mowanjum pastoral business plan - final.pdf

8/11/2019 Mowanjum Pastoral Business Plan - final.pdf

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Mowanjum

Pastoral

BusinessPlanforILCgrantandWESTPACICASfinance

TradingEnterpriseforFatteningofWeanersVersion4

August2012

Prepared for

MowanjumAboriginal Corporation

by

Richard Smith, Ph. D.

([email protected], 08 9384 3308)


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DisclaimerandMethodology

This business plan uses material from the Winyuduwa Business Plan V1prepared in 2007 by BlueBone Solutions for the Winyuduwa PastoralCompany (subleasee) for the Mowanjum Aboriginal Corporation (leasor).

This plan now focuses solely on cattle production, lessons learned since2007 and the need for a viable business model.

A Gross Margin methodology is used for financial analysis to account forincome and direct costs associated with the pastoral enterprise, excludingthe fixed costs already covered by MAC.

This plan was reviewed by ILC, 13th June 2012 (ILC, 2012) and 28 th June2012 followed by my visit to Mowanjums Pastoral lease with Jason Russ,then meetings with Brian Lord, PLC, Andrew Denniss, Westpac and SteveAustin,CEO MAC from July 515th2012 and again by ILC on 25thJuly 2012.

The author, a volunteer, has worked with the Mowanjum Community forthe past 5 years as a member of the Boab Network (Boab, 2012). He hasdeveloped the Mowanjum Community Resource Centre (CRC, 2012) toprovide computer and internet literacy and training in vegetable/fruittree growing. He continues to assist with administration of the CRC.

The author has been a Farm Management Consultant, University Lecturer,CSIRO Research Leader and Manager of Satellite Remote Sensing Services,Landgate where his staff developed the mapping of burnt area fromsatellite used in Carbon Capture from Savannah burning.

My son Matthew Smith, another member of the Boab Network (Boab,2012) has contributed his expertise to this business plan.

Information used in the Business Plan was kindly provided by:

Russell Shaw, WA Department of Agriculture and Food

Jason Russ (Russ Contracting Pty Ltd) Manager of Mowanjum Pastoral

Steve Austin, CEO Mowanjum Aboriginal Corporation, who madeavailable all the financial details included in the ILC application for acapital grant

Stephen Sharpe (Version 1), Kira Meadus, Richard Brake, Len Boladerasand Iain Loganathan (Version 2), ILC Perth Office (V3,V4,V5)

Andrew Denniss, Westpac Business Banking Manager, Broome

Brian Lloyd, Pastoral Lands Board, Broome

Mr John Styants, WA Department of Indigenous Affairs

Paul Morgan, Betterlink Group on updating the Mowanjum Strategic Planand Management Audit to deal with succession planning

Peter Merin, MLCS Corporate Pty Ltd, on Mowanjum Enterprises Pty Ltd


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TABLEOFCONTENTS

1. Executive Summary ...............................................................................................................5

1 Background .............................................................................................................................8

1.1

Mowanjum ...........................................................................................................................8

1.2

Property Location ......................................................................................................... 10

1.3 Pastoral Assessment .................................................................................................... 11

1.4

Cultural Considerations ............................................................................................. 16

1.5

Current Land Uses ........................................................................................................ 16

2

Proposal ................................................................................................................................. 17

2.1

Mission Statement, Vision and Objectives .......................................................... 17

2.2

Sources of Income ......................................................................................................... 17

2.3

Pastoral Infrastructure ............................................................................................... 18

2.4

Capital Works Plan ....................................................................................................... 20

2.5

Sources of Funding ....................................................................................................... 21

2.6 Stakeholders .................................................................................................................... 22

2.7

Business Structure & Management................................................................... 25

3 SWOT Analysis ................................................................................................................... 27

4 Competitive Analysis ...................................................................................................... 30

4.1

Competitors ................................................................................................................... 30

4.2 Competitive Advantages ......................................................................................... 30

5

Financial Analysis .............................................................................................................. 31

5.1 Parameters ....................................................................................................................... 31

5.2 Herd Development 2012 2016 ............................................................................ 32

5.3

Cattle Purchases and Sales ........................................................................................ 32

5.4 Gross Margin Analysis ................................................................................................. 33

5.5

Westpac Overdraft Analysis ..................................................................................... 34

5.6

Assumptions .................................................................................................................... 35

6

Projected Impact of Proposal on MACs Financial Position ............................. 36

6.1

Discussion of Financial Analysis ............................................................................. 38

7

References............................................................................................................................. 39

Appendix A

Draft Contract Management Agreement ........................................... 40


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TABLEOFFIGURES

Figure 1: TAFE trainees clearing regrowth, dozer clearing Pindan .............................. 9

Figure 2: Water trough with gates of trap yard at Russ bore, July 2012 .................... 9

Figure 3: Jason Russ with new fence built in 2011 from ILC funding ....................... 12

Figure 4: Diagram of planned ILC Trucking Yards (Jason Russ, 2012) .................... 12

Figure 5: Mowanjum Station ....................................................................................................... 15

Figure 6: Cattle on agistment and warning notice, July 2012 ....................................... 18

Figure 7: Russ Bore awaiting Solar pump to get water into Tank .............................. 19

Figure 8: Russ Contracting fullservice contract business and bull buggy .......... 24

Figure 9: Livestock Truck and stock camp with fuel trailer .......................................... 24

Figure 10: Saddlery and dozer ................................................................................................... 24

Figure 11: Welding trailer for building yards ...................................................................... 24

Figure 12: Mowanjum Coprorate Structure ......................................................................... 26

TABLEOFTABLES

Table 1: Social Benefits & Measures ........................................................................................... 5

Table 2: Mowanjum Pastoral Financial Summary of Weaner Fattening .................. 6

Table 3: Knowsley Agriculture Area ........................................................................................ 11

Table 4: MACowned Housing Blocks in Derby ................................................................... 11

Table 5: 2012/13 Investment Budget ..................................................................................... 20

Table 6: 2013/14 Investment Budget ..................................................................................... 21

Table 7: Training Plan .................................................................................................................... 26

Table 8: Model Parameters .......................................................................................................... 31

Table 9: Cattle Units ........................................................................................................................ 31

Table 10: Herd Development for Weaner Fattening Enterprise ................................. 32

Table 11: Cattle Purchases and Sales including freight cost ......................................... 32

Table 12: Gross Margin Analysis of Weaner Fattening Enterprise ............................ 33

Table 13: Westpac Overdraft Projection ................................................................................ 34

Table 14: MAC Projected Income 20122015 (w/Mowanjum Pastoral) ................. 36

Table 15: MAC Projected Expenditure 20122015 (w/Mowanjum Pastoral) ....... 37

Table 16: MAC Projected Surplus/Deficit 20122015 (w/Mowanjum Pastoral) . 37


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1. ExecutiveSummary

The Mowanjum Aboriginal Corporation (MAC) holds a pastoral lease over 55,000hectares of good quality grazing land situated just outside Derby in the

Kimberley. This lease has been underutilized for the last 40 years.

Indigenous communities with viable cattle enterprises progress better, bothsocially and economically, than those without (Shaw, 2012). The 2015Government pastoral lease review makes this development a matter of urgency.

This Plan reestablishes a profitable cattle enterprise which will retainindigenous control of the lease as well as provide training, and employment tohelp break the cycle of welfare, alcohol dependence and cultural alienation.

This development will provide employment through Russ Contracting Pty Ltd, of1 Manager, 4 casual staff, and 10 TAFE trainees per year. With close proximity to

Derby, the trainee program will offer a variety of TAFE courses and CDEPemployment to enable the Mowanjum community to engage with their land andchoose long term, employmentbased lifestyles.

SocialBenefits Measures

Employment 1 Full Time Manager (Russ Contracting Pty Ltd)

2 Casual positions with the Contractor

and 2 more Casuals with CDEP

Training

withCDEPandotherfunding

63 Training Participants

20 Certificate II in rural operations

8 Business Administration

25 Automotive Servicing & Driving licenses

10 Governance Training

Indigenousheldland 55,000 hectares

IncreasedIncomeGeneration 3 Indigenousowned businesses:

Mowanjum Pastoral

Russ Contracting Pty Ltd, and

Mowanjum Driving Academy

LandManagementEvents 13 total:

2 New Paddocks established

5 Water points

5 Trap yards

1 Trucking yard

1,500 head weaner fattening enterprise

Eventually a breeding herdTable1:SocialBenefits&Measures


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For every trainee who gains employment, the net capital cost will be $5,000,generating savings of over $500,000 in reduced welfare expenses and resultantimprovements in communal well being. The basis of this social dividend fromemployment and training opportunities for the Mowanjum Community in thefirst two years are shown in Table 1.

Integral to this Plan is MACs contract with Russ Contracting Pty Ltd to run thecattle enterprise. The indigenous principal, Mr Jason Russ, has over 20 years ofexperience in the pastoral industry, business management and TAFE training.

Mowanjum Pastoral will focus initially on trading to fatten weaners for the liveexport trade in Broome 180km away. It will capitalise on its strategic locationclose to Derby, access to all weather roads and its good flood plain soils. MAC hasa highly competent CEO, expert management by Russ Contracting Pty Ltd andsupport of the Kimberley Indigenous Management Support Services of theDepartment of Agriculture and Food WA.

Financially, the Plan begins with a capital investment of $567,750 in 201214 forfencing, bores, trap yards and trucking yard from the Indigenous LandCorporation (ILC). This ILC grant enables a $500,000 Westpac ICAS overdraft forpurchase and fattening of over 1,000 weaners each wet season. This cycle ofbuying weaners September to November and selling them fattened April toOctober will bring the ICAS overdraft to zero by the end of the 2015 dry season.

The predicted financial outcomes of the Plan are presented in Table 2.

2012/13 2013/14 2014/15 2015/16 2016/17

GrossProfitCattle 227,420 238,350 249,280 225,290 236,220

CumulativeGross

Profit

227,420 465,770 715,050 940,340 1,176,560

Directcosts(w/interest) 239,656 265,664 144,390 156,423

168,455

GrossMargin (12,236) (27,314) 104,890 68,868

67,765

CumulativeGrossMargin (12,236) (39,550) 65,340 134,208

201,973

Table2:MowanjumPastoral- FinancialSummaryofWeanerFattening

MACs diversified set of businesses will insulate it from the variable business

cycles of individual businesses. Its corporate structure (Figure 12) will furtherminimise risks. Therefore MAC has the financial resources and diversification towithstand short term downturns in the live cattle export market and to diversifyfurther in the future to include a self sustaining cattle breeding herd.

In summary, with the necessary investment, Mowanjum Pastoral will become aprofitable business and training venture within MACs portfolio of businessesproducing significant social and economic benefits to the Mowanjum Communityif:

High quality pastoral management is used by contracting RussContracting Pty Ltd (Jason Russ) to manage the weaner fattening

enterprise with responsibility for livestock costs at a rate of $110/head;


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MAC provides overall financial control through CEO, Steve Austin andFinance Officer Nardia Gerrard;

Infrastructure spending of $567,750 in the first two years results in twonew paddocks with water, troughs and trap yards for low cost mustering

and a set of trucking/drafting yards enabling a trading weaner fatteningenterprise of 1,000 expanding to 1,500 to be run with a $500,000WESTPAC ICAS overdraft reducing to zero within 3 years;

As ILC funding will not be available till the end of 2012 dry season, butinfrastructure is needed before then, some flexibility by ILC and Westpacin use of their funds for either capital improvement or cattle purchases isrequired to enable the proposed Plan to be achieved within the $500,000WESTPAC overdraft limit;

Once in profit, Mowanjum Pastoral has the choice to transition from atrading enterprise based on weaner fattening to a mix of a breeding herd

and fattening to provide diversity within the live export cattle industry;

TAFE training is provided to improve the skills of staff members andprovides a low cost source of labour;

All trainees gain Driving Licenses through driving lessons from theMowanjum Driving Academy, an essential element of future employment;

Early cash flow is generated from agistment, sale of unmanaged cattle,and purchase of weaners for fattening over the wet and early dry season;and

Mowanjums positional advantage near Derby provides:

o Ability to get stock to the live export market in Broome 180kmaway in optimum condition.

o Source of neighbouring stock for fattening

o Access to TAFE trainees for lowcost labour

o Access to the Management and pastoral skills of Jason Russ whoresides in Derby within 15 minutes of Mowanjums pastoral lease.


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1 Background

1.1

Mowanjum

The Mowanjum Community was established as a working pastoral station in themid 1950s. This was a natural way to respond to the needs of an Aboriginalcommunity displaced from country. The community has suffered significantdislocation similar to other Aboriginal communities in remote areas.

The aim of reviving Mowanjums Pastoral lease as a working station is:

The training of younger members of the community in a significant area

of land management and business opportunity through reestablishing a

long and successful tradition of their Elders in the pastoral industry.

To ensure that the Community does not lose their pastoral lease and

therefore suffer yet another significant disruption to its future withundesirable social implications (welfare dependance, alcohol and

suicide).

To offer a viable way to economic selfmanagement at a low cost to

Government in support of Aboriginal aspirations of sovereignty,

management of land in their care and economic independence.

Most MAC members reside in the Mowanjum Community. The community iscomposed of the Ngarinyin, Worora and Wunambul clans who have notraditional ties to the Mowanjums pastoral lease, but have family ties that

extend north and east. Over 100 young people in the Community will benefitover the first 10 years from enhanced training and employment opportunitiesprovided by development of Mowanjums Pastoral lease.

Mowanjum community is on Reserve R1326/1434 vested with the AboriginalLands Trust. There are currently between 290350 people living fulltime in theMowanjum community. The actual figure changes according to the season (e.g.,muster time, festive season, ceremonial periods).

MAC was registered with the Office of Registrar of Aboriginal Corporations(ORAC) in 1981 under the Aboriginal and Torres Strait Islander Act 2006 (CATSIAct). MAC is made up of members of family groups which live and work in theMowanjum community. MAC has an operating governing structure. Allgovernance and financial details of MAC are internet accessible (ORAC, 2012).

Mowanjum Aboriginal Corporation (MAC) controls various tracts of land,including pastoral lease, unencumbered freehold land, crown land grazinglicence and reserve. The majority of these various tracts have been amalgamatedinto the one pastoral lease. Cattle were run by local indigenous people onMowanjum property from the 1960s until the early 1980s when the mission eraended and social problems developed associated with unregulated access toalcohol, passive welfare and government policy failures. The Mowanjumcommunity is determined to reverse this trend.

Reestablishment of Mowanjum Pastoral as a commercially viable enterprise of


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MAC is central to Mowanjums strategic plan to overcome its social problems bybecoming an economically selfsustaining community. MACs aspiration forMowanjum Pastoral is to build the business to provide training and employmentas well as community development and cultural opportunities for the people ofMowanjum.

Mowanjum Pastoral forms part of a portfolio of MAC businesses which includeDerby Workforce, Mowanjum Driving Academy, and the King Sound Gravel jointventure. Other businesses such as fuel distribution and a Caravan Park withService Station on Mowanjums road frontage on the DerbyBroome road arebeing investigated with assistance of the Indigenous Business Association.

Figure1:TAFEtraineesclearingregrowth,dozerclearingPindan

MAC used $174,756 from ILC from August 2011 to successfully complete capitalworks on Mowanjums pastoral lease with TAFE trainees (Figure 1 and Figure 2).

This money came from an existing grant from ILC to Winyudwa AboriginalCorporation who had a sublease with MAC. Winyudwa were not able to performto the expectations of ILC, MAC and PLB, and therefore MAC cancelled thesublease and directly fulfilled the obligations to ILC. This Plan completes theinitial vision.

Figure2:WatertroughwithgatesoftrapyardatRussbore,July2012

1.1.1 PropertySize

Mowanjum Pastorals 55,000ha compares with a typical pastoral lease of320,000ha (DAFWA, 2009). Thus profitability of Mowanjum Pastoral depends onMAC:

Developing its fences, bores, trap yards, a trucking yard, roads and


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firebreaks to maximise carrying capacity (ILC grant).

Achieving a low operating cost/head by using specialist contracting(Russ Contracting Pty Ltd) exploiting economies of scale.

Minimising overhead costs using its existing capital, administrative,management and workshop resources (MAC).

Exploiting its strategic location near to Derby to maximise cattle tradingand training opportunities (Westpac ICAS overdraft).

Focusing on trading and fattening of weaners for the live export trade outof Broome only 180km away on an all weather road (MAC, RussContracting and Westpac overdraft).

Eventually diversification to include a self sustaining breeding herd. Thepossibility of diversification depends on early profitability the tradingenterprise and expanding the number of paddocks.

The economic viability of this strategy has been verified by modelling andfinancial analysis (section 5). The diversity of MACs income sources (Section 6),

based on an expanding portfolio of businesses, which gives Mowanjum theability to withstand a downturn in the live cattle export industry. EmployingRuss Contracting provides the expertise and the economies of subcontracting.

1.2

Property

Location

Mowanjum Pastoral Lease 3114/1008 is located about 10 kilometres south ofDerby, along the main Derby road. As shown in Figure 1, the property is in theShire of DerbyWest Kimberley, within the West Kimberley Land ConservationDistrict. It neighbours are the Meda, Yeeda and Debesa stations, the Derby townreserve and Derby RAAF facility.


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Figure1:MowanjumStationLocation

Mowanjum property incorporates the pastoral lease, which occupiesapproximately 55,000 hectares.

Grazing Lease 295/109 runs on both sides of the DerbyBroome road in the

northern end of the pastoral lease (see Map). There are blocks ranging in sizefrom 5090ha designated in 1925 as the Knowsley Agricultural Area. FreeholdLand in the Knowsley Agricultural Area with lot numbers and areas are shown inTable 3: Knowsley Agriculture Area.

Lot Area(hectares)

3 34.88

12 60.29

13 46.82

93 81.13

94 81.23

98 81.13

99 80.52

146 154.96

Total:620.96

Table3:KnowsleyAgricultureArea

The above areas offer economic opportunities on the Highway for a CaravanPark and/or Service Station which MAC is currently exploring with IndigenousBusiness Australia. In addition MAC is negotiating a Fuel Delivery joint venturepartnership for the Derby area.

MAC also has two freehold housing blocks with houses in the township of Derbythat provides valuable collateral for borrowing from Westpac.

Lot Plan Area(m2) Address

11771177 215280 819 Cnr Holman and Wodehouse St

46

7953 1012 Watt St

Table4:MAC-ownedHousingBlocksinDerby

1.3

Pastoral

Assessment

1.3.1 Infrastructure

The pastoral lease had little infrastructure remaining following the closure ofpastoral activities by the Uniting Church prior to the handover of the land to theMowanjum Aboriginal Corporation. At that time, the Uniting Church sold off allstock. Previous to this sale Mowanjum Station was developing as a successful

pastoral enterprise (Mowanjum Community, 2007).


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While a previous ILC grant in 2011 improved infrastructure (see Figure 3), butnot sufficient required to achieve a profitable carrying capacity (see Figure 4).

Figure3:JasonRusswithnewfencebuiltin2011fromILCfunding

Figure4:DiagramofplannedILCTruckingYards(JasonRuss,2012)

1.3.2 StockingHistory

There are no historical stock return records for Mowanjum Station, andtherefore stocking history is unknown. There have been limited pastoral

Loading Ramp

Drafting Gate

Drafting race

Lane Way from Paddocks


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management activities on the property since the early 1980s (around the timewhen the community moved from the Old Mowanjum site, near the airport).

1.3.3 CurrentStockSituation

The cattle on Mowanjum station are limited and have not been managed for

many years. The property is home to about 200 Brahman with some Shorthornstock; the majority are unbranded. These will be progressively sold off as theweaner fattening enterprise is built.

1.3.4 Climate

Mowanjums climate is similar to Derby with an average rainfall ofapproximately 800mm. The usual growing season for pasture is betweenDecember and May.

1.3.5 SoilandPastures

The main soil types are Pindan sands, marine plains and sand dunes, with a

roughly even mix of the three. Most potential cattle production is from pasturesgrowing on the marine plains, however all areas are suited for grazing.

1.3.6 CarryingCapacity

Under current land and pasture conditions, the estimated carrying capacity ofthe property by DAFWA is 2,000 Large Cattle Units with potential to expand to2,400 cattle units when fully improved (Jeffery, 2007). To realise this carryingcapacity requires investment in fire breaks, access roads, fencing, water, troughs,trap yards for low cost mustering and a set of trucking yards.

1.3.7 Hydrology

There are numerous creeks and tributaries. The river and creek systems onlyflow after significant rainfall. There are also numerous natural lakes andsprings on the property. The quality and quantity of waterways on the propertyare dependent on the seasonal conditions and surrounding landuses.

In addition to natural surface water, there are numerous bores on the propertywhich have proven to be very reliable water sources in both quality and quantityfor previous pastoral enterprises.

The specific groundwater resources of the property and the region in general areunknown. Derby Township acquires its water from shallow aquifers that

underlie the area, therefore it is anticipated that adequate ground water exists tosupport the development of irrigated pasture for fattening in the dry season tomaximise prices for fattened stock and a fodder supplier through hayproduction.

1.3.8 Weeds

Identified weeds on the property are Parkinsonia and Rubber Bush, which havebeen classified for control. This is an environmental management issue andtherefore, an operational management consideration.

1.3.9 FeralAnimals

Cats are the main feral animal on Mowanjum station. There are no donkeys, pigsor other feral animals on the property.


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1.3.10 CattleBreeds

Markets in Southeast Asia prefer Bos indicus cattle, or those with better than50% content of Brahman, Droughtmaster or Santa Gertrudis. As a rule the moredominant the traits of these breeds in a beast, the more highly it will be

favoured by exporters. Shorthorn (Bos

tuarus) are periodically discounted$0.20/kg below the equivalent Bosindicusprice (DAFWA, 2009).

19thJuly 2012

Mr Eddie Bear

A/g Chair

Mowanjum Aboriginal Corporation

PO Box 3

DERBY WA 6728

Dear Eddie

MOWANJUM PASTORAL LEASE

On 5 July, whilst in the area, I took the opportunity to look over the improvements onMowanjum Station with the Manager, Jason Russ.

I was pleased to both hear of and see the progress being made on the station,particularly in relation to the new bore and associated trapyards, the new fencing thathas been erected, the maintenance of existing fencing and the removal of old fencing.I was also pleased to see the involvement of some of the Mowanjum Community indoing this work.

Such activity is heartening, given the previous poor history of lease management onMowanjum. I trust such progress can be maintained in a consistent manner in thecoming years as 2015 and lease renewal approaches.

Yours sincerely

Brian LloydPastoral Liaison Officer, WA Pastoral Lands Board

Copy of letter from Brian Lloyd following his inspection of the Mowanjum PastoralLease on 5thJuly 2012


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Gibb River Road

Curtin Air Force Base

Derby

Figure5:MowanjumStation


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1.4

Cultural

Considerations

Ngarinyin, Worora and Wunambul have a historic and cultural association to country derivedfollowing their movement from their traditional lands and their settlement at Mowanjum inthe early 1960s. Mowanjum continues to shape and enrich their language, law and custom,

food, art, spirituality and identity. The Pastoral lease is not on the historic lands of theNgarinyin, Worora and Wunambul, but the Ngarinyin and Wunambul retain historic links withthe pastoral industry where many worked successfully in years gone by.

Activities and cultural practices undertaken include Junba (Traditionalceremonies/corroborees), rejuvenation of language, spiritual practices and traditional(ecological) knowledge through information sharing, oral histories and education (includingchildren, parents and Elders), and fishing, hunting and gathering of plants and animals,providing food, medicine and spiritual/cultural sustenance. There are no registered sacredsites on Mowanjum lands, however the Mowanjum community members use the lands forcultural business including womens and mens cultural business, education and learning for

the young people and for hunting and gathering.The cattle currently running on the property are an unmanaged socialcultural resource.While providing clear economic benefits through the direct sale of stock, the pastoralenterprise will also provide employment and training for community members withmanagement by MAC. Approximately 50 head are used as a food source by the communitymembers every year. MAC will be responsible for negotiating the allocation of fresh meat forceremonies and other special occasions with senior people ensuring that it is distributedequitably. Cattle are often used for ceremonial purposes, usually during Yuwinji (wet season)with beef being supplemented by other bush meats, including fish, kangaroo, emu, wildpig, bush turkey and goanna.

1.5

Current

Land

Uses

The land and natural resources of the property are used for a variety of cultural, social andeconomic purposes, which include hunting, fishing, camping, gathering bush tucker and bushmedicines, collecting woods and stones for tool making/artefact making, travelling,conducting ceremonies and teaching the younger generation language, place names andstories. The Mowanjum lands have not been used for any commercial purpose to fosterindigenous employment since the closure of the old Mowanjum community approximately 30years ago. This closure and failure to continue with development of Mowanjums pastorallease for culturally appropriate employment and training is associated with the deteriorationin the economic, social, cultural and health of the Community. The national press recently

documented the relationship between lack of employment opportunities and the increasingrate of suicides among young people (Skelton, 2012).

The purpose of the present plan with ILC and Westpac support is to reverse this trend atminimal cost to the Government.


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2 Proposal

2.1

Mission

Statement,

Vision

and

Objectives

Mission

Statement

Within 5 years, build a commercially viable pastoral business that will provide

employmentandtrainingopportunitiesforindigenouspeople,usingappropriateland

managementpractices to lookafter thecountryforfuturegenerationsandcultural

renewal.

Members of the Mowanjum community aspire to selfdetermination, selfsufficiency, andfinancial independence. MACs vision is a pastoral business that will provide employment andtraining for young people of the Mowanjum community to prepare them for work in thepastoral industry.

Further, MAC will ensure that business operations work handinhand with appropriate landmanagement practices to preserve the land for future generations.

Mainly working on horseback, Manager Jason Russ aims to train his team on how to look aftertheir horses and the cattle and be able to show that Aboriginal people can work and managetheir land effectively and responsibly.

2.2

Sources

of

Income

The immediate sources of potential income are the purchase and sale of fattened weaner cattleand rental from agistment.

Longer term, other sources of income include a breeding herd, plus hay and seed productionon the marine plains. Further potential paddock development to the north east betweenCurtin Airforce base and Gibb River road to increase carrying capacity.

2.2.1 SaleofCattle

To achieve profitability quickly, the focus of Mowanjum Pastoral will be purchase of weanersfor fattening for the live export trade out of Broome which is only 180km away. This requirestwo more paddocks, watering points, trap yards and a set of trucking yards for management of1,500 head of cattle.

Given the types of pasture growing at Mowanjum, attempting to fatten cattle on the currentpastures without significant supplementary feeding during the dry season would be verydifficult. Therefore the objective is to time the buying of steer weaners to maximise use of thewet season growth and marketing of animals before between April and October depending ontheir weight and state of the market.

To improve the potential income from sales of fattened cattle, improvements in pasturecombined with additional paddocks and watering points is planned. These will increase thecarrying capacity, such that the herd can be expanded towards 2,000 breeders and fatteningextended further into the dry season.

2.2.2 Agistment

Two hundred cattle are already on agistment, see Figure 6. It is estimated that up to 600 head

of cattle per year could be carried under agistment arrangements in the first year, generatingapproximately $1 per head per week. Mowanjums convenient access to the sealed Derby to


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Broome road makes such arrangements appealing to potential customers.

Agistment provides short term cash flow while Mowanjum builds two fully serviced paddockswith an ILC grant and Westpac overdraft facility to maximize short term profitability,employment and training opportunities.

Figure6:Cattleonagistmentandwarningnotice,July2012

2.3

Pastoral

Infrastructure

To enable increased stock of high quality to be carried, existing infrastructure needs to beimproved, additional construction undertaken, and improved fire management and animalhusbandry practices put in place.

The current 200 head of cattle will be sold off when conditions are right to make way for thenew herd of exportpreferred Bosindicuscattle.

Apart from recent minor improvements to the infrastructure, the majority of fencing andyards on the property have not been maintained for many years. It is a priority for theproperty to get artificial watering points in working order, repair and replace fencing, and

maintain the homestead yards and thus enable the cattle enterprise to expand from thecurrent four paddocks to seven.

2.3.1 PreviousILCInvestment

MAC invested $174,756 to complete capital works on Mowanjum pastoral leases in 2011 froman existing grant between ILC and WINYUDUWA Aboriginal Corporation who had a subleasearrangement with MAC. MAC cancelled the sublease agreement due to nonperformance andcompleted the work itself through a contracted with Jason Russ in 2011, who completedsuccessfully the following work with Trainees from TAFE:

Blue bush paddock fence & Nobbys Paddock fence

Reinstatement of bores in 3 paddocks

A new Trap Yard

A new bore

New fire breaks.

2.3.2 Fencing

Boundary fencing is now in good condition due to the 2011 ILC grant. A large amount offencing on the property still has to be erected to create two new paddocks and atrucking/drafting yard before the fattening weaner herd can be run.

2.3.3 WateringPoints

There are a number of bores and dams on the property, which are in variable condition. Theoperating water points are Ringo Dam, Bend Dam, Bluebush Dam and Five Mile Mill. Most of


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the station relies on natural sources of water, which are of a seasonal nature. Morebores, tanks and infrastructure are to be installed with the proposed ILC grant as shown inFigure 7: Russ Bore awaiting Solar pump to get water into Tank that supplies the trough (Fig6).

Figure7:RussBoreawaitingSolarpumptogetwaterintoTank

2.3.4 Stockyards

There is one small yard on the property at the Old Mowanjum site. To support development ofthe business, new stockyards at Five Mile for drafting and trucking on the all weather DerbyBroome highway are proposed with the ILC grant and Westpac ICAS overdraft facility whichprovide discounted interest rates.

2.3.5 PastureImprovements

Weed eradication activities must be carried out on an ongoing basis, involving treating theplants after the wet season, before they get a chance to set seed again, by means of manualremoval and spraying. The removed plants will be burned in controlled areas. Sucker growthalong fence lines is removed by hand.


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2.4

Capital

Works

Infrastructure investment on Mowanjum Pastoral in fencing, bores, yards, roads andfirebreaks and weaners to fatten, needed to bring the pastoral enterprise to profitabilitywithin 3 years is shown in Table 5: 2012/13 Investment Budget. First stage of the truckingyards are completed in 2012 to enable the first batch of weaners to be purchased fromSeptember 2012.

Funding is sourced from ILC as a $567,750 grant and from MAC with the assistance of a$500,000 Westpac ICAS overdraft facility for Capital and Weaners.

2012/13 Westpac ILC

1 Firebreaks $22,000 Machinery

2 ClearingMangoPaddock $16,500 Machinery

3 NewPaddockPindan $39,000 Materials&Labour

$91,000

Materials

&

Dozer

4 NewBore,Tank,Trough,Solar(PindanBore) $58,000 Materials

5 NewTrapYardPindan $13,750 Mat.&Lab.

6 NewTrapYardatRussBore(BlueBushPd) $13,750 Mat.&Lab. Materials

7 Solar,TankandTroughsat5mileYards $4,400 Dozer $34,500 Materials

8 Stage1NewTruckingYards $48,400 Materials,

Dozer

&

Labour

$39,000

Materials

9 BoreRoadsPindanPaddock $12,000 Dozer

10 NewTankatMango Materials

11 PurchaseSteerWeaners $100,000 Cattle

Totals

$157,800

$334,500

Table5:2012/13InvestmentBudget

NOTEfor ILC,WESTPACandMAC:

ILC funding is for materials to construct fencing, bores, troughs, trap yards and truckingyards. However to begin the weaner fattening enterprise in 2012 some essential capital workneeds to be completed during the current dry season. HoweverILCfunding willnotbeavailableuntilNovember2012. Therefore MAC will need to fund essential capital items($100,000) from WESTPAC funds to be offset later by ILC funding $100,000 of the Weanerpurchase (See item 11 in Table 5: 2012/13 Investment Budget).

To handle the new weaner fattening herd the funds will used for the new Pindan paddock(item 3) with water supply (Item 4) and the first stage of the trucking yards (Item 8) withwater supply( Item 7) will be completed.

This arrangement is to avoid the risk of MAC breaching its $500,000 overdraft limit agreementwith WESTPAC.


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In 2013/14 the proposed Capital works with ILC funding can occur normally during the dryseason and all weaner purchases made by MAC using the Westpac ICAS overdraft facility (item10 in Table 6: 2013/14 Investment Budget). Already nine TAFE trainees are enrolled andworking on Mowanjum Pastoral. Included in the ICL works plan is to begin construction of ashed for TAFE trainees at the Trucking Yards which in time will be used for instruction. This

ILC funding will be supplemented from other sources as they become available.

2013/14 Westpac ILC

1 NewCurtinPaddock $39,000 Labour $91,000 Materials&

Dozer

2 NewBore,Tank,Trough CurtinPaddock $58,000 Materials

3 NewTrapYardsCurtinPaddock $13,750 Labour $13,750 Materials

4 NewBoreRoads CurtinPaddock $14,500 Dozer

5 Stage2NewTruckingYards $52,750 Mat&Lab. Materials

6 Clearingforfirebreaks $13,500 Dozer

7 BigDam 5miledam $10,000 Dozer

8 TrapYardsRussBore CurtinPaddock $13,750 Labour $13,750 Materials

9 TAFETrainingCentreat5mileYards $18,500 Materials

Totals $277,050 $233,250

Table6:2013/14InvestmentBudget

In 2013/14 the trucking yards will be completed and Curtin paddock with infrastructure willbe completed for running an expanded Weaner Herd, to complement the paddocks on theMarine Plain being used for Agistment of cattle from Mt Barnett.

The priority is to establish the fattening program to create cash flow to fund ongoingimprovements that will enhance capacity to deliver training and increase the number of cattlethat can be carried.

2.4.1 FencingSpecifications

Mowanjum is close to the coast and salt content in rain is corrosive. Therefore galvanisedmaterial will be used according the specifications set by Main Roads WA. The Specificationsfor the fencing are:

2.5 mm heavy barbed galvanised wire

1.65cm galvanised pickets

100mm galvanised post and rails for ends.

7m spacing of pickets with 3 strands of wire.

Distances for fencing and fire breaks:

Pindan Paddock, 26 km fencing 52km of firebreaks

Curtin Paddock, 26 km fencing with 52km of firebreaks

Bore Paddock, 150km of firebreaks

2.5

Sources

of

Funding

2.5.1 IndigenousLandCorporation

Total funding of $567,750 for the above dry season infrastructure development is beingsought from ILC in 2012 and 2013. Delay in funding being available till November 2012 will


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require flexibility on some capital funding being made available for cattle purchase.

2.5.2 MowanjumAboriginalCorporation

MAC will contribute $500,000 towards cattle purchases and fattening operation through aWestpac ICAS overdraft. MAC will also contribute its present plant, equipment, workshop,

workforce, administration and accounting and the cost of insurances, Derby Shire rates andPastoral Lands Board rent and asset replacement (about $200,000 per year (Table 16, page37)) as part of maintaining the integrity of its Land resources for the longer term welfare ofthe Community. MAC will also use other cash reserves from other enterprises (Store, Graveland Interest) to stay within the WESTPAC overdraft limit.

2.5.3 WestpacIndigenousCapitalInvestmentScheme

MACs contribution for establishing the Weaner fattening enterprise will come from anoverdraft facility through the Westpac Indigenous Capital investment scheme. This facility hasbeen agreed on principle by WESTPAC Management (Denniss, 2012, private communication).

2.5.4 DerbyWorkforce

(a

business

of

MAC)

DWF will contribute safety clothing and equipment for the indigenous workers, plus a vehicleand fuel for trainees to get to the work sites. DWF will also provide lunches.

2.5.5 MowanjumDrivingAcademy(abusinessofMAC)

MDA will provide access to its two dual control cars for driving lessons for licensedinstructors. A drivers license it essentially mandatory in order for Trainees to be employable.

2.5.6 MowanjumCommunityResourceCentre(abusinessofMAC)

With funding from RDLs Royalties for Regions, Mowanjum CRC provides access to computerswith free access to Government Web Sites for Mowanjum Pastoral Trainees to undertaketheoretical driver training. Access will also be provided to computers and internet to facilitatework towards TAFE Certificate II in Business Administration and Rural Operations.

For Certificate II Rural Operations, a new module could be introduced on use of near realtimesatellite data for assessing stock carrying capacity (Vegetation Watch, 2012) and forprescribed burning for fire management (FireWatch, 2012), with training sourced fromSatellite Remote Sensing Services, Landgate.

The new module could provide the basis for future exploration of the use of savannah burningfor gaining Carbon Credits (See http://www.ilc.gov.au/site/page.cfm?u=298). This potentialexists at Mowanjum and on other lands belonging to the Mowanjum people on the Mitchell

Plateau.2.5.7 KingSoundGravel(ajointventurewithMAC)

King Sound Gravel provides an ancillary source of income to ensure MACs financial viability inthe event of a downturn in the cattle export market.

2.6

Stakeholders

2.6.1 MowanjumAboriginalCorporation(MAC)

MAC was officially incorporated under the provision of the Association Act 1976, and wasofficially granted its Certificate of Incorporation and Rules of Association in 1981 (MOW,

June 2006). It now operates under the Aboriginal and Torres Strait Islander Act 2006 (CATSIAct).


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MAC controls various tracts of land, including a pastoral lease, unencumbered freehold land,crown land grazing licence and reserve. One of MACs aims is to support the development ofcommunity members through providing opportunities of mainstream employment and thesupport of income generating projects.

2.6.2 WADepartmentofAgricultureandFoodWA(DAFWA)

DAFWA assists the State's Agriculture be sustainable and profitable, with a clear focus onexportled growth. Kimberley Indigenous Management Support Service (KIMMS) is aninitiative funded by DAFWA and ILC. They will provide updated maps of the lease.

2.6.3 IndigenousLandCorporation(ILC)

ILC is an Australian Government authority that assists Indigenous Australians acquire landand manage Indigenousheld land in a sustainable way to provide cultural, social,economic and/or environmental benefits for themselves and future generations.

2.6.4 IndigenousCapitalAssistanceScheme(ICAS)Westpac

ICAS is a partnership with the Department of Education, Employment and WorkplaceRelations to offer eligible indigenous businesses financial and advisory support. The schemeprovides business advisory and mentoring services to assist in the development of a business.

ICAS provides finance from $20,000 to $500,000 with interest rates reduced from the officialrate by 6% units, 4.5% units and 2.5% units for the first three years.

MAC has freehold assets with an estimated value of over $5 million to secure Westpac ICASfinance (Denniss, 2012).

2.6.5 TechnicalandFurtherEducation(TAFE)

TAFE in Derby will provide training courses and certification.

2.6.6 EmamaNguduAboriginalCorporation(ENAC)

ENAC in Derby is a training and CDEP provider.

2.6.7 PastoralLandsBoard

The PLB establishes grazing lease requirements of Crown Land and will be enacting the 2015review (Brian Lloyd, 2012, private communication and letter to MAC on page14).

2.6.8 RussContractingPtyLtd

Russ Contracting Pty Ltd will be contracted to run the cattle enterprise covering all operating

costs at a cost of $110 per head compared with $120 per head for large standalone KimberleyPastoral Leases (DAFWA, 2009). Jason Russ has a significant mustering and maintenancecontract with Christmas Creek with 14,000 head of cattle and has been approached to providemustering for Mt Barnett. For these contracts Jason Russ employs Mowanjum Trainees as partof his contract team.

Existing equipment of Russ Contracting is shown in Figure 8, Figure 9, Figure 10 and Figure11.


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Figure8:RussContractingfull-servicecontractbusinessandbullbuggy

Figure9:LivestockTruckandstockcampwithfueltrailer

Figure10:Saddleryandtackleforhorsesanddozer

Figure11:Weldingtrailerforbuildingyards


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2.6.9 DepartmentofCorrectiveServicesWA

An MOU is being negotiated by Steve Austin, CEO to provide training services to the newDerby Prison who will also be a source of TAFE trainees.

2.7 BusinessStructure &Management

Mowanjum Pastoral will be run as a business enterprise of MAC under the direction of CEOSteve Austin and the Mowanjum Council. Trusts are being investigated to isolate each fromthe collapse of any one enterprise.

Management will be contracted to Russ Contracting Pty Ltd, for a fee of $110/head per year oflivestock purchased for weaner fattening by Mowanjum Pastoral. Contract will include alllivestock operating costs. All administrative services will be provided by MAC who alreadypay the insurance, Derby Shire rates and Pastoral Board rent and asset replacementassociated with the pastoral lease.

2.7.1 FutureAdministrativeStructureandSuccessionPlan

Mowanjum Pastoral increases MACs business enterprises and number of government grantsand training being undertaken requires an Administrative Officer for efficient management ofall these enterprises, grants and community Services (Morgan, 2012).

The administrative structure recommended is:

1. Board2. CEOBusiness Manager (Steve Austin)3. Senior Administrative Officer (new position)4. Senior Financial Officer (Nardia Gerrard)5. Junior Financial Officer (new position) for offsite business enterprises

These positions and other administrative costs would be funded by a 10% administrative levyon all grants, business enterprises and community services.

2.7.2 CorporateStructure

The proposed corporate structure incorporating Mowanjum Pastoral is depicted in Figure 12:Mowanjum Coprorate Structure was recommended by Peter Marin in a recent review of MACsbusiness activities (Marin, 2012) for establishing a joint venture for fuel distribution. Theproposed structure minimises the financial risk of any one enterprise compromising MACsfinancial viability. For Mowanjum Pastoral this would minimise the risk of MACs Directorscompromising its financial viability. The later is achieved by putting MAC at arms length

through a separate (Pty Ltd) governance structure and appointment of independent Directorswith a commercial focus. Ultimately, MAC is the parent organisation but within the structureprofits can be retained within Mowanjum Pastoral for further development of the pastoralenterprise or distributed to its shareholder which is Mowanjum Enterprises.

This structure is of particular relevance to the WA Governments 2015 Pastoral Lease reviewwhere one of the criteria will be the soundness and stability of the Governance structure toensure compliance with the terms of the lease (Brian Lloyd, 2012 Personal Communication).PLBs preference is for a sublease, but such an arrangement could compromise MACsobjective of providing employment and training. Therefore the proposed corporate structureshould meet the objectives of PLB and MAC.


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Figure12:MowanjumCoprorateStructure

2.7.3 Training

Per Table 7: Training Plan, Mowanjum Pastoral will train its employees and ensure training is

provided on an ongoing basis, to maintain a high level of job performance and employability.

Table7:TrainingPlan

Course/CertificateName Trainingprovider NumberofParticipants

Yr1 Yr2 Yr3 Total

CertificateIIinRuralOperations TAFE 10 10 10 30

GovernanceTraining OIC 5 5 10

BusinessAdministration ENAC 4 4 5 13

AutomotiveServicing ENAC 5 6 7 18

DriversLicense Mowanjum Driving

Academy

7 7 6 20

Total 31 32 28 91

MowanjumAboriginalCorporation

(Public Benevolent Institution)

Mowanjum Enterprises Pty Ltd

(Trustee)

Mowanjum Enterprises

Charitable Trust

MowanjumPastoralCompanyPtyLtd

Community Level

Already in place

Enterprise Level

Currently being implemented

Business Level

To be implemented


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3 SWOTAnalysis

3.1.1 Strengths

High nutrition value in native grass on Mowanjum to be further improved withintroduced grass and legumes. Sowing to occur with a seeder attached to the dozerused to clear fence lines and expose bare soil. Gazing stock then distribute the seedthroughout via their dung.

High quality stock water and potable water. To be further improved with buffel grassand legumes.

No surface water, meaning that mustering costs are cut by 60%70%, as the cattle selfmuster into trapped areas (Yards) around water points.

The property can easily be accessed throughout the year (on horseback during the wetseason), meaning that cattle can be mustered early in the year, when they are at theirbest value. Other Kimberley stations cannot muster and sell cattle until much later inthe year, when the cattle lose weight and therefore value.

Close proximity to Mowanjum Community, which allows staff to arrive at work daily,rather than have to camp on the property.

Steve Austin, CEO, has good business experience in the trucking industry and withmanaging other Aboriginal Corporations.

Russ Contracting Pty Ltd has a mustering and maintenance contract of 10 weeks per

year with Christmas Creek which runs 14,000 head on over 200,000ha. Using Russ

Contracting, Christmas Creeks average livestock cost is $70/head. This compares with

$120/head for a fully serviced stand alone pastoral lease in the Kimberley (DAFWA,

2009).

Mowanjum community members are highly motivated to be involved in the business,

evidenced by the number of people who engaged with the TAFE training to complete

the work for the IDL grant in 2011 and the nine who are engaged in the current work

(Figure 3).

3.1.2 WeaknessesandMitigations

Lack of capital for infrastructure and cattle to realize productive potential.

o Grant from ILC and finance from Westpac ICAS.

Mowanjum property is relatively small which will restrict business growth due tolimited carrying capacity, but its strategic position permits more efficient operations.

o Contracting and MACs other businesses minimise fixed costs.

Profitability of grazing systems are sensitive to stocking rate

o Investment in more paddocks, bores, trap yards and pasture improvements tomaximize carrying capacity.

Lease will be run directly by MAC to minimize overhead costs, to capitalize on itsfreehold assets to access seasonal finance and to provide diversification to minimiserisk.


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Lack of Management expertise contract the running of trading cattle enterprise toRuss Contracting Pty Ltd principle Jason Russ.

3.1.3 Opportunities

To provide meaningful work for Mowanjum people and training and skills to become

employable in Kimberley industry.

Through intensive grazing provide a service to other stations that require their cattleto be fattened before sale.

To attract funding for training Rural Traineeships

Become Derby regional TAFE training centre for indigenous people to enter into fulltime employment in the pastoral industry.

Develop a new administrative structure for MAC with a Senior Administrative Officerand basis for future succession.

Include in the existing primary and secondary education curriculum the effective use ofland incorporating a Historic centre for the involvement of Aboriginal people in theKimberley pastoral industry

3.1.4 ThreatsandMitigations

Low cattle prices due to market fluctuations

o Sales projections use average cattle prices over the past few years, todemonstrate financial viability even in an unfavourable market

o Weight gains of cattle are modelled as below average.

o The market will be monitored to ensure planning is in place to counter lowprices.

Politics and jealousy among Mowanjum groups

o Maintain a professional approach; employ workers from outside Mowanjum ifnecessary.

Mowanjum people thinking they own the station, so trespass for killers whenever theylike

o Communicate with Mowanjum Council to ensure the agreement is honoured bythe community members, enforce trespassing policy, and provide the agreed

number of killers per year. Vandalism through cutting fences and lighting fires

o Again work with the Mowanjum Council as above.

o Develop community activities for young people such as the CommunityResource Centre and sports activities to reinforce positive values and respect forproperty belonging to others.

Level of commitment to training displayed by employees

o Talk to them to find out what problems there may be, make the training fun andinteresting to ensure high level of participation.

Contracting Livestock Management


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Success of Russ Contracting Pty Ltd demonstrates Jasons competence in cattle,business and Aboriginal management, and commitment to development ofMowanjums lease into a profitable cattle and Indigenous training enterprise.

Jason Russ is an Indigenous pastoralist contractor keen to pass on his extensive skillsin a collaborative relationship with Mowanjum and TAFE. His pastoral contractingbusiness provides a unique opportunity for Aboriginal people to learn his skills. He isalready as source of contact and employer for future employment of trainees.

Proximity to Derby makes Mowanjum Pastoral an attractive working proposition forJason Russ compared to larger more remote pastoral leases.

Jason Russ (8th July, 2012) has quoted $110 per head per year for running MowanjumPastoral.

o The contract would cover all livestock costs including tags, licks, vet, trucking,

casual labour, superannuation, maintenance and mustering

o

MAC would be responsible for costs of administration, insurance, rates, lease,interests on loans and replacement of capital assets

Benefits of a longterm SubContract business model for Management of MowanjumPastoral are:

o Provides stability and guards against parochialism and channelling of resources

in inappropriate ways by the Community.

o Goes part way towards meeting the Pastoral Lands Boards preferred sub

leasing business model. The is Contract model is a step towards a sublease that

should meet the Pastoral Boards Lease review requirement of a sustainable

business model.o Reduces the livestock cost/head to $110/head (when fully stocked) which is

less than the typical $120/head for a large standalone station (DAFWA, 2009).

o Incentive as contractors income rises with number of stock fattened

This contractual business model conforms with the central importance of Aboriginal landdevelopment and control, essential for providing a sustainable economic base for Aboriginaleconomic independence as an alternative to passive welfare (Gary Folley, 2011).

The weaner trading model assumes weaners are purchased at $295 landed and are sold for$507 after transport costs giving a net return per fattened weaner of $212. Of this margin theContractor receives $110 for the running costs and MAC receives $100 to cover interest on theWESTPAC overdraft and other fixed costs. The result is a profitable trading venture and longerterm outcome.


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4 CompetitiveAnalysis

4.1

Competitors

Competition will come mainly from local Kimberley stations, primarily supplying cattle for thelive export market in Broome.

These same stations are also a source of income from sale of agistment, unbranded stock,lease of yards and source of stock to purchase to fatten.

4.2 CompetitiveAdvantages

High productivity of coastal flood plains, suitable for successful cattle production andfattening own stock and stock from neighbouring properties. Suitable for pastureimprovement with legumes and more productive species using grazing cattle as seeddistributors.

High quality of underground water, ensuring ongoing supply of freshwater.

Water accessibility (10 below the surface) the depth of the water allows forvery cost effective methods of accessing water. Also the possibility of developingirrigated pasture for fattening in the dry season and for forage and seed production.

There is no permanent surface water on Mowanjum, which means that cattle willnaturally come in to drink from available water points (bores) that will be fenced(cattle traps). Therefore, the cattle will muster themselves, resulting in easiermanagement and reduced mustering costs.

The property has the ability to move cattle quickly off the property, which makesroom for other, younger cows, and therefore increases the turn off rate on theproperty and the level of sales, while maintaining the carrying capacity over the year.

The cattles peak condition is in the wet season, and most other properties are unable totransport them off the property in the wet, missing the high prices of the early market.The majority of cattle sold out of the Kimberley region are not sold in prime condition,due to wet season access problems. Mowanjum landscape and access to the Derbyhighway and flood plain soils means that it can muster from March and sell cattle inprime condition, achieving significantly higher income and turnover of stock.

Close proximity to the Derby highway, high water quality and feed availability present

an opportunity to develop intensive grazing to allow Mowanjum to increase numbersby almost 50% within a short period of time. Providing a service to otherproperties that require their stock to be fattened is a lucrative option forMowanjum. It can then decide whether to purchase the stock and finish them off(fatten them before shipping) or sell agistment.


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5 FinancialAnalysis

5.1

Parameters

Parameters are based, on Cattle Invest (DAFWA, 2009), ILCs Analyses using the DYNAMAMultiyear Herd model (Brake, 2012) and ILCs own running costs (ILC, 2012).

The modelling assumes that:

ILC Board Meeting in October 2012 approves the $567,250 according to the plan(Section 2.2) and notifies WESTPAC.

WESTPAC on receipt of ILC Board advice makes available to MAC the $500,000 ICASoverdraft facility to enable essential Capital Improvement in the 2012 Dry Season;

ILC funding becomes available in November 2012.

ModelParameter Value

WeanerSteerscost/head $265

Freightincost/head $30

Freightoutcost/head $18

WeanerssoldApriltoOctoberat300kgfor$1.75/kg $525

Survivalrate(deathrateof10%peryear) 90%

Numberofunmanagedcattlesoldperyear 60

UnmanagedCattle(Cleanskinsfromneighbouringproperty) 200

Killerscomefromunmanagedcattle 50

Weanerspurchased2012/13 1000





AgistedStock2012/13 600





Contractcost

per

head

for

livestock

purchased

$110

Table8:ModelParameters

Type CattleUnits

CowsandBulls 1.00

Calves 0.34

HeiferandSteers 0.80

Table9:CattleUnits


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MowanjumPastoralBusinessPlan

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5.2

Herd

Development

2012

2016

2012/13 2013/14 2014/15 2015/1

Numbers Dry Wet Dry Wet Dry Wet Dry

UnmanagedCattle 200 140 126 66 59

0

Weanersboughttofatten 1000 900 1100 990 1200

1080 1300

AgistedCattle 600 600 500 500 400

400 300

TotalCattleNumbers 1800 1640 1726 1556 1659 1480 1600

EquivalentCattleUnits 1600 1460 1506 1358 1419 1264 1340

Table10:HerdDevelopmentforWeanerFatteningEnterprise

5.3

Cattle

Purchases

and

Sales

2012/13 2013/14 2014/15 2015/16 2016

Purchases

plus

freight

in

Weanersforfattening 295,000 324,500 354,000 383,500 41

Total

295,000

324,500

354,000

383,500

41

Salesplusfreightout

Agistment 31,200 26,000 20,800 15,600 1

UnmanagedCattle 34,920

34,920

34,920

FattenedWeaners 456,300 501,930 547,560 593,190 63

Total

522,420

562,850

603,280

608,790

64

GrossProfit

227,420 238,350 249,280 225,290 23

CumulativeProfit/Loss 227,420

465,770

715,050

940,340

1,17

Table11:CattlePurchasesandSalesincludingfreightcost


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5.4

Gross

Margin

Analysis

2012/13 2013/14 2014/15 201

GrossProfit 227,420 238,350

249,280

Directcostsofrunningcattle

CapitalDevelopment

(WESTPAC)

157,800 119,250

Contractor'sfee(8monthsin2012/13) 73,333 121,000 132,000

Interestonoverdraft 8,523 25,414

12,390

Totaldirectcosts 239,656 265,664

144,390

GrossMargin (12,236) (27,314)

104,890

CumulativeGrossMargin (12,236) (39,550) 65,340

Table12:GrossMarginAnalysisofWeanerFatteningEnterprise

NotesonTable12:GrossMarginAnalysis:

Cattle will be sold between April and October each year depending on weight and market determined by the purchase and running costs of weaners in one year and the sale of weaners in

ILC funding of $100,000 of cattle in 2012, is necessitated by the need to keep the Westpac because Westpac ICAS funds for vital capital improvements necessary before the weaner fattlease in 2012.

Interest rates calculated on 50% of peak overdraft above.


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5.5

Westpac

Overdraft

Analysis

Assuming ILC Board approval August 2012, capital development will begin in September 2012 and wea

2012/13

OctMar

2013

AprSept

2013/14

OctMar

2014

AprSept

2014/15

OctMar

2015

AprSept

2015/16

OctMar

PurchaseofWeaners (195,000) (324,500) (354,000) (383,500

SaleofWeaners 456,300 501,930 547,560

OtherCattleIncome 66,120 60,920 55,720 15,600

GrossProfitCattle (128,880) 456,300 (263,580) 501,930 (298,280) 547,560 (367,900

LessCosts

InlieuofILCCattle

purchase(100,000)

Contract

Fee (27,500) (45,833) (40,333) (80,667) (44,000) (88,000) (47,667

CapitalWorks (78,900) (78,900) (59,625) (59,625)

Interest (8,523) (25,414) (12,390) (13,423

TotalCosts (214,923) (124,733) (125,372) (140,292) (56,390) (88,000) (61,089

GrossMargin (343,803) 331,567 (388,952) 361,638 (354,670) 459,560 (428,989

Peak Overdraft (343,803) (12,236) (401,188) (39,550) (394,220) 65,340 (363,649

Table13:

Westpac

Overdraft

Projection

The conclusions from Table 13: Westpac Overdraft is that the Westpac overdraft goes to zero at eweaners is sold. After the ICAS discount ends, interest is calculated at 7% for a 6 month period.


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5.6

Assumptions

Compared with a 320,000ha commercial standalone Kimberley Pastoral Lease(DAFWA, 2009) where operating costs are $120 per head and on ILC properties costs

are $128/head. A cost of $110 is achieved here for a 55,000ha lease through economiesof scale from contacting herd management to Russ Contracting Pty Ltd and MACcovering Landholding costs in its present budget (Table 7.2) from revenue generatedfrom training, sale of gravel, interest on surplus funds and administration charges onGovernment grants.

The weaner trading model assumes weaners are purchased at $295 landed and aresold for $507 after transport giving a net return per fattened weaner of $212. Of thismargin the Contractor receives $110 for the running costs and MAC receives $100 tocover interest on the WESTPAC overdraft and other fixed costs. The result is aprofitable trading venture and longer term outcome.

ILC provides the long term Capital investment for the fixed assets needed to bringMowanjum Pastoral to full productive and commercial capacity for employment andtraining community members in pastoral management and associated skills.

Cumulative Gain/Loss is an estimate of the Westpac ICAS overdraft facility needed byMAC for costs not covered from other revenue sources.

Staff Manager full time with 4 casual workers and up to 10 employed as trainees.Others employed at times of mustering etc.

Negative Gross Margin covered by Westpac ICAS overdraft facility with interest rates at2%, 4.5% and 6.5% in the 3rd and 7% in subsequent years.

Russ Contracting Pty Ltd quote is $110/head which will cover all livestock costs (Tags,Vet, Licks, Pregnancy Testing, labour, superannuation, provision of vehicles andmachinery) needed to run the herd.

Contract business model:

o Provides stability and guards against parochialism and channelling of resources

into inappropriate ways by the Community.

o Goes part way towards meeting the Pastoral Lands Boards preferred sub

leasing business model for the Pastoral Lease review in 2015.

o

Achieves a livestock cost/hd of $110/head which compares with the $120/headassumed by DAFWA (2009) and the $128/head recorded by ILC for 2010/11

(ILC, 2012).

o Materially affects the predicted economic outcome by providing control over

future costs by sharing the risks with the contractor.


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6 ProjectedImpactofProposalonMACsFinancialPosition

While the positive impacts on the Mowanjum Community through skill development,employment and pride of ownership are clear, the Mowanjum Pastoral proposal must not

negatively impact MAC from a financial perspective. Conversely within 5 years it must providea profit to funds to expand the business and for other community development activities.

The following analysis shows that the proposal poses minimal risk to MACs ongoing viability.Indeed, Mowanjum Pastoral provides diversification of MACs income sources away fromsolely government sources and begins a path to a selfsustaining future.

All figures related to Mowanjum Pastoral are adapted from MACs ILC application (April2012).

Table 14 shows the consolidated income of MAC including Mowanjum Pastoral, Table 15shows the consolidated expenses of MAC including Mowanjum Pastoral and Table 16 theconsolidated surplus/deficit.

IncomeSources 2012/13 2013/14 2014/15

FaHCSIA 175,433 177,187 178,958

HomeandCommunityCare 169,887 171,586 188,744

DepartmentofHealth 98,220 108,042 118,846

EmamaNguda 65,000 65,000 65,000

DeptRegionalDevelopmentand

Lands(CRC)

100,000 100,000

100,000

DepartmentofHousinggrants 51,305 53,870 56,563

MAC'sCommunityBuildingTeam 790,610 802,840 842,982

DerbyWorkForce 100,000

MowanjumCommunityStore 533,416 560,086 588,091

Elect/Utilities/RentCommunity

Contrib.614,514 645,239 677,501

WorkshopSales 20,000 21,000 22,000

BankInterest 26,000 26,000 26,000

SalesFromGravelPit 30,000 30,000 30,000

MowanjumPastoralIncome

CattleSales,agistment 522,420 562,850 603,280

ILCgrant 334,500 233,250

TOTALINCOME $3,531,305 $3,556,950 $3,597,965

Table14:MACProjectedIncome2012-2015(w/MowanjumPastoral)


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Expenses 2012/13 2013/14 2014/15

Landholdingcosts

Rates 25,000 30,000 45,000

Insurance

44,000 49,000

65,000ReplacementofAssets 100,000 110,000 120,000

PastoralLandsBoardlease 10,000 12,000 15,000

TotalLandholdingcosts 179,000 201,000 245,000

Operatingcosts

Superannuation 100,000 120,550 130,990

W/Comp 6,800 7,500 9,500

M/Vehicle 14,000 14,500 25,000

Rego 5,200 5,800 9,000

Power/Water 241,000 265,000 290,000

Wagesex.Project 1,800,000 1,850,000 2,150,000

TotalOperationcosts 2,167,000 2,263,350 2,614,490

Projectcosts

CattlePurchases($100,000fromILC)$295,000 $324,500 $354,000

DirectCosts$239,656 $265,664 $144,390

Capital(WESTPAC)$157,800 $119,250

ILC grant($100,000usedforcattle)$234,500 $233,250

Totalproject

costs

$926,956 $942,664 $498,390

TOTALEXPENSES$3,272,956 $3,407,014 $3,357,880

Table15:MACProjectedExpenditure2012-2015(w/MowanjumPastoral)

Surplus/Deficit 2012/13 2013/14 2014/15

TotalIncome $3,531,305 $3,556,950 $3,597,965

TotalExpenses

$3,272,956 $3,407,014

$3,357,880

Surplus $258,349 $149,936 $240,085

Table16:MACProjectedSurplus/Deficit2012-2015(w/MowanjumPastoral)

These figures are based on those presented in the original ILC application by Steve Austin,adjusted for inflation. Surplus funds are the carryover amount of Government grants whichare invested to earn interest. These funds are not available for investment in MowanjumPastoral.


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6.1

Discussion

of

Financial

Analysis

Mowanjums livestock operating cost of $110 per head compares with a $120 per LSUcommercial standalone Kimberley Pastoral Property of 300,000 ha (DAFWA, 2009)and the $128/head for ILC herds (ILC, 2012). The lower costs of Mowanjum Pastoral

results from economies of scale through subcontracting to Russ Contracting Pty Ltd,running a weaner fattening enterprise and MAC covering the fixed costs as part of itsLand Holding costs (Section 7.2).

MACs Land holding costs are funded from income derived from interest, sale of gravel,an administrative charge against all grants, the store, Arts Centre and the communitieschuck in levy (Amenities Levy).

The assumption of $525/head selling price for fattened cattle compares with$587/head used by DAFWA in their 2009 investment analysis for a much largerKimberley property without the strategic advantages of Mowanjums location,intensive quality management, good river flat pastures and ability to sell stock before

end of March. Stock to be based on Bos

Indicusrequired for the Southeast Asian market.

At least $1.0 million of investment in infrastructure and cattle is needed to bringMowanjum Pastorals stock carrying capacity to the level needed for profitability,training and to deliver a social dividend.

Early establishment of cash flow by building stocking rate of the cattle herd is vital toachieving profitability in year 3 and meeting Westpacs overdraft criteria.

If the proposed investments are made in 2012/13 and 2013/14, Mowanjum Pastoralcan break even by 2014 and be in profit in 2015 with an estimated return of over 10%per annum on the $1.0m investment

From an indigenous perspective the $567,750 investment by ILC represents $5,000per Indigenous person trained to employment ready status resulting in a potentialsaving to Government of over $500,000 in welfare payments alone a 100:1 return.

The Westpac ICAS overdraft is secured against MACs freehold assets in Derby.WESTPAC has completed valuations and security is adequate for the overdraft facility.

Good management and tight financial control are essential to achieving the proposedoutcomes. A 6 month rolling budget review by the CEO and Manager to coincide withthe wet and dry seasons is recommended.

Mowanjum Pastoral by becoming a profitable investment creates the expertise and

financial capacity to expand into other businesses using its strategic position on theDerbyBroome Highway for a Caravan Park and Service Station. Also with closeproximity to the new Derby Prison, Mowanjum is well placed to provide DriverTraining and licensing through their Driving Academy and other training services.

MAC is currently negotiating a Joint Venture Fuel distribution Business with LibertyFuels and the Dambinamgari Aboriginal Corporation to further enhance its financialposition.


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7 References

Boab, 2012. On the Boab Network volunteer organisation:

http://www.boabnetwork.org

CRC, 2012. On the Mowanjum Community Resource Centre:

http://www.mowanjum.crc.net.au/

DAFWA, 2009. Cattle Invest: A business case for investment in the Northern WesternAustralian pastoral cattle industry.

http://agfood.agric.wa.gov.au/LinkClick.aspx?fileticket=64eptfsdxaY%3D&tabid=109

Denniss, A, (2012). Westpac Business Banking Manager: Commercial and Agribusiness WA.Valuation of MACs freehold properties. Meeting in Derby, 12thJuly 2012.

Folley G., 2011, paper presented at Melbourne International Arts Festival, quotation page 21Clare Land, Politics of Solidarity with Indigenous Struggle (Ph.D. thesis, Deacon University)

Jeffery, 2007. Michael Jeffery, Beef Research Officer Northern Rangelands, Department ofAgriculture and Food (DAF) Western Australia, Kimberley beef industry profile, Derby WA.Referenced from Winyuduwa Business Plan V1, Bluestone Solutions.

Marin, P. 2012, Recommended Mowanjum Corporate Structure. MLCS Corporate Pty. Ltd.

Morgan, 2012. P. Morgan, Mowanjum Aboriginal Corporation Strategic Plan 201222.Betterlink Group: Business Consultancy and Training Services. Suite 17, 133 Kewdale Road,Kewdale WA 6105.

Mowanjum Community, 2007. Mowanjum Station Draft Property Plan, Mowanjum Derby,WA. Referenced from Winyuduwa Business Plan V1. With assistance from KimberleyIndigenous Management Support Service (KIMSS), an initiative funded by DAFWA and ILC.

Mowanjum Aboriginal Corporation, 2012. Application for 2012 Land Management Propertybased Projects. Mowanjums application from Steve Austin, MAC CEO. April 2012.

ORAC, 2012, Mowanjum Aboriginal Corporations Governance and Financial records at theOffice of the Registrar of Aboriginal Corporations:

http://www.orac.gov.au/document.aspx?concernID=100090

ILC, 2012. Actions/Outcomes Mowanjum Field Workshop, Wednesday 13thJune 2012. From

Steve Austin, MAC CEO via Kira Meadus, ILC.ILC, Annual Report 2010/11 Table 15 Business Performance 2010/2011, Page 91

Shaw, 2012. Private communications from Russell Shaw, WA Department of Agriculture andFood.

VegetationWatch, 2012:

http://www.landgate.wa.gov.au/corporate.nsf/web/Vegetation+Watch

FireWatch, 2012:

http://firewatch.landgate.wa.gov.au

Skelton, R. 2012: Sydney Morning Herald and Western Australian articles, April 2012.


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AppendixA DraftContractManagementAgreement

The following is a draft agreement between MAC and Russ Contracting Pty Ltd to manage thelivestock operations of Mowanjum Pastoral. The insurance component was signed on March

12, 2012 to underline the commitment of the parties to further consultation and legal adviceto finalise this agreement if the proposed funding becomes available.

BETWEEN: Mr Jason Russ (THE MANAGER), PO Box 1129, Derby 6728

AND: Mowanjum Aboriginal Corporation (MAC), Gibb River Road, Derby WA

2. NATURE OF AGREEMENT

The Mowanjum Aboriginal Corporation agrees to contract The Manager at a rate of $110 per animal per year foreach animal purchased and then fattened as part of MACs herd. These rates are to coverall livestock costs (tags,vet, licks, vaccination, pregnancy testing, labour, superannuation, provision of vehicles, horses, tackle andmachinery) from the time the cattle are delivered to the lease to the time they are finally removed.

When MAC herd is established and projections of purchases and sales each year are worked out as per theMowanjum Pastoral business plan there will be a 5% bonus paid to the manager for the amount that the GrossProfit (Sale price minus Purchase Cost inc. Transportation costs) of the Cattle Trading Account exceeds theprojections set out in Table 11 of the Mowanjum Pastoral business plan.

The Manager will comply at all times with the directions of the CEO, Mowanjum Aboriginal Corporation andPastoral Lands Board as provided by the board its agents, either in Range Condition Reports or any othercorrespondence pertaining to rangeland management and the management and welfare of stock.

This agreement does not allow the Manager to otherwise sublease any portion of this pastoral lease.

The agreement does not allow the Mowanjum Aboriginal Corporation to further sublease or agist any portion ofthe Mowanjum pastoral lease without written approval of the Manager.

The agreement does not allow the Manager to construct or have constructed any dwelling on the lease withoutthe written approval of the Mowanjum Aboriginal Corporation and the Pastoral Lands Board.

The Manager shall apply through the Mowanjum Aboriginal Corporation to receive and spend grants of moneyfor the purpose of developing the infrastructure of the Mowanjum pastoral lease from the Government of theCommonwealth or of the State or other sources. Mowanjum Aboriginal Corporation will be the owner of allcattle. The Manager may run his own horses on the pastoral lease for the purposes of managing the livestock.

The Manager will not carry out any activities that are contrary to the Rules and Objects as described in theMowanjum Aboriginal Corporations Constitution.

Where and when applicable the Manager will work with the Mowanjum Aboriginal Corporation work programs,specifically the Community Development Employment Program, to provide work and training options for themembers of the Mowanjum Aboriginal Corporation and the Mowanjum Aboriginal Corporation.

All rates, taxes and pastoral lease fees associated with the Mowanjum Pastoral lease are to be the soleresponsibility of the Mowanjum Aboriginal Corporation.

3. FINANCIAL AND ADMINISTRATIVE MANAGEMENT

All financial management, accounting and auditing services will be done by the Mowanjum AboriginalCorporations.

Mowanjum Aboriginal Corporation will maintain the Bank Account and provide necessary security for any bankloans secured for the operation of Mowanjum Pastoral.

Mowanjum Aboriginal Corporation will be the sole applicant for all accounts, grants and loans required for theoperation of Mowanjum Pastoral.

3. INFRASTRUCTURE DEVELOPMENT

The Manager agrees to build or reinstate at least five

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