Seafarms ‘committed’ to reviving collapsed project

Seafarms Group says it is committed to developing Project Sea Dragon after it regained control of the collapsed prawn farm from administrators in March.

Project Sea Dragon was placed into voluntary administration in February after the company withdrew funding and was found liable to pay a contractor $13.9 million in unpaid fees. 

A month later, the company sought to buy back the failed large-scale prawn aquaculture project near Kununurra from administrators for $3.5 million through a deed of company arrangement. 

With the project back in Seafarms' hands, chief executive Rod Dyer told the market this morning that he was pleased to announce the board had restated its commitment to its development. 

He said the the board would assess an updated business case and funding arrangements before making a final investment decision for the project, of which a timeframe has not been set. 

“The financial modelling is sufficiently complete with the remainder of the documents describing the revised business case and options for development, well progressed,” Mr Dyer said.

Seafarms said it had confirmed customer commitment and had negotiated improved pricing, as well as updated production and marketing assumptions.

Mr Dyer told the market that key risks around the use of 10-hectare ponds and absence of financing had been addressed in updated plans, following a review of the project that was tabled in March last year.  

He said the company had remained in touch with lenders and funders from pre-March 2022.

“We have maintained an arms-length approach with funders, pending the completion of our updated business case and financial modelling,” Mr Dyer said.

“The documents describing the revised business case are well progressed, with the financial model sufficiently complete and tested to enable decisions and discussion with funders.

“While the outputs of the financial model are pleasing the project's final business case must necessarily consider the funding arrangements that will differ according to the appetite of the different funders for the scale of the initial development and their returns.

“To that end, we are reengaging with both previous and new funders, as well as debt providers.”

The viability of Project Sea Dragon became increasingly uncertain in the last two years after the company was unable to secure further funding for the project when it was estimated to cost at least an extra $80 million due to changes in scope and increasing material costs.

In February, Seafarms issued a statement to the ASX advising Shaun McKinnon and Andrew Fielding of BDO Business Restructuring had been appointed voluntary administrators after it lost $13.9 million in contract dispute with construction company Canstruct.

Earlier that month, the Royal Institution of Chartered Surveyors found Seafarms liable to pay the sum to Canstruct for claims of money owed after the suspension of work on Project Sea Dragon in December 2021 and the termination of contracts in April 2022.

After Seafarms started the process of buying back the project, it updated the market that it had been served with Federal Court proceedings from Canstruct seeking orders that the deed for the project be terminated and that a liquidator be appointed to the company.

In today’s statement, Mr Dyer said the Federal Court matter was an unwanted distraction.

“The Federal Court matter is an unwanted distraction for the Company and while no outcome is guaranteed in circumstances involving litigation and the courts, Seafarms legal position gives it confidence,” he said.

“We do not see this as an impediment to progressing funding for Project Sea Dragon nor the progression towards a final investment decision.”

The dispute between the two companies will be before the Federal Court in August. 

Off the back of today’s announcement, Seafarms share price rose 12.5 per cent to 0.4 cents.