A Bremer Bay abalone farming venture is seeking $3.5 million from Western Australian investors to fund its expansion to commercially sustainable levels.
A Bremer Bay abalone farming venture is seeking $3.5 million from Western Australian investors to fund its expansion to commercially sustainable levels.
The private group already has three years worth of stock and is set to make its first harvest in 2006, with 20 tonnes worth about $900,000.
But Western Australian Abalone Ltd is seeking funds to more than double capacity to 50 tonnes by 2008, a scale required for long-term success in the export-focused business.
The move would significantly add to the farmed capacity of Australia’s $250 million abalone business. Globally, Australia is the biggest producer, with 5,766 tonnes in 2001-02, but is a minnow in the aquaculture side of the industry.
According to the information memorandum for sophisticated investors, up to 52 per cent of WA Abalone is on offer, with general manager and director Jim Morrison holding 4 per cent of the post fund raising stock and a large group of seed capitalists holding the remainder of the shares.
The two other directors are Pendragon Capital director and former Barrington Partners partner Keith Platell and WA Abalone founder Tim Richards, a Hong Kong-based pilot.
Mr Richards said the farming of abalone looked very attractive in the face of a growing market in Asia and a diminishing wild resource.
He said the economics were very strong with a licence to harvest 20 tonne of wild abalone costing $7 million, while a farm with a 200-tonne capacity would cost just $2 million more, at $9 million.
Mr Richards said the farm, which was onshore with shaded tanks, was environmentally friendly because abalone fed on cereal-based food and there was no obvious effluent.
“There are 26 different government departments we have satisfied,” he said.
WA Abalone was growing greenlip abalone, which takes four years to grow to optimum size, though farmed abalone can be harvested earlier.
The company believes it will have an advantage over wild abalone in that it can deliver smaller sizes preferred by the market because it can harvest without minimum size restrictions.
Mr Richards said the company was aiming for organic growth of the operation if the fund raising was successful but could also consider an IPO in the future.
The information memorandum suggests the numbers have been crunched for such a move with a further $4.5 million required to expand capacity from 50 tonnes to 200 tonnes, including spawning levels for 200 tonnes of abalone to take place in 2006.
By approaching investors with significant stock set for a harvest in 2006, the WA Abalone move does remove one of the big barriers to investors highlighted by 2003 study by PricewaterhouseCoopers commissioned by the Aquaculture Council of WA.
The Study on Investment Attraction for the Abalone Aquaculture Industry in Western Australia found many investors thought the risk was too high for the return available from a start-up.
WA Abalone was one of eight abalone aquaculture projects listed in the study.
Mr Platell said he hoped WA Abalone’s move to have substantial stock near harvest would make the offer more attractive to investors.
“We have sort of reduced that side of the risk substantially,” he said.
