Australia’s Yumbah Aquaculture, the largest abalone farmer in the Southern Hemisphere, has acquired a 75 percent stake in EP Aquafeeds (EPA) for an undisclosed amount.

Under the terms of the deal, which will make Yumbah the only abalone producer to produce and control its own feed, EPA will change its name to Yumbah Aquafeeds, and Thomas Coote, the former owner of EPA, will retain the remaining 25 percent stake in the company.

Yumbah Aquaculture was launched as a privately held company last year through the merging of four abalone farms located in Bicheno in Tasmania, Port Lincoln and Kangaroo Island in South Australia, and Narrawong in Victoria. Initial production will total 500 tons per year, however the company is targeting production of 700 tons per year, of which The Examiner reports that 80 percent will be earmarked for export to China and other Asian markets, the U.S, Canada, and the EU.

Through an agreement with Eileen McLeay, the custodian of the traditional Yaygir language on the North Coast of New South Wales, Yumbah Aquaculture has adopted the word “yumbah,” meaning “larger shellfish” for its name.

“With scale, certainty of supply and quality, and other business efficiencies we gain through transforming into one company, we’ll be able to better meet the needs of a consumer base that continues to demand far more than we can supply,” said Yumbah Chairman Garry Higgins.

The acquisition of EPA will provide a range of efficiencies for the abalone producer, and with the reliability of having a steady supply of feed at a controlled and constant quality level, the company will have a solid platform from which to pursue growth, expansion, and innovation.

“With Yumbah Aquafeeds, we can increase our focus on research and development, grow the capabilities of our company and ultimately achieve new efficiencies and improve productivity,” said Yumbah Director Anthony Hall.

Insatiable Demand

Ramping up abalone production at this time is a positive strategic move. In December 2016 Dean Lisson, chief executive of the Tasmanian Abalone Council, told ABC that abalone prices in China have reached a record A$85 per kilogram due to a combination of a destructive typhoon hitting China’s prime centers of production along its coast, and a weakening of the Australian dollar. Additional factors including algal blooms and disease outbreaks have also had negative impacts on Chinese abalone production.

“I know they had a massive typhoon go through two or three months ago,” said Lisson. “My understanding is that it did cause quite significant damage to some of the floating farm systems, in particular in the inshore area and bays mainly within the Fujian province.”

Mainly produced in Australia, New Zealand, China, Japan, South Africa, and the West Coast of the U.S., abalone is considered a highly-sought delicacy across Asian markets, particularly China. Insatiable demand has created a market through which investors and producers see the ability to gain long-term returns.

In March of last year South Africa-based  Futuregrowth Asset Management earmarked R200 million (US$13.2 million) under its Futuregrowth Development Equity Fund to invest in sustainable aquaculture operations, with the bulk of the funds to be invested in abalone farming companies.

“We see this as a strategic play to enhance returns for our shareholders by investing in a sector that shows significant long-term growth prospects with very high export potential,” said Futuregrowth Investment Analyst Amrish Narrandes in a company statement. “Our investment also meets the mandate of the Futuregrowth Development Equity Fund thanks to the socially responsible, sustainable nature of abalone aquaculture, a sector that remains under-invested in South Africa despite ongoing poaching of wild abalone populations.”

Last year also saw Australia’s Jade Tiger Abalone build a new $2 million export facility to support the company’s plans to boost output by 25 percent to meet demand from the Chinese market, reports the Geelong Advertiser.

“In Shanghai alone we could easily sell twice what we produce, which is why our new aquaculture facility at Avalon and export facility in Indented Head make so much sense,” said Anton Krsinich, general manager of Jade Tiger.

Looking toward 2017, Ocean Grown Abalone is planning a $15 million initial public offering (IPO) to fund the doubling of its operations off the coast of Western Australia. Using 5,000 concrete blocks, Ocean Grown has created what it calls an abalone “ranch” – an artificial reef on which the company is aiming to produce 100 tons of abalone per year by 2019. In the future, Ocean Grown said it is also planning to add two additional “ranches” in Esperance in Western Australia and Port Lincoln in South Australia.

 

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com