Agricultural investment group AACL will no longer require financial support from CBH Grain after securing an important funding and marketing deal worth almost $30 million with Glencore Grain for the 2010-11 season.
Agricultural investment group AACL will no longer require financial support from CBH Grain after securing an important funding and marketing deal worth almost $30 million with Glencore Grain for the 2010-11 season.
The unresolved negotiations between the AACL and CBH Grain, where commercial terms weren't able to be met within a suitable timeframe, lead to the resignation of AACL managing director, Andrew McBain late last month, amid questions about the company's financial viability.
Under the terms of the new agreement, Glencore will provide funding for AACL's Grain Co-Production contracts for 2010 and will then partner with AACL to market the 2010 season grain, utilising its global marketing networks.
AACL said the new Glencore facility of up to $28.8 million supplements AACL's existing funding from retail investors of $24 million to fund Grain Co-Production agreements with approximately 200 farmers across southern Australia.
The new funding agreement is subject to the final number of contracted tonnes executed via 2010 Grain Co-Production contracts.
AACL chairman, Peter McEwen said completion of the Glencore agreement was an important step forward, providing certainty to the company's farmers and shareholders alike while creating a strong platform for its growth strategy
"I am also pleased to say the Glencore agreement means we can resume payments to contracted farmers for the 2010 season this week," Mr McEwen said.
"Unfortunately the ongoing negotiations between AACL and CBH Grain were unable to reach mutually beneficial commercial terms within a suitable timeframe.
"While we would have preferred a quicker resolution, with the funding in place earlier, we believe this outcome is in the best interests of our shareholders and our farmer stakeholders. Through this agreement with Glencore, those interests have been protected."
After announcing the issues surrounding the ongoing discussions with CBH Grain in mid-June, AACL said it was approached by a number of international trading houses to provide alternative funding proposals with Glencore representing the best outcome for shareholders, contracted farmers and project investors.
AACL also announced significant initial changes to the company's executive structure including the appointment of Victoria and Western Australia farmer, Trevor Stoney as a non-executive director effective immediately.
Mr Stoney has been farming since 1962 and was initially involved with AACL at its inception as a contracted farmer.
AACL acting chief executive, Mike Shields has stepped down from the board to concentrate on his farming and business interests.
Mr McEwen said the board would assess AACL's management operations in coming weeks to put in place the appropriate structure to take the company forward.
AACL said it will now complete a comprehensive review of its financial performance, that has been underway for some weeks, in light of the new funding arrangement with Glencore.
However, the company confrimed hat recent events will result in lower production tonnages in FY10, with a consequent impact on revenue and earnings to be outlined in revised earnings guidance for FY10 that the company hopes to make as soon as possible.
Full announcement below:
AACL executes funding agreement with Glencore Grain Pty Ltd for 2010-11 season
- AACL successfully completes funding agreement with Glencore Grain Pty Ltd (Glencore)
- Favourable commercial terms and conditions
- Supports continued growth of AACL's unique Grain Co-Production model
- AACL Holdings Limited (ASX: AAY) is pleased to announce that it has successfully executed a funding and marketing agreement with Glencore for the 2010-11 season.
Under the terms of the agreement, Glencore will provide funding for AACL's Grain Co-Production contracts for 2010. AACL and Glencore will then partner to market the 2010 season grain, utilising Glencore's worldwide marketing expertise.
The agreement with Glencore means that AACL no longer requires funding from CBH Grain. AACL was unable to meet commercial terms with CBH Grain within a suitable timeframe.
Following AACL's ASX announcement dated 15 June 2010 concerning ongoing discussions with CBH Grain, AACL was approached by a number of international trading houses to provide alternative funding proposals.
Having assessed the funding options, AACL believed the Glencore proposal represented the best outcome for shareholders, contracted farmers and project investors.
The new Glencore facility of up to $28.8 million supplements AACL's existing funding from retail investors of $24 million to fund Grain Co-Production agreements with approximately 200 farmers across southern Australia.
AACL Chairman Peter McEwen said completion of the Glencore agreement was an important step forward for AACL.
"This gives certainty to our farmers and shareholders alike and creates a strong platform for AACL's growth strategy," said Mr McEwen.
"I am also pleased to say the Glencore agreement means we can resume payments to contracted farmers for the 2010 season this week."
The key commercial terms of the agreement include:
- The Grain Purchase Pre-payment facility for up to $28.8 million (subject to the final number of contracted tonnes executed via 2010 Grain Co-Production contracts).
- Grain Marketing Agreement - Glencore has been engaged to execute an appropriate price risk management strategy for all grain grown in the 2010 planting season.
- The price risk management strategy developed by Glencore to specifically meet AACL's grain marketing objectives.
- Glencore to provide an inventory finance facility for the 2010 harvest to support AACL in meeting timely payment obligations to contracted farmers post harvest.
Mr McEwen said AACL understood the significant impact that the uncertainty of funding has had on farmers.
"Unfortunately the ongoing negotiations between AACL and CBH Grain were unable to reach mutually beneficial commercial terms within a suitable timeframe," said Mr McEwen.
"While we would have preferred a quicker resolution, with the funding in place earlier, we believe this outcome is in the best interests of our shareholders and our farmer stakeholders. Through this agreement with Glencore, those interests have been protected."
AACL Board Changes
AACL is also pleased to announce the appointment of Mr Trevor Stoney as a Non-Executive Director of the Company, effective immediately.
Mr Stoney has been farming since 1962 in both Victoria and WA, and brings to AACL extensive experience from a wide range of farming locations and enterprises.
Mr Stoney was initially involved with AACL at its inception, as a contracted farmer, and has agreed to accept a seat on the Board given his belief in the opportunities that AACL has to offer agriculture in Australia.
Mr Mike Shields, who recently filled the role of Acting Chief Executive of AACL, has now stepped down from the Board to concentrate on his farming and business interests.
Mr McEwen thanked Mr Shields for his contribution to AACL and welcomed Mr Stoney to the Board.
"We are delighted to have a person of Trevor's experience and capability on the Board of AACL as we re-set our growth strategy," said Mr McEwen.
"I also want to thank Mike Shields for his enormous work on behalf of shareholders, especially in recent weeks."
Mr McEwen said the Board would assess AACL's management operations in coming weeks to put in place the appropriate structure to take the Company forward.
FY10 Earnings Guidance
Following completion of the Glencore agreement, AACL will now complete a comprehensive review of the Company's financial performance that has been underway for some weeks.
An announcement on revised earnings guidance for FY10 will be made as soon as possible. AACL can confirm that recent events will result in lower production tonnages in FY10, with a consequent impact on revenue and earnings.
