Yumbah Aquaculture to invest millions into Kangaroo Island operations

Yumbah Aquaculture Kangaroo Island general manager Dave Connell is excited about the opportunity to expand his operation.
Yumbah Aquaculture Kangaroo Island general manager Dave Connell is excited about the opportunity to expand his operation.

Yumbah Aquaculture has cautiously lifted an investment freeze over its Kangaroo Island abalone farm.

The company says it is confident there is now no substance to the business case for a 650-metre timber export wharf less than 200 metres from its Smith Bay operation.

Kangaroo Island Plantation Timbers in an announcement to the Australian Stock Exchange however said it was committed to timber harvesting and its Smith Bay port.

Yumbah's board has agreed to immediately unlock an initial $1 million capital investment for Yumbah KI based on two convictions, said company director, Anthony Hall.

"First, KI post-fires needs confidence from genuine - not imagined or speculated - and immediate business investment to support the economy, jobs and skills. Yumbah can do that, starting immediately," he said.

"Second, Kangaroo Island Plantation Timbers has made it clear that KI won't need a timber wharf for perhaps 20 years, and only then if its plantations are replanted. So the risk that has paralysed our investment plans for Smith Bay has abated.

"Like all KI residents we mourn the damage and loss resulting from the fires. However, Yumbah cannot see how Kangaroo Island Plantation Timbers can finance, build or operate its KI Seaport concept after the loss of its commercial plantations.

"Objectively, the claimed KI Seaport business case no longer stacks up."

Work at Yumbah's KI abalone farm.

Work at Yumbah's KI abalone farm.

Yumbah's initial $1 million investment will see repairs and upgrades of Smith Bay infrastructure, including further fire prevention works and increased integration of assets like water storages into Country Fire Service operational plans.

But any investment beyond that remains parked until the KI Seaport threat is formally removed.

"Yumbah's farm at Smith Bay has been a part of KI's economy for 30 years. We want to stay, to invest and to grow," Mr Hall said.

"If the KI Seaport proposal is taken off the table, Yumbah can contemplate a further $12 million in infrastructure, jobs and skills on KI, for KI."

That includes a $3 million expansion to lift abalone production from 150 to 250 tonnes a year, providing 50 new skilled jobs. A third phase can extend to a $9 million aquaculture centre of excellence at Smith Bay, concentrating on research, education and tourism.

"An early 'no'to a KI Seaport at Smith Bay means an early, emphatic 'yes' for Yumbah's investment," Mr Hall said.

KIPT shares remain voluntarily suspended from trading on the Australian Securities Exchange.

The company released a statement to the ASX on January 29 confirming 90 per cent of its tree crop had suffered significant canopy fire.

KIPT made another announcement on February 11 stating it had received a $10 million pay out from its insurer, with the balance of its claim being assessed.

"When the tree crops of independent growers are included, this means that approximately 15,000 ha of plantations will need to be felled in order to return the land to production," the statement reads.

"The task is urgent, as timber quality deteriorates with time, even when stockpiled under ideal conditions.

"Moreover, the situation is complicated by the lack of an approved deep-water port and the reduced economic value and reduced volume of fire-damaged timber.

"The company continues to consider its options, including the form in which timber may be exported and sold (e.g. as logs, chip or pellets). Such operations would effectively subsidise the necessary land-clearing following the fires.

"The company remains committed to securing final approval for its proposed deep-water wharf at Smith Bay. The proposed KI Seaport will be essential to enable the removal and sale of trees that would otherwise need to be chain-felled and completely burnt in situ: a costly process that would take several years, releasing considerably more smoke and CO2 than the fast-moving intense fires of December and January.

"The KI Seaport can also play an important role in building resilience in the Island's economy, as a significant capital works project, and, when completed, by enabling import and export activity in non-forestry sectors.

"The company has also begun employing a small taskforce to assist our neighbours and to work alongside volunteers from BlazeAid to re-establish fences for stock, along forestry boundaries.

"The company has been well-supported by its finance and project partners, as well as by the State and Commonwealth governments. KIPT looks forward to playing a significant and transformative role in the economic recovery of Kangaroo Island, whose other major industries, Agriculture and Tourism, have also been hit hard by the recent fires."