Vancouver, B.C. May 1, 2008 - GLG Life Tech Corporation announces the signing of a strategic alliance and long-term renewable supply agreement with Cargill Inc. for the supply of Rebaudioside A extract.
The initial term of this agreement is for 10 years and is automatically renewable through at least 2030. GLG is currently a supplier to Cargill for high quality stevia extract for its rebiana product. The companies have worked in close partnership to develop a world-class supply chain for the ingredient, including leaf supply and extract manufacturing. The agreement aligns both the interests of GLG and Cargill to pursue the successful development of the rebiana supply chain.
"This agreement is a major milestone for GLG. Our company will produce high quality stevia extract through a vertically integrated supply chain beginning with patent pending stevia seedlings, exclusive stevia growing areas, through to proprietary processing and extract technology. Cargill's long term commitment to our business provides a solid foundation for future growth, capital investment and secures a leading market position for our company," said Dr. Luke Zhang, Chairman and President of GLG.
Key highlights under the terms of this agreement:
* GLG will provide a minimum of 80% of Cargill's RA stevia extract global requirements for the first five years of the agreement.
* GLG will be Cargill's exclusive Chinese supplier of RA stevia extract for the term of the agreement. GLG will also be Cargill's agent in China for any additional RA stevia extract sourcing opportunities that should arise.
* This agreement includes annual minimum purchase and supply quantities for both parties that define the minimum binding quantities over the term of the agreement for both Cargill and GLG. Cargill will have a rolling 3 year minimum commitment, the value of which is estimated by GLG to approach $US 200 million in the first 3 years.
* GLG expects to earn an average EBITDA margin of 30% during the first five years of the contract.
* Cargill has the right to purchase up to 93% of GLG's production of RA extract.
* Cargill will take the lead role in arranging working capital financing for GLG's stevia leaf purchases each year.
* New product opportunities from GLG are to be offered to Cargill on a right of first refusal basis.
* Should Cargill wish to terminate the agreement early, it may do so on three years notice.
This new agreement will replace the current supply arrangements between the parties as of October 1, 2008. The new agreement is effective from today and certain amendments to the existing agreement will be made to align the bridge period until the new agreement takes full effect.
"GLG's long term vision along with its history in the growing areas and surrounding communities for stevia in China make them an excellent strategic partner. This is part of the journey to introduce and develop this new, natural, zero calorie sweetener for use in foods and beverages around the world," said Marcelo Montero, President, Cargill Health and Nutrition.