Don Fuller on Sea Dragon

UPDATE August 6, 2020

The Alice Springs News put questions raised by Don Fuller about Project Sea Dragon to Chief Minister Michael Gunner. He replied, and Dr Fuller in turn responded to Mr Gunner’s points. That exchange is below, followed by Dr Fuller’s full report.

 

QUESTION BY THE NEWS: Could you please confirm or correct the facts below about the aquaculture / prawn project Sea Dragon?

The Core Breeding Centre and Broodstock Maturation Centre was going to be located at Bynoe Harbour, near Darwin; a hatchery at Gunn Point and the Grow-Out Facility at Legune Station. The required finance to commence the construction of the project remains unavailable.

This suggests potential lenders (including NAIF) are concerned about one or more of the following factors: An ability to repay the interest and principal on the loan; the amount of funding required; available collateral to act as security for the loan.

MR GUNNER’S ANSWER: Project Sea Dragon prawn aquaculture project will be the largest of its kind in Australia and will ultimately see the development of up to 10,000 hectares of ponds for black tiger prawn production facilities.

At full scale the project has the potential to create around 1500 ongoing jobs, of which around 1000 will be located in the Northern Territory.

Construction and earthworks for the Core Breeding and Maturation Centre, located at Bynoe Harbour commenced earlier this year, and early works at the Legune Grow-Out Facility have also been complete.

Seafarms are committed to delivering this project and have appointed a sole arranger to help secure up to $150m of debt for stage one construction of the project.

RESPONSE TO THE CHIEF MINISTER FROM DON FULLER: As reported, the Chief Minister has been forced to admit that funding issues have impacted the prawn project. He is quoted as saying: “Unfortunately, it’s that private sector side of things where [the projects] haven’t been able to get the cash … which is frustrating.”

Mr Gunner, who oversees the major projects portfolio in Cabinet said the company behind the mega prawn farm, Seafarms Australia, had recently managed to raise some private sector funding but was yet to secure a key loan from the federally-funded $5 billion North Australia Infrastructure Facility.

While the company may have appointed a “sole arranger” to help secure up to $150m of debt for stage one of the Project, so far neither the wider international or Australian financial market nor the Commonwealth government has shown sufficient confidence in the Project to provide the large amount of  finance required.

This has finally been acknowledged by the Chief Minister.

It suggests the risks associated with the Project are being assessed as unfavourable by major lenders, compared to the likely financial return. This begs the question as to why the NT government would have spent substantial sums building roads for the Project when there is a risk that the Project will not proceed.

Would not it have been far more preferable to wait until the private sector and Commonwealth government had completed their economic assessments of the Project before committing Territory funding?

Would not it have also been preferable if competent economic and financial analysis and assessment were undertaken by the Territory Government before proceeding to spend taxpayer monies in this manner?

This prevents limited taxpayer funding being spent on roads likely to have an important economic stimulus effect to key, high performing industries in the Territory, such as tourism.

A far more certain and guaranteed economic return would have come from sealing the Mereenie Loop road in the centre, for example. This is crucial to tourism recovery in the centre of Australia and would have generated a substantial financial return.

 

QUESTION BY THE NEWS: The NT Government has completed the road to Gunn Point at a cost of $32.2m. With the Commonwealth it has also been involved in awarding a $58m tender for the first section upgrade of the Keep River Road as a signal of strong financial support for the project. How much to the $58m did the NT contribute?

Was the principal purpose of these roads, worth together $90m, to serve the Sea Dragon project? What are they used for now?

MR GUNNER’S ANSWER: The upgrade of Gunn Point Road was 100% funded by the Northern Territory Government and the upgrade of Keep River Plains Road is funded 80% by the Commonwealth and 20% by the Northern Territory Government.

There are other purposes and development opportunities that the sealing of these roads support.

Keep River Plains Road provides access to large parcels of agricultural land, currently being advertised by NT Land Corporation, as well as potential onshore gas.

Gunn Point Road currently serves many different purposes including access to agriculture, mining, tourism and fishing facilities and is also access to the future development of Murrumajuk and Glyde Point.

RESPONSE TO THE CHIEF MINISTER FROM DON FULLER: But, such alternative projects these new roads are supposed to support are blue sky, or rather, likely to be pie in the sky opportunities rather than established, viable economic opportunities.

By contrast, the Mereenie Loop and further expenditure in key Territory and national parks for valuable  infrastructure development designed to support the growth of tourism would provide a far higher economic return in the form of jobs and economic activity.

Tourism is an established growth sector for the economy and for the Territory, in particular. While tourism  generates substantial jobs and economic returns to the Territory it has been largely ignored by the Gunner government, too focussed on political point scoring with large, high risk projects without adequate economic and financial analysis and understanding by government.

That is, the Gunner government is way out of its depth, to the expense of all Territorians. There have been numerous examples of this during the Gunner government, including the Charles Darwin University inner city Darwin development and the construction of the new grandstand in the Chief Minister’s electorate.

Additional examples include evidence disclosed by the Auditor General that the NT Government handed out “billions of dollars” in grants without proper record-keeping and without proper oversight and the approval of $10.5m of taxpayer funding to Darwin water bottler NT Beverages, despite the company being deeply in debt and on the brink of financial collapse.

This government has shown a fatal lack of competence in economic and financial management and understanding. This has had a major impact on funding and desperately needed support for established industries, such as tourism, vital to the economy of Central Australia.

 

PROJECT SEA DRAGON – ANOTHER NORTHERN GAMBLE TO BREAK THE BANK?

By Dr DON FULLER

Background

The majority of land-based aquaculture in Australia is concentrated in Queensland. An important exception to this is Humpty Doo Barramundi Farm, located at the headwaters of the Adelaide River.

Queensland has less than 1, 000 hectares dedicated to aquaculture. The majority of this is in prawn farming. However, the industry has not shown evidence of growth for over a decade.

In part this is due to the fact that prawn farming and aquaculture in general, is a high risk, capital intensive, site specific operation which requires a high degree of technical expertise. It requires management who are flexible and adaptable and able to deal with sudden changes in conditions. Management must be technically proficient and extremely competent in risk management, marketing and liaison with government bodies.

On 20 December 2013, a company called CO2 Group announced that its wholly owned subsidiary, Western Australian Resources Ltd (WARL) had executed agreements to acquire the business and assets of the Queensland prawn aquaculture company Seafarm Pty Ltd. CO2 had been an environmental services company with operations in Australia, New Zealand and South-East Asia.

In February 2014, CO2 Group was renamed Commodities Group Limited. The Group demerged its environmental business to focus on aquaculture. To this end the ASX Listed Company Commodities Group Limited (ASX:COZ) became the ASX Listed Seafarms Group (ASX: SFG).

On April 20, 2018 the Australian Stock Exchange announced the listing of SFG which offered ‘shareholders the opportunity to invest in the company that’s dedicated to operating, building and investing in sustainable aquaculture.’

From a concentration on the environmental industry the Group had refocused on the aquaculture industry. This appeared to be a particularly challenging change of direction given the specialized technical skills and high degree of experience required in the field of aquaculture. It also appeared to have little in common with the previous industry the Group had been involved in. Such changed requirements could be expected to be particularly challenging for the senior management and board of this now, quite different, operation.

Project Sea Dragon

Purchasing the Seafarm prawn operation in Queensland gave the company the platform and justification to become involved in formulating the concept and development of Project Sea Dragon.

This is a very large scale, integrated, land-based, prawn aquaculture project in Northern Australia. It is proposed to produce year round volumes of prawns for export markets, principally in Asia.

Stage 1 of the Project is proposed to comprise around 1,000 hectares of prawn farming ponds and associated infrastructure. The prawn grow-out facilities are to be located at Legune Station in the Victoria River District of the Northern Territory. In addition, there will be $90 million spent on a range of breeding program, processing and export facilities that will be located in, or near Darwin, Exmouth, Kununurra and Wyndham.

Main Project Component of Project Sea Dragon

At full capacity, the Project will consist of the following components:

1. Broodstock facilities and Hatcheries – to breed and raise 100 million post-larvae per year, to be transferred into the production system.

1. Land-based, pond grow-out facilities. This will consist of 10,000 hectares (100 square kms) of production ponds and an additional 5,000 hectares of additional water treatment ponds/canals.

1. Product Processing Facilites

1. Product Export and Transportation Facilities

Beside this a number of other infrastructure components are required. These include:

• Feed Mills – to produce pelletised feed products to feed the prawns in the production systems.

• Feed Raw Materials Supply – agriculture product supply/production systems to access materials for the pelletised feed. These include large quantities of soya beans, lupins, maize and wheat. There is also the need for transportation systems to deliver the materials from growing locations to the Feed Mills

• Additional support infrastructure is required including;

• • Electrical Power generation- For driving pumps and aeration systems and also for Feed Mill and Product Processing Facility.

It is expected that (1) The Founder Stock Centre and Quarantine Centre will be located at Exmouth, WA. This is where wild caught prawns will be held, tested and bred to produce disease-free stock for the production system. (2) The Core Breeding Centre and Broodstock Maturation Centre will be located at Bynoe Harbour, near Darwin. (3) A Hatchery for spawning and rearing tanks for producing disease-free post larval prawns to stock the grow-out facility, will be located at Gunn Point. (4) The Grow-Out Facility will be based at Legune Station in the N.T. (5) The Processing Plant is to be based at Kununurra.

This is a huge project. At full capacity, it is estimated that the Project will require capital expenditure of around $1.25 billion. Annual production of prawns is estimated at 125,000 tonnes per annum. The construction stage of the Project will employ around 300 people, with on-going operational employment of around 1,700.

While the Queensland operations are primarily intended to demonstrate the operating concepts for Project Sea Dragon it is difficult to understand how such concepts can be transferred from what is a relatively small operation of some 160 hectares of growing out ponds and a total production of 1,770 tonnes – to an enormous scale-up, involving 10,000 hectares and 125,000 tonnes per annum.

This is not to mention the quite different geographical and climatic characteristics of Northern Western Australia and the Northern Territory to Queensland. Such differences include remoteness from skilled labour, high transport costs and elevated costs of production.

Such barriers to commercial development are likely to be an important reason why such a large-scale aquaculture development has not been attempted anywhere in Australia, much less the extremely challenging Australian North.

It therefore begs the question why the proponents of such a Project would choose this region of Australia. Is it likely that an important influence has been the possibility of attracting large amounts of government funding, directed at the development of the north?

If so, then perhaps the commercial realities including the large scale capital establishment costs and relatively high operating costs become less important to the owners and managers of the enterprise. However, whether such a situation can be maintained in the medium to longer run without substantial appreciation of commercial realities, remains an important question. 

Capital Start-Up Requirements

Since 2014, substantial effort has been expended into attempting to attract the required large amount of capital funding for Project Sea Dragon.

In a submission to the Inquiry into the Development of Northern Australia, it has been indicated that Seafarms has funded the project development to the completion of a Preliminary Feasibility Study stage (Stage 1) – and is now seeking a partner for the following stages:

• Stage 2 – completion of ‘Bankable Feasibility’ through to the financial investment decision. It is stated that the partner may wish to exit at the completion of Stage 2. However, it is not clear what would be gained by such a decision. Alternatively, it is stated a partner may make a decision to progress to;
• Stage 3 – Development Funding (Engineering, Procurement, Construction phase); and
• Stage 4 – Operations.

To this end, Seafarms has ‘embarked on a marketing program’ with a number of foreign state-owned enterprises, sovereign and private investment funds, large global food companies and several investment banks.

In addition, the Group has successfully sought to have the Project recognized as a Project of State Significance in WA and the NT. It has also been given Major Project Status with the Commonwealth Government.

Such a ‘marketing program’ has not been successful in attracting anything like the required funding for the Project from commercial sources of funding. This raises important questions as to the way in which the Project is perceived by experienced commercial financial intermediaries.

During the last financial year, Seafarms Group announced the following financial events, relating to capital requirements.

• Nippon Suisan Kaisha Ltd, a major Japanese seafood company, undertook an equity investment in Seafarms shares at 10 cents per share equating to an equity raising of $24.99 million on 7 August 2018.

• A share placement to major domestic, institutional and professional investors at 9 cents per share resulted in equity raising of $20 million on 12 April 2019.

• Nippon Suisan Kaisha’s further investment in the Group, pursuant to the top-up rights under the Shareholder Rights Agreement finalised in August 2018 at 9 cents per share resulting in an equity raising of $3 million on 15 May 2019

• Seafarms Group Sharepurchase Plan, provided eligible shareholders the opportunity to subscribe for up to $15,000 each in Seafarms at 9 cents per share, raised $4.3m on 29 May 2019.

• Equity raising fees were $1.4m.

It is noteworthy that on 7 August 2018, Seafarms Group issued 5,320,622 unlisted share options to Nippon Suisan Kaisha (Nissui). The Options are subject to a voluntary 3-year escrow period, have an exercise period of 5 years at an exercise price of 6.2 cents per unlisted option. At the 30 June, 2019, these 5, 320, 622 unlisted options remain unexercised. As the current share price of around 0.051 is well below the exercise price such options are not likely to be exercised.

On 12 December 2018 the Group issued 50 000 000 and 30 000 000 unlisted share options to AAM Investment partners as part of the transaction involving the Grow-Out facility at Legune Station. Both sets of options are subject to a 12 month escrow period and have an exercise period of 3 years and 5 years respectively at an exercise price of 9.7 cents per unlisted option. At 30 June, 2019, both unlisted options remain exercised and are also unlikely to be exercised due to the falling share price.

On March 25, 2020 Seafarms Group announced the private placement of 416,666,666 shares at a price of AUD 0.03 per share for gross proceeds of AUD $12,500,000 on March 25, 2020.

Such equity raisings are insufficient for the extensive start-up capital required for even Stage 1 of the Project.

In a recent update on Financing for the Project the company stated that financing was ‘well advanced’. However, no further details on this were provided, other than to indicate that a ‘number of international banks were at various stages of their due diligence processes’ and that a ‘number of parties were expressing potential interest in direct equity participation’ in the Project.

However, no finance of any magnitude had materialized. The results of a  financial analysis of Seafarms is likely to make the sourcing of the required finance even more problematic for potential investors. A financial analysis of Seafarms would be undertaken by a significant potential investor to Project Sea Dragon. The results of one such financial analysis of Seafarms are discussed in a following section. 

Potential Government Involvement

As mentioned, Project Sea Dragon has been recognized as a ‘Project of State Significance’ in WA and also the NT and it has been given ‘Major Project Status’ by the Commonwealth government.

Major Project Status from the Commonwealth provides recognition for the Project as having national significance for economic growth and employment for regional Australia. The Project can therefore expect to receive assistance from the Major Projects Facilitation Agency in the coordination and facilitation of Commonwealth government approvals, such as environmental, bio-security, or foreign investment approvals.

Major Project Status in the NT recognizes that such Projects are significant contributors to the economic development of the NT, through the creation of jobs and business opportunities. Such Projects can be expected to receive substantial NT government assistance through the facilitation of the required approvals as well as importantly, assistance with the provision of essential infrastructure, such as roads, bridges and other facilities.

It is likely that the recognition of Major Project Status by the Commonwealth will also assist a Project to receive funding support from the Northern Australia Infrastructure Facility (NAIF).

This is a Commonwealth Government $5 billion lending facility to assist finance projects via the governments of the Northern Territory, Queensland and Western Australia to achieve growth in the economies and populations of these regions and encourage and complement private sector investment in Northern Australia.

NAIF can lend up to 100% of the debt for a project, providing the Commonwealth does not bear the majority risk in a project.

This is likely to prove a very attractive option to Project Sea Dragon, particularly as financial intermediaries in the private sector, both domestic and international, appear reluctant to lend substantial sums to commence construction of the Project.

Current Project Status

The Project has been reported by the Company as ‘shovel ready’.

Stage 1 has approvals in place and preparatory tendering has been completed to enable construction to commence.

However, the required finance to commence the construction of the Project remains unavailable. This suggests potential lenders to the Project are concerned about one or more, of the following factors:

• An ability to repay the interest and principal on the loan.
• The amount of funding required.
• Available collateral to act as security for the loan.

With respect to the first point, lenders are concerned with what is known as the Debt to Income Ratio. Where this is high, as in the case of the Seafarms Group, lenders will be concerned about the increased risk of undertaking such a loan. In a later section dealing with the Financial Analysis of the Seafarms Group this, and other relevant ratios from the Group’s financial statements will be discussed.

Despite the apparent difficulties being experienced to attract the necessary funding for the commencement of Project Sea Dragon, it has been reported that the Company worked with the NT Government to amend its Project Development Agreement to provide Seafarms with tenure at Bynoe Harbour.

Apparently all approvals are in place, including the development, clearing and aquaculture licenses. The company reported using the ‘current Dry Season to commence clearing for the sites of the broodstock maturation centre at Bynoe Harbour. Inlet and outlet ponds have been formed and site fencing has also commenced.’

One wonders whether such development should have commenced if the required funding is not forthcoming.

Seafarms has signed a Sub-Lease and Cooperation Agreement with AAM Investment Group (AAMIG). AAMIG completed the purchase of the Legune Perpetual Pastoral Lease in December and an arrangement has been made between Seafarms and AAMIG to utilize the land for the grow-out ponds and associated infrastructure.

In addition to such Company developments the NT Government has completed the road to Gunn Point at a cost of $32.2 million. With the Commonwealth it has also been involved in awarding a $58 million tender for the first section upgrade of the Keep River Road as a signal of strong financial support for the Project.

It is important to consider what company financial information the NT Government considered before deciding to expend such an amount of taxpayer funds at this stage.

In particular, information available on the financial status of the Seafarms Group should be regarded as having an important influence on the likely level of risk ascribed to the Project by both commercial and public sector lenders of finance. 

If this Project does not proceed it is almost certain to be the case that expenditure by the NT government could have achieved a far greater return to the Territory community if spent on alternative options.

Financial Analysis

Earnings and Risk Analysis

The on-line financial analyst ‘Simply Wall Street’ has undertaken a financial analysis of the Seafarms Group.

Key findings include the following;

• In 2019 the aquaculture segment of the Group ran at a loss of                             $18, 216, 237. This followed a loss of $14, 262, 502, in the previous year.

A risk analysis undertaken by the financial analyst found that:

• Earnings have declined by 17.07% over the past five years.
• The share price has been highly volatile – particularly over the last 3 months.
• Existing shareholdings have been diluted in the past year, and
• The Seafarms Group does not have a ‘meaningful’ market capitalisation.

With regard to the share price, this reached a high of $0.15 in September 2018. It then fell to 0.10 by 12 September 2019. By 27 March 2020 the share price fell far further, to a low of $0.03. It recovered slightly to $0.049 by 30 June, 2020. This had a major impact on the value of the company and can be expected to have a significant negative impact on the capacity of Seafarms to borrow for Project Sea Dragon.

On June 19, 2020 Simply Wall Street reported that ‘shareholders will doubtless be very grateful to see the share price up 37% in the last quarter. But that is minimal compensation for the share price under-performing over the last year. The cold reality is that the stock has dropped 40% in one year, under-performing the market.’

The analyst goes on to report that given that Seafarms Group didn’t make a profit in the last twelve months the focus should be on revenue growth for anyone interested in investing in the company. Companies without profits it is argued, are expected to grow revenue every year and at a relatively fast pace. Unless this is done it is difficult to be confident that the company will be sustainable if revenue growth is negligible, and it never makes a profit.

In the last twelve months Seafarms Group increased its revenue by 2.0%. This is not regarded as a sufficiently high growth rate considering it doesn’t make profits.

The Balance Sheet is rated as ‘Mediocre’ with ‘weak fundamentals’ – from the perspective of financial strength.

A financial ratio analysis of Seafarms Group indicated that the Return on Capital Employed by Shareholders earned a negative 44.5% three years ago, compared with a negative 31.3% last year. The debt to equity ratio of Seafarms is considered high at 44.4%. Seafarms Group debt to equity ratio increased from 35.3% to 44.4% over the last five years.

Such findings act to further constrain the borrowing ability of Seafarms Group.

Ownership Arrangements

Simply Wall Street notes that the Seafarms Group is characterized by a lack of Institutional Ownership. Institutional ownership is defined as the amount of a company’s stock owned by organisations such as mutual or pension funds, insurance companies, investment firms, or other large entities that manage funds on behalf of others.

There are a number of reasons why this might be the case. For example, it may be hard for institutions to purchase larger amounts of shares if the amount traded is low. On the other hand, it is possible that professional investors are avoiding a company because they assess the risk to be too high and the return too low. It is also noted that hedge funds don’t have a meaningful investment in the Seafarms Group.

As at 30 June 2019, the largest shareholder was Avatar Industries Pty. Ltd. at 20.31%. This was followed by Nippon Suisan Kaisha, Ltd. at 12.68% and Gabor Holdings Pty. Ltd. at 9.74%. According to Simply Wall Street the top 12 shareholders had a combined ownership of 51% implying that the company is not widely held.

Insider ownership of a company can be positive when it signals that leaders of the organisation are thinking like the true owners of a company. However, it may also serve to diminish the influence on decision making of other shareholders, including institutional shareholders. This can be expected to be taken into account and to be of concern to such potential investors.

The Directors of Seafarms Group as at 30 June, 2019 were Ian Norman Trahar, Harley Ronald Whitcombe, Dr Christopher David Mitchell and Paul John Favretto.

Ian Trahar is the Executive Chairman of the Seafarms Group. He is also a Director and significant shareholder of Avatar Industries Pty. Ltd, an unlisted private company. Ian Trahar is also a Director of Gabor Holdings. In addition, Paul Favretto has held the position of Managing Director of Avatar Industries.

Simply Wall Street notes that Seafarms has no CEO, or no data can be found relating to this position. This is important from a governance and management perspective. Usually for example, the CEO would be responsible for the management of the company with other line managers reporting to the position. Presumably this role is undertaken by the Managing Director of the Seafarms Group.

Trading Query – Seafarms Group (SFG)  by the ASX

On 20 April 2020, the ASX Listings Compliance Officer formally wrote to the Company Secretary of Seafarms Group regarding a change in the price of SFG’s securities from an intraday low of $0.055 to an intraday high of $0.074. A significant increase in the volume of SFG’s securities traded was also noted.

In light of this, the company was asked to respond to a number of questions related to whether the company was aware of ‘any information concerning it that has not been announced to the market which, if known by some in the market, could explain the recent trading in its securities?’

The Company Secretary responded that the Company was not aware of any information that had not been announced to the market, which if known by some in the market, could explain the recent trading in the securities.

Summary and Conclusions

Project Sea Dragon appears as a project on a scale never before attempted in Australia, much less the difficult and testing business and commercial environment of the North of Australia.

While the Seafarms Group has been involved in aquaculture since 2013, this is not regarded as a particularly long time, given the special technical requirements of this industry. It is also important to note that the prawn farming industry has not grown in Queensland for the last ten years.

The Project now envisaged by Seafarms is around 10 times larger than the current scale of all aquaculture operations in Queensland. Seafarms has around 160 hectares currently involved with prawn farming in Queensland. An expansion to that of 10,000 hectares of ponds would be at a scale around 63 times larger than their current operations.

The construction of the required infrastructure, plant and equipment calls for a very large amount of capital, estimated at $1.25 billion. Annual production of prawns is also projected to be over 60 times the current output of Seafarms. On-going operational employment requirements are in the order of nearly 2000 people.

To date it appears the company has had difficulty getting close to the amount of capital required for such a massive project. It appears that if it is to proceed there will be a need for a significant amount of government funding.

To be successful the company also faces a number of other major obstacles common to all business enterprises in the North of Australia. This includes difficulties securing a technically skilled and reliable labour force, which is a very important requirement for this particular industry.

Additional obstacles can be expected with regard to remoteness from key suppliers, transport and logistics costs associated with integrating the various stages of the production process and the on-going costs associated with a harsh and unpredictable climate.

It would appear particularly risky, given such potential obstacles, to attempt to develop this project in such a rapid, large scale, approach.

Experience with successful aquaculture operations in the Territory have demonstrated that it is often necessary to commence at a smaller scale. This enables the necessary learning and understandings to successfully deal with the substantial commercial obstacles in establishing successful commercial operations in the North of Australia. 

For example, it is not clear how prawn aquaculture arrangements will need to change and adapt to the different environmental and climatic conditions of the North of Australia compared to Queensland, or whether certain infections or diseases are likely to be more difficult to manage in a changed environment. Such considerations have previously proved fatal to other primary production enterprises in the North of Australia. 

As pointed out by Glen Morrison in Rural Weekly – an often-quoted piece of research with regard to large scale primary development in Northern Australia is ‘The Northern Myth: A Study of the Physical and Economic Limits to Agricultural and Pastoral Development in Tropical Australia’, by Davidson. While this related to the Ord River Development, many of the arguments are relevant to large scale development in other projects within primary industry such as aquaculture.

Davidson concluded the idea to develop the North was “a platitude uncritically accepted by many Australians.”

Davidson’s findings have since been reinforced by a number of independent studies.

As the Northern Futures Collaborative Research Network suggests there are three big influences shaping Australia, which collide in the North.

The first is ‘Big Development’. This is often characterised by the drive to build major infrastructure projects, including dams and agricultural development, mining and gas.

The second is ‘Big Conservation’. This tends to require the North to be like untouched wilderness, a pristine ecology that requires preservation.

The third are the policies aimed at seeking to promote Indigenous well-being.

Often these major aspects are considered in isolation of each other. However, for those living in the North, such influences are inseparable. It would therefore prove valuable if government policy makers at both the Commonwealth and Territory levels could spend more time and effort considering where such major influences intersect and the likely implications of such intersections.

The financial analysis presented by Simply Wall Street highlights important financial challenges facing Seafarms Group. It would seem important that key indicators such as revenue, production and net income will need to increase before key investors can be encouraged to invest in such a Project, given the risks and to the extent required.

The current financials of the company, are likely to dissuade many investors from becoming involved in such a large scale, high risk project, without more evidence that the obstacles confronting this development can be overcome at reasonable levels of cost and return.

If the commercial sector is not prepared to lend the required finance then, if the Project is to proceed, it is likely that the principal responsibility will fall on the shoulders of the taxpayer.

Given the major financial difficulties confronting the NT Government and now the Commonwealth following coronavirus, can this Project really be regarded as an optimum use of limited taxpayer funds, given the significant risks that have been discussed?

This does not seem to have been a question for the Gunner government to ponder. The NT government has awarded contracts worth $32.2m to upgrade the Gunn Point Road for Project Sea Dragon. It has also become involved in the up-grade of the Keep River Plains Road for the Project.

On 15 June, 2020 the ABC reported that the Chief Minister was forced to admit that ‘funding issues and the pandemic have impacted the prawn project.’

‘Unfortunately, it’s that private sector side of things [Author itlalics] where [the projects] haven’t been able to get the cash … which is frustrating.’ Mr Gunner, who oversees the major projects portfolio in Cabinet said the company behind the mega prawn farm, Seafarms Australia, had recently managed to raise some private sector funding but was yet to secure a key loan from the federally-funded $5 billion North Australia Infrastructure Facility.

This suggests that the Commonwealth is being far more careful with taxpayer funding than the Gunner Labor government. As the person responsible for major projects in the NT Cabinet, Mr Gunner should appreciate the reasons why the private sector is being far more careful about the ‘headlong’ financing of this project.

Presumably the Commonwealth is also more cautious about building high cost roads in remote regions’ to no particular place’ or for no particular purpose.

Commercial operations are required to satisfy the owners of their company that a financing decision is likely to have a positive economic and commercial outcome. No such constraints appear to act on the financial decisions of the Gunner government. Major financial decisions have been undertaken in a number of cases without serious commercial or economic analysis or business plans – often with disastrous results for the Budget.

Unfortunately government in the Territory face their ‘shareholders’ only once every four years. By then the financial damage done can be almost irretrievable.