56 Nicholls Wed 1245 1250 DALLAS DONOVAN
So today I'm briefly going to provide a quick overview of who we are, the strategic setting, some
strategic setting for the Australian and global prawn aquaculture industry-- and forgive me, if I
use the word "shrimp" every now and again-- and an introduction to an opportunity to make
Australia a truly global leader in the prawn aquaculture sector.
So the Seafarms Group is a publicly listed company with a market capitalisation of
approximately $52 million. And although our history has been in carbon, previously known as
CO2 group, followed by Commodities Group. And my own business area now is aquaculture-operations and development of large-scale transformative aquaculture projects. In regard to our
aquaculture operations, Seafarms Group is the owner and operator of 160 hectares of grow-out
ponds, hatchery, and processing plant in North Queensland.
We acquired these over the last 12 months. And in that time we've invested in significant
business processes, upgrades in health and safety, accreditation, and data management. And we
continue to drive efficiencies and increase yields in overall improvements in production
processes across the organisation. We also offer branded product into the marketplace at Crystal
Bay Prawns, and we're opening export channels for the Australian farmed prawn sector, using
the same brand.
We've all heard through numerous forums, not just at ABARES the last couple of the days, but
over previous years, that Australia has a significant opportunity to become a leading participant
in supply of agricultural products to a growing Asian region. The food bowl of Asia has been a
common catch cry in agricultural and political discussions over the last few years.
But in essence, the demand for agri-food is growing, and this growth has been driven by
population growth and improved standards of living throughout Asia. In fact, there is a real
possibility that the demand for protein will fall in the West, further reinforcing a geographical
competitive advantage in key markets. And a significant feature of this increased demand for
protein is that it's most clearly evident in the Asian region.
This graph, from some early Helen Jensen's work, is an important one to consider when we think
about the demand for protein. There's a clear link between increasing personal wealth and protein
consumption. Although this data was published in 2006 and relies on earlier data, so it can be
considered a little old, the trend in potential is clear, particularly when we look at where China
has been. So China has probably moved along that curve a little bit. But what we can be certain
of is that, as personal wealth increases in China and Asia in general, the demand for protein will
increase.
An important part or correlary for that is that seafood already makes up more than twice the
protein source in Asia as it does in Europe and the US. 26% of dietary protein in Asia is based on
seafood. And given the size of Chinese and Asian populations, even a small shift in protein
demand will have significant implications on seafood demand. So while food preferences can
change, seafood is clearly an established preference in these markets.
Now we've seen this graph a few times before. But having established that there's an expectation
of increased demand for aquaculture and, in our case, prawns and in our region, I can turn our
attention to the supply side. So Robert presented this slide earlier, and anyone who's been to any
fisheries conference over the last 5, even 10 years, has probably seen this graph ad nauseum. But
it does underline an important point-- that the required supply marine protein, seafood, will not
and cannot come from capture fisheries.
Wild fisheries have been static on a global basis in supply since the mid '80s. And this means
that aquaculture has to fill the gap. Aquaculture now represents almost half of global seafood
production, and the FIO forecasts that aquaculture production will grow by 60% between 2010
and 2020. And recent work by the global Aquaculture Alliance has indicated that aquaculture
needs to increase production 7.2% per annum just to keep up with growing demand.
Unfortunately, though, recent growth in aquaculture globally has been limited to 3% to 4%,
which is providing further pressure on the supply side. This and the cost competitiveness of
aquaculture, compared to producing other sources of animal proteins, means large-scale
aquaculture will play an increasingly important role in meeting the rising demand for animal
protein.
So given the clear role for aquaculture to meet demand, it's important noting some of the current
production pictures. As you can see here, China is the world's largest producer of prawns, in this
case, and is a major exporter. This supply side, though, is a little confounded by the fact that
China has recently shifted from a net exporter of seafood to a net importer.
Disappointingly, and despite Australia's potential, we don't even rank. But clearly, what we've
done is we've been able to identify a market, and we've also identified a looming market gap.
So this leads to the next questions. So how can Australia be part of the supply? And how is
Australia currently positioned? So let's deal with the second question first. You can see here
some comparisons with other aquaculture-producing nations. And I wasn't particularly selective.
It was reasonably random in the aquaculture-producing nations that I've chosen.
So Australia is underrepresented and is an underperformer when it comes to developing
opportunities in aquaculture. With some 25,000 kilometres of coastline, Australia really hasn't
taken advantage of the opportunity. We are out-produced by countries with smaller available
coastlines. And as you can see here, we're actually beaten by New Zealand again.
In regard to Australian prawn farming, Australian prawn farming industry is currently around
about 4,000 tonnes. It's been bouncing around from 3,400 to 4,200, settling at about 3,700 for the
last 10 years. So Australia's prawn aquaculture sector hasn't shown any significant growth in that
10 years, while global production has increased by 66%. It should be noted that Australia has
some very good, in fact world-leading, prawn farmers, and they are supported by extensive and
world class researchers.
But there are some other important considerations for Australia. What we can see is not really
represented well in this graph. But global shrimp production appears to be peaking. We've
probably said that once before in history, which was about 2002, 2001. But with recent disease
issues in Asia, there's a reinforcement of a very delicate supply side.
There's limited suitable new areas for prawn farming on a global basis. Horizontal expansion will
be limited and future growth is likely to be from vertical expansion, or more tonnes per hectare,
which, by necessity, equals smaller shrimp. There's also increasing consumer focus on food
safety, and clean food, and sustainability, across many market segments.
Australia has a good story to tell. Provenance is important and Australian fresh foods are highly
trusted in China. The opportunity for Australia is that price premiums are available for larger,
high-quality prawns, potentially offsetting Australia's higher cost of production.
So Australia's current prawn farming industry, which I haven't shown on this slide, sits primarily
along the eastern coastline from Yamba in the south, to Mossman in North Queensland.
However, to unlock the potential in Australia's prawn aquaculture sector, development will need
to be in the true North. Investors will be looking for year-round crops and the opportunity to
design and operate facilities on a year-round basis to optimise their return on capital.
Building on the work of CSRO, which was presented at ABARE several years ago, Seafarms has
undertaken significant studies in the North of Australia, including detailed GIS mapping, aerial
surveys, and ground truthing. And for those of you, or those of us, who are part of that sitting for
a week in a helicopter over the top of the Northern Territory, it tends to get a little shaky after a
while.
And there are a lot of significant, suitable areas for aquaculture development in the North. And
from this strategic and general overview, I can turn to offer now a concrete example of how
Australia can become part of that global supply chain. So Seafarms has recently entered into an
access and option agreement on its preferred development site in the Northern Territory. And the
next steps for project Sea Dragon are underway.
The agreement that we have provides Seafarms with the ability to apply for appropriate
government approvals and land tenure. It allows us access to the site for technical due diligence
and studies required to take the project through bankable feasibility, and it allows us to purchase
the site under agreed commercial terms. The project aims to introduce prawn farming to
Australia on a truly global scale. It will be a large-scale, integrated, land-based aquaculture
project, producing world scale volumes of Black Tiger prawns for export markets.
The development will be rolled out in four to five stages over several years and require
investment of circa $1.5 billion US dollars. The result will be the production of 100,000 tonnes
per annum, generating some $800 million US dollars in revenue. The 10,000 hectare grow-out
facility will be supported by feed mills, hatchery and brood stock facilities, power station,
processing plant, and storage and export facilities.
The investment will require the development of suitable port facilities for both export of finished
product, but also for the delivery of raw materials. Questions to be answered include the where-what location provides the greatest economic returns for each of the infrastructure requirements?
Project Sea Dragon, when complete, will contribute to Australia reaching at least part of its
aquaculture potential, with other investments leveraging off the infrastructure expertise and
investment confidence.
Project Sea Dragon will see Australia as a top 10 global shrimp producer and will create some
1,600 sustainable, long-term jobs in the North, with a range of skills required in diverse fields,
including aquaculture technology, administration, human resources, electrical, mechanical, and
trades, processing and food safety, veterinary and animal health, and research and training.
Employment locations will be spread throughout the top end, including Darwin, Kununurra,
Exmouth and Legune. Employment
Further indirect employment opportunities will be available in logistics, science, support, and
education. Additionally, on top of this, current Queensland operations act like a pilot for the
Project Sea Dragon. And this has helped to establish some important building blocks for us,
including the development of farm management teams, systems and processes, science, and
brand and product range expansion.
This is a real, concrete, and doable project, and is recognised in the Green Paper on developing
Northern Australia. Aquaculture provides real opportunities to provide economic diversification
in the North. Projects of this kind obviously require some level of enabling. Robust government
support is a requirement to ensure that we can drive project development in the North, and we
don't spend years talking about things that can happen. Cooperation and speed between
governments and departments is critical.
Moreover, to realise the opportunity, there needs to be credible, tangible projects, with robust
business [INAUDIBLE], like Project Sea Dragon, and governments as willing partners. For
multi-jurisdictional projects such as this, government, such as territory, state, and federal levels,
all have a role to play in developing the North.
Free trade agreements have wider implications. But as we heard this morning, it's really about
market demand. And Minister Truss noted this morning, infrastructure development in the North
is critical. Simple things that get taken for granted in the East, including all-weather roads, port
facilities suitable for frozen products, and social infrastructure to support workforces, are a
requirement.
There are significant training opportunities for local and regional residents, including indigenous
employment and development. The breadth of employment opportunities is significant, through
both construction and operational phases.
So just in conclusion, Seafarms Group-- we are a major domestic farm prawn supplier. So we're
a doer. We're not just sitting in an office, saying we can do these things. There is a major gap in
the global prawn market emerging an the North of Australia is well-positioned to supply that
market. And we should really stop talking, and let's start doing, with tangible, real projects in the
North. And to realise the opportunity, we need credible, tangible projects with robust business
cases like Project Sea Dragon, and governments as willing partners with the private investors.