Losses mount as prawn men dream of $2 billion super farm
Food & Agriculture
Food & Agriculture
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Five years ago Ian Trahar, chairman of Seafarms Group, pitched an audacious idea: build the world’s largest prawn farm on Australia’s northern coast.
Code-named Project Sea Dragon, the $2 billion project aims to produce 150,000 tonnes of black tiger shrimp annually in a 10,000-hectare facility.
Six years on Seafarms (ASX:SFG) has spent $72 million — only another $1.9 billion-odd to go.
Seafarms announced on Wednesday the Kununurra Native Title holders of Legune Station had authorised an Indigenous Land Use Agreement for the Sea Dragon project’s land-based growing farms.
The group also released its full-year results — another net loss of $19.8 million, its fifth in a row and up 7 per cent on last year.
Seafarms — which is already the biggest producer of farmed shrimp in Australia — made $35.7 million in revenue, up 51.9 per cent thanks to rising aquaculture earnings. The group has $11.9 million cash in the bank.
Company secretary Harley Whitcombe told Stockhead that because they don’t yet have a boots-on-the-ground project, costs have to be expensed — and this is why they’re running at a loss.
Come next year, when Whitcombe expects phase-one construction to start, they’ll be able to capitalise costs which are now weighing on the bottom line.
The end game is a 10,000 hectare aquaculture farm covering hatcheries to breed and raise about 100 million Black Tiger prawns a year, food production facilities, growing ponds, water treatment canals, processing and transportation facilities.
The venture is based on an expectation that protein consumption is set to rise dramatically as the world becomes wealthier. Seafood consumption is anticipated to rise 86 per cent globally from 2007 to 2030.
Sea Dragon has had its doubters: how will a tiny company fund, build and pull off such an ambitious project?
The company said in January it was tapping US markets for debt to fund the project, appointing Lazard as advisor.
“We’ve got little doubt we’ll pull the money together,” Whitcombe said, adding that “Australian banks don’t quite get it” when it comes to funding major infrastructure projects.
They plan to raise money through a mixture of debt, equity and future sales.
Approvals from the federal government were secured this year. What’s remaining is the project agreement from the Northern Territory government.
While Whitcomb is confident the company is on track, it did need to go to the market in May to raise $10 million to finalise native title approvals for the Northern Territory development.
Trahar converted $2.5 million of a debt facility from a company he owns into shares.
Seafarms has a market capitalisation of $91 million and about 3700 shareholders, says Whitcombe.
Construction can’t start on the first phase until the dry season next year, normally around April. That will consist of 1120 hectares, expected to be finished by 2020.
Currently, the Cardwell farm in Queensland is in us as a pilot for future Sea Dragon system. It’s this farm that was behind the boost in revenues.
Seafarms shares were steady yesterday at 6.5c, trading near the bottom of their 6c to 11c range this year.