Alterra Ltd (ASX:1AG) (Alterra or Company) is pleased to announce it has completed the feasibility study for its planned 300-hectare avocado project located in Pemberton, Western Australia.
The study sought to test the viability of the proposed development and identify critical issues that may impact the bankability of the project.
It confirmed that the project could support a viable 300-hectare avocado orchard based on the following key assumptions:
- Land assembly and approvals are in place to support the project
- Project site is suitable for avocado production subject to implementing subsurface drainage
- Independent hydrological study forecasting water catchment out to 2050 found the project self-sufficient in water and able to meet peak water demands of 2.1 gigalitres per annum
- Project can be developed over three years
The study confirmed a development funding cost of $40.6 million, a minimum 30-year life of the project and a strong, double-digit internal rate of return. It also confirmed development completion could be achieved within three years.
The 300-hectare project is housed within a special purpose vehicle, Carpenters Beedelup Pty Ltd (Carpenters).
The majority of funding for Carpenters will be sourced from external equity and debt providers, with Alterra retaining a substantial minority interest. Alterra will provide long-term management services to the project. In addition, it is entitled to performance fees for both operational outcomes and any project sale to third parties.
With the feasibility study now complete, discussions with both equity and debt providers are underway with first external contributions expected in early 2021. Subject to availability of capital, Alterra plans to proceed with a 2021 planting of up to 50 hectares. The balancing 245 hectares will be planted over two years through to 2023.
To date, Alterra has incurred direct costs of c.$1.4 million in priming Carpenters, including funding an initial 5-hectare planting in October 2020 that has yielded crucial research data, including the performance of higher-density planting to optimise the full 300-hectare planting. Research is showing that increasing the number of trees per hectare, if successful, could result in a 67% higher yield per annum (up to tree age 6) based on yield performance data provided by French’s Group.
Images of avocado tree growth from the 5-hectare planting.
Carpenters 4.1GL Dam Construction Commenced
Construction of the 4.1 gigalitre dam to support the project is already underway. Originally, this was to be funded by Alterra with construction to start in late 2021 with the project relying on existing dam water on site for irrigation during the initial ramp-up phase.
However, the landowner from whom Alterra leases the Carpenters land, has elected to start construction early and to directly fund the build costs. This is in part due to permitting requirements that dam construction must be substantially commenced by June 2021 and any construction that extends beyond this permit may require a permit extension.
As part of this new arrangement, the Carpenters lease (see Appendix 1 in ASX announcement) has been amended to reflect:
- Landowner agrees to fund and construct the dam at their own risk
- Dam will be built to Alterra’s specification with oversight of construction
- Landowner gains access to an area of 31.9 hectares on the property to extract gravel
Alterra Chief Executive Officer Oliver Barnes said the results of the Carpenters study confirmed the opportunity for the Company to develop a large-scale project in a premium horticultural region.
“In pursuing this opportunity, we are adopting conservative assumptions around yield and market prices. However, we are also applying the best available technologies and horticultural practices to ensure Carpenters has the best chance for outperformance,” said Mr Barnes.
Alterra continues to further its pipeline of project opportunities in the south-west of Western Australia, targeting premium horticulture developments through the repurposing of water and land.