Strictly Private and Confidential
Sapphire Integrated Beef Operations (“Sapphire”)
Dr Shane Blakeley
+61 458 651 659
shane...
Agenda
2
• Executive Summary
• Property portfolio
• Operations
• Management
• Financials
• Conclusion
3
Area (ha) Water (ML)
Name Grazing Dryland Irrigation Total Gen security Harvested Storage
Ekari Park 24,633 24,633 n/a n...
Property portfolio ...overview and locations
4
Ekari Park
Ballaroo
Mt Driven
Woodlands
Sapphire Feedlot
Murragoran
Area (h...
...... the properties provide scale, security of supply and
complementarity
5
Ekari Park
Ballaroo
Mt Driven
Woodlands
Sapp...
1.Backgrounding A string of grazing properties to grow out and pre-condition 20,000 head for the feedlot and
3,000 grassfe...
Secure cattle
supply
Strong, widespread buyer network
Backgrounding stations enable strategic & tactical buying, according...
Macro World demand for protein is increasing and as incomes in developing countries continue
to improve. A large portion o...
Establishment pathway
Growth
Establishment
• Property acquisition
• Staff engagement
• Buyer network
• Marketing alliances...
Indicative capital requirement . . .
10
Property acquisitions (a) Funds required
Ekari Park $11,000,000 Property purchases...
$51.41
$72.07
$89.06
$103.58 $103.58
$12.64
$16.42
$19.06
$21.43 $21.43
$7.80 $11.45
$14.03 $16.35 $16.35
$0.00
$20.00
$40...
Agenda
12
• Executive Summary
• Property portfolio
• Operations
• Management
• Financials
• Conclusion
Property portfolio ...overview and locations
13
Ekari Park
Ballaroo
Mt Driven
Woodlands
Sapphire Feedlot
Murragoran
Area (...
Ekari Park
Ekari Park
Ballaroo
Mt Driven
Woodlands
Murragoran
Sapphire
Location Map
• Land use:
• Carrying capacity: 6,000...
Ballaroo
Ekari Park
Ballaroo
Mt Driven
Woodlands
Murragoran
Sapphire
Location Map
• Land use:
• Carrying capacity: 3,000 A...
Mt Driven
Ekari Park
Ballaroo
Mt Driven
Woodlands
Murragoran
Sapphire
Location Map
• Land use:
• Carrying capacity: 6,000 ...
Woodlands
Ekari Park
Ballaroo
Mt Driven
Woodlands
Murragoran
Sapphire
Location Map
• Land use:
• Carrying capacity: 6,000 ...
Murragoran
Ekari Park
Ballaroo
Mt Driven
Woodlands
Murragoran
Sapphire
Location Map
• Land use:
• Level, self-mulching gre...
Sapphire feedlot
Ekari Park
Ballaroo
Mt Driven
Woodlands
Murragoran
Sapphire
Location Map
• Land use:
• Chocolate/grey bri...
Agenda
20
• Executive Summary
• Property portfolio
• Operations
• Management
• Financials
• Conclusion
Production system
21
Grain
Backgrounding
Entry
Dryland farming
Entry
Irrigation farming
Entry
E
n
t
r
y
Grass fed bullocks...
Supply chain landscape
22
Ekari Park 24,633 ha
Ballaroo 10,963 ha
Mt Driven 26,260 ha
Woodlands 18,700 ha
Total area 80,556 ha
Carrying capacity 21,...
Backgrounding: Feeder cattle
24
Backgrounding
Dryland farming
Irrigation
Feedlot
Entry Sourced by buyer team to specificat...
Backgrounding: Grass-fed bullocks
25
Entry Sourced by buyer team to specifications issued by the pastoral manager
No restr...
Dryland farming
26
Backgrounding
Dryland farming
Irrigation
Feedlot
Grain
production
Dryland grain production will be focu...
Irrigation farming
27
Backgrounding
Dryland farming
Irrigation
Feedlot
Forage Corn silage is the forage of choice, provide...
28
Backgrounding
Dryland farming
Irrigation
Feedlot
Entry 50% of the feeder cattle will come via the backgrounding stream ...
29
Feedlot: 100 day Jap ox
Backgrounding
Dryland farming
Irrigation
Feedlot
Entry 50% of the feeder cattle will come via t...
Australian
Country
Choice
• ACC process all the beef for Coles stores in Queensland and northern New South
Wales at their ...
Output
31
Year 1 Year 2 Year 3 At capacity
Cattle Feeder cattle 13,800 20,300 20,300 20,300 head
70 day trade 15,900 22,40...
Critical success factors: Backgrounding
32
Cattle cost Close supervision of the buyer network
Develop supplier alliances
A...
Critical success factors: Farming
33
Preparation Moisture conservation
Minimum till
Minimise compaction/precision farming
...
Critical success factors: Feedlot
34
Cattle cost Close supervision of the buyer network
Backgrounding/tactical buying
Deve...
Risk management: Production
35
Backgrounding Flexibility to move stock between stations to match feed (pasture and fodder ...
Risk management: Market and price
36
Grainfed cattle Store cattle and finished cattle tend to move in concert, providing a...
Risk management: Regulatory
37
OH&S Comprehensive induction programs for employees and contractors
Employee manuals and wr...
Sustainability strategy
38
Environment • An environmental management policy will be developed and implemented
• The Austra...
Growth opportunities
39
Internal Expand the feedlot to its licenced 8,700 SCU capacity
Apply to expand to 15,000 SCU or de...
Agenda
40
• Executive Summary
• Property portfolio
• Operations
• Management
• Financials
• Conclusion
Organisational chart
41
Shane Blakeley
Ian McLean
Alex Leonard to be appointed Kylie Gibbs Arnel Corpuz
Key management profiles
42
Name Position Background
Dr Shane Blakeley General manager Shane is is a veterinarian with thir...
Name Position Background
To be appointed Dryland farming
manager
A suitably qualified manager will be recruited to supervi...
Buyer network
44
Scope The project requires 500 to 700 cattle per week for the backgrounding properties and a
similar numb...
Key advisors and consultants
45
Name Expertise Background
Vincent Posada Nutrition consultant Master degree in animal nutr...
Agenda
46
• Executive Summary
• Property portfolio
• Operations
• Management
• Financials
• Conclusion
Acquisition assumptions.
47
Name Purchase Equipment Cattle Stocks Total
Ekari Park $11,000,000 $11,000,000
Ballaroo $7,000...
Dryland farming Irrigation farming
Wheat yield 2.0 tonnes/ha Silage yield 60.0 tonnes/ha
Input cost $382 /ha Water use 7.5...
EBITDA pre-aggregation
49
$6,000,000$1,500,000
$2,400,000
Gibbs
Woodlands
Van Riet
$3,700,000
$4,200,000
$2,000,000
Backgr...
with strong forecast growth in sales ...
50
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
Backgrounding Dryland
Irriga...
and earnings
51
2012 2013 2014 2015 2016
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
Backgrounding Dryland
Irrigation Feedlot
...
Consolidated financials ($ million)
52 52
Year 1 Year 2 Year 3 Year 4 Year 6
Revenue $51.41 $72.07 $89.06 $103.58 $103.58
...
(AUDm) Year 1 Year 2 Year 3 Year 4 Year 5
Cash Inflows
Equity $95.00
Bank debt $50.00
Nett sales receipts $32.46 $53.10 $6...
Detail: Profit & loss
54
(AUDm) Year 1 Year 2 Year 3 Year 4 Year 5
Feedlot revenue $29.04 $40.92 $56.75 $71.27 $71.27
Graz...
Detail: Balance sheet
55
(AUDm) Year 1 Year 2 Year 3 Year 4 Year 5
Assets
Property portfolio $105.25 $110.51 $116.04 $121....
(AUDm) Farming Grazing Feedlot Total Adjusted
Revenue
External sales $10.20 $3.01 $73.01 $86.22 $86.22
Internal transfers ...
Agenda
57
• Executive Summary
• Property portfolio
• Operations
• Management
• Financials
• Conclusion
Conclusion
• Sapphire provides an opportunity to assemble a compelling vertically integrated beef supply chain at a signif...
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This presentation provides an overview of the Sapphire Beef project. An opportunity to invest in an integrated beef supply chain in Queensland, Australia.

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Sapphire Beef IM

  1. 1. Strictly Private and Confidential Sapphire Integrated Beef Operations (“Sapphire”) Dr Shane Blakeley +61 458 651 659 shane.blakeley@raywhite.com.au
  2. 2. Agenda 2 • Executive Summary • Property portfolio • Operations • Management • Financials • Conclusion
  3. 3. 3 Area (ha) Water (ML) Name Grazing Dryland Irrigation Total Gen security Harvested Storage Ekari Park 24,633 24,633 n/a n/a n/a Ballaroo 10,963 500 11,463 n/a n/a n/a Mt Driven 26,260 700 26,960 n/a n/a n/a Woodlands 18,700 12,300 31,000 n/a n/a n/a Murragoran 116 1,434 2,226 1,715 13,757 5,320 Sapphire 959 466 1,712 565 405 2,005 Total 80,556 14,575 1,900 97,994 2,280 14,162 7,325 A high quality property portfolio consisting of 98,000 ha and around 16,000 ML of general security and harvested water . . .
  4. 4. Property portfolio ...overview and locations 4 Ekari Park Ballaroo Mt Driven Woodlands Sapphire Feedlot Murragoran Area (ha) Water (ML) Name Grazing Dryland Irrigation Total Gen security Harvested Storage Ekari Park 24,633 24,633 n/a n/a n/a Ballaroo 10,963 500 11,463 n/a n/a n/a Mt Driven 26,260 700 26,960 n/a n/a n/a Woodlands 18,700 12,300 31,000 n/a n/a n/a Murragoran 116 1,434 2,226 1,715 13,757 5,320 Sapphire 959 466 1,712 565 405 2,005 Total 80,556 14,575 1,900 97,994 2,280 14,162 7,325
  5. 5. ...... the properties provide scale, security of supply and complementarity 5 Ekari Park Ballaroo Mt Driven Woodlands Sapphire Feedlot Murragoran Area (ha) Water (ML) Name Grazing Dryland Irrigation Total Gen security Harvested Storage Ekari Park 24,633 24,633 n/a n/a n/a Ballaroo 10,963 500 11,463 n/a n/a n/a Mt Driven 26,260 700 26,960 n/a n/a n/a Woodlands 18,700 12,300 31,000 n/a n/a n/a Murragoran 116 1,434 2,226 1,715 13,757 5,320 Sapphire 959 466 1,712 565 405 2,005 Total 80,556 14,575 1,900 97,994 2,280 14,162 7,325
  6. 6. 1.Backgrounding A string of grazing properties to grow out and pre-condition 20,000 head for the feedlot and 3,000 grassfed bullocks per year Ekari Park, Ballaroo, Mt Driven, Woodlands 2. Dryland farming 14,000 ha of fertile, productive farming country to produce grain for the feedlot, forage crops for crop fattening and a silage reserve for drought mitigation Woodlands, Mt Driven, Ballaroo 3. Irrigation 1,900 ha of irrigation farming to provide forage for the feedlot and cotton and grain cash crops Murragoran, Sapphire 4. Feedlot The current 6,000 head feedlot can be expanded to15,000 head capacity, producing 60,000 quality cattle per year to exacting market specifications Sapphire . . . forming a robust, reliable supply chain, consisting of four key areas of operations 6
  7. 7. Secure cattle supply Strong, widespread buyer network Backgrounding stations enable strategic & tactical buying, according to the market They also provide flexibility in diverting out of spec cattle to the grassfed stream And control the preparation of 40% to 50% of the feedlot’s cattle intake Secure feed supply Forage cropping to accelerate the backgrounding cattle Irrigation underpins 100% of the feedlot’s forage demand The dryland farming provides 50% of its grain requirement Secure markets Inner circle supplier to Australian Country Choice/Coles Long term supply relationships with the major export abattoirs Drought mitigation Option to sell down grassfed bullocks to free up country for backgrounding feeder cattle Silage reserve and drought feedlot on Woodlands Irrigated cotton acreage can be assigned to grain production if necessary Diversification High value dryland grain and pulse production provide a natural hedge against feed grain price movements The irrigated cotton production provides a high value, diversified income stream while enabling the flexibility to convert that area to grain in drought years Strong management Accomplished, experienced and committed management team Depth of specialist technical advisors and consultants Comprehensive business and reporting systems with compelling strategic advantages ... 7
  8. 8. Macro World demand for protein is increasing and as incomes in developing countries continue to improve. A large portion of that demand will be directed towards red meat. This increase in global demand will be constrained by limitations or even reductions in the world cattle herd and production of beef. Also driven by structural changes in population growth, urbanisation in the developed worlds, scarcity of available land and water rights and climate change This combination of increasing global demand and domestic consumption points to a promising future for innovative and professionally managed beef production enterprises Micro Properties characterised by fertile soils, fertile soils and efficient infrastructure Substantial irrigation component Modern feedlot complex Strategically located in terms of cattle supply, access to feedstocks, services Established markets and supply relationships Scope for development and expansion Capital structure supported by significant land and water assets with strong capital gain prospects . . . underpinned by strong fundamentals 8
  9. 9. Establishment pathway Growth Establishment • Property acquisition • Staff engagement • Buyer network • Marketing alliances • Management systems Year 1 TransitionOperationsMarketing • Expand feedlot to 8,700 SCU • Expand irrigation to 2,400 ha • Consolidate ACC alliance • Active marketing of 100 day bullocks Year 2 • 8,700 head feedlot • Intensify grazing strategies • Irrigation farming ops • Dryland farming ops • Expand feedlot to 10,000 SCU • Develop Woodlands drought reserve complex • Expand supply to Australian Country Choice • Explore direct beef marketing opportunities • Explore direct grain marketing opportunities Years 3 to 5 • 10,000 to 15,000 head feedlot • Cattle supply alliances • Irrigation farming ops • Dryland farming ops • Expand to 15,000 SCU • Explore renewable energy opportunities • Explore carbon credit opportunities • 6,000 head feedlot • Build up cattle stocks • Irrigation farming ops • Dryland farming ops 9 Core growth is expansion of inventory and feedlot capacity from 6,000 currently to 15,000 by Year 4 (2015)
  10. 10. Indicative capital requirement . . . 10 Property acquisitions (a) Funds required Ekari Park $11,000,000 Property purchases (a) $100,000,000 Ballaroo $7,000,000 Acquisition costs (b) $5,250,000 Mt Driven $12,000,000 Development capital (c) $4,800,000 Woodlands $32,000,000 Plant & equipment (d) $6,345,000 Murragoran $26,000,000 Cattle inventory (e) $15,484,607 Sapphire $12,000,000 Working capital (f) $10,963,890 Total $100,000,000 Transaction Value (g) $142,843,497 LVR (assumed) (h) 50% Debt (indicative only) (i) $50,000,000 Indicative equity amount (j) $92,843,497 Notes (a) Represents capital amounts required to acquire properties (b) Represents stamp duty costs (c) Development capital is capital required to expand the feedlot to 8,700 head expansion. Represents construction of additional pens and to expand irrigation on the sapphire property (lateral move irrigator). Additional expansion is funded from cashflow (d) Plant and equipment include existing machinery to be purchased from the Gibbs family property and further plant and equipment (including heave machinery such as tractors etc) required for the other grazing properties (e) Represents acquisition of the Gibbs family cattle [c10,000 head] for $8.6m and additional purchases of $6.9m [12000-14000] of cattle in the first 12 months. Additional cattle purchases are undertaken from cashflow (f) Working capital represents feedlot working capital and cropping seasonal finance (g) Estimated total transaction value (h) Assumed LVR of 50% only on property capital value at (a) (i) Estimated level of debt (illustrative only) (j) Estimated equity requirement (illustrative only)
  11. 11. $51.41 $72.07 $89.06 $103.58 $103.58 $12.64 $16.42 $19.06 $21.43 $21.43 $7.80 $11.45 $14.03 $16.35 $16.35 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 Revenue Gross margin EBITDA Summary financials 11 11 Feedlot capacity: 6,000 Feedlot capacity: 15,000 Revenue and EBITDA 2012(f)- 2016(f) AUDm
  12. 12. Agenda 12 • Executive Summary • Property portfolio • Operations • Management • Financials • Conclusion
  13. 13. Property portfolio ...overview and locations 13 Ekari Park Ballaroo Mt Driven Woodlands Sapphire Feedlot Murragoran Area (ha) Water (ML) Name Grazing Dryland Irrigation Total Gen security Harvested Storage Ekari Park 24,633 24,633 n/a n/a n/a Ballaroo 10,963 500 11,463 n/a n/a n/a Mt Driven 26,260 700 26,960 n/a n/a n/a Woodlands 18,700 12,300 31,000 n/a n/a n/a Murragoran 116 1,434 2,226 1,715 13,757 5,320 Sapphire 959 466 1,712 565 405 2,005 Total 80,556 14,575 1,900 97,994 2,280 14,162 7,325
  14. 14. Ekari Park Ekari Park Ballaroo Mt Driven Woodlands Murragoran Sapphire Location Map • Land use: • Carrying capacity: 6,000 AE • 80% improved pasture; bambatsi, rhodes grass, silk sorghum and buffel • Balance naturally established buffel • Well designed subdivision and infrastructure • New 1,500 head cattle yards, centrally located • Watered by 35 dams plus 2 bores reticulated to 8 troughs • Homestead, quarters and outstation cottage • Bitumen road frontage; triple road train access Ekari Park is a very well developed backgrounding property, strategically located to draw cattle from western Queensland. Property overview Detailed Property Map Pulled & blade ploughed 6,500 ha Pulled 13,000 ha Timber & watercourses 5,133 ha Total area 24,633 ha 14
  15. 15. Ballaroo Ekari Park Ballaroo Mt Driven Woodlands Murragoran Sapphire Location Map • Land use: • Carrying capacity: 3,000 AE • 2,000 ha brigalow country sown to bambatsi, rhodes grass, silk sorghum, bluegrass & stylo • Balance well established buffel • Fifteen main paddocks, mainly new fencing • New 800 head cattle yards • Watered by creek, 19 dams plus 2 bores reticulated to 30-odd troughs • Homestead and two cottages • 60 km south of Roma; bitumen to within 10 km Ballaroo is close to Roma saleyards, the largest livestock selling centre in Australia and is renowned as a very reliable fattening property. Property overview Detailed Property Map Cultivation 500 ha Pulled & blade ploughed 2,200 ha Pulled 7,900 ha Timber & watercourses 863 ha Total area 11,463 ha 15
  16. 16. Mt Driven Ekari Park Ballaroo Mt Driven Woodlands Murragoran Sapphire Location Map • Land use: • Carrying capacity: 6,000 AE plus farming • Brigalow country sown to bambatsi, rhodes grass, digitaria, wynn cassia & stylo • Balance well established buffel • Scope for further pasture development/farming • Thirty-five main paddocks, laneways • Two sets of 1,200 head cattle yards • Watered by Moonie River, 44 dams and 3 bores • Two homesteads, four cottages plus quarters • Moonie Highway bitumen frontage A strategically located, productive backgrounding property with potential to increase numbers by 30% to 50%. Property overview Detailed Property Map Cultivation 700 ha Brigalow/belah pasture development 4,700 ha Buffel pastures 21,560 ha Total area 26,960 ha 16
  17. 17. Woodlands Ekari Park Ballaroo Mt Driven Woodlands Murragoran Sapphire Location Map • Land use: • Carrying capacity: 6,000 AE plus farming • Farming country mainly brigalow/belah self mulching clays • Over 100 main paddocks connected by laneways • Two main yards (800 & 1,00 head) and two smaller sets (800 head) • 2,000 SCU feedlot, 6,000 SCU licence • Moonie Highway bitumen frontage In addition to the backgrounding function, Woodlands’ farming operation produces much of the project’s grain demand and provides a crop fattening and drought relief capacity. Property overview Detailed Property Map Cultivation 12,300 ha Pulled & blade ploughed 4,700 ha Open grazing 14,000 ha Timber & watercourses 2,871 ha Total area 33,871 ha 17
  18. 18. Murragoran Ekari Park Ballaroo Mt Driven Woodlands Murragoran Sapphire Location Map • Land use: • Level, self-mulching grey/black clay soils • 1,715 ML general security water and 13,757 ML water harvesting licences • 5,320 ML on-farm storage in three cells • Homestead and cottage • Four machinery sheds, 3,000 tonnes of grain storage and 10,000 tonnes silage storage • Small 700 SCU feedlot The irrigation on Murragoran provides silage for the feedlot. It also supports a substantial cotton enterprise. Property overview Detailed Property Map Irrigation 1,484 ha Cultivation 116 ha Grazing, storage & support land 676 ha Total area 2,226 ha 18
  19. 19. Sapphire feedlot Ekari Park Ballaroo Mt Driven Woodlands Murragoran Sapphire Location Map • Land use: • Chocolate/grey brigalow/belah and wilga soils • 565 ML general security water and 405 ML water harvesting licences • 2,005 ML on-farm storage • Scope to add another 400 ha lateral move irrigator to the irrigated area • Fully equipped 6,000 SCU feedlot with approval to expand to 8,700 SCU • Office and weighbridge complex • Feed mill, hay shed, 1,300 tonnes of grain storage and 25,000 tonnes silage storage The Sapphire feedlot is the focal point of the project, ensuring a reliable supply of cattle to high value markets.. Property overview Detailed Property Map Irrigation 466 ha Cultivation 959 ha Grazing, storage & support land 287 ha Total area 1,712 ha 19
  20. 20. Agenda 20 • Executive Summary • Property portfolio • Operations • Management • Financials • Conclusion
  21. 21. Production system 21 Grain Backgrounding Entry Dryland farming Entry Irrigation farming Entry E n t r y Grass fed bullocks Entry 70 day trade cattle Entry 100 day Jap ox Entry Cotton & grain Entry Feedlot Entry • 21,000 AE capacity • Supplies 50% of feedlot cattle intake • 20% of herd as grass fed bullocks • Supplies grain to the feedlot • Provides crop fattening for cattle • Also conserved forage for drought reserve • Produces 100% of feedlot’s forage • Also a significant cotton and grain operation • 8,700 SCU licence • 6,000 SCU developed • Reliable supply of cattle for high value markets • Sold to south-east Queensland meatworks • Inner circle supplier to ACC/Coles • Sold to south-east Queensland meatworks • Diversified income stream • 5,000 - 10,000 bales/yr Foddercrops FeedercattleSilage ProductsInputs
  22. 22. Supply chain landscape 22
  23. 23. Ekari Park 24,633 ha Ballaroo 10,963 ha Mt Driven 26,260 ha Woodlands 18,700 ha Total area 80,556 ha Carrying capacity 21,500 AE Four key divisions 23 Backgrounding Properties located to draw cattle from western Qld and northern NSW Large operations with highly productive pastures, infrastructure designed for low cost, efficient stock management & significant economies of scale 80% of the cattle are managed to produce pre- conditioned feeder cattle The balance are grass fed bullocks, providing flexibility to free up resources in drought years Dryland farming Major grain producer Fertile brigalow soils, modern technology and infrastructure optimise yields and operating efficiency Output can be directed to the feedlot or high quality grain can be sold and cheaper grain bought for the feedlot Also produces forage crops (oats, sorghum) to fatten cattle and silage and hay for drought reserves Irrigation Primary purpose is to ensure 100% forage self sufficiency for the feedlot Also a significant cotton operation with planted area adjusted to water availability The irrigation can also be assigned to grain production in severe drought years At least another 400 ha of dryland cultivation on Sapphire can be developed to irrigation Feedlot Modern feedlot complex with robust environmental and animal welfare management systems in place Sourcing 50% of its cattle from the backgrounding properties Balance from alliance suppliers and the established buyer network Inner circle supplier to ACC/Coles Long established relationships with other major processors Ballaroo 500 ha Mt Driven 700 ha Woodlands 12,300 ha Murragoran 582 ha Total area 14,082 ha Murragoran 1,434 ha Sapphire 959 ha Total area 2,393 ha General security 2,280 ML Water harvesting 14,162 ML Storage 7,325 ML Current capacity 6,000 SC U Licenced capacity 8,700 SC U Potential capacity 15,000 SC U
  24. 24. Backgrounding: Feeder cattle 24 Backgrounding Dryland farming Irrigation Feedlot Entry Sourced by buyer team to specifications issued by the pastoral manager Preference is for no more than 5/8th bos indicus Target entry weight of 225 kg Preference for stock sourced direct from breeders with minimal reliance on sale yards Entry vaccinations and treatments in accordance with feedlot policy and requirements Grow out Monitor feed availability and quality with this stream having priority access Emphasis on water availability and quality Schedule crop fattening if available This group has priority access to the Woodlands silage drought reserve Target 0.6 kg average daily gain over a 200 day period for a total gain of 120 kg/head Turnoff Target feedlot entry criteria: dentition: milk tooth live weight: 350 kg Only cattle within the feedlot’s specified weight and definition range are suitable for feedlot entry Cattle gaining less than 0.4 kg per day are culled as stores Cattle above the maximum weight and definition criteria are transferred to the grass fed bullock stream This stream will provide about 50% of the feedlot’s annual cattle intake, i.e. 23,000 head per year
  25. 25. Backgrounding: Grass-fed bullocks 25 Entry Sourced by buyer team to specifications issued by the pastoral manager No restriction on bos indicus content Target entry weight of 350 kg This group can also absorb cattle that do not fit the exact feeder cattle entry and exit criteria Vaccinated and implanted on entry with minimal co-mingling Grow out Monitor feed availability and quality with this stream having priority access Emphasis on water availability and quality Schedule crop fattening if available This group can be progressively terminated if seasonal conditions deteriorate, preserving pasture for the feeder stream Target 0.6 kg average daily gain over a 15 month period for a total gain of 250kg/head Turnoff Target exit criteria: dentition: 0-4 tooth live weight: 550-650 kg P8 fat: 7-22 mm Aiming to turn off 3,000 head per year Backgrounding Dryland farming Irrigation Feedlot
  26. 26. Dryland farming 26 Backgrounding Dryland farming Irrigation Feedlot Grain production Dryland grain production will be focused on the southern section at Woodlands Where insufficient water is available for a full irrigated cropping program on Sapphire and Murragoran, unused irrigation acreage will be allocated to dryland farming Cropping decisions will be based on soil moisture available with the planting window for each variety and market prospects for those crops. The mix will be approximately Winter cereal 35% Winter pulses 40% Summer coarse grains 25% • Stubble will be baled and used in the feedlot with any excess sold to other feedlots Crop fattening The farming areas on Ballaroo, Mt Driven and the northern section of Woodlands will be allocated to fodder crops for grazing; forage sorghum in summer and oats in winter In favourable seasons, this would enable the fattening of an additional 15,000 cattle for 100 days, gaining 1.0 to 1.2 kg per head per day The economics of crop fattening versus grain production will be evaluated before committing to a forage cropping program Silage reserve A silage reserve will be established at Woodlands to enable the Woodlands feedlot to serve as a drought relief facility for the backgrounding operation; It is intended to establish a reserve of 30,000 tonnes and silage over a three year period requiring an average 500ha per year planted to graze and grain sorghum varieties This tonnage is sufficient to feed the backgrounding cattle one year in four for 60 days The silage reserve will be replenished as seasonal conditions permit
  27. 27. Irrigation farming 27 Backgrounding Dryland farming Irrigation Feedlot Forage Corn silage is the forage of choice, provided water supply is secure If water supply is limited, planting will switch to sorghum silage Silage fields have priority for composted manure Target yields of 20 tonnes silage dry matter/ha for both corn and sorghum silage Annual silage demand is around 5,000 tones dry matter, requiring approximately 250 irrigated ha per year Silage production has first call on irrigation water Cotton Cotton has second priority for water after forage The crop will be managed under the Australian cotton industry’s Best Management Practice guidelines Aim to produce 7,500 bales per year Grain In drought years when grain is scarce, the irrigation operation can be assigned to grain production to support the feedlot The grain crop will be managed under principles adapted from the Australian cotton industry’s Best Management Practice Stubble from irrigated grain crops will be baled and used in the feedlot
  28. 28. 28 Backgrounding Dryland farming Irrigation Feedlot Entry 50% of the feeder cattle will come via the backgrounding stream with 50% sourced externally by the buying team to the feedlot manager’s specification Preference is for no more than 5/8th bos indicus Target specifications: dentition: milk tooth live weight: 350 kg • Comprehensive animal health protocol on induction Grow out Scrupulous attention to feed bunk management and water quality and quantity Rations designed to optimise cost of gain and minimise health problems Cattle inspected everyday with sick animals treated according to feedlot procedures Contingency plans in place for high heat load events Target 2.0 kg/day gain over the 70 day period at a feed conversion ratio of 6.0:1 Turnoff Target exit criteria: dentition: 0-2 tooth live weight: 450-500 kg P8 fat: 4-18 mm Mouth cattle within 4 days of exit to ensure conformance; Cattle not meeting the ACC spec can be sent to Swifts or can enter 100 Jap ox stream Kill space and pricing will be fixed 4 to 6 weeks prior to the anticipated close out date Aiming to turn off 31,000 head per year Feedlot: 70 day trade cattle
  29. 29. 29 Feedlot: 100 day Jap ox Backgrounding Dryland farming Irrigation Feedlot Entry 50% of the feeder cattle will come via the backgrounding stream with 50% sourced externally by the buying team to the feedlot manager’s specification Target specifications: dentition: 0-2 tooth live weight: 450 kg • Comprehensive animal health protocol on induction Grow out Managed under the same procedures as the 70 day cattle Target 2.0 kg/day gain over the 100 day period at a feed conversion ratio of 7.5:1 Turnoff Target exit criteria: dentition: 0-2 tooth live weight: 450-500 kg P8 fat: 4-18 mm Kill space and pricing will be fixed 4 to 6 weeks prior to the anticipated close out date Aiming to turn off 14,500 head per year
  30. 30. Australian Country Choice • ACC process all the beef for Coles stores in Queensland and northern New South Wales at their meatworks at Cannon Hill, Brisbane • They have very tight product specifications but their prices for in-spec product are the best available • They process about 5,000 head per week, of which 50% comes from their own feedlots • Sapphire is one of only ten preferred external suppliers JBS Swifts Australia’s largest meat processor with four plants in Queensland with a combined kill capacity at approximately 6,000 head per day The Queensland plants kill all the cattle for their Queensland and New South Wales feedlots (4 feed yards with a combined capacity of approximately 90,000 head) Their main plant in south-east Queensland is at Dinmore near Ipswich Sapphire has been supplying cattle to Swifts for twenty years. Others Kilcoy Pastoral John Dee Teys Bros Stanbroke Bindaree Beef Kilcoy Warwick Beenleigh Grantham Inverell Export markets Potential to export frozen quarter beef to China, Indonesia and the Middle East Service kill capacity at Warwick and Casino Key customers 30
  31. 31. Output 31 Year 1 Year 2 Year 3 At capacity Cattle Feeder cattle 13,800 20,300 20,300 20,300 head 70 day trade 15,900 22,400 26,000 39,000 head 100 day Jap ox 8,100 11,500 13,300 20,000 head Grassfed bullocks 0 2,600 2,600 2,600 head Farming Silage (dry matter) 4,600 5,300 6,700 7,900 tonnes Wheat 9,000 9,000 9,000 9,000 tonnes Pulses 5,500 5,500 5,500 5,500 tonnes Sorghum 9,700 13,300 10,100 9,500 tonnes Cotton 7,900 7,900 7,900 7,900 bales
  32. 32. Critical success factors: Backgrounding 32 Cattle cost Close supervision of the buyer network Develop supplier alliances Animal health & welfare Pre-entry health program Minimal reliance on saleyard sourcing of cattle Low stress stock handling and sound infrastructure Drought management plan and fodder reserve Pasture production Rangeland management plan Pasture monitoring and budgeting Meeting specification Compliance with entry weight and age specifications Manage cattle by weight group Crop fattening and nutritional supplementation Backgrounding Farming Feedlot
  33. 33. Critical success factors: Farming 33 Preparation Moisture conservation Minimum till Minimise compaction/precision farming Fertiliser application rates/soil testing Time of planting Weather Contractor availability Seed varieties In crop husbandry Water availability & timing/moisture probes Fertiliser Weed control Pest & disease control Time of harvest Contractor availability Weather Backgrounding Farming Feedlot
  34. 34. Critical success factors: Feedlot 34 Cattle cost Close supervision of the buyer network Backgrounding/tactical buying Develop supplier alliances Pay for known performance Animal health Induction health program Minimal reliance on saleyard sourcing of cattle Low stress stock handling and cattle-friendly infrastructure Daily supervision Heat stress mitigation Site hygiene Feed cost High roughage diets Target low price, feed quality grain Internal supply Average daily gain Ration formulation Rigorous bunk management and hygiene Manage shy feeders Marketing ACC preferred supplier status Forward contracts for Jap ox Backgrounding Farming Feedlot
  35. 35. Risk management: Production 35 Backgrounding Flexibility to move stock between stations to match feed (pasture and fodder crops); Use the Woodlands drought reserve feedlot to maintain production Sell cattle out of the grass feed bullock stream to reduce grazing pressure. Dryland farming Crops only planted on adequate moisture profile Minimum till farming, stubble retention and composting to optimise moisture retention. Irrigation farming A full irrigation program requires only 60% of the 16,000 ML water licence. Forage production has priority use of available water Feedlot Irrigation guarantees forage supply Rigorous feeding management practices and ration design underpin performance Comprehensive animal health procedures minimise disease problems Biosecurity Animal biosecurity procedures to minimise the risk of animal disease introduction The cotton industry Best Management Practice methodology to minimise plant disease and pest build up and introduction Catastrophic loss Geographic spread minimises the risk of wide spread hail or fire damage; Crop insurance or self insure; General property insurance and fire precautions reviewed annually Production Market & price Regulatory
  36. 36. Risk management: Market and price 36 Grainfed cattle Store cattle and finished cattle tend to move in concert, providing a natural hedge Emphasis on feeder cattle conformance to entry specification Maintenance of ACC preferred supplier status is a priority Ensure conformance to processor specifications before leaving the feedlot, diverting cattle at risk of non-conformance to an alternative stream Rigorous analysis of non-conformance data to identify areas for improvement; Look to forward contract where possible and profitable. Grassfed bullocks Again store and finished cattle prices tend to move in concert Use the Woodlands drought reserve feedlot to finish these cattle if necessary Farming commodities Prime hard and feed grain prices tend to correlate, providing a natural hedge Cotton can be forward sold Agri-commodity marketing expertise will be drawn upon as required Production Market & price Regulatory
  37. 37. Risk management: Regulatory 37 OH&S Comprehensive induction programs for employees and contractors Employee manuals and written procedures Benchmarking and external audit and review Water licences Scrupulous water use history documentation Participation in the water reform process Agricultural practices Strict adherence to Best Management Practice Regular review of BMP compliance Feedlot licencing Strict adherence to the National Feedlot Accreditation Scheme conditions Regular review of NFAS compliance Expand feedlot capacity on Woodlands if unable to secure approval for Sapphire expansion from 8,700 to 15,000 SCU Production Market & price Regulatory
  38. 38. Sustainability strategy 38 Environment • An environmental management policy will be developed and implemented • The Australian cotton industry’s Best Management Practice system will be adapted to safeguard the property and surrounding environment Innovation • A systems management approach will be applied across the business • Participation in industry information programs will provide access to the most recent technologies, products and ideas Social • Active participation in industry affairs; Agforce, ALFA and Border Rivers Food & Fibre • Targeted support for local groups and events • Emphasis on staff training and development Economic • Cost control and profit focus • Attention to asset maintenance and enhancement • Growth strategy Regulatory • Policies and procedures to ensure compliance with regulatory standards
  39. 39. Growth opportunities 39 Internal Expand the feedlot to its licenced 8,700 SCU capacity Apply to expand to 15,000 SCU or develop the Woodlands 6,000 approved licence Develop additional 400 ha of irrigation on Sapphire Expand the improved pasture development on the backgrounding properties Develop direct markets for beef into China, south-east Asia and/or the Middle East External Horizontal integration by acquiring additional backgrounding properties Vertical integration by adding a breeding element to the project Purchase additional water licences Explore renewable energy and carbon trading opportunities
  40. 40. Agenda 40 • Executive Summary • Property portfolio • Operations • Management • Financials • Conclusion
  41. 41. Organisational chart 41 Shane Blakeley Ian McLean Alex Leonard to be appointed Kylie Gibbs Arnel Corpuz
  42. 42. Key management profiles 42 Name Position Background Dr Shane Blakeley General manager Shane is is a veterinarian with thirty years experience in managing farming operations in Australia and south-east Asia. He has also provided consulting services to an extensive range of clients including Meat and Livestock Australia and Ray White Rural. Ian McLean Business manager Ian has worked in various positions in government, industry affairs and livestock production since graduating with a commerce degree in 2005. Arnel Corpuz Feedlot manager Arnel has managed feedlots in the Philippines and Queensland since 2000. He has worked closely with Shane during this time and has agreed to take over the management of the Sapphire feedlot. Alex Leonard Pastoral manager Alex has tertiary qualifications in animal science and has held management and strategic planning roles with AACo as well as running his own livestock contracting business. He will be based at Woodlands with responsibility for that site’s cattle operations as well as coordinating the other backgrounding properties’ operations. Kylie Gibbs Irrigation manager Kylie has a Diploma in Agricultural Science from the University of Queensland. She and her husband have been responsible for the irrigation farming activities on Murragoran and Sapphire for the last seven years and will be invited to continue in this role.
  43. 43. Name Position Background To be appointed Dryland farming manager A suitably qualified manager will be recruited to supervise the dryland farming operations on Woodlands and to assist the Ballaroo and Mt Driven managers with forage cropping programs if necessary Alternatively, a contractor may be engaged to provide these services To be confirmed Property managers The property managers on Ekari Park, Ballaroo and Mt Driven will be offered continued employment A livestock overseer will be recruited for Woodlands, answering to the pastoral manager To be confirmed Field staff Most field staff on the target properties will be offered continued employment Suitably qualified staff will be recruited to fill any gaps 43 Key management profiles (continued)
  44. 44. Buyer network 44 Scope The project requires 500 to 700 cattle per week for the backgrounding properties and a similar number direct to the feedlot Coverage Sapphire has established arrangements in place with a number of cattle buyers across New South Wales and southern Queensland One or two new buyers will be commissioned to source cattle from central and northern Queensland Efforts will be made to develop direct alliances with cattle producers Process Buyers will be issues weekly instructions, outlining numbers, rates, specifications and delivery points for backgrounding and feeder cattle Buyer performance will be monitored and reviewed quarterly with regard to conformance to buying instructions and post-delivery cattle performance
  45. 45. Key advisors and consultants 45 Name Expertise Background Vincent Posada Nutrition consultant Master degree in animal nutrition and range management from Texas A&M. Client base of feedlots, dairies and stock feed manufacturers in Australia, North and South America and south-east Asia. Quirindi Feedlot Services Veterinary consultant Sophisticated beef cattle practice, specialising in epidemiology, disease prevention and performance analysis Phil Lockwood Agronomist Highly regarded local cotton and forage crops agronomist Bruce Gunning Property acquisition and valuation Licenced valuer in Queensland and NSW with forty years experience in high-value rural real estate. Ostwald Bros Civil engineering Expertise in irrigation and feedlot design and construction. Devine Agribusiness Land and vegetation management Innovative business advisors with high level expertise in vegetation management policy and government liaison Thynne Macartney Legal Legal practice with a specialist focus on rural property and agribusiness issues Hanrick Curran Accounting Accountancy practice with an agribusiness group focusing on the beef industry
  46. 46. Agenda 46 • Executive Summary • Property portfolio • Operations • Management • Financials • Conclusion
  47. 47. Acquisition assumptions. 47 Name Purchase Equipment Cattle Stocks Total Ekari Park $11,000,000 $11,000,000 Ballaroo $7,000,000 $7,000,000 Mt Driven $12,000,000 $125,000 $4,500,000 $16,625,000 Woodlands $32,000,000 $32,000,000 Murragoran $26,000,000 $3,300,000 $700,000 $30,000,000 Sapphire $12,000,000 $950,000 $3,400,000 $2,500,000 $18,850,000 Total $100,000,000 $4,375,000 $7,900,000 $3,200,000 $115,475,000
  48. 48. Dryland farming Irrigation farming Wheat yield 2.0 tonnes/ha Silage yield 60.0 tonnes/ha Input cost $382 /ha Water use 7.5 ML/ha Sales $250 /tonne Input cost $2,205 /ha Chickpea yield 1.7 tonnes/ha Sales $75 /tonne Input cost $411 /ha Cotton yield 10.5 bales/ha Sales $450 /tonne Water use 8.2 ML/ha Wheat yield 2.5 tonnes/ha Input cost $2,993 /ha Input cost $383 /ha Sales $550 /bale Sales $180 /tonne Combined overheads $1,219,500 /year Budget assumptions 48 Backgrounding 70 day Trade cattle 100 day Jap ox Purchases 22,696 head/year Purchases 26,500 head/year Purchases 13,800 head/year $2.00 /kg liveweight $1.95 /kg liveweight $1.70 /kg liveweight Weight gain 0.60 kg/day Weight gain 2.10 kg/day Weight gain 1.90 kg/day Mortality rate 0.50% Feed conversion 5.7 Feed conversion 7.2 Feeder sales $1.85 /kg liveweight Feed cost of gain $1.53 /kg Feed cost of gain $1.96 /kg Grassfed sales $3.50 /kg carcass wt Mortality rate 0.10% Mortality rate 0.10% Dressing % 55% Dressing % 56% Sales $4.00 /kg carcass wt Sales $3.80 /kg carcass wt Overheads $1,605,530 /year Combined overheads $1,542,500 /year
  49. 49. EBITDA pre-aggregation 49 $6,000,000$1,500,000 $2,400,000 Gibbs Woodlands Van Riet $3,700,000 $4,200,000 $2,000,000 Backgrounding Farming Feedlot 2010(a) Proforma by division (pre aggregation) AUDm Total 2010(a) proforma = $9.9m Total 2010(a) proforma = $9.9m 2010(a) Proforma by Vendor (pre aggregation) AUDm
  50. 50. with strong forecast growth in sales ... 50 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 Backgrounding Dryland Irrigation Feedlot $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 Cattle Cotton Forage Grain Other Model Output Revenue by product 2012(f)- 2016(f) AUDm Model Output Revenue by division 2012(f)- 2016(f) AUDm
  51. 51. and earnings 51 2012 2013 2014 2015 2016 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 Backgrounding Dryland Irrigation Feedlot 2012 2013 2014 2015 2016 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 Backgrounding Dryland Irrigation Feedlot Model Output Gross margin by division 2012(f)- 2016(f) AUDm Model Output EBITDA by division 2012(f)- 2016(f) AUDm
  52. 52. Consolidated financials ($ million) 52 52 Year 1 Year 2 Year 3 Year 4 Year 6 Revenue $51.41 $72.07 $89.06 $103.58 $103.58 Gross margin $12.64 $16.42 $19.06 $21.43 $21.43 EBITDA $7.80 $11.45 $14.03 $16.35 $16.35 2012 2013 2014 2015 2016 $0.00 $20.00 $40.00 $60.00 $80.00 $100.00 $120.00 Revenue Gross margin EBITDA Establishment first full year at capacity AUDmillions
  53. 53. (AUDm) Year 1 Year 2 Year 3 Year 4 Year 5 Cash Inflows Equity $95.00 Bank debt $50.00 Nett sales receipts $32.46 $53.10 $69.54 $84.48 $87.38 Total Cash Inflows $177.46 $53.10 $69.54 $84.48 $87.38 Cash Outflows Property acquisition $105.25 Property development $4.80 $3.80 $3.50 $0.50 Plant & equipment $6.35 $0.21 $0.41 $0.83 $0.86 Cattle inventory $15.45 $2.43 $3.23 $2.96 Total capex $131.84 $6.44 $7.14 $4.29 $0.86 Legals, etc $0.50 Operating expenditure $23.77 $44.43 $57.45 $67.47 $70.44 Interest $3.50 $3.50 $3.50 $3.50 $3.50 Tax $0.94 $1.98 $2.70 $3.40 $3.41 Total cash outflows $160.56 $56.35 $70.79 $78.67 $78.21 Net cash flow $16.90 ($3.24) ($1.25) $5.81 $9.18 Ending cash at bank $16.90 $13.66 $12.41 $18.22 $27.39 Detail: Sources and application of funds 53 Establishment first full year at capacity $18m of cash flow from operations is utilised to expand the feedlot to 15,000 head capacity
  54. 54. Detail: Profit & loss 54 (AUDm) Year 1 Year 2 Year 3 Year 4 Year 5 Feedlot revenue $29.04 $40.92 $56.75 $71.27 $71.27 Grazing revenue $9.82 $17.40 $17.40 $17.40 $17.40 Farming revenue $12.55 $13.75 $14.90 $14.90 $14.90 Total revenue $51.41 $72.07 $89.06 $103.58 $103.58 Feedlot cash costs ($29.18) ($40.47) ($54.07) ($63.83) ($63.83) Grazing cash costs ($12.65) ($13.46) ($13.46) ($13.46) ($13.46) Farming cash costs ($8.23) ($8.75) ($9.34) ($9.34) ($9.34) Central overheads ($0.60) ($0.60) ($0.60) ($0.60) ($0.60) Consolidated cash flow $0.75 $8.79 $11.59 $16.35 $16.35 Changes in inventory $7.05 $2.67 $2.44 Consolidated EBITDA $7.80 $11.45 $14.03 $16.35 $16.35 Depreciation ($1.15) ($1.34) ($1.51) ($1.51) ($1.47) EBIT $6.64 $10.11 $12.51 $14.84 $14.88 Interest ($3.50) ($3.50) ($3.50) ($3.50) ($3.50) Taxable Income $3.14 $6.61 $9.01 $11.34 $11.38 Tax ($0.94) ($1.98) ($2.70) ($3.40) ($3.41) Profit after tax $2.20 $4.63 $6.31 $7.94 $7.96 Represents cattle purchases Establishment first full year at capacity
  55. 55. Detail: Balance sheet 55 (AUDm) Year 1 Year 2 Year 3 Year 4 Year 5 Assets Property portfolio $105.25 $110.51 $116.04 $121.84 $127.93 Fixed improvements $4.44 $7.62 $10.29 $9.98 $9.23 Plant & Equipment $5.55 $5.04 $4.77 $4.90 $5.03 Livestock inventory $17.27 $19.94 $22.38 $22.38 $22.38 Accounts receivable $8.11 $11.25 $14.57 $17.48 $17.48 Cash $16.90 $13.66 $12.41 $18.22 $27.39 Total $157.53 $168.02 $180.45 $194.79 $209.45 Liabilities Bank debt $50.00 $50.00 $50.00 $50.00 $50.00 Trade creditors Tax $0.94 $1.98 $2.70 $3.40 $3.41 Total $145.94 $146.98 $147.70 $148.40 $148.41 Assets over liabilities $11.58 $21.03 $32.75 $46.39 $61.03
  56. 56. (AUDm) Farming Grazing Feedlot Total Adjusted Revenue External sales $10.20 $3.01 $73.01 $86.22 $86.22 Internal transfers $3.95 $14.39 $0.00 $18.34 $0.00 Total $14.14 $17.40 $73.01 $104.56 $86.22 Costs External direct costs -$8.12 -$11.86 -$44.54 -$64.51 -$64.51 Internal transfers $0.00 $0.00 -$18.34 -$18.34 $0.00 Enterprise overheads -$1.34 -$1.61 -$1.66 -$4.61 -$4.61 Central overheads -$0.20 -$0.20 -$0.20 -$0.60 -$0.60 Total -$9.66 -$13.66 -$64.74 -$88.06 -$69.73 Gross margin $6.02 $5.55 $10.13 $21.71 $21.71 % of annual sales 43% 32% 14% 21% 25% EBITDA $4.48 $3.74 $8.27 $16.49 $16.49 % of annual sales 32% 21% 11% 16% 19% Operating cycle (months) 12 9 4 Annualised GM/Sales 43% 42% 42% Annualised EBITDA/Sales 32% 29% 34% Turnover ratios Exclude payments for internal transfers
  57. 57. Agenda 57 • Executive Summary • Property portfolio • Operations • Management • Financials • Conclusion
  58. 58. Conclusion • Sapphire provides an opportunity to assemble a compelling vertically integrated beef supply chain at a significant capacity of (15,000 head) with compelling strategic advantages including: • Secure cattle supply, Strong, widespread buyer network, Backgrounding stations enable strategic & tactical buying, according to the market • Secure feed supply Forage cropping to accelerate the backgrounding cattle Irrigation underpins 100% of the feedlot’s forage demand The dryland farming provides 50% of its grain requirement • Secure markets Inner circle supplier to Australian Country Choice/Coles Long term supply relationships with the major export abattoirs • Drought mitigation Option to sell down grassfed bullocks to free up country for backgrounding feeder cattle, Silage reserve and drought feedlot on Woodlands irrigated cotton acreage can be assigned to grain production • Diversification, High value dryland grain and pulse production provide a natural hedge against feed grain price movement. The irrigated cotton production provides a high value, diversified income stream while enabling the flexibility to convert that area to grain in drought years • Strong management Accomplished, experienced and committed management team Depth of specialist technical advisors and consultants Comprehensive business and reporting systems • Favourable Macro thematic World demand for protein is increasing and as incomes in developing countries continue to improve. A large portion of that demand will be directed towards red meat. This increase in global demand will be constrained by limitations or even reductions in the world cattle herd and production of beef. Also driven by structural changes in population growth, urbanisation in the developed worlds, scarcity of available land and water rights and climate change • High value constituent assets Properties characterised by fertile soils and efficient infrastructure. Substantial irrigation component, Modern feedlot complex, strategically located in terms of cattle supply, access to feedstocks and services. Established markets and supply relationships • The aggregation consists of motivated vendors (driven mostly by generational change) and is open to discussing acquisition and strategic options with prospective investors 58

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