

That was centred on constructing a state-of-the-art plant which would process raw cashew nuts grown by local smallholders.

Producing approximately 720,000 tonnes per annum, Côte d'Ivoire was described by the board as one of the largest producers of raw cashew nuts in the world, and was also the world's largest exporter.

A significant lack of value-adding processing capacity in Côte d'Ivoire restricted the amount of raw cashew nuts processed in-country, the board explained.

“Today's €1m investment by Concordia into Pearlside provides further endorsement of the attractive economics of an initial 10,000tpa cashew processing plant at Tiebissou,” said DekelOil executive director Lincoln Moore.

“By providing the funds needed for the drawdown of the development loans, the Concordia investment enables the commencement of construction work at the site, which in turn puts the project firmly on track for first production in time for 2020's cashew harvesting season.

“At this point, DekelOil will have been transformed into a multi-project, multi-commodity agriculture company, generating revenues that are not only far larger in terms of scale, but also diversified in terms of end markets.”

Moore noted that the company was also able to keep its interest in Pearlside largely intact without having to invest significant new funds in the company.

“I look forward to providing further updates on progress at Tiebissou in the near term, including confirmation of the loan drawdowns and commencement of works, as well as on operations at our vertically integrated palm oil project at Ayenouan, as we look to build a leading West African focused agricultural company, and in the process generate significant value for our shareholders.”