Karitane Mariculture NZ Ltd Financial Projections

There are two financial projections out lined in this document. The first is a seaweed feed based project, the second is an artificial feed based project. The seaweeds used will be drift collected from the beaches around the Karitane area. There are a variety of different types of artificial feed available, such as the New Zealand produced, Makara and the South African, AbFeed. There is a summary produced for each of these two options. However, it is most likely that a combination of the two will occur. This is due to the regulations against the collection of seaweed. It is desirable to use seaweeds and a feed, especially for pearl production due to chemical properties. There has been research conducted on the effect of feeding paua different seaweeds and the colour and quality of the pearl. Artificial feed is important because it is formulated to enhance growth. The final cashflow projection is based on the ratio 25 % seaweed and 75 % artificial diet.

All of the figures used in the financial projections are the worst case scenario reasonably expected. Therefore, if for some reason one part of the estimate changes, for example the cost of food increases by 30 %, the farm will not become unviable.

There are four main areas of the farm development that have been addressed. These are listed on page 1 of the financial projection section, the itemised costs are listed on page 2. As the project is on going, some of these items have been purchased by this date. As the operation continues, additional juvenile paua culture v-tanks and paua growout tanks will be needed. The design of these is continuing to evolve, but as the basic structure will not change, the estimated cost of $5000 each is acceptable.

The farm operating costs are comprised from the staff salaries and the annual operating costs. The number of staff required is estimated to be three from similar farms. The breakdown of the annual operating costs is outlined on page 2.

Spawning will commence immediately. It will take approximately 18-24 months for the juvenile paua to be large enough to insert pearls. From then it will take another 18-24 months before the first harvest. The farm will expand operations until an annual capacity around 150 000 cocktail paua and 37 500 pearls are being produced. A very conservative figure a 25 % success rate in pearl production is used to predict the pearl production. On years 1 and 2, 10 000 adult paua will have pearls inserted. This will produce at least 2500 pearls on years 3 and 4.

The $ 75.00 value per pearl is very conservative. At present, the maximum price for a high quality matching paua pearl triplicate is in excess of $ 5000. The price is estimated this low so as to be highly conservative and see the worst case scenario. Likewise, the price of $5.00 per cocktail sized paua is conservative for the same reason.

The paua production parameters are adapted from estimates made by Peter Redfern from the NIWA in Wellington. The artificial food prices are the current prices for Makara, produced by Promak Technology. The cost of this product will probaly decrease as the volume of the product sold increases.

The feed conversion rate is the ratio between the amount of food fed and the increase in the biomass of the animal. For example 2.5 kilograms of Makara are fed to each paua for an increase of 1 kilogram in weight. The ratio is high when feeding seaweed as over 90% of the mass of seaweed of water.

The cashflow projections are over a 10 year period. Before the operation returns a profit, $1.1 million is needed. The sustained aftertax cashflow annually will be around $2 million after year 5. Therefore, this operation is highly viable.