Diageo has signed a public-private initiative with the US Virgin Islands Governor John P. deJongh, Jr. for the construction and operation of a high capacity distillery on the island of St. Croix.

The new facility will produce bulk rum beginning in 2011. Beginning in 2012, the distillery will supply all bulk rum used to make Captain Morgan branded products for the US.

Financial details of the deal were not disclosed.

It is estimated that the distillery will have capacity to distil up to 20m proof gallons per year.

Governor deJongh said: "This agreement, when ratified by the legislature of the Virgin Islands, marks the greatest single financial step forward we have taken in this Territory in fifty years. This will bring jobs and a tremendous future stream of revenue, a long-term source of funds that will go far towards solving many of the challenges we face as a territory."

"We are always looking for ways to secure long term, high quality production for all our brands," said David Gosnell, managing director, global supply and global procurement for Diageo. "The investment in - and development of - the project on St. Croix continues the tradition of Captain Morgan sourcing from the best bulk rum stocks in the Caribbean and enhances Diageo's position in the global rum market as the brand continues to grow."

The development of the new Diageo rum distillery will diversify the Virgin Islands rum industry, which has an existing relationship with primary rum producer, Cruzan VIRIL.