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Atlantic Sapphire drops expansion bombshell for salmon farmers gathered in Brussels

Matt Craze

May 9, 2019
BRUSSELS, Belgium – Land-based start-up Atlantic Sapphire issued a statement to the Oslo stock exchange in the early hours of May 8. Buried in a PDF presentation attached with the statement, the company disclosed expansion plans that have become the talk of the Brussels show.

Originally, Atlantic Sapphire said that it plans to supply 90,000 metric tons of Atlantic salmon from its land-based farm near Miami by 2025. That would serve almost a quarter of current US demand. The company now plans to supply 220,000t by 2030, a figure would serve more than half of the US market.

That single Powerpoint slide has become the talking point for the salmon industry gathered at the flagship annual meeting of the seafood industry in Brussels. Salmon producers from Chile to Norway have enjoyed a prolonged spell of record profits, as growing demand from major markets like China and the US outpaces supply. Atlantic Sapphire and others that can grow Atlantic salmon to harvest size in land-based tanks could disrupt the industry at a rate faster than imagined.

“Even though the salmon farming CEOs won’t admit it, they are watching everything that Atlantic Sapphire is doing,” said one senior Norwegian banking source. “[The presentation] has become the talking point of the show.”

For sure, the land-based salmon movement is at an early stage. Atlantic Sapphire is supplying land-harvested salmon from a much smaller plant in Denmark and stocked salmon eggs at its huge Miami plant earlier this year. The company plans to harvest 6,000t of salmon in 2020 when the Miami plant starts to harvest fish.

Atlantic Sapphire announced it successfully raised NOK 783 million ($90m) in a private share placement. This raises the company’s outstanding capital by 13%, the company said. Atlantic Sapphire’s share price has surged from an opening value of less than NOK 40 in its first year of trading in 2018 to a record NOK 104 on May 8. The share price surged 12% alone on the day of the financial agreement.

The key to Atlantic Sapphire’s success will be in achieving its first ever harvest at the Miami plant, and then scaling up to the company’s original production target of 90,000t by 2025, said another senior banking analyst.

“They need to show they can achieve 90,000t, let alone 220,000t,” the source said. “That said, 220,000t would torpedo the market.”

There are up to 40 land-based salmon grow-out projects on the drawing board, said one analyst. Many projects will fail because of a lack of access to finance and technical constraints. The land-based start-ups have to compete with traditional salmon farmers to secure the service of turnkey recirculating aquaculture system (RAS) turnkey suppliers such as Norway’s AKVA group, Billund Aquaculture and Israel’s Aquamaof.

Where companies such as Atlantic Sapphire are succeeding is in getting investors on board. Besides Atlantic Sapphire, Denmark’s Nordic Aquafarms and Whole Oceans have secured some financing to develop land-based farms in Maine.

The economic rationale behind these projects is that the technology has been proven at facilities such as those currently operated by Atlantic Sapphire in Denmark, albeit at a smaller scale.

Norway’s largest bank, DNB, said land-based has the potential to disrupt the salmon industry. The bank’s leading analyst, Alexander Aukner, said that land-based salmon farms could deliver 341,000t of production by 2025, from 8,000t this year and 17,000t by 2020. The technology is still risky given that it has not been proven at a larger scale and the fact that salmon companies still experience failures at their RAS hatchery farms, he said.

To date, conventional salmon farmers such as Mowi and Agrosuper-owned Empresas AquaChile have utilized RAS technology to grow larger smolt and vastly improve mortality rates before fish are put in pens at sea. But the same farmers have said that using the technology to grow fish to harvest size is too risky.

Atlantic Sapphire’s success or failure is likely to determine the willingness of investors to invest in other projects going forward, analysts say. The company is scheduled to commission so-called post-smolt tanks in the third quarter of this year, a milestone that will be closely watched by the salmon industry.

Contact the author matt@sphericresearch.com


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