SeaDragon signs new agreements for shark liver oil 26 Mar 2015
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SeaDragon signs new agreements for shark liver oil; costs jump in Nelson refinery
By Jonathan Underhill
March 26 (BusinessDesk) - SeaDragon, which
manufactures fish oil for health supplements, has terminated
a contract with a charter vessel that supplied deep-sea
shark liver oil and signed two new supply agreements,
highlighting the challenge of ensuring it can source enough
raw material.
The Nelson-based company today said
sales for the year ending March 31 will be about $6.5
million, up from $3.1 million a year earlier. Costs related
to the start-up of its new refinery for producing its second
product stream, Omega 3 rich fish oils used in supplements,
mean it will post an operating loss in the period, it
said.
A full-year loss would include an unprofitable
first-half, which SeaDragon attributed last November to
difficulties in securing raw material for its squalene
operations. Squalene is an oily, liquid hydrocarbon which is
extracted primarily from shark liver oil and used in
moisturisers.
At the time of its first-half results, the company said it had struck a supply agreement, which analytics firm Edison International said was a new charter vessel, which would specifically target sharks for its supply of deep sea shark liver oil. That contract has since been terminated and SeaDragon has entered two new supply agreements with operators of vessels to supply frozen shark liver and the oil, it said today.
"Our squalene
operations have demonstrated their potential, when not
constrained by the supply of raw materials," said chief
executive Ross Keeley. "The considerable effort we have made
to overcome prior supply difficulties has been rewarded with
a strong trading performance for the 2015 financial year,
and the new supply agreements we have announced
today."
The new supply agreements have the potential
to keep the company's squalene operations running through to
late 2016, the company said.
SeaDragon faces a
challenge ensuring enough shark liver oil because of a
"significant contraction in sharks being recovered," Keeley
told BusinessDesk. Amid growing concern about fishing
practices such as finning, where shark fins were sold in
Asia as a delicacy but the carcasses typically throwing
overboard, shark has fallen in value to less than half what
it was a year ago. In turn that has "significantly" driven
up the price of squalene, used by the cosmetics
industry.
"By-catch shark fin has crashed and the
price consumers are prepared to pay for flesh has dropped
significantly," he said. SeaDragon does not condone finning,
he said. The new supply agreements were with vessels
targeting deep-water species in international waters.
The new Nelson refinery being built to produce Omega 3 rich fish oils is now estimated to cost $9.2 million, up from an original forecast of $6 million, SeaDragon said. It blamed the cost escalation on changes to building regulations following the 2013 Seddon earthquake, extra equipment and changes to the layout of the plant.
As a result, "SeaDragon is considering a number of funding alternatives including using existing cash flows, debt and equipment leasing and new equity," it said. In January 2014, the company raised $4.1 million in a sale of shares to existing investors, and a further $4.5 million from the sale of its stake in Snakk Media and a placement. As at Sept. 30, the company has about $2.3 million in cash and equivalents, according to its interim report.
SeaDragon shares rose 4.6 percent to 2.3 cents, valuing the company at about $43 million.
(BusinessDesk)
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