Cashews are a popular nut, with demand growing 6.1% in 2016 from 2015, as shown by Tridge.com. By 2021, expectations are for cashews to comprise 29% of the total global nut market.
According to Mordor Intelligence, a supply crunch is supporting rising prices for cashews. Vancouver-based Great Quest Fertilizer Ltd. (TSX-V:GQ) wants a piece of that action, saying on Thursday that it has agreed to acquire Ivorienne Noix de Cajou SARL, which loosely translates to Ivory Coast Cashew Nut Corporation, or INC for short.
Côte d'Ivoire (Ivory Coast) is a West African country on the Atlantic Coast and (according to Great Quest) the world's largest exporter of in-shell cashew nuts.
Quest has agreed to pay $3.0 million and assume $9.0 million in debt for 80% of INC, with the other 20% held by a local partner (an experienced trader of agricultural products).
INC's primary asset is a recently completed 12,000 tonnes per year processing facility near Abidjan, the capital of Ivory Coast. The plant is expected to begin processing and shelling cashews in March 2019, which dovetails with the start of cashew harvesting season.
Along with the plant, Great Quest gets a 4,500 square metres of warehouse space on six hectares of land situated in the Azaguié industrial corridor 44 kilometers from the Port of Abidjan.
Further, the plant contains a charcoal conversion plan to convert cashew shell waste into sellable cooking charcoal for the local market.
As mentioned, Ivory Coast is a top exporter of cashews in-shell, with fewer than 6% of the nuts processed in the country. To that end, Abidjan is aiming to increase domestic processing by taking an accommodative stance, including a tax break until 2030, insuring quantity and quality of nuts for domestic processors and tariffs on the export of unprocessed nuts. INC will also benefit from an import duty exemption into the U.S. through 2025.
The deal, which is expected to generate cash flow next year for Great Quest, still needs to be followed by a definitive agreement and garner all customary approvals.
The acquisition does not affect Great Quest's intentions to develop its Tilemsi phosphate project in Mali, Africa.
Shares of GQ have not yet traded early in Thursday action following a gain of 23.8% to 2.5 cents on Wednesday.
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