Seafarms sells two farms to Barramundi group MainStream for $13.5m to fund prawn mega-project

In February a court overturned a Deed of Company Arrangement (DOCA) for the mega project that comprises multiple locations spread across the NT and northern WA - a deal that would have alleviated Seafarms of its liability to pay an estimated $13.9 million owed to contractor Canstruct for works at the Legune Station, NT prawn facility. 

Seafarms successfully sought a stay order for the judgment so it could lodge an appeal, which is due to be heard by the court on 12-13 August.

In the group's half-yearly report released in February, Seafarms revealed its ability to continue as a going concern depended on "one or more" of several outcomes, including its ability to successfully defend the court case, reduce discretionary cash outflow, raise project finance through equity and debt, and generate cash through asset sales.

Today the company has ticked off one of those boxes with its subsidiary Seafarm Queensland entering into binding transaction documents with regional Victoria-based MainStream Aquaculture to sell its 'Farm 1' and 'Farm 2' assets in Cardwell on the Cassowary Coast between Townsville and Cairns.

The sale is due for completion on 30 April 2025 with conditions precedent including a new 20-year lease, the removal of lease renewal restrictions, and MainStream being able to raise $15 million in buyer finance.

MainStream, which is known for the Infinity Blue brand with exports to 32 countries and operations in Australia and the USA, will advance $7.56 million as an interest-free secured loan, offset against the purchase price at completion.

After the transaction, Seafarms' Queensland subsidiary will continue to own and operate Farm 3 in Ingham, the hatchery near Flying Fish Point and the processing plant on the site of Farm 1 in Cardwell.

"Farm 3, the processing plant, and the hatchery will continue to be fully utilised, with a particular focus on export," says CEO Peter Fraser, who was appointed to the role in March to replace retiring former CEO Rod Dyer.

"Farms 1 and 2 have been important in our journey towards Project Sea Dragon (PSD) but have been focused on the production of Banana prawns for the domestic market which is not a part of our strategy going forward.

"Now is an opportune time to sell Farms 1 and 2, streamline our operations and focus on the key contributing elements of PSD - breeding, farming, processing, and exporting world-class Black Tiger prawns."

Fraser, a seasoned seafood executive, was promoted to the top role after being hired as commercial director earlier in the year, having consulted with the group as an international business advisor since 2015.

Since joining he has asserted the viability of Project Sea Dragon, claiming it will provide significant benefits to local and indigenous communities, Northern Australia and the company.

"We remain confident of the ultimate [legal] outcome being a favourable decision to Seafarms and Project Sea Dragon," he said last month, also noting the company was engaging with international stakeholders, as well as debt and equity investors, to develop the project.

The last budget estimate for the construction of Project Sea Dragon itself stood at $1.87 billion. By mid-2020 Seafarms had raised $110 million for the project with the Northern Territory Government committing to spend an additional $56 million on roads.

Seafarms raised a further $92.5 million for the project before construction began in June 2021, $20 million of which came from its largest shareholder Ian Trahar, who successfully ousted a former CEO who had instigated a review of the project which found it to be infeasible.

Under leadership that is more aligned with Trahar, a study tour of large prawn farming operations in Ecuador was undertaken which management believed provided positive signs from a technical perspective about the 10,000ha of ponds contemplated under Project Sea Dragon in Legune Station.