November 14, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

The struggling cotton industry in Australia’s far north on the Ord River Irrigation Area (the Ord) is finally seeing an organized effort to advance, thanks to a complex web of partnerships, fundraisings, and investments. 

Back in September, Naomi Cotton Limited (Naomi) announced its agreement with Kimberley Cotton Company (KCC) to build and operate a new cotton gin at Kununurra, in Western Australia. 

Under the terms of this agreement, Naomi committed to invest $2.8 million in KCC in exchange for a 20 percent stake and representation on the board. As a matter of funding this move, Naomi undertook a $14 million capital raising (advised by King & Wood Mallesons), by way of an underwritten renounceable pro-rata entitlement offer. 

In turn, KCC entered into an agreement with the Commonwealth government’s Northern Australia Infrastructure Facility (NAIF) for the execution of a $32 million loan to purchase a multi-user, high-tech cotton processing facility in Kununurra with the intention of implementing upgrades.

This capital commitment is part of the federal government’s $5 billion loan scheme for infrastructure projects located throughout Northern Australia, and brings the total financing deployed to-date to more than $3.1 billion.

“Supporting the establishment of a new $925m cotton growing industry in northern Australia is an example of NAIF helping generate transformational growth in northern Australia,” said Chris Wade, CEO NAIF.

Other backers of the project include Kimberley Agricultural Investments (KAI), owned by China’s Shanghai Zhongfu, Prime Grain Limited, owned by Ron Greentree, one of Australia’s largest wheat farmer, and local farming families. 

It was back in 2013 that the government of Western Australia and KAI signed an agreement stipulating that over the following four years, KAI would invest $200 million to create new agricultural land in the Goomig and Knox Plain areas of the Ord Valley. Work advanced in fits and starts, and by 2017, KAI submitted plans to Australia’s Environmental Protection Agency (EPA) for the development of another 3,086 hectares for the production of both annual and permanent crops including cotton, grains, citrus, mangos, and other tree crops. 

The establishment of this new cotton gin, which is expected to have an initial yearly capacity of 100,000 bales, has the potential to create more than 1,000 direct and indirect jobs in the first 10 years, according to a study cited by the state government. It also has the knock-on potential for increased cattle herd sizes, as the animals can be fed on the cotton seed by-products.

The interconnected deals and partnerships being announced now are key to the advancement of a sustainable cotton industry in the country’s north, that once operational, will provide the certainty needed to be a catalyst for the industry to scale up production.

The government has been working with KCC and local growers for five years to see the fruition of this project by providing land and financial support, with a lease for a 79.4 hectare signed earlier this year. It also has invested more than $4 million to upgrade the electric power supply using low emission hydroelectricity from the nearby Argyle Dam.

At this point, KAI has invested approximately $350 million across the local area to-date, and negotiations are continuing between the state government and KAI for a development lease at Knox Plain to expand cotton production toward achieving scale and greater profitability. 

“This important announcement gives investors the confidence to move ahead with building a strong and profitable cotton industry, backed by the certainty of a locally based high-tech, multi-user processing facility,” said Alannah MacTiernan, Agriculture and Food Minister.

 “Our Government is working closely with investors and industry to support this visionary and ambitious project. I look forward to the arrival of the cotton gin in the Kimberley and the generation of economic growth and jobs in the north.”

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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