INVESTMENT OPPORTUNITIES IN THE NEW ZEALAND SALMON INDUSTRYFebruary 2014

ThisinformationwaspreparedbyCoriolissolelyfortheuseofourclient;itisnottobereliedonbyanythirdpartywithout priorwrittenconsent.

InvestmentopportunitiesintheNewZealandSalmon industry

PartoftheFood&BeverageInformationProjectMay2012v1.01

www.foodandbeverage.govt.nz

Cover im

age courtesy New

Zealand K

ing Salmon

STAGEIIIThisdocumentrepresentsthethirdstageofawiderindustryscreendesignedtoidentify,develop&highlightemerginggrowthopportunitiesinNewZealandfoodandbeverageexportsforpotentialinvestorsandotherinterestedparties

StageIISecondaryScreen

StageIIIDevelopOpportunities

StageIPreliminaryScreen

Initialinputtoprocess

559

Metcriteria

129Metcriteria

25Identified

20

Exploredindepth

3

HoneySalmonSpirits

SeerelatedStageI&IIdocumentfordetailsAvailableatwww.foodandbeverage.govt.nz

Youarehere

PAGE3

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5

Methodology&datasources 6

Summary&conclusions 7

1.Salmonisanattractiveproduct 8

2. Industryhasachievedstronggrowth 16

3.Export marketsaretheprimedriverofgrowth 31

4.Stronghypotheticalpotential;unlikelyinpractice 38

GLOSSARYOFTERMS

PAGE5

Thisreportusesthefollowingacronymsandabbreviations

ANZSIC AU/NZStandard IndustryClassification

b Billion

CAGR CompoundAnnualGrowthRate

e Estimate

f Forecast

FOB FreeonBoard

FT Fulltime

HSCodes Harmonised SystemCodesforcommodityclassifications

m Million

n/a Notavailable/notapplicable

NZ NewZealand

NZ$/NZD NewZealanddollar

PT Part time

S.H./N.H. Southern/NorthernHemisphere

T/O Turnover

t Tonne

US/USA United StatesofAmerica

US$/USD United Statesdollar

UK United Kingdom

METHODOLOGY&DATASOURCES

PAGE6 *FoodandAgricultureOrganisationoftheUnitedNations

Datawasfromavarietyofsources,andhasanumberofidentifiedlimitations

- Thisreportusesarangeofinformationsources,bothqualitativeandquantitative.

- Thenumbersinthisreportcomefrommultiplesources.Whilewebelievethedataaredirectionallycorrect,werecognisethelimitationsinwhatinformationisavailable.- Inmanycasesdifferentdatasourcesdisagree(e.g.

StatisticsNewZealandvs.FAO*vs.UNComtrade).- Manydatasourcesincorporateestimatesofindustry

experts.- Asoneexample,inmanycases,thevalueand/orvolume

recordedasexportedbyonecountrydoesnotmatchtheamountrecordedasbeingreceivedasimportsbythecounterparty[forunderstoodreasons].

- Inaddition,insomeplaces,wehavemadeourownclearlynotedestimates.

- CoriolishasnotbeenaskedtoindependentlyverifyoraudittheinformationormaterialprovidedtoitbyoronbehalfoftheClientoranyofthedatasourcesusedintheproject.- Theinformationcontainedinthereportandany

commentaryhasbeencompiledfrominformationandmaterialsuppliedbythirdpartysourcesandpubliclyavailableinformationwhichmay(inpart)beinaccurateorincomplete.

- Coriolismakesnorepresentation,warrantyorguarantee,whetherexpressorimplied,astothequality,accuracy,reliability,currencyorcompletenessoftheinformationprovidedinthereport.

- AlltradedataanalysedinallsectionsoftheF&BInformationprojectarecalculatedanddisplayedinUS$(otherthanafewplaceswheredetaileddataisnotavailable).Thisisdoneforarangeofreasons:1. Itisthecurrencymostusedininternationaltrade2. Itallowsforcrosscountrycomparisons(e.g.vs.Denmark)3. ItremovestheimpactofNZDexchangeratevariability4. Itismorecomprehensibletonon-NZaudiences(e.g.foreign

investors)5. ItisthecurrencyinwhichtheUnitedNationscollectsand

tabulatesglobaltradedata

- Theopinionsexpressedinthisreportrepresentthoseoftheindustryparticipantsinterviewedandtheauthors.ThesedonotnecessarilyrepresentthoseofCoriolisLimitedortheNewZealandGovernment.

- Ifyouhaveanyquestionsaboutthemethodology,sourcesoraccuracyofanypartofthisreport,pleasecontactTimMorris,thereport’sleadauthoratCoriolis,on+6496231848

SUMMARY– THESALMONOPPORTUNITY

Overview- Salmoncanonlybefarmedinalimitedrangeofareasgloballyasthefishrequire

coldwater.Inaddition,theindustryishighlycapitalintensiveleadingtosalmonfarmingonlyoccurringinapoliticallystablecountriesthatofferlongtermseaspaceleases.SalmonaquacultureemergedinNorwayandScotlandintheearly60sand70s.Fromthereithasspreadtoahandfulofothercountriesatanyscale.

- ThecoastlineoftheSouthIslandofNZishighlysuitedtosalmonfarminginmanyareas.ShelteredbayscontainingcoldwaterscanbefoundintheMarlboroughSounds,BanksPeninsula,StewartIslandandFiordland.

Driversofsuccess- NZisabletofarmChinooksalmon/KingsalmonasNZwaterslackthemajor

diseasesthatimpactthisspecieselsewhere.ChinookissignificantlydifferentiatedfromAtlanticsalmonandonlyavailableinlowquantities,thusitachievesa5-15%premium.

- OnlyTasmaniahassentanyquantityoffreshsalmontoNewZealandinthelastdecade(forunclearreasons1).ThislackofcompetitionhasmeantthatgrowingNZdomesticconsumptionhasbeenmetbyNZfirms.

- ThedevastationcausedbyISA*inChileoverthepastthreeyearsdroveupworldpricesandhencethevalueofNZsalmonexports.

- Relativetootherproteins,salmonisapremiumproductfarmedsustainablywithpositivehealthattributes.

Investmentopportunities- TheNZsalmonindustryemergedinthelate70searly80swithgreatfanfare.

Largenumbersoffirmsentered,manylistedonthestockexchangeandwereinvestmentdarlingsforaperiodoftime.However,thecombinedeffectoffallingglobalsalmonprices(drivenbyincreasedefficienciesandincreasedproduction)andtheon-goingrequirementsforadditionalcapitaltofundgrowthpushedtheNZsalmonindustryintocrisisintheearly90s.Fromthiscrisisemergedtwokeyindustryplayers:NewZealandKingSalmon(NZKS)andSanford.

- NewZealandKingSalmon [NZKS](68%ofNZproduction)iscurrentlyownedbytheTiong GroupofMalaysia(anAsianconglomeratewithinterestsrangingfrompalmoiltonewspapers)andDirectCapital(aNZbasedPrivateEquityFirm).Itisnotobviousthateitheroftheseownersareclearlongtermholders.KingSalmon

hasannouncedthedesiretoadd+206hectares,allowingittogrowturnoverto$500m/year.

- Sanford (24%ofNZproduction)isaNZX-listedseafoodcompanywithactivitiesrangingfromdeepseafishingthroughtomusselfarming.PrivatelyownedAmalgamatedDairiesisacornerstoneshareholderat37%.

- Beyondthesetwolargefirms,therearefoursmallscalesalmonproducers– threeinfreshwaterhydroelectriccanalsand1usingsea-cagesinAkaroa.OftheseMtCooksalmonhasrecentlyannounceda$20mexpansionplantofuela1,400%productionincreaseoverthenextfouryears.

Growthpotential?- NewZealandhasexcellenttheoreticalpotentialtoproducesalmon:Norway,a

countryofasimilarsizetoNewZealand,produces75timesasmuchsalmon;and,atasmallerscale,theFaeroeIslandsproduces218timesasmuchsalmonastheBanksPeninsularegion.

- However,thisstronghypotheticalpotentialforcontinuedgrowthisunlikelytoberealised.UnlikeNorwayortheFaeroes,therulebookhasbeenregularlychanged.Itistooearlytotellatthisstagewhethertherulesintroducedlastyearwillmakethingseasierinpractice.

- ThefundamentalissueisthatNZasasocietyhasyettocometoaconsensusonsalmonaquaculture,withtheproponentsarguingforittobecomeabilliondollarindustry,whileawiderangingoppositionofrecreationalfisherman,inshorefishingcompanies,holidayhomeownersandenvironmentaladvocatesopposeitsgrowth.Thereisalsohistoricuncertaintyaroundforeshoreandseabedownership.

- InthisenvironmentitisdifficulttorecommendinvestmentintheNZsalmonindustryduetothehighlevelsofrisk,uncertaintyandcostaroundoceanspacetenureandrenewabilityoftenure.Anyusechangeisslow,uncertainandcostly.NZKShasrecentlyspentNZ$6monaresourceconsentandfileda2,600pageapplicationfrom40expertswithanunclearchanceofsuccess.ItishopedthattherecentlyintroducedEPA,decidingonconsentsofnationalsignificance,willimprovetheprocess.

- NZ’slargestseafoodcompanySealordrecentlyinvestedinsalmonaquacultureinTasmania.

1.Wearetoldbyindustrythatthecauseisnotbiosecurity,butlacktheresourcestoconfirmthisstatement;*ISA=InfectiousSalmonAnemia virus

NewZealandsalmonisunlikelytorealiseitspotentialand– astheindustryisalreadyhighlyconsolidated– therearelimitedinvestmentopportunities

PAGE7

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5

Methodology&datasources 6

Summary&conclusions 7

1.Salmonisanattractiveproduct 8

2. Industryhasachievedstronggrowth 16

3.Export marketsaretheprimedriverofgrowth 31

4.Stronghypotheticalpotential;unlikelyinpractice 38

Salmonproducingregions(2011)

SALMON– PRODUCTIONREGIONSSalmoncanonlybeproducedinalimitedrangeofareasglobally

PAGE9

NativePacificIntroducedAtlantic

NativeAtlanticIntroducedPacific

NativeAtlanticIntroducedPacific

IntroducedAtlantic&Pacific IntroducedAtlantic

&Pacific

RangeparticularlylimitedinSouthern

Hemisphere

SALMON– KEYSPECIES

Source:UNFAOFishStat;UNFAOFIGIS;Wikipedia;Coriolisanalysis

Therearesixkeysalmonspeciesglobally– threefarmed(Atlantic,browntroutandCoho)andthreewild(Pink,ChumandSockeye);NewZealandfarmsaminorspeciesChinook/Kingsalmon

Overviewofthekey/secondaryspeciesintheglobalsalmonindustry(various;2008-2010asavailable)

Scientificname Commonname(s) Wildcapture

(t;000;08)

Aquacultureproduction(t;000;08)

Keyaquacultureproducingcountries

Comments/notes

Salmo salar Atlanticsalmon 3 1,457 NorwayChileScotlandCanada

FaeroeIsl.USAOthers

- Most importantspeciesglobally- Mostsuitableforfarming- Strongbreedingprogramsinplaceimprovingperformance

Salmo trutta BrowntroutSeatrout

TBD TBD

Oncorhynchuskisutch

Cohosalmon 21 105 ChileJapan

- Valuable enoughforfarming- PrimarilyforJapanesemarket

Oncorhynchusgorbuscha

PinksalmonHumpback salmon

307 - - - - Of lowvaluesonotattractivetoaquaculture

Oncorhynchusketa

ChumDogsalmonKeta salmon

343 - - - - Of lowvaluesonotattractivetoaquaculture

Oncorhynchusnerka

Sockeyesalmon 136 - - - - Lessadaptableforfarmingbecauseithaslowergrowthandsurvivalrates,ithasalowerfilletyieldanditismoresusceptibletostressleadingtopoorproductquality

Oncorhynchustshawytscha

ChinooksalmonKingsalmonColumbiariversalmonCopperriversalmon

6 9 N.ZealandCanada

- OthercountriesgettingoutofnotintothisspeciesduetoitspoorperformancerelativetoAtlantic (e.g.rateofgrowth,realworldFCR,etc.)

- Persistentfishhealthchallengesinothermarkets(bacterialkidneydisease,rickettsia)

- Effectively onlytwofirmfarmingthisspeciesglobally(NZKSandCreativeSalmon[B.C..Canada])atscale

- New Zealandproduces70%+ofglobalfarmingoutput

PAGE10

Typicalusageofthreekeysalmonspeciesbyusageform(2012)

SALMON– CANNEDVS.FRESHInmostmarketsfarmedAtlanticsalmonandtroutaresoldasapremiumfreshorsmokedproductwhilewildPacificsalmonissoldincannedform

PAGE11 Source:various;photocredit(fish:publicdomainviaWikipedia;products:fairuse;lowresolution;completeproduct/brandforillustrativepurposes);Coriolisanalysis

SockeyeorRedsalmonOncorhynchus nerka

Pinksalmon or humpbacksalmonOncorhynchus gorbuscha

AtlanticsalmonSalmo salar

BrowntroutSalmo trutta

RainbowtroutOncorhynchus mykiss

Globalsalmonproduction:wildcaptureandaquaculture(t;000;1950-2008)

SALMON– GLOBALPRODUCTIONGloballywildcaptureofsalmonisflat;salmonaquaculturetookoffintheearly80’sandhasachievedstronggrowthsuchthataquaculturenowexceedswildcapture

PAGE12

-

500

1,000

1,500

2,000

2,500

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

AquacultureWildcapture

Wildcapture

Aquaculture

0%

7%

10yearCAGR(98-08)

4%

Globalsalmonaquacultureproduction:actualandforecast(t;000;1980-2030f)

SALMON– FORECASTGROWTHTherateofgrowthinfarmedsalmonproductionhasslowedastheindustryhasmatured;howeverMarineHarvest(theglobal#1salmonfirm)forecasts6%globalproductiongrowththrough2030

PAGE13 Source:FAOFishStat (1980-2008);Kontali 2009-2010;MarineHarvest2010-2030(OsloSalmonSummit2010Howtosatisfythedemandforsalmonin2011andin2030)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220232024202520262027202820292030

ProjectedCAGR(10-30)6%

CAGR(80-90)43%

CAGR(90-00)14%

CAGR(00-08)6%

Disease(ISA)outbreakin

Chile1

EXAMPLE:PriceperkilogramofsalmonandselectothermeatsintheUnitedStates(US$/kilogram;March2011)

SALMON– PRICEVS.OTHERMEATSSalmonisapremiumproductthatachieveshigherpricesthanmostotherproteins

PAGE14

$3.95

$5.50

$7.70

$9.03

$10.60

$16.53

$17.00

$17.64

$35.21

Source:SafewayUSonlinegroceryshoppingwebsite20110305(SanFranciscopostcode);Coriolisanalysis

Smokedsalmon

Frozensalmon

Cannedsalmon

Freshsalmon

Cannedsalmon

Realised“NewZealandfarmgate”valueperhectareofspace(NZ$;2011orasavailable)

“FARMGATE”RETURNPERHECTARESalmonreturnsdramaticallymoreperhectarethanotherformsofagri/aqua-culture;forexample,salmonreturns2,000timesasmuchperhectareasbeefandsheepmeat

PAGE15 Source:CoriolisF&BIPSeafoodp89;MAFSONZAF2011;UNFAOAgStat database;Zespri annualreport2011;SNZAgriculturalcensus2007(lastavailable);Coriolisanalysis

$721 $6,086$41,914 $28,889 $39,238

$1,450,000

Cattle/Sheepmeat

Dairy Kiwifruit Oysters Mussels Salmon

2,000x

IncrementalNewZealand“farmgate”valueof+700haofspace(NZ$;millions;2011orasavailable)

$0.5

$4.3

$29

$20

$27

$1,015

Cattle/Sheepmeat

Dairy

Kiwifruit

Oysters

Mussels

Salmon

Another700haofsheep/cattlewouldadd

halfamillion

Another700haofsalmonwouldadda

billiondollars

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5

Methodology&datasources 6

Summary&conclusions 7

1.Salmonisanattractiveproduct 8

2. Industryhasachievedstronggrowth 16

3.Export marketsaretheprimedriverofgrowth 31

4.Stronghypotheticalpotential;unlikelyinpractice 38

TimelineofsalmonandsalmonaquaculturedevelopmentinNewZealand(1860-2010)

TIMELINESalmonwereintroducedintoNewZealandmorethan100yearsago;salmonfamingstartedin1976andtheindustryhasexpandedsincethen

PAGE17 1.Successfulinthesenseofcreatingameaningfulamountofproductionandexports;Source:Coriolis

Earlier 1960’s 1970’s 1980’s 1990’s 2000’s

OceanranchingKing/Chinooksalmon1976

BrowntroutfirstintroducedbyAcclimatisationsocietyfromBritishstockviaTasmania1860’s

Rainbowtroutintroduced byAcclimatisationsociety fromWestCoastofNorthAmerica1883

NumerousattemptsbyvariousAcclimatisation societiestointroducesalmonandtrout1875- 1900

Chinook,SockeyeandAtlanticsalmonsuccessfullyintroducedbygovernment1901 - 1907

Atlantic salmonhatcheryestablishedonWanganuiriver1924

SeacageKing/Chinooksalmon1981

Numerousfirmslist toattractadditionalcapital

MalaysianTiong Groupdrivesindustryconsolidation

NZGovernmentputsmoratoriumonnewaquaculturedevelopment2001

Illustration Species Yearintroduced Source CurrentstatusinwildFarmed

elsewhere?FarmedinNew

Zealand?

BrowntroutSalmo trutta

1860’s BritishstockviaTasmania;subsequentintroductions

WidespreadsouthofCoromandelPeninsula

Yes(PrimarilyinUK)

No(illegal)

RainbowtroutorsteelheadOncorhynchus mykiss

1883 FromSonomaCreek,California

N &SIsland;riversthatflowintolakes(not

seagoing)

Yes(widespread)

No(illegal)

AtlanticsalmonSalmo salar

1901 - 1907 BritishstockviaAustralia;numerousattempts toseedaroundcountry

Closetoextinction2;remnantwildstocksconfinedtolakesin

Southland’supperWaiaucatchment

Yes(widespread)

No(Pasttrials; nocurrentfarms)

SockeyeorRedsalmonOncorhynchus nerka

1902 GiftfromCanadianGovernment

Virtuallyextinct;remnantpopulationaroundLake

Ōhau (SIsland)

No(Noteconomic)

Limited(1small firm)

ChinookorKingsalmonOncorhynchus tshawytscha

1875(failed)1901 - 1907

FromBairdFishStation,McCloudRiverinCalifornia.

MainlyonSouthIslandEastCoast

Limited(2farms;disease;pooreconomics

Yes(Primaryspeciesfarmedcurrently)

KeymemberoftheSalmon(Salmonidae)familyintroducedinNewZealand1(1850-1910)

INTRODUCEDSPECIESFivekeymembersoftheSalmonfamilywereintroducedtoNewZealandover100yearsago;onlyonespecies(Chinook)iscurrentlyfarmedatanyscale

PAGE18 1.AlsoSalvelinus fontinalis (brookchar)&Salvelinus namaycush (mackinaw); 2.BreedingstocksofAtlanticsalmonaremaintainedattheOtago FishandGameCouncilhatcheryinWanaka;Source:various;photocredit(fish:publicdomainviawikipedia);Coriolisanalysis

Whydoothercountries notfarmChinook? WhydoesNewZealandfarm Chinook?

Disease - Chinookfarming haspersistentfishhealthchallenges(BacterialKidneyDisease,Rickettsia)inotherregions(Canada,Chile)whichareprofoundchallengestoproductionforNorthAmericanorEuropeanmarket

- Thesediseases aredifficultandexpensivetotreat2

- ChinookinNZarefreeofmostdiseasesandparasites

- If keydiseasesweretoarrive(cf.oysters,kiwifruit),theindustrywouldlikelycollapse(andneedtotransitiontoAtlantic)

Economics - Chinookgrow moreslowlythanAtlanticsalmon(timeismoney)

- Chinookhaveapoorerfeedconversionratio(FCR)thanAtlanticsalmon

- NorwayhasamajorbreedingprogramunderwayforAtlanticsalmoncontinuouslyimprovingtheproductionefficiencyofAtlantic

- Significant fresh/frozenimportsofsalmondonothappen,forunclearreasons,thereforeNew Zealandproducerscanbelessefficient

- Lackofdiseasesimproveseconomics(costoftreatment,rateofgrowth,yield,survivalrate)

History(pathdependence)

- “Atlanticsalmonhavebecomethedominantfarmedspeciesforanumberofreasons.MostnotableisthatNorway's-andtoalesserextentScotland's-earlydevelopmentofAtlanticsalmonaquaculturemeantthatthetechniquesandtechnologiesforcultivatingthisparticularspecies,aswellasmarketsforitssale,werewellestablishedbythetimetheindustryspreadtoothercountries.Inaddition,Norway'sdominanceofthemarket,combinedwithitspioneeringroleindevelopingsalmonaquaculture,hasmeantthataquacultureresearchandexperienceinNorwayhasstronglyinfluencedtheindustry'sdevelopment.Well-establishedNorwegianbreedingprogramshavedevelopedhighlydomesticatedbroodstock (AmosandAppleby,1999)with"...fastergrowthrates,greatertoleranceforhigherstockingdensities,superiordiseaseresistance,andmoreefficientfeedconversionrates" (TheStandingSenateCommitteeonFisheries,2001)

- ChinooksalmonwidespreadaroundSouthIsland ofNewZealand

- Atlanticsalmononlyinoneriver(Waiau)attimesalmonaquacultureemergedinNewZealand(1976/1981)

- IndustryemergedlocallyratherthanthroughinvestmentbyTop10global(i.e.Norwegian)salmonaquaculturefirms

IdentifiedreasonsforandagainstChinooksalmonfarming(2012)

WHYCHINOOK?Unliketherestoftheworld1,NewZealandfarmsChinooksalmon;thisistheresultofhistoricalaccidentratherthananyplanorstrategy

PAGE19 1.OtherthantwofarmsinBC,Canada;2.thisisnottosayAtlanticsalmondonothavediseaseproblems(e.g.ISA)butAtlanticdiseasesappeartobemoremanageablebyexperiencedfarmoperators;Source:Coriolisfromvariousarticlesandreports

NewZealandsalmonproduction(t;000;1984-2010e)

SALMON– NZPRODUCTIONTheNewZealandsalmonindustryexperiencedaperiodofstronggrowththroughthemid-90’s;growthsincewasslowinguntilarecentsurge09/10e

PAGE20 Source:UNFAOFishStat (1984-1997);NZFSA(1998-2009+2010e);Coriolisanalysis

0.1 0.20.6

0.91.2

1.5

2.52.9 3.0

3.54.0

5.0

6.4

4.4

5.9

5.1

6.1

8.59.1

6.7

7.4 7.27.7

8.4 8.5

10.7

12.4

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

CAGR(84-90)73%

CAGR(90-95)15%

CAGR(90-95)11%

CAGR(00-05)3%

CAGR(05-10)12%

ProductionincreaseisprobablyduetoNZKingSalmon'sClayPoint(Tory

Channel)farmcomingonline

Listedfirm Whenlisted

Details Effectiveoutcome Today

NewZealandSalmon 1983 - Setup; islisted;loseslotsofmoney;diversifiedintovegetableprocessing(Cedenco)andpackaging(Drum);getsexportcommendationfromTradeNZ;didn’tachievescale;wassold

Lostinvestorsmoney;acquiredbyRegal;eventuallyacquiredbyTiong Group

NowpartofNZKS

BigGlorySeafoods Oct1986 - FirstNZseacageoperation setupbyBritishPetroleumin 1981- Wentthroughanumberofhands;waslisted;diversified;gets

exportcommendationfromTradeNZ;wasacquired;sold

Acquiredby80’seraconglomeratewhichbecameMontanaWines;soldsalmonoperation

NowadivisionofSanford

NewZealandMarineFarms

1986 - Reverse takeoverbyComo- ComosellssalmonoperationstoSouthPacificSalmon;SPSsells

toFleetwing Ent.;Fleetwing convertssitetomusselfarming

Lostinvestorsmoney;eventuallyacquired

Gone

RegalSalmon Sep1986 - CreatedinmergerofSouthIslandSalmonPartnershipandtheSouthIsland SalmonCompany

- Initialsuccess;furthercapitalraising;diversifiesintowineandwasabi;losesmoney;winsTradeNZ exportaward;sellsmoreshares;allegedinsider trading;SecuritiesCommissioninvestigation;fined;losesmoremoney;acquiredbyTiong

Lostinvestorsmoney;eventuallyacquiredbyTiong Group

NowpartofNZKS

CroweCorporation Jan1987 - Goat farmingandoceanranchingofsalmon Lostinvestorsmoney;receivership;acquiredbyDFC

Gone

Salmond SmithBiolab [1965] - Listedfirmbuysintosalmonindustrypioneer,diversifies;losesmoney

AcquiredbyTiong Group NowpartofNZKS

NewZealandsalmonfarmingcompanieswhichwerepubliclylistedinNewZealand(1980-1990

LISTEDFIRMSTheexcitementaroundsalmonfarmingledtofivesalmoncompaniesbeinglistedonthestockexchangeandonelistedfirm(Salmond SmithBiolab)acquiringasalmoncompany;allweretobepoorlongterminvestments

PAGE21

EARLYHYPE

- “[Investorswill]participateintwoofthemostexcitingprimaryindustriestoemergeinNewZealandinthelastfiveyears,Goatfarmingandoceanranchingofsalmon.”TonyCrowe,ManagingDirector,CroweCorporation,Jan1987(attimeoflisting)

PAGE22

Theindustryinitiallyhadstronghypeaboutthepotentialforgrowth

MOREDIFFICULTTHANEXPECTED

- "Thenumberoflistedsalmoncompaniesisunjustifiedyetmoreareexpectedbeforetheendofthisyear…Oceanranchingisaveryvolatilebusinesswithnoguaranteeofreturnsafterlargeinitialcapitalcosts.Operatingcostsarelowerthanforseacagesbutitshouldnotbeconsideredalow-costexercise.Seacageprofitmarginsareatbestmoderateandarelikelytodeterioratewithsalmonpricesfallingthroughtheworld-wideproductionexplosion...[Wenote]asimilarpatternoccurredinotherglamourindustriessuchasthoroughbredbreedingandgoats.Initialpricesforthesestocksprovedunsustainableandrationalisationofsalmonstocksisexpectedoverseveralyears.”Analystreport,O'ConnorGrieveandCo.(sharebrokers),May1987

- “Salmonfarmingisanewspeculativeventurecapitalindustrycarriedoutinremoteareas…Acombinationofunforeseencircumstanceshadledtothepresentposition.”SirRonaldScott,Chairman,NewZealandMarineFarms,July1987

- “ListedsalmonfarmerNewZealandMarineFarmsLtdisinaliquiditycrisisandthefutureofthecompanydependsonthebankerdevisingarescueplan.ThecompanyyesterdayreportedtothestockexchangeitsplanstodevelopnewlicencesinthenewlyidentifiedPort Underwoodareahadtakenaseveresetbackthroughthecompany'ssharepricefallingbelowpar($1)onthestockexchange… ApilotsalmonfarmingschemeoperatedintheportUnderwoodareahadshowngoodresults,MrBaigent said.However,morecashwasneededtosetupafulloperationbuttimehadrunout.”NewZealandHerald,Feb1987

- “TheNewZealandSalmonCoLtdhasnotyetbeenabletoidentifythealgaebloomresponsibleforkillingaproportionofitssalmonstockfromseacage farmingoperationinBigGloryBay,StewartIsland.”NewZealandHerald,Jan1989

PAGE23

Salmonfarmingprovedmoredifficultthanexpected

WORLDPRICESDOWN

- “AcombinationoflossesfromtheJanuary1989algaebloom,weakerworldsalmonprices andaninternationaloversupplyoffishhaspromptedRegalSalmontorevisedownwardsitsprofitforecast.”NewZealandHerald,Feb1990

- “NewZealandcompaniesinvolvedinsalmonfarmingarebeinghithardbyafallof25to30percentinworldpricesforfrozenandchilledsalmon.”NewZealandHerald,April1990

- “NewsofadisappointingresultfromNewZealandSalmonCoLtdhasfocusedattentionagainontheskyrocketingworldproductionofsalmon,andthequestionofhowwellNewZealanderscanfootitinsuchaclimate.HardontheheelsofRegalSalmonLtd's 18-monthlossof$940,000toMarch31,NZSalmonturnedinasix-monthlossof$1.797milliontoMarch31,comparedwithalosstothesametimelastyearof$425,000.Bothcompanieshavepointedtoworldoversupplyasthemainsourceoftheirwoesonthesalmonsideoftheirbusinesses,butholdouthopeforabrighterfuturefortheindustry.”NationalBusinessReview,July1990

- “Worldwidepriceshavenotrisenasexpected.”TerryShagin,ManagingDirector,RegalSalmon,June1992

- “Troublecamein1993when[RegelSalmon]announceda$4.63millionlossforthesixmonthsendedSeptember..Thecompanyblamedthelossona25%dropinpricesforfishsoldtoJapanandageneralworldoversupply,stemmingprincipallyfromanunanticipatedincreasefromNorway.Regal's sharepriceimmediatelyfellfrom80cto48c,bothfiguresbeingasubstantialslumpfromthe$2.50reachedin1992forsharesissuedat50cin1986.ThecompanythencameunderthecontrolofMalaysia'sTiong Group,whichacquiredSalmond SmithBiolab inlate1995/early1996andmergedthetwo.”PeterV.O’Brien,NationalBusinessReview,Dec1997

- “RegalSalmonyesterdayreportedanexpectedtradinglossforthesixmonthstoSeptember30,butpulledasurprisebyaddingthatitsprospectsofmeetingapredictedannualprofitanddividendhaddiminishedconsiderably.Thecompanyblamedthe$4.63million interimlossonforeignexchangelossesandasharpdeclineintheprice ofsalmonontheJapanesemarket.”NewZealandHerald,Dec1993

PAGE24

IncreasingglobalproductionoffarmedAtlanticsalmondrovedownworldpricesimpactingNewZealandfirms

ChartofkeytakeoversandacquisitionsinthefarmedsalmonindustryinNewZealand(1978-1996)

INDUSTRYCONSOLIDATIONTheNewZealandsalmonfarmingindustrywentthroughanumberofphasesofindustryconsolidationinthelate80’sandearly90’sleadingtothecurrentsituationoftwokeyfirms

PAGE25

BubblingSpringsSalmon1978

SouthernOceanSalmon1987

SalmondSmithBiolab

NewZealandSalmon1983

RegalSalmon1986

BigGlorySeafoods1987

BritishPetroleum

1981

SaudiCorpClypex1986

1995

SouthIslandSalmon

Partnership

SouthIslandSalmonCompany

1992

MarlboroughSalmonCo.

1989

Tiong Group/OregonGroup

1996

CorporateInvestments

1990

1993

Newlylisted

Date Target Price Buyer Seller Details

Feb1992 NZ Salmon $3.7m Regal Salmon NZSalmon - ListedNZSalmonsellsdomesticNZsalmonfarmsleavinginvestmentinChileansalmonfarm

- seacagesatStewartIsland,theTrentburnHatchery,its50%share inthefeedmillownedwithRegalSalmon

Mar1993 BigGlorySeafoods $14m SanfordLtd. CorporateInvestments - 700-800t/year production- Includesotherseafoodassets- OriginalBPseacagebusiness

Oct1995 Salmond SmithBiolab N/A Tiong Group Listed - Tiong Groupacquireslistedsalmonfirm

Jul1996 RegalSalmon N/A Tiong Group Listed - Tiong acquiresRegalsalmonoperationsinstagesduringcrisisleavingshellcompany

Oct2008 Silverstream Hatchery N/A SalmonSmolt NZ NIWA(Governmentagency)

- Governmenthatcheryboughtbyjoint-venture ofMtCook,Akaroa,Skeggs,HighCountry,Benmore &Sanford

Jan2011 Pacifica SalmonLimited(IslandAquafarms)

NZ$950k(???)

NewZealandKingSalmon(Tiong &others)

Skeggs Group - TwosalmonfarmsinMarlboroughSoundsandahatcheryinCanterbury

- Partof Skeggs exitfromaquaculture(soldotheroperationstoSanford)

KeyhistoricalacquisitionsinsalmonfarmingsectorinNewZealand(1990- Feb2012)

KEYACQUISITIONSAcquisitionsintheNewZealandsalmonindustryhavebeendrivenprimarilybyasearchforadditionalscale

PAGE26 Source:variouspublishedarticlesandpressreleases;Coriolisanalysis

CompanyYearfounded

Salmonprod(t)

Turnover EmployeesOwnership Note/comments

1996merger

7,9612 NZ$115m 420 Evergreen/Tiong 53%DirectCapital43.5%Management3.5%

- Formed in1996mergerofSouthernOcean&RegalSalmon

- 7seafarms(MarlboroughSounds(M.S));2hatcheries;4processingfacilities

- Recentlyacquired2salmonfarmsfromSkeggs- www.kingsalmon.co.nz

1993acquired

2,613 GroupNZ$421m 1,055FT/PT AmalgamatedDairies37%Others63%

- 1farm;BigGloryBay,StewartIsland- Purchased in1993- RecentlyacquiredPacificaSeafood,didnotincl

salmonoperationsinM.S.- NZ$7mupgradein2007;1,900tto3,000t- www.sanford.co.nz

1994 256 N/A N/A MattEvans - OperateinCentralOtagohydroelectric canals- LeaseIsaacquarry- www.smokedsalmon.co.nz

1984 189 $3m 22 Batesfamily - 1farm;LucasBay,BanksPeninsula- www.akaroasalmon.co.nz

1992 74 N/A N/A Various - OperateinCentralOtago hydroelectric canals- www.mtcooksalmon.com

1992 66 N/A N/A Loganfamily - OperateinCentralOtago hydroelectric canals- Nowebsite

N/A 15(?) N/A N/A Isaacfamily - Ex-quarry;production highlyvariable- www.isaac.co.nz/salmon_farm.html

ProfilesofthekeyfirmsinNewZealandsalmonaquaculturesector(various;2010orasavailable)

SALMON– KEYNZFIRMSNewZealandhastwosalmonaquaculturefirmsproducingmorethat1,000tonnes– NewZealandKingSalmonandSanford– andarangeofsmaller,primarilyriver-basedfirms

PAGE27 1.Includesnon-salmonactivities;2.IncludesPacificafromSkeggs;Source:variousindustrypublications;variouspublishedarticles;companywebsitesandannualreports;NZSFA;Coriolisanalysis

NewZealandsalmonaquacultureproductionsharebykeyproducersbyspecies(%ofproductionvolume;2010)

NZPRODUCTIONSHARENewZealandsalmonaquacultureproductionisnowhighlyconsolidated

PAGE28 Note:NZKSincludesPacifica(fromSkeggs);Source:NZSalmonFarmer’sAssociation(email);Coriolisanalysis

68%

24%

2%3% 2%

Other1%

TOTAL=12,391

SeaCage94%

River/Hydroelectric6%

42%

38%

18%

2%

Farmedsalmonproductionsharebyfirmacrossselectcountries(%oftonnes;2010orasavailable)

CONSOLIDATIONELSEWHEREOthermarketsarealsoconsolidated,indicatingstrongeconomiesofscaleinsalmonfarming

PAGE29 Source:SalmonfromtheFaeroes(http://salmon-from-the-faroe-islands.com/producers.html);ABAREAustralianFisheriesStatistics2010;MarineHarvest;variouscompanywebsites;Coriolisanalysis&estimates

53%

18%

15%

14%

FaeroeIslands BritishColumbiaTasmania

57%25%

14%

4%

TOTAL=41,357 TOTAL=73,600TOTAL=31,915

Locationofsalmonfarmingoperationsover50tinNewZealand(2011orasavailable)

FARMLOCATIONSNewZealandhasnine(~eleven)seafarmslocatedacrossthreeregionsandthreeproducersinhydroelectriccanals

PAGE30 Source:variouspublishedarticlesandcompanywebsites;photocredit(NASA;publicdomain);Coriolisanalysis

7/9seafarmsinMarlboroughSounds- Otanerau (nearPicton)- Ruakaka (nearPicton)- Te Pangu (nearPicton)- Crail Bay(nearPicton)- ForsythBay(MarlboroughSounds)- Waihinau (MarlboroughSounds)- ClayPoint(MarlboroughSounds)- Plusrecentacquisitionof2farms

fromSkeggs/Pacifica

OneseafarmatBigGloryBay

OneseafarminLucasBay,Akaroa

CentralOtago Hydroelectriccanals3firmsoperating

Lessthan50tnotshownIsaac,Anatoki &Leslie

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5

Methodology&datasources 6

Summary&conclusions 7

1.Salmonisanattractiveproduct 8

2. Industryhasachievedstronggrowth 16

3.Export marketsaretheprimedriverofgrowth 31

4.Stronghypotheticalpotential;unlikelyinpractice 38

ProductionandflowofsalmoninandoutoftheNewZealandmarket(utilisationbymarket)(t;000;1988-2010e)

SALMON– NZUTILISATIONGrowingNZsalmonproductionhasgonetobothdomesticandexportmarkets

PAGE32 Source:UNFAOFishStat (1984-1997);NZFSA(1998-2009+2010e);SNZInfoshare(Import&Exportdatabase);Coriolisanalysis

0.1 0.4 0.8 0.8 0.6 1.0 1.0 1.1 1.4 0.8

2.6 2.83.9

5.0

3.11.9

3.14.0

3.2

5.2 5.15.7 5.6

1.11.1

1.7 2.1 2.42.5 3.0

3.9

5.0

3.5

3.22.3

2.2

3.65.9

4.8

4.43.2 4.5

3.2 3.4

5.0

6.8

-1.0 -0.8 -1.2 -0.8 -1.4 -1.8 -1.7 -1.9 -2.4 -2.1 -1.6 -1.7 -2.0 -1.7 -1.8 -1.8 -2.1 -1.9 -1.8 -1.5 -1.8 -1.0 -1.5

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

DomesticconsumptionofNZproduction

ExportsfromNZ

12.4

10.7

8.48.47.7

7.27.46.7

9.18.5

6.1

5.1

5.9

4.4

6.4

5.0

4.03.5

3.02.92.5

1.51.2

Note:Calculationisapparentconsumption(production-exports=domesticconsumption);willincludewastage

Imports(almosttotallycanned)

Note:Recentsurgepurelyexportdriven

ApparentNewZealandsalmonconsumptionbysource(kg/capita;1988-2010e)

NZ– CONSUMPTIONPERCAPITAAfteraperiodofstronggrowth,NewZealandsalmonconsumptionpercapitaappearstohaveflattenedandstabilised

PAGE33 Source:UNFAOFishStat (1984-1997);NZFSA(1998-2009+2010e);SNZInfoshare (Import&Exportdatabase);SNZInfoshare (EstimatedResidentPopulation);Coriolisanalysis

0.29 0.250.34

0.240.39

0.50 0.46 0.520.63

0.540.43 0.44 0.50 0.44 0.46 0.44 0.51 0.47 0.42

0.340.43

0.220.34

0.02 0.12

0.23

0.23

0.16

0.290.28

0.31

0.36

0.22

0.69 0.72

1.011.27

0.78

0.48

0.740.95

0.76

1.231.19

1.32

1.28

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Domestic

Imports

1.621.54

1.621.57

1.18

1.42

1.25

0.92

1.24

1.71

1.51

1.151.11

0.76

0.99

0.83

0.740.79

0.550.47

0.57

0.360.32

Note:Calculationisapparentconsumption(production-exports=domesticconsumption);will includewastage;calculationdoesnotincludeimpactoftouristsduetolackofdata

CAGR(88-00)14%

CAGR(00-10)1%

Domestic

Imports

Salmonconsumptionpercapita:NewZealandvs.selectpeers(kg/capita;2008-2010)

SALMON– CONSUMPTIONPERCAPITANewZealandsalmonconsumptionpercapitaisatorabovemostpeerssuggestinglimiteddomesticmarketgrowthgoingforward

PAGE34 Note:roundedtoonedecimalplace;Source:UNFAOFishStat (1984-1997);NZFSA(1998-2009+2010e);SNZInfoshare (Import&Exportdatabase);SNZInfoshare (EstimatedResidentPopulation);UNComtrade (variouscodes);NationalMarineFisheriesService(USA);Coriolisanalysis

1.9

1.6

1.6

1.3

1.0

0.7

UnitedKingdom

NewZealand

Australia

Canada

UnitedStates

Spain

ValueofNewZealandsalmonexportsbyproducttype(NZ$m;2000-2010)

SALMON– NZEXPORTVALUEThevalueofNewZealand’ssalmonexportswererelativelyflatuntilthelasttwoyears;wesuggesttherecentsurgeisrelatedtotheChileanISAoutbreakdrivingupworldprices+18%(09)and+16%(10)

PAGE35 Source:StatisticsNewZealandInfoshare database(customjob);Coriolisanalysis

$9.3$16.5

$12.5$16.7 $18.1 $15.7

$22.7 $22.9 $24.1$27.8

$38.9$12.9

$12.5$25.0 $15.2 $12.3

$7.0

$13.3

$4.0$8.7

$22.9

$27.3

$0.7

$0.3

$0.8

$0.7$0.6

$0.6

$1.0

$0.4

$1.4

$1.6

$9.2

$7.2

$7.9

$4.9

$6.1$4.4

$3.7

$4.9

$7.8

$8.6

$6.7

$5.4

$1.0

$0.2

$0.3

$0.3

$0.1

$0.0

$0.1

$0.1

$0.1

$0.1

$0.1

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Preserved

Smoked

Frozenfillets

Frozenwhole

Freshorchilledwhole

-18%

15%

10yearCAGR(00-10)

Freshorchilled,whole(0302-12)

8%Frozen,whole(0303-10/11/19)

29%Frozen,fillets(0304-200091/290078)

Smoked(030541)

Processed/Preserved (160411)-3%

10%

$31.1

$37.3

$43.5

$39.1$35.4

$27.0

$42.1

$35.1

$42.8

$59.1

$80.9

LikelyChileISAimpact

ValueofNewZealandsalmonexportsbydestination(NZ$m;2000-2010)

SALMON– NZEXPORTVALUEGrowthhascomefromasurgeinsalestoAustralia,theUSandTaiwan(amongothers)

PAGE36 Source:StatisticsNewZealandInfoshare database(customjob);Coriolisanalysis

$23.6$27.7

$33.2$27.2

$22.9

$14.9$22.3

$13.8$17.0

$26.1 $27.7

$3.1

$5.9

$4.0

$6.5

$5.4

$5.9

$9.3

$11.8$12.2

$10.7

$19.4

$0.6

$0.8$1.0

$1.1

$3.6

$3.2

$6.7

$6.4

$8.8

$11.9

$15.8

$0.2

$0.3

$2.9

$1.4$0.7

$0.5

$0.3

$0.2

$0.3

$5.4

$5.5

$1.7

$1.4

$1.3

$1.5$1.8

$1.5

$2.4

$1.8

$3.3

$3.2

$8.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Other

Singapore

FrenchPolynesia

HongKong

Taiwan

USA

Australia

Japan

18%

2%

10yearCAGR(00-10)

Japan

20%Australia

38%USA

Taiwan

HongKong

37%

10%

$31.1

$37.3

$43.5

$39.1$35.4

$27.0

$42.1

$35.1

$42.8

$59.1

$80.9

2%FrenchPolynesia3%Singapore

17%OtherLikelyChileISAimpact

Inflationadjustedexportpriceperkilogramoffreshwholesalmon(US$/kilogram;inflationadjusted2010$;1988-2010)

SALMON– INFLATIONADJUSTED$/KGNewZealandexportpricetracks(above)theworldprice;asChilerecoversfromISA,wewouldexpectpricestoreturntotheirdownwardtrend

PAGE37 Note:USESSITC2-REV2code030412;Source:UNComtrade database;USBLS(US$inflation);Coriolisanalysis

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

ChileNewZealandNorwayU.K.

NewZealand (lightblue)

Scotland(yellow)

Norway(green)Chile(blue)

ChileISAimpact

TABLEOFCONTENTS

Section Page

Contents 4

Glossaryofterms 5

Methodology&datasources 6

Summary&conclusions 7

1.Salmonisanattractiveproduct 8

2. Industryhasachievedstronggrowth 16

3.Export marketsaretheprimedriverofgrowth 31

4.Stronghypotheticalpotential;unlikelyinpractice 38

NEWZEALANDSALMON– SWOT ANALYSISWhilesalmonhasstrongpotentialforcontinuedgrowth,inpracticethispotentialisunlikelytoberealised

PAGE39 Source:Interviews;Coriolis

Strengths Weaknesses

- FarmsKing SalmonnotAtlanticSalmon(lowsupply,nodiseases,premium)

- 30yearsexperienceinseacagesalmonfarming

- IsolatedSouthPacificlocation,exposuretodiseaselow

- Strongbiosecuritysystem

- Industryconsolidatedaroundtwofirms(NZKS&Sanford)

- FarmsKing SalmonnotAtlanticSalmon(slowergrowing)

- Industrynotatscalerelativetocompetitors(~40,000t)

- Largeamountofbestcoastforsalmonfarminginsideparks(areashighlyvaluedbyotherusersofenvironment)

- Increasingspacerequireshugeinvestmentoftime,effortandmoneywithunclearchanceofsuccess;impossibletodevelopnewseaareawithoutgoingtocourt

- Competingland/seausesandusers

- Changeablegovernmentbehaviourtowardsindustryoverpast30years;limitedclearcross-partyconsensusgoingforward

- Closetoimpossibletointroducenewgenetics

- Negativeattitudestowardsgeneticmodification

- Nopresenceofglobaltop30salmonfirms;nottiedintotheirnetworks

- Residualuncertaintyaroundownershipofforeshoreandseabed

Opportunities Issues/Threats/Risk

- Strongtheoreticalpotentialformuchgreaterproduction(NZKSplanstodoubleproductionby2015)

- Mostrecentnewlegislation(AquaculturelawreformOctober2011)

- Potentialarrivalofsalmondiseases,particularlythosewhichimpactKingSalmonseverely(cf.PSAinkiwifruit;oyster“herpes”)

- AtlanticsalmonimportsfromTasmania– andpotentiallyimportedsalmonfromothercountriesimpactingprofitabilityofdomesticmarket

- MuchlargerAtlanticSalmonbreedingprogramimprovingproductioneconomicsfaster(compareRoss/Cobbchickenswithanyheritagebreed)

SALMON– NZVS.NORWAYNewZealandhasexcellenttheoreticalpotentialtoproducesalmon;Norway,acountryofasimilarsizetoNewZealand,produces75timesasmuchsalmon

PAGE40 Source:CIAWorldFactBook;photocredit(CIAWorldFactBook;publicdomain);Coriolisanalysis

1,156km1,190km

12,391t

Salmon production

936,980t75x

SALMON– FAEROEISLANDSVS.BANKSPENINSULAAsanexample,theFaeroeIslandsproduces218timesasmuchsalmonasBanksPeninsularegion

PAGE41 Source:photocredit(NASA;publicdomain);varioussources;Coriolis

BanksPeninsula/Akaroa~40km

189tofsalmon;1firm

Onefarm,similarinsizetoaKentuckyFriedChickenoutlet(excludingthecarpark).

FaeroeIslands~40km

41,357tofsalmon;4firms

“ThereisafishfarminalmosteverysuitablebayandfjordintheIslands. ”

218xasmuchfarmedsalmon

Salmonproductionmatrix:coastlinevs.coastproductivityvs.totalproductionforNewZealandandpeergroupcountries(2010orasavailable)

PRODUCTIONMATRIXAcomparisonwithpeerssuggestsNewZealandisnotintensivelyfarmed

PAGE42 Source:UNFAOFishStat;Wikipedia;CIAWorldFactBook;MarineHarvest;otherpublishedarticlesandreports;Coriolisanalysis

0

10

20

30

40

50

60

70

80

90

100

110

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 22,000 24,000 26,000 28,000

Tasmania

SouthIsland

FaeroeIslands

t/km

Norway

Scotland

Chile

BritishColumbiaStewartIsland NewZealand

Lengthofcoastline (km2)

Salmonproductionperkilometre ofcoastline

(t/km2;2010)

Sizeofbubble=totalsalmonproduction

SALMON– THEGREATOPPORTUNITY

- “Thebiggestopportunityissalmon.Wejustneedtomaintainthepremium,it’sapremiumproduct,highfatcontent,greateatingquality,it’saverysuccessfulproduct.”Industryrepresentative,2011

- “WehaveworkedouthowtogetapremiumforKingsalmon;it’sararespecies.Wehavetobecauseittakesmoretofeed,it’snotasefficientasAtlanticsalmon.Wegeta30-40%premium.”CEO,Seafoodcompany,large,2011

- “Whynotgoforthelowhangingfruit,likesalmon,itisthebiggestopportunity”Industryrepresentative,2011

- “Salmon isstillinitsinfancy.Thereissuchopportunitythere.”GM,SeafoodCompany,medium,2011

- “Growthwillcomefromsalmon.”CEO,largeSeafoodCompany,2011

- “NewZealandKingSalmonisapplyingtoincreaseitscurrentproductionof7,500tonnes ofsalmonayearto15,000tonnes by2015.Ifsuccessful,NewZealandKingSalmonbelievesitcandoubleitsproductioninthreetofiveyearsinsupportoftheaquacultureindustry’stargetof$1billioninsalesby2025.”NewZealandKingSalmon,April2011

- “MtCookAlpineSalmonCEO,Matthewsisdrivingabold$20millionexpansionplanhesayswillfuela1400percentproductionincreaseforthecompanywithinfouryears…WhenMatthewstookover,MtCookwasproducing160tonnesperyear.Thisyearitwillproduce400tonnes.Andwitha$20millionexpansion,includingaprocessingfactoryandavalue-addedplant,Mathewssaystheywillbeturningout1000tonnesin2012and2000tonesin2013.”Matthews,CEO,AlpineSalmon,AquacultureNZ,July2011

PAGE43

Thesalmonindustryisheraldedbymanyasagreatopportunitywithinvestorsplanningfurtherexpansions

PotentialareasforsalmonfarminginNewZealand(hypotheticalmodel)

CHALLENGESINPOTENTIALGROWTHREGIONSWhilefourregionsofNewZealand’sSouthIslandhavegoodhypotheticalpotentialforsalmonaquaculture,therearesignificantlimitations

PAGE44 1.~OslotoBergen;Source:;photocredit(NASA;publicdomain);Coriolisanalysisandestimates

StewartIslandHypotheticalpotential:5,000-15,000t

2/3asmuchcoastlineastheFaeroeIslandsAlmostalloftheislandownedbyGovernment

80%ofislandisnationalpark

FiordlandHypotheticalpotential:100,000-200,000t

SimilarinsizetoSouthwestNorway1AlmostalllandinsidenationalparkEffectivelyuninhabited;pooraccess

Nelson/MarlboroughSoundsHypotheticalpotential:40,000-100,000tSimilarinsizetoNorthernScotlandSignificanttourismHolidayhomesRecreationalfishingNationalparksInshorefishing

BanksPeninsula/AkaroaHypotheticalpotential:5,000-15,000tSimilarinsizetoFaeroeIslandsSignificanttourismHolidayhomesRecreationalfishingNationalparks

SALMON– CHALLENGE– ACCESSTOSPACE

- “Thesalmonsectorhasgotsuchhugepotential.It’sauniqueproductwhichisgettingitsfeedconversionratedown,whichwill increaseproductivity.Allitneedsisadditionalspaceallocatedanditwillhum.”Industrybodyrepresentative,2011

- “ThebiggestlimitationwithsalmonistheaccesstowaterspaceintheMarlboroughSounds.Someofthedecisionswemakeandtheplaceswedeployoureffortsissoinefficient.Wewasteresourceswithbaddecision-making.70%ofallmarineassetsareinthewrongplace.Theyarenotproducingwhattheyshould.Wecouldmoveafarm20metresanddoubleourproduction.Thesystemisincapableofmakingdecisions.Wemakethechoicetohaveasmall14,000tonnesalmonindustryasopposedtoa1mtonneone.IdeallywewouldbeinMarlboroughithastheinfrastructureandgreatenvironment,closetotheairport,town.”CEO,Seafoodcompany,large, 2011

- “Wewanttochangesomespacefrommusselstosalmon,thecostisjusttooprohibitive.Theprocessistoomuch,itdoesn’tmakeitfeasible.”CEO,SeafoodCompany,medium,2011

- “Thewholewaterspaceallocationisadebacle.Salmoncomparedtomusselshas5timesthevaluetothewaterspace.Thereiscompletehaltuntilthelegislativereform.Salmonneedmorespacetodevelop.”GM,SeafoodCompany,medium,2011

- “Thebiggestholduptodevelopmentistheregulatoryenvironment.Consentingprocesstogetwaterspaceandtheabilitytochangetheuseofthewaterspace.Evenwhenyoudogetachangeitstilltakes18monthsto2yearstostartdevelopingandsellingsomething.”Manager,Seafoodcompany,Medium,2011

- “Theindustryneedsscale.Thegovernmentseemskeen,yetaccessisstillahugeissue.”CEO,SeafoodCompany,medium,2011

- “Consentchangesareanightmare.Wecanchangetosalmon,butitisahugecost.”Manager,Seafoodcompany,Medium, 2011

PAGE45

Thesalmonindustry,inparticular,isrestrictedbyspacelimitations

www.foodandbeverage.govt.nz