After spending eight years and $33 million developing its pearl farming business in the Northern Territory, Perth company Arafura Pearls is hoping it is finally ready to deliver profitable returns.
After spending eight years and $33 million developing its pearl farming business in the Northern Territory, Perth company Arafura Pearls is hoping it is finally ready to deliver profitable returns.
The company has announced plans to raise $4 million through a public share offer, and has recruited Fortescue Metals Group chief executive Andrew Forrest as its new chairman to boost its prospects.
Arafura’s plan to list on the Australian Stock Exchange is part of a wider rationalisation taking place in Australia’s $200 million pearl industry, which has been forced to adjust to a halving of pearl prices over the past decade.
Other recent changes include an alliance between the industry’s two big players, the Paspaley and Kailis groups, to share a range of infrastructure and services.
Another notable change was the acquisition by Sydney-based Autore Group of Broome’s Clipper Pearling Group.
Along with Paspaley and Kailis, Autore is the third force in the marketing of Australia’s south sea pearls, which attract a premium price in global markets.
It distributes over 600,000 south sea pearls annually and its sales account for approximately 18 per cent of global production
The launch of Arafura’s IPO followed the release of an upgraded revenue forecast by Australia’s only other listed pearl producer, Perth-based Atlas Pacific, which also markets its pearls through Autore.
Atlas has delivered erratic results in recent years, but expects this year’s revenue will jump 22 per cent to $12 million, which should ensure a healthy profit from its Indonesian pearl farms.
Arafura was established eight years ago by accountant Andrew Hewitt and has sought to expand its Northern Territory operations since then.
It expects to harvest 21,000 commercial pearls this year, up from 7,300 in 2004.
The company has prepared for further growth by acquiring additional quota units.
It currently owns 80 units of quota, giving it the right to seed 80,000 shell per year, has licence and purchase agreements over a further 80 units, and recently signed an agreement to acquire a further 60 units in the Northern Territory for $3 million.
In total, Arafura will be the second largest holder of pearl quota in Australia. As well as acquiring extra quota, Arafura has focused in recent years on developing managed investment scheme projects.
The MIS projects are designed to bring forward revenue from its pearling activities, in the form of management fees.
In the year to June 2006, Arafura posted its maiden net profit of $2 million, with most of its operating revenue of $4.4 million coming from MIS management fees.
Arafura’s profit was also boosted by a $5.6 million gain in the market value of shells and pearls.
The company had been hoping to list on the ASX last year, but suffered a significant setback last March, when a cyclone damaged its operations.
