KUALA LUMPUR, March 21 Asia Pulse - Lion Forest Industries Berhad [LFIB]said it has signed a joint venture agreement with the government of theMalinau Regency (PKM) in Indonesia's Kalimantan Timur for the proposeddevelopment of 40,000 hectares of oil palm plantation and the constructionof two crude palm oil mills.
Under the deal signed on 17 March 2005, the parties will set up a jointventure company to be known as PT Lion Intimung Malinau (PT Lima) with atotal registered and paid-up capital of US$5 million.
In a statement to Bursa Malaysia, LFIB said it will inject cash up to US$5million into the venture while PKM will contribute the piece of land forthe development of 40,000 hectares of oil palm plantation.
LFIB will hold 95 per cent and PKM will own 5 per cent of the equity of PTLima respectively.
It is a condition precedent of the joint-venture that PT Lima shall beissued the right for use of the land for an initial period of 35 yearswith an option to renew for a further period of 25 years.
The annual fresh fruit produce for the plantation when fully cultivated isexpected to be about 720,000 tonnes annually.
The kernel production is expected to be up to about 36,000 tonnes perannum while the crude palm oil production is forecast to be up to about144,000 tonnes per annum.
LFIB said the capital requirements for the plantation and the CPO millswill be funded on a progressive basis over a period of 10 years from bankborrowings and internally generated funds.
It said the proposed JV will enable the LFIB group to tap into the oilpalm industry to diversify its earnings into a stable, growing business inthe long-term which is expected to give reasonably attractive returns.