August 3, 2016

After nearly two years of negotiations, China’s Shanghai Zhongfu – doing business in Australia as Kimberly Agricultural Investments (KAI), has reached a $100 million sale and leaseback agreement with Consolidated Pastoral Co. (CPC) for the historic Carlton Hill cattle station.

The transaction has already gained approval by the Foreign Investment Review Board (FIRB), the government of Western Australia, and Treasurer, Scott Morrison this past March.

“The matter was assessed by the government prior to the election and not deemed to be contrary to the national interest,” said Morrison.

Located in the Ord River District in the Kimberly of Western Australia, the acquisition of Carlton Hill is a more strategic move on KAI’s part than a simple station acquisition, as it will be a key factor in the expansion of KAI’s irrigated cropping farmland development project currently in stage two at the Ord River Dam irrigation area.

In 2012, KAI was granted the right to develop 14,000 hectares of irrigated cropland along the Ord River under a 50-year lease at $1 per year in exchange for a commitment to invest $600 million in irrigation, farming operations, processing plants, and employment according to The Australian.

However, only 1,650 hectares of irrigated farmland producing chia, quinoa, and maize have been fully developed to date.

Under the terms of the agreement KAI will pay CPC a $70 million cash payment for the property, then the bulk of Carlton Hill will be leased back to CPC for the next ten years through a $30 million leaseback deal. CPC will continue to run approximately 50,000 head of cattle on the land, with the exclusion of 14,000 hectares of freehold land which will be developed by KAI into irrigated cropland.

The addition of this land will enable KAI to grow sugar, cotton, sorghum, and other grain crops at a large enough scale to justify the construction of its food processing facility at Kununurra. Other possible value-addition facilities that KAI is considering are a $400 million sugar mill, a biofuel million, a cotton gin, a cattle abattoir, a grain grinding facility, and a fermented sorghum baijiu plant according to The Australian.

“We see the relationship with KAI as very much a partnership but they will run the cropping operation and be fully in control of the cropping operation and we will be in control of the cattle operation,” CPC CEO Troy Setter told ABC. “We do see significant opportunities for both of us to work together with combining cattle and cropping together.”

Although KAI is currently not active within the cattle or beef industries in Australia, Setter told Beef Central that the tie-up between the two groups could provide for future synergies.

“It’s a partnership, and we’re going to explore opportunities that may be mutually beneficial to both companies, to increase both cropping and cattle production,” said Setter. “With further development of the Ord cropping infrastructure, there’s likely to be further opportunity to expand cattle production in the region.”

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Lynda Kiernan