Join our daily newsletter At The Bell to receive exclusive market insights
- Seafarms Group (SFG) will undertake a farming pilot before continuing with its Project Sea Dragon (PSD) prawn farms in Northern Australia
- This follows a project review which identified a number of challenges, including unacceptable risks with the project in its current form
- The findings will set the project back three years
- The company said while this is happening, it will focus on existing Queensland operations
- Seafarms shares have fallen 34.6 per cent, trading at 1.7 cents
Seafarms Group (SFG) has hit a hurdle with its Project Sea Dragon (PSD) prawn farm venture in northern Australia, with the project set back three years after a review which found the project should not proceed in its current form because of “unacceptable risk”.
The PSD proposal is a large-scale prawn project which has been in development for over eight years. It is aimed to be a staged development of up to 10,000 hectares of prawn production ponds, supported by a series of separate facilities across the top of Australia, including Exmouth, Bynoe Harbour, Gunn Point, Legune Station and Kununurra. The aim of PSD is to produce high-quality, year round reliable prawns for the export market.
However, the project review found the PSD cannot proceed in its current form because of a funding shortage due to the failure of debt financing process.
Further, it found the project in its current form will not generate acceptable financial returns, the existing scope cannot be completed for targeted costs or achieve target completion dates.
For PSD to “proceed in any form”, farming out-performance will need to be shown through a pilot project. The performance will be based on two crops and on the construction of a cost effective 10 hectare ponds which are unproven in Australia.
“Prawn aquaculture is a complex, integrated, agricultural supply chain and the combination of a new location/environment, unproven 10 hectare ponds and lack of an existing competitive farming system makes for unacceptable risk without piloting and proving farming out-performance,” the company said.
The farming pilot is proposed for the existing partially constructed ponds at Legune, but it will take up to three years to re-scope, construct and conduct a pilot.
Due to the review, all PSD construction will be on hold until the farming pilot is completed, refinement of other key project elements such as further development of the breeding strategy and the availability of sufficient funds to proceed with the farming pilot.
Seafarms said while this is happening, it will focus on its existing Queensland operations.
Last year the company raised over $92 million for PSD, with construction progressing through the second half of the year. In October, it said PSD was going to cost more than expected due to steel and copper prices, with the project now expecting to cost as much as $410 million.
On the market, Seafarms shares fell 34.6 per cent, trading at 1.7 cents per share at 12:19 pm AEDT.
