Investment outlook for land based aquaculture in Australia ( eg Prawn Farms)

1. Pacific Reef Fisheries Investment outlook for land based aquaculture in Australia ( eg Prawn Farms) http://www.pacificreef.com.au/

2. Source DEEDI "Report to Farmers 2009" How’s our industry going?

3. Broad scale (whole coastline) spatial analysis

4. Study area: 13,200,000 m ha Potentially suitable: 1,700,000 m ha Qld: 594,000 ha NT: 528,000 ha WA: 516,000 ha Current industry: 1,000 ha 4,000 MT $ 60 M Industry target: 5,000 ha 25,000 MT $ 375 M Huge potential for sustainable expansion Cape York Kakadu Bonaparte Darwin Kununurra Gulf N Qld Roper # Lagrange Central Qld Carnarvon SE Qld NSW CSIRO: McLeod et al 2002 #

5. Australian prawn farms total ~ 1,000 ha No adverse environmental impacts for 20 years Weipa Port Douglas Cairns Cardwell Mackay Bundaberg Brisbane “Aquaculture production is subject to an unnecessarily complex array of legislation and agencies” ProductivityCommission (2009)

7. The coming famine: risks and solutions for global food security Julian Cribb    Saturday, 17 April 2010 Most of us have by now heard the forecast there will be 9.2 billion people in the world of 2050. But current projections suggest human numbers will not stop there – but will keep on climbing, to at least 11.4 billion, by the mid 2060s. Equally, the world economy will continue to grow – and China, India and other advancing economies will require more protein food.  Thus, global demand for food will more than double over the coming half-century, as we add another 4.7 billion people. By then we will eat around 600 quadrillion calories a day, which is the equivalent of feeding 14 billion people at today’s nutritional levels. The central issue in the human destiny in the coming half century is not climate change or the global financial crisis. It is whether humanity can achieve and sustain such an enormous harvest.

8. Labor promises national food strategy • Tony Burke says the plan will look at food policy "from the paddock to the plate". (ABC News) • Labor will develop a national food plan if re-elected to government, Agriculture Minister Tony Burke has announced. • "This is a first for Australia and will integrate all aspects of food policy by looking at the whole food chain, from the paddock to the plate," he said. • "Even though we export 60 per cent of what we grow, we need to ensure that our country's food security is protected in the years to come. • The Greens are in favourof a national food plan, while the Coalition is in favour of more monitoring of foreign purchases, but does not want a register. • Mr Burke says the plan will include a consultation process with key industry players such as the National Farmers Federation, the Australian Food and Grocery Council, CSIRO and Woolworths.

9. Senate inquiry into Australia’s food security A new Senate inquiry is to examine how Australia can produce enough food for itself and maintain its major export capacity in the face of global warming. The inquiry will be chaired by Senator Bill Heffernan, Liberal Senator for NSW, and represents the first time that the Senate has examined the issue of food security in Australia. The inquiry will hopefully determine how to produce food that is affordable to consumers, viable for production by farmers and has a sustainable impact on the environment.

10. Northern Queensland has the potential to become a global player in the production of the world's food, an international conference on global food security has been told. James Cook University's (JCU) Professor Jeff Sayer has told the Brisbane conference that North Queensland not only has unique advantages to help feed the world but also could export expertise, innovations and research. Prof Sayer said the world has to increase food production by 70 per cent by the middle of this century. "This increase will mostly be met through the expansion and ecological intensification of agriculture in tropical developing countries, and on a diminishing resource base," he told delegates. "We will have passed the peaks of phosphorous, potassium, fossil fuels and water, and the danger is that yield increases will come at the expense of the conversion of environmentally valuable natural forests and wetlands.

11. Key Points • Opportunity to increase healthy seafood grown in drought-proof environments using ecologically sustainable systems • Enhance self sufficiency in seafood • Enhance export of high quality seafood • But unnecessarily complex array of legislation and agencies is a critical barrier

12. Minimize flood risk • Preserve viability of sugar industry • Optimize land use economics • No added environmental load (nitrogen, phosphorous, sediment) $$ per hectare Max 10 yr avg Max 10 yr avg Sugar Prawns No additional nutrients or sediment into river

13. Comparative profitability of beef and prawn production Beef feedlot: 5,000 head, 5 groups per year, excluding labour costs Prawn farm: 50 ha, 1 crop per yesr including labour costs

14. How does land based aquaculture stack up in the Australian context? • Worlds best practice environmental standards and management • Highly productive use of sometimes marginal agricultural land with significantly increased yield and returns over any other agricultural land use; up to 15 MT or $300K/Ha (prawns) vs$20K/Ha(sugar cane) • Relatively immune to drought, flood, fire, and storm when compared to most other forms of agriculture (eg cyclone Yasi)

15. Site location – north of Bowen, Qld

16. Site location – north of Bowen, Qld

17. Due process Comm Decision Application lodged EIS lodge EIS tor State & Comm State Decision 2000

18. … Indecisiveness? Offsets no longer required 2nd EIS required Supp EIS required Offsets refused Comm Decision Application lodged EIS lodge EIS tor State & Comm State Decision 2006 2004 2009 2009 2000 2002 2003 2008 2010 2008 2001 2008 Offsets required Further assess. required CSIRO / AIMS report

19. So what’s the problem??? • In spite of the overwhelming scientific evidence gathered now over 25 odd years, this science has not been translated into government policy (mismatch between science and policy) • What is clearly lacking is political will • Decisions made on the basis of outdated anecdotes and departmental ideologues (what other industry is faced with zero net discharge??)

20. What can be done? • Continue to actively lobby government, through our associations and as individual companies • Keep up the good fight on the science/environmental front, ie Caring for Country, further RD&E activities, benchmarking • Keep improving our management through adaptive practices and technological advancement • Market ourselves and make sure we remain profitable! • Invest in our other key resource, our people • Always think out of the square, synergistic integration

21. Decision-making … Comm Decision Application lodged EIS lodge EIS tor State & Comm State Decision 2000 2004

22. Actual process Offsets no longer required 2nd EIS required Supp EIS required Offsets refused Comm Decision Application lodged EIS lodge EIS tor State & Comm State Decision 2006 2004 2009 2009 2000 2002 2003 2008 2010 2008 2001 2008 Offsets required Further assess. required CSIRO / AIMS report

23. Serious consequences of final decision • No change detectable in nutrient levels • nutrient levels are not ecosystem function • beyond the scope of existing technology • Offsets are still required (State) • there must be no impacts, so what is to offset?

24. Commitments for Australian and State Govt • Risk-based assessment of aquaculture • PIMC’s 'Best Practice in Regulatory Arrangements for Aquaculture' (http://www.daff.gov.au/__data/assets/pdf_file/0004/5755/best_practice_paper.pdf) • National ESD strategy (http://www.fisheries-esd.com/a/pdf/ESDHowtoGuideAquaculture.PDF). • Impositions must be commensurate with the level of risk • Conditions imposed under IPA must be “relevant to, but not an unreasonable imposition on, the development or use of premises as a consequence of the development; or be reasonably required in respect of the development or use of premises as a consequence of the development” (Section 3.5.30 of the IP Act). • However … • Scientific research concludes that risk is very slight • Environmental agencies treat risk as very high - inappropriately severe restrictions

25. So where do the opportunities for investing in land based aquaculture lye? • Speculative investing in Greenfield sites • Buying up of farms currently on the market (Seafarm, Mackay farm?) • The Tassal industry takeover and rationalization model, ie small farms getting gobbled up by larger players • Investment in existing or upcoming ventures through joints ventures or public floats

26. Types of Investment • IPO or floating on the stock market (ASX) • Pros- a good source of equity rather than debt based funding, Cons-more complex management and reporting structures so tends to be more relevant to medium/large enterprises • Joint venture • Pros- again, a good source/and or mix of debt:equity funding, risk sharing • Cons- finding groups with similar expectations and objectives

27. Economics for investing • Agriculture seen as a counter-cyclical activity (recession proof) • Dollar most likely to drop encouraging foreign investment (at some point) • Interest rates rising, although slowly • Not an abundance of venture capital around at present but opportunities likely to present over time as true potential of aquaculture is realized and some of the uncertainty dealt with • Availability of venture capital will be closely linked to our industries ability to educate and convince the public and investors of the triple bottom line

28. There are still some risks! • Rising costs (wages, electricity, flow on from carbon tax unknown) • Risk of disease • Government policy, Barrier to entry? • Can we secure our supply chains and industry growth by improving the public’s perception • .

29. What will the industry look like in 5 years? Unlikely to see more than modest growth in the number of farms, more likely to see a similar number of farms run by fewer companies The yields and returns are likely to slowly improve with advances in technology and management such as domestication and floc systems for example The selling price our products are likely to keep improving in line with demand, larger sizes and more fresh being sold It is likely that farms may again starting looking outside the basic farming model and begin growing other species in line with demand and returns, eg cobia, other prawn species One day the lights will come on and political will begin to creep through into policy and regulation and new ventures will begin construction