Mowanjum Irrigation Business Plan 8.pdf

8/11/2019 Mowanjum Irrigation Business Plan 8.pdf

1/32

Mowanjum Irrigation Business Plan Commercial in Confidence

Page 1 of 32

Mowanjum IrrigationBusiness Plan for Irrigation Development forintensification of MowanjumsPastoral Lease

Version 1

13 May 2014

Prepared forMowanjum Aboriginal Corporation

by Richard Smith, BSc(Agric), Dip Agric Econ, Ph. D.([email protected],08 9384 3308)

Mowanjum Pastoral

Mowanjum Irrigation
mailto:[email protected]:[email protected]:[email protected]:[email protected]


2/32


Page 2 of 32

Methodology and Assumptions

This first version of the Business Plan was developed for the Mowanjum AboriginalCorporation (MAC) in response to an initiative of the Department of RegionalDevelopment (DRD) to sponsor the development of intensive agriculture in the Derby

area. Department of Water Resource will bear the initial cost of developing the ground water

resources to support irrigated agriculture based on centre pivot irrigation technology

DRD will fund the first centre pivot of 38ha at Mowanjum to evaluate the economicpotential of irrigated perennial tropical pasture to fatten weaners for the live exportmarket.

Gross Margin Analysis of fattening cattle for live export from irrigated fodder crops orpasture will be used to assess the economic potential for MAC to improve its economicindependence.

Gross Margin (gross income less direct production costs) is the amount generated will beused to determine the ability of the irrigation enterprise to contribute to the overhead or

fixed costs. Growth of perennial pasture based on intensively irrigated and fertilised perennial

tropical grass will be the most cost efficient irrigation enterprise for Mowanjum.

The most efficient utilisation of the pasture will be by grazing of 200kg steers forfattening to a market weight of 300kg along with the strategic cutting of the pasture forhay or baled silage by a contractor for feeding to the breeding herd to improve theircalving percentage, thereby producing more weaners for fattening.

The development will improve the social and economic conditions of the indigenouspeople through employment and stimulate education of younger members for the jobsthat will become available from the regional development of irrigation.

Irrigation, Agronomic and Economic Consultants will be necessary to ensure a high levelof technical and economic efficiency. Six monthly acquittal reporting of Governmentfund contributed to the project will be critical.

Water and nutrients will be the major limiting factors to pasture growth and irrigationwith high nitrogen input will be required year round to achieve optimum production.

The irrigated pasture will be harvested by strip grazing and baling to achieve 80%utilization of the grown feed.

Fattening of weaners to optimum weight for the live cattle trade is limited to the 3-4month wet season and is severely limited during the 8-9 month dry season. However it isanticipated that irrigation and nitrogen fertilisation will be required year round.

Nutritive value of pasture is limited throughout the year due to limited protein content.

This limitation will be overcome through application of liquid nitrogen through theirrigation system to both maximise pasture growth but also to boost protein content.

Frequent grazing or cutting to maintain the perennial pasture in the vegetative growthstage will be important. Digestibility and protein content declines rapidly when pasturesmove into the flowering stage o phonological development.

Risk will be minimised by maximising cash flow from the fattening of cattle or cuttinghay to increase the calving percentage.

Many of the assumptions have yet to be verified and further updates of this Buisness Planwill be needed as further information comes to hand.


3/32


Page 3 of 32

TABLE OF CONTENTS

Executive Summary ................................................ ......................................................... ..................................... 5

1 Background ................................................................................................................................................ 7

1.1 Mowanjum ................................................ ......................................................... ..................................... 7

1.2 Property Location ........................................................................................... ..................................... 81.3 Irrigation Assessment ................................................................................... ..................................... 9

2 Proposal ............................................... ......................................................... ............................................ 12

2.1 Mission Statement, Vision and Objectives .............................................................................. 12

2.2 Irrigation Infrastructure ................................................. ........................................................ ....... 12

2.3 Establish a 38 hectare Centre Pivot ......................................................... .................................. 12

2.4 Costs of implementing the proposed Irrigation System .................................................... 14

2.5 Capital Cost of Site Works (GWW) ................................................. ............................................ 14

2.6 Research, Development and Advisory Costs (GWW).......................................................... 14

2.7 Direct Production and Leasing Costs ........................................................................................ 15

3 Sources of Funding ............................................................................................................................... 16

3.2 Stakeholders ....................................................................................................................................... 16

3.3 Business Structure & Management...................................................... .................................. 17

4 SWOT Analysis..................................................... ....................................................... .......................... 21

5 Competitive Analysis.................................................. ....................................................... ................. 23

5.1 Competitors...................................................... ....................................................... .......................... 23

5.2 Competitive Advantages ............................................................................................................. 23

6 Research Results for Irrigated Beef Production .......................................................... .............. 24

7 Modelling the Mowanjum Irrigation Enterprise ...................................................... ................. 26

7.1 Assumptions ....................................................................................................................................... 26

7.2 Meteorological Data and estimate of Soil Water Deficit .................................................... 27

7.3 Herbage to Liveweight Gain Conversion ................................................................................. 28

7.4 Irrigation Scheduling ......................................................... ....................................................... ....... 28

7.5 Summary of Costs from Section 2 ................................................... ............................................ 29

7.6 Financial Sensitivity Analysis ................................................. ...................................................... 30

7.7 Discussion of Economics of Mowanjum Irrigation Enterprise ....................................... 31

8 References ..................................................... ......................................................... .................................. 32

TABLE OF TABLES

Table 1: Summary of Costs for establishing and annual running a 38ha Centre Pivot .............. 5

Table 2: Economics of the first centre pivot for optimal conditions ................................................. 6

Table 3: Economics of the first centre pivot for sub-optimal conditions ........................................ 6

Table 4: Capital Cost of Establishing the First Centre Pivot ............................................. ................. 14


4/32


Page 4 of 32

Table 5: Research, Development and Advisory Costs .................................................. ........................ 14

Table 6: Direct Production Costs ................................................... ........................................................ ....... 15

Table 7: Leasing Costs for Pivot, Pump and Power ....................................................... ........................ 15

Table 8: Training Plan ...................................................................................................................................... 20

Table 8: Model Assumptions .................................................. ....................................................... ................. 26

Table 9: Meteorological Data ................................................. ....................................................... ................. 27

Table 10: Herbage to Liveweight Gain (at $2.2/kg) ............................................................................. 28

Table 11: Irrigation Scheduling Requirements ...................................................................................... 28

Table 12: Sensitivity to variations in price of LWG, for optimal feed conversion efficiency andpasture production ................................................. ......................................................... .................................. 30

Table 13: Sensitivity to variations in price of LWG, for sub-optimal feed conversion efficiencyand pasture production ............................................................................. ...................................................... 30

TABLE OF FIGURESFigure 1: Mowanjum Station Location ................................................. ......................................................... 8

Figure 2: Hay and Silage Making .......................................................................................... ........................ 10

Figure 3: Mowanjum Station .................................................. ....................................................... ................. 11

Figure 4 Diagram of First Centre Pivot ............................................................................ .......................... 12

Figure 5: Overall Centre Pivot Layout Design ........................................................................ ................. 13

Figure 6: Mowanjum Corporate Structure ........................................................................................ ....... 19


5/32


Page 5 of 32

Executive Summary

The Mowanjum Aboriginal Corporation (MAC) holds a Pastoral lease over 55,000 hectaresof good quality grazing land situated just outside Derby in the West Kimberley. This lease,underutilized for the last 40 years, is now in production following a $1m investment. Thecurrent herd is 500 breeding cows, 350 weaners and 150 calves. Potential carrying capacityis 3,000 breeders with only half of the lease developed with paddocks and watering points.

Therefore when fully developed the Mowanjums Pastoral lease could carry a 5,000 headbreeding herd.

Intensification of Mowanjums cattle enterprise by irrigation would enable MowanjumPastoral Inc. to reach its potential carrying and fattening capacity. In so doing it would boostthe economy, training, and employment of local Indigenous people. Indigenous communitieswith viable cattle enterprises progress better, socially and economically, than those without(Shaw, 2012).

The objective is to fattening weaners year round for live export from their breeding herd.The long term plan is for five Centre Pivots of 38 ha each providing from groundwater over

190 ha of irrigated land.Summary of the estimated costs of establishing the first centre pivot of 38 hectares andoperating for the first year estimated by GGW to be:

Summary of Costs (from Section 2)

DIRECT PRODUCTION EXPENSES per year including Mowanjums labour cost of

$50,000 pa329,200

LEASING COSTS FOR PIVOT, PUMP and POWER SOURCE per year159,506

RESEARCH, DEVELOPMENT and ADVISORY COST per year 122,300

CAPITAL COST OF ESTABLISHING the FIRST 38ha CENTRE PIVOT 1,127,301

TOTAL COST in Year One1,738,307

Estimated Cost of adding each additional centre pivot $382,046

Table 1: Summary of Costs for establishing and annual running a 38ha Centre Pivot

The economics of a single 38 ha centre pivot irrigation system was evaluated on theassumption that 80% of irrigated pasture grown would be eaten by fattening steers of 200kgweight growing to a weight of 300kg at a weight gain of 1.2kg/day. Two possible outcomeswere predicted for optimum conditions of 1) A Feed Conversion Efficiency of 1:7 from 36tonnes/year of pasture production (GGW estimates) and suboptimal conditions of 2) A FeedConversion Efficiency of 1:14 or pasture production on only 18 tonnes/ha. Periodicallywhen steers are not available for fattening surplus grass will be baled as hay or silage bycontract to supplement the breeding herd to increase their calving percentage. It is assumedthat these calves or sale of the hay will produce an equivalent economic return to that fromfattening cattle.


6/32


Page 6 of 32

Production under Optimal ConditionsGGW predictions

Feed Conversion Efficiency of 1:7 from Pasture Production of 36 tonnes/ha/year

Price/kg LWG $1.0/kg $1.5/kg $2.0/kg $2.5/kg $3.0/kg $3.5/kg

Gross Return 38ha pivot$194,727 $292,090 $389,454 $486,817 $584,181 $681,544

Gross Margin (Gross

ReturnDirect Costs)-$134,473 -$37,110 $60,254 $157,617 $254,981 $352,344

Gross Margin - Leasing

Costs-$293,979 -$196,615 -$99,252 -$1,888 $95,475 $192,839

Gross Margin - R&D Cost-$416,279 -$318,915 $221,552 $124,188 -$26,825 $70,539

Gross Margin - 20%

Capital Cost-$641,739 -$544,376 $447,012 $349,649 $252,285 $154,922

Table 2: Economics of the first centre pivot for optimal conditions

Production under Sub-Optimal Condition50% of GGW predictions

Feed Conversion Efficiency of 1:14 or Pasture Production of 18 tonnes/ha/year


Gross Return 38ha pivot $97,363 $146,045 $194,727 $243,409 $292,090 $340,772

Gross Margin (Gross

Return less Direct Costs)-$231,837 -$183,155 $134,473 -$85,791 -$37,110 $11,572

Gross Margin less Leasing

Costs-$391,342 -$342,661 $293,979 $245,297 $196,615 $147,934

Gross Margin less R,D&A

Costs-$513,642 -$464,961 $416,279 $367,597 $318,915 $270,234

Gross Margin less 20%

Capital Cost-$739,102 -$690,421 $641,739 $593,057 $544,376 $495,694

Table 3: Economics of the first centre pivot under sub-optimal conditions

Conclusions

Under optimum conditions Mowanjums Gross Return will only cover the direct costs ofproduction of $329,000 if liveweight cattle prices are above $2/kg (Table 1). To cover theleasing cost would require that cattle prices to be above $3/kg.

Under sub-optimal conditions there would be no positive Gross Margin therefore achievingthe potential of this sub-tropical environment through state of the art agronomy, irrigation,nutrient and grazing management is paramount for the success of this project.

The annual Research, Development and Advisory cost of $122,300 will yield up valuable technical

and economic data for future investors in such irrigation enterprises in the region. This cost hastraditionally been borne by Government for the public good. Government has traditionally made theIntellectual Property gained freely available to potential investors. Therefore it is assumed that thiscost will be borne by the Government as part of their commitment to regional development in theDerby West Kimberley Shire.


7/32


Page 7 of 32

1 Background

1.1 Mowanjum

The Mowanjum Community was established as a working pastoral station near Derby in themid-1950s by the Presbyterian Church as part of their Mission. This was a natural way torespond to the needs of an Aboriginal community displaced from country. The community

has suffered significant dislocation similar to other Aboriginal communities in remote areas.

The aims of establishing Mowanjum Irrigation is to increase the benefits of their pastorallease by expanding the:

Fattening of weaners year-round for the live export market

Training of younger members of the community through building on a long and

successful tradition of their elders in the pastoral industry

To maximizes the benefits from their pastoral lease and overcome their welfare

dependence, alcohol, poor health and high incarceration and suicide rates.

To create a viable path to economic self-management at a low cost to government in

support of Aboriginal aspirations of sovereignty, management of land in their care

and economic independence.

Most MAC members reside in the Mowanjum Community. The community is composed ofthe Ngarinyin, Worora and Wunambul clans who have no traditional ties to the MowanjumIrrigation lease are, but have family ties that extend north and east. Over 100 young peoplein the community will benefit over the first 10 years from enhanced training andemployment opportunities provided by development of Mowanjumsirrigation enterprise.

Mowanjum community is on Reserve R1326/1434 vested with the Aboriginal Lands Trust.There are currently between 290-350 people living full-time in the Mowanjum community.The actual figure changes according to the season (e.g., muster time, festive season,ceremonial periods).

MAC was registered with the Office of Registrar of Aboriginal Corporations (ORAC) in 1981under the Aboriginal and Torres Strait Islander Act 2006 (CATSI Act). MAC is made up ofmembers of family groups which live and work in the Mowanjum community. MAC has anoperating governing structure. All governance and financial details of MAC are internetaccessible (ORAC, 2012).

Mowanjum Aboriginal Corporation (MAC) controls various tracts of land, including apastoral lease, unencumbered freehold land, crown land grazing licence and reserve. The

majority of these various tracts have been amalgamated into the one pastoral lease. Cattlewere run by local indigenous people on Mowanjum property from the 1960s until the early1980s when the mission era ended. Subsequently social problems developed associated withunregulated access to alcohol, passive welfare and government policy failures. TheMowanjum community is determined to reverse this trend by developing its human and non-human assets.

Establishment of Mowanjum Irrigation as a commercially viable enterprise of MAC is centralto Mowanjums strategic plan to overcome its social problems by becoming an economicallyself-sustaining community. MACs aspiration for Mowanjum Irrigation is to build thebusiness to provide training and employment as well as community development and

cultural opportunities for the people of Mowanjum. The irrigation enterprise willsignificantly expand the productive capacity of Mowanjums pastoral lease enabling adoubling of carrying capacity from 1,500 to 3,000 breeding cows and number of fattenedcattle from 1,000 to over 2,000 each year.


8/32


Page 8 of 32

Mowanjum Irrigation forms part of a portfolio of MAC businesses which include DerbyWorkforce, Mowanjum Driving Academy, and the King Sound Gravel joint venture. Otherbusinesses such as fuel distribution and a Caravan Park with Service Station on Mowanjumsroad frontage on the Derby-Broome road are being investigated with assistance of theIndigenous Business Association.

1.1.1 Property Size

Mowanjums 55,000ha compares with a typical pastoral lease of 320,000ha (DAFWA, 2009).Thus longer term profitability of Mowanjum Pastoral depends on intensification of itsproduction through use of irrigation.

The economic viability of this strategy has been verified by modelling and financial analysis(section 7). The diversity of MACs income sources based on an expanding portfolio ofbusinesses, gives MAC the ability to withstand a downturn in the live cattle export industry.Employing Russ Contracting provides the expertise and the economies of sub-contracting.

1.2 Property Location

Mowanjum Pastoral Lease 3114/1008 is located about 10 kilometres south of Derby, alongthe main Derby road. As shown in Figure 1, the property is in the Shire of Derby WestKimberley, within the West Kimberley Land Conservation District. It neighbours are theMeda, Yeeda and Debesa stations, the Derby town reserve and Derby RAAF facility.

Figure 1: Mowanjum Station Location

Mowanjum property incorporates the Pastoral Lease, which occupies approximately 55,000hectares.

Grazing Lease 295/109 runs on both sides of the Derby-Broome road in the northern end ofthe Pastoral Lease (see Map). There, freehold are blocks ranging in size from 50-90hadesignated in 1925 as the Knowsley Agricultural Area.

The above areas offer economic opportunities on the Highway for a Caravan Park and/or


9/32


Page 9 of 32

Service Station which MAC is currently exploring with Indigenous Business Australia. Inaddition MAC is negotiating a Fuel Delivery joint venture partnership for the Derby area.

MAC also has two freehold housing blocks with houses in the township of Derby thatprovides valuable collateral for borrowing from Westpac.

1.3 Irrigation Assessment

1.3.1 Infrastructure

Basic infrastructure of handling stock exists with the Trucking yards at 8 km from the GibbRiver turnoff. The proposed site for the irrigation pivots is about 14km along the Gibb RiverRoad.

1.3.2 Climate

Mowanjums climate is similar to Derby with an average rainfall of approximately 800mm.The usual growing season for pasture is between December and March with periodic dryspells where irrigation would be beneficial. Irrigation would be essential during theextended dry season from April to November.

1.3.3 Soil and Pastures

The main soil types are Pindan sands, marine plains and sand dunes, with a roughly evenmix of the three. The irrigation enterprise will be on Pindan soils.

1.3.4 Carrying Capacity

Under current land and pasture conditions, the estimated carrying capacity of the Pastoralproperty by DAFWA is 2,000 Large Cattle Units with potential to expand to 2,400 cattle unitswhen fully improved (Jeffery, 2007). This carrying capacity would be further expanded withaccess to irrigated pastures. The Pastoral Property would provide a source of Weaners forthe Irrigation Enterprise. In addition weaners could be purchase opportunistically forfattening. Similarly the irrigated pasture could be opportunistically harvested for hay for thebreeding herd.

1.3.5 Hydrology

There are numerous creeks and tributaries. The river and creek systems only flow aftersignificant rainfall. There are also numerous natural lakes and springs on the property.The quality and quantity of waterways on the property are dependent on the seasonalconditions and surrounding land-uses.

In addition to natural surface water, there are numerous bores on the property which haveproven to be very reliable water sources in both quality and quantity for previous Irrigation

enterprises.

The specific groundwater resources of the property and the region in general are unknown.Derby Township acquires its water from shallow aquifers that underlie the area, therefore itis anticipated that adequate ground water exists to support the development of irrigatedpasture for fattening to maximise prices for fattened stock and a fodder supply through hayproduction.

1.3.6 Weeds

Identified weeds on the property are Parkinsonia and Rubber Bush, which have beenclassified for control. This is an environmental management issue and therefore, an

operational management consideration.

1.3.7 Feral Animals

Cats are the main feral animal on Mowanjum station. There are no donkeys, pigs or other


10/32


Page 10 of 32

feral animals on the property. While not feral, the native agile wallaby would be attracted tothe irrigated past and enclosure fencing would be required.

1.3.8 Cattle Breeds

Markets in Southeast Asia prefer Bos indicuscattle, or those with better than 50% contentof Brahman, Droughtmaster or Santa Gertrudis. As a rule the more dominant the traits ofthese breeds in a beast, the more highly it will be favoured by exporters. Shorthorn (Bostuarus) are periodically discounted $0.20/kg below the equivalent Bos indicus price(DAFWA, 2009).

Figure 2: Hay and Silage Making


11/32


Page 11 of 32

Gibb River Road

Curtin Air Force Base

Derby

Figure 3: Mowanjum Station

Approximate Pivot 1 Location


12/32


Page 12 of 32

2 Proposal

2.1

Mission Statement, Vision and Objectives

Mission StatementWithin 5 years, build a commercially viable Irrigation business that will provide

employment and training opportunities for indigenous people, using state of the art

irrigation management practices to ensure maximum forage and meat production.

Members of the Mowanjum community aspire to self-determination, self-sufficiency, andfinancial independence. MACs vision is an Irrigation business that will provide employmentand training for young people of the Mowanjum community to prepare them for work in theIrrigation industry.

2.2 Irrigation Infrastructure

To enable increased stock of high quality to be carried, existing infrastructure needs to beimproved, additional construction undertaken, and improved fire management and animalhusbandry practices put in place.

2.3 Establish a 38 hectare Centre Pivot

To irrigate 40 hectares the length of the Centre Pivot is 350 metres.

The land where the Centre Pivot is situated will require clearing and fencing to enclose theCentre Pivot area and provide a laneway from the Central yards. Initially the Pindan Fence linefrom the Central Yards to the Gibb River Road to the east of Mowanjum will provide the lanewayto the Central Pivot area. There will need to be a boundary fence around each pivot with a

gateway for cattle access. In addition an circular inner fence may be needed to exclude the agilewallabies that predominates in this area. Movable electrical fencing will be used for strip grazingwith cattle being confined to the central yard with a watering trough while fencing is beingmoved.

Gate

Electric Fence for Strip Grazing

Pivot Irrigation Pipe

Fencing

Figure 4 Diagram of First Centre Pivot


13/32


Page 13 of 32

Figure 5: Overall Centre Pivot Layout Design


14/32


Page 14 of 32

2.4

Costs of implementing the proposed Irrigation System

2.5 Capital Cost of Site Works (GWW)

Capital cost of site works for Pivot 1 estimated by GWW (Richard Nixon, 2014)

CAPITAL COST OF ESTABLISHING FIRST 38HA CENTRE PIVOT - GWW $

Planning, Design and Supervision 160,000Baseline Data Acquisition & Training 54,000

Clearing - Jason Russ 25,000

Roads - Jason Russ 100,000

Fencing - Jason Russ 12,000

Donga 22,000

Pumping - Bore Pump 48,720

Piping - from Bore to Pivot 138,671

Power Supply and electrical - Solar Hybrid 111,200

Instrumentation and control 100,000

Site Development - Earth Works, Pumps, Pipes etc. 210,228

Irrigation system 61,866

Field prep and seeding - Jason Russ 53,616

Commissioning 30,000

Total $ 1,127,301

Table 4: Capital Cost of Establishing the First Centre Pivot

The Centre Pivot will be sown Rhodes grass with a base fertilizer rich in phosphate. Thesecapital costs are the estimates of Richard Nixon, GGW and still have to be verified for the actualsituation at Mowanjum.

2.6 Research, Development and Advisory Costs (GWW)

Annual Research, Development and Advisory Costs were estimated by Richard Nixon, GWW as:

RESEARCH, DEVELOPMENT and ADVISORY COSTSGGW (Annual) $

Daily Scheduling - Soil Moisture and Met data 18,720

Weekly Monitoring/ Off Site 9,360

Monthly Monitoring - water, nutrient, production 25,920

Monthly Review -Water and Nutrients 10,560

Quarterly Agronomics - Weeds, Leaf Tissue, Water, Hay, Soil 3,600

Quarterly Agronomy Review and Reporting 20,800Travel and Accommodation 12,000

Monitoring Equipment & IP Licenses 9,500

Analysis Costs - Plants, soil, water, hay 11,840

Total 122,300

Table 5: Research, Development and Advisory Costs

These services will be provided by a specialist hydrologist and agronomist from GlobalGroundwater (Australian Bore Consultants Pty Ltd: Hydrology Division. Services will provide:

Remote Telemetry of soil water level and meteorological conditions for precision

scheduling of irrigations (frequency and amount) to optimise pasture growth. Remote operation of the Centre Pivot when soil water status indicates.

Tissues testing of the pasture for nutrient status and supply of liquid nitrogen forfertilisation.


15/32


Page 15 of 32

Analysis of Hay, Silage and Pasture for digestibility and protein content.

Review of pasture production and animal production.

These estimated costs are based on the experience of GGW with Centre Pivot systems in thePilbara which are used by the Mining Industry to dispose of water from the dewatering of mines.

2.7 Direct Production and Leasing Costs

The annual direct production and leasing costs estimate by Richard Nixon, GGW (2014) are:

DIRECT PRODUCTION COSTS - GWW costings plus Mowanjums Labour cost $

Nitrogen Inputs for 38 hectares 76,000

Chemigation Unit Rental 12,000

Fuel for 38 hectares 21,600

Maintenance, services and repairs 10,000

Water delivery 136,800

Fodder Production Contractor 22,800

Mowanjum's Labour Cost 50,000

Total 329,200

Table 6: Direct Production Costs

The costs are the estimate of Richard Nixon, GGW to which has been added Mowanjums cost ofemploying Jason Russ to run the operations. It is not clear what the high water delivery chargerelates to. It is assumed that much of the additional labour will be employed under theAustralian Governments new Remote Jobs and Communities Program (RJCP) which is designed to

provide a more streamlined and flexible approach to employment, participation and community-development services in 60 remote regions across Australia. This will provide Mowanjums IrrigationEnterprise a ready source of indigenous labour. The Managers costs will be covered by his existingcontract with Mowanjum Aboriginal Corporation but will be a pro rata rate based on each animalsold but would probably add another $50,000 to the Direct Cost per annum.

The cutting of hay or baling of silage will be done by a contractor. This will avoid the investment inexpensive equipment.

LEASING COSTS FOR PIVOT, PUMP and POWER - GWW costings $

Centre Pivot 70,115

Irrigation Pump & Control Gear 19,360

Hybrid power system 70,030

Total 159,506

Table 7: Leasing Costs for Pivot, Pump and Power

These estimates of Leasing are from Richard Nixon, GGW and have not been verified.


16/32


Page 16 of 32

3 Sources of Funding

Mowanjum Aboriginal Corporation has extremely limited sources of funding and much of itcomes via short term Government grants for specific purposes.

3.1.1 WA Department of Housing

Annual grants support the CBT (community building team) who make there money from

department of housing from repairs and maintenance and also refurbishment of housing. Last2 tenders for refurbishment were for $1.2 million to be completed by May. These funds maintaina well equipped workshop and body of skilled persons for periodic repairs.

3.1.2 Mowanjum Aboriginal Corporation

3.1.3 Mowanjum Driving Academy (a business of MAC)

MDA will provide access to its two dual control cars for driving lessons for licensed instructors.A drivers license it essentially mandatory in order for Trainees to be employable.

3.1.4 Mowanjum Community Resource Centre (a business of MAC)

With funding from RDLs Royalties for Regions, Mowanjum CRC provides access to computerswith free access to Government Web Sites for Mowanjum Irrigation Trainees to undertaketheoretical driver training. Access will also be provided to computers and internet to facilitatework towards TAFE Certificate II in Business Administration and Rural Operations.

For Certificate II Rural Operations, a new module could be introduced on use of near real-timesatellite data for assessing stock carrying capacity (Vegetation Watch, 2012) and for prescribedburning for fire management (FireWatch, 2012), with training sourced from Satellite RemoteSensing Services, Landgate.

3.1.5 King Sound Gravel (a joint venture with MAC)

King Sound Gravel provides an ancillary source of income to ensure MACs financial viability inthe event of a downturn in the cattle export market.

3.1.6 Derby TAFE (training possibilities).

Jason Russ has previously run courses for Derby TAFE in pastoral management. Proximity toDerby of only 12Km makes Mowanjum Pastoral Lease easily accessible for training in all aspectsof Pastoral Management. With the irrigation enterprise the possibly of training in intensiveagriculture exist once the enterprise is establish with emphasis of pasture establishment,irrigation scheduling, plant nutrition, and intensive grazing management.

3.2

Stakeholders

3.2.1 Mowanjum Aboriginal Corporation (MAC)

MAC was officially incorporated under the provision of the Association Act 1976, and wasofficially granted its Certificate of Incorporation and Rules of Association in 1981 (MOW, June2006). It now operates under the Aboriginal and Torres Strait Islander Act 2006 (CATSI Act).

MAC controls various tracts of land, including a pastoral lease, unencumbered freehold land,crown land grazing licence and reserve. One of MACs aims is to support the development ofcommunity members through providing opportunities of mainstream employment and thesupport of income generating projects.

3.2.2 WA Department of Regional Department of Development (DRD)

DRD with funds from Royalties of Regions available (one billon dollars per year) seeks topromote regional development. The regional groundwater resources around Derby provide onesuch opportunity to diversify the local economy.


17/32


Page 17 of 32

3.2.3 WA Department of Water

Exploration of groundwater, establishment of bores capable of supporting irrigation flow ratesof 30 l/s for centre pivot operation and monitoring of water tables.

3.2.4 WA Department of Agriculture and Food WA (DAFWA)

DAFWA assists the State's Agriculture be sustainable and profitable, with a clear focus on

export-led growth. Kimberley Indigenous Management Support Service (KIMMS) is aninitiative funded by DAFWA and ILC. They will provide updated maps of the lease.

3.2.5 Indigenous Land Corporation (ILC)

ILC is an Australian Government authority that assists Indigenous Australians acquire landand manage Indigenous-held land in a sustainable way to provide cultural, social, economicand/or environmental benefits for themselves and future generations.

3.2.6 Technical and Further Education (TAFE)

TAFE in Derby will provide training courses and certification.

3.2.7 Winun Ngari Aboriginal Corporation (WNAC)WNAC in Derby is a training and RJCP provider. From 1 July 2013 the Australian Governmentsnew Remote Jobs and Communities Program (RJCP) will provide a more streamlined and flexibleapproach to employment, participation and community-development services in 60 remote regionsacross Australia. This will provide Mowanjums Irrigation Enterprise a ready source of indigenouslabour.

3.2.8 Pastoral Lands Board

The PLB establishes grazing lease requirements of Crown Land and will be enacting the 2015review.

3.2.9 Russ Contracting Pty LtdRuss Contracting Pty Ltd will be contracted to run the irrigation enterprise covering alloperating costs at a cost of $110 per head compared with $120 per head for large standaloneKimberley Irrigation Leases (DAFWA, 2009). Jason Russ has a significant mustering andmaintenance contract with Christmas Creek with 14,000 head of cattle and has beenapproached to provide mustering for Mt Barnett. For these contracts Jason Russ employsMowanjum Trainees as part of his contract team.

3.2.10 Department of Corrective Services WA

An MOU is being negotiated by Steve Austin, CEO to provide training services to the new

Derby Prison who will also be a source of TAFE trainees.3.2.11 Shire of Derby West Kimberley

Mowanjum is a member of and significant rate payer of the Shire of Derby West Kimberley. TheShire of Derby/West Kimberley covers a vast area of 118,560 square kilometres and is locatedmore than 2,000 kilometres north of Perth. In the Shire there are numerous Aboriginalcommunities and two main towns: Derby and Fitzroy Crossing.

3.3 Business Structure & Management

Mowanjum Irrigation will be run as a business enterprise of MAC under the direction of CEOSteve Austin and the Mowanjum Council. Trusts are being investigated to isolate each from thecollapse of any one enterprise.

Management will be contracted to Russ Contracting Pty Ltd, for a fee of $110/head per year oflivestock purchased for weaner fattening by Mowanjum Irrigation. Contract will include all


18/32


Page 18 of 32

livestock operating costs. All administrative services will be provided by MAC who already paythe insurance, Derby Shire rates and Irrigation Board rent and asset replacement associatedwith the Irrigation lease.

3.3.1 Future Administrative Structure and Succession Plan

Mowanjum Irrigation increases MACsbusiness enterprises and number of government grantsand training being undertaken ideally requires an Administrative Officer for efficientmanagement of all these enterprises, grants and community Services (Morgan, 2012).

The administrative structure recommended is:

1. Board2. CEO-Business Manager (Steve Austin)3. Senior Administrative Officer (new position)4. Senior Financial Officer (Nardia Gerrard)5. Junior Financial Officer (new position) for off-site business enterprises

These positions and other administrative costs would be funded by a 10% administrative levyon all grants, turnover of business enterprises and community services. Positions 3 and 5

provide the basis of a succession plan for when either the CEO or SFO depart MAC.

3.3.2 Corporate Structure

The proposed corporate structure for Mowanjum Irrigation is depicted in

was recommended in a recent review of MACs business activities (Marin, 2012) forestablishing a joint venture for fuel distribution. The proposed structure minimises the financialrisk of any one enterprise compromising MACs financial viability. For Mowanjum Irrigationthis would minimise the risk of MACs Directors compromisingits financial viability. The latteris achieved by putting MAC at arms length through a separate (Pty Ltd) governance structure

and appointment of independent Directors with a commercial focus. Ultimately, MAC is theparent organisation but within the structure profits can be retained within MowanjumIrrigation for further development of the Irrigation enterprise or distributed to its shareholderwhich is Mowanjum Enterprises.

This structure has been adopted for Mowanjum Pastoral and is of particular relevance to theWA Governments 2015 Pastoral Lease review where one of the criteria will be the soundnessand stability of the Governance structure to ensure compliance with the terms of the lease(Brian Lloyd, 2012 Personal Communication). PLBs preference is for a sub-lease, but such anarrangement could compromise MACs objective of providing employment and training.Therefore the proposed corporate structure should meet the objectives of PLB and MAC.

Mowanjum Irrigation could operate as an enterprise of Mowanjum Pastoral or be incorporatedas a separate Pty Ltd company. MAG will need to decide the best course of action in the light ofthe administrative cost of running two separate Pty Ltd companies.


19/32


20/32


Page 20 of 32

3.3.3 Training

PerTable 8: Training Plan,Mowanjum Pastoral will train its employees and ensure training isprovided on an ongoing basis, to maintain a high level of job performance and employability.

This training will include Mowanjum Irrigation expanding the range of skills.

Table 8: Training Plan

Course/Certificate Name Training provider Number of Participants

Yr 1 Yr 2 Yr 3 Total

Certificate II in Rural Operations TAFE 10 10 10 30

Governance Training OIC 5 5 10

Business Administration ENAC 4 4 5 13

Automotive Servicing ENAC 5 6 7 18

DriversLicense Mowanjum Driving Academy 7 7 6 20

Total 31 32 28 91


21/32


Page 21 of 32

4 SWOT Analysis

4.1.1 Strengths

Availability of suitable soils, groundwater and access to power suitable for Centre Pivotirrigation.

The property can easily be accessed throughout the year (on horseback during the wet

season), meaning that cattle can be moved along the laneway to the Centre Pivots.

Close proximity to Mowanjum Community, which allows staff to arrive at work daily.

Steve Austin, CEO, has good business experience in the trucking industry and withmanaging other Aboriginal Corporations.

Russ Contracting Pty Ltd has a mustering and maintenance contract of 10 weeks per

year with Christmas Creek which runs 14,000 head on over 200,000ha. Russ

Contracting Pty Ltd will be contracted to run the Irrigation Enterprise.

Mowanjum community members are highly motivated to be involved in the business,

evidenced by the number of people who engaged with the TAFE training.

4.1.2 Weaknesses and Mitigations

Lack of capital for infrastructure and cattle to realize productive potential.

o Grants from DRD, ILC and finance from Westpac.

Profitability of grazing systems sensitive to stocking rate

o Investment in more paddocks, bores, trap yards and pasture improvements tomaximize carrying capacity.

Lease will be run directly by MAC to minimize overhead costs, to capitalize on itsfreehold assets to access seasonal finance and to provide diversification to minimise risk.

Lack of Irrigation Management expertise contract GGW Consultant Richard Nixon toprovide technical advice.

Lack of administrative capacity and succession plan,

o Appoint an administrative officer.

4.1.3 Opportunities

Development of irrigation enterprise for year round fattening and supplement ofbreeding herd..

To provide meaningful work for Mowanjum people and training and skills to becomeemployable in Kimberley Pastoral industry.

Through intensive grazing provide a service to other stations that require their cattle tobe fattened before sale.

To attract funding for training Rural Traineeships

Become Derby regional TAFE training centre for indigenous people to enter into full timeemployment in the Irrigation industry.

Develop a new administrative structure for MAC with a Senior Administrative Officer

and basis for future succession.

Include in the existing primary and secondary education curriculum the effective use ofland incorporating a Historic centre for the involvement of Aboriginal people in the


22/32


Page 22 of 32

Kimberley Irrigation industry

4.1.4 Threats and Mitigations

Low cattle prices due to market fluctuations

o Sales projections use average cattle prices over the past few years, todemonstrate financial viability even in an unfavourable market

o Weight gains of cattle are modelled as below average.

o The market will be monitored to ensure planning is in place to counter low prices.

Politics and jealousy among Mowanjum groups

o Maintain a professional approach; employ workers from outside Mowanjum ifnecessary.

Mowanjum people thinking they own the station, so trespass for killers whenever theylike

o Communicate with Mowanjum Council to ensure the agreement is honoured by

the community members, enforce trespassing policy, and provide the agreednumber of killers per year.

Vandalism through cutting fences and lighting fires

o Again work with the Mowanjum Council as above.

o Develop community activities for young people such as the Community ResourceCentre and sports activities to reinforce positive values and respect for propertybelonging to others.

Level of commitment to training displayed by employees

o

Talk to them to find out what problems there may be, make the training fun andinteresting to ensure high level of participation.

Contracting Irrigation Management

Success of Russ Contracting Pty Ltd demonstrates Jasons competence in cattle, businessand Aboriginal management, and commitment to development of Mowanjums lease into

a profitable cattle and Indigenous training enterprise.

Jason Russ is an Indigenous pastoral contractor keen to pass on his extensive skills in acollaborative relationship with Mowanjum and TAFE. His pastoral contracting businessprovides a unique opportunity for Aboriginal people to learn his skills. He is already assource of contact and employer for future employment of trainees.

Proximity to Derby makes Mowanjum Irrigation an attractive working proposition forJason Russ compared to larger more remote Pastoral leases.

Jason Russ (8th July, 2012) has quoted $110 per head per year for running MowanjumIrrigation.

Benefits of a long-term Sub-Contract business model for Management of MowanjumIrrigation are:

This contractual business model conforms with the central importance of Aboriginal landdevelopment and control, essential for providing a sustainable economic base for Aboriginal

economic independence as an alternative to passive welfare (Gary Folley, 2011).


23/32


Page 23 of 32

5 Competitive Analysis

5.1 Competitors

Competition will come mainly from local Kimberley stations, primarily supplying cattle for thelive export market in Broome.

These same stations are also a source of income from sale of agistment, unbranded stock,lease of yards and source of stock to purchase to fatten.

5.2 Competitive Advantages

High productivity of coastal flood plains, suitable for successful cattle production andfattening own stock and stock from neighbouring properties. Suitable for pastureimprovement with legumes and more productive species using grazing cattle as seeddistributors.

High quality of underground water, ensuring ongoing supply of freshwater.

Water accessibility ( from 10 below the surface) the depth of the water allows

for very cost effective methods of accessing water. Also the possibility of developingirrigated pasture for fattening in the dry season and for forage and seed production.

There is no permanent surface water on Mowanjum, which means that cattle willnaturally come in to drink from available water points (bores) that will be fenced (cattletraps). Therefore, the cattle will muster themselves, resulting in easier managementand reduced mustering costs.

The property has the ability to move cattle quickly off the property, which makesroom for other, younger cows, and therefore increases the turn off rate on the propertyand the level of sales, while maintaining the carrying capacity over the year.

The cattles peak condition is in the wet season, and most other properties are unable totransport them off the property in the wet, missing the high prices of the early market.The majority of cattle sold out of the Kimberley region are not sold in prime condition,due to wet season access problems. Mowanjum landscape and access to the Derbyhighway and flood plain soils means that it can muster from March and sell cattle inprime condition, achieving significantly higher income and turnover of stock.

Close proximity to the Derby highway, high water quality and feed availability presentan opportunity to develop intensive grazing to allow Mowanjum to increase numbers byalmost 50% within a short period of time. Providing a service to other propertiesthat require their stock to be fattened is a lucrative option for Mowanjum. It can

then decide whether to purchase the stock and finish them off (fatten them beforeshipping) or sell agistment.

The Irrigation Enterprise will increase these competitive advantages and provide theadded opportunity of selling high quality hay in the dry season or baled silage in the wetseason.


24/32


Page 24 of 32

6 Research Results for Irrigated Beef Production

With high nitrogen inputs of about 800 kg N/ha and adequate soil water grass yields of over20 tonnes per hectare can be produced (Teitzel et al. 1991). This is rain fed, therefore withirrigation it is expected that this level of production would be exceeded. Projections by GGW

are that levels of production of 36 tonnes/ha/year should be achievable.

Livestock of 200kg weight can gain 1 kg/ha on a high quality intake of 17 Mcal/day ofMetabolizable Energy (Figure ) and field trials on tropical pastures both rainfed and irrigatedindicate that live weight gain of 1000kg/ha/year could be produced. Thus for a 38 hectareCentre Pivot this would translate into a potential income of $80,000 per year of production.

These assumptions were used in the following forecasts.


25/32


Page 25 of 32


26/32


Page 26 of 32

7 Modelling the Mowanjum Irrigation Enterprise

An analysis was done using a simplified model of irrigation water demand, pasture growth,animal feed intake and conversion of pasture to meat based on a set of scientific assumptions.This modelling was done independently of GGW then compared later and calibrated againsttheir results to predict the best case scenario. The initial assumptions made in the model were:

7.1

AssumptionsAssumptions

Solar Irradiance of 1 cal cm-2day-1= 41.868 kJ m-2day-1

Temperature is non limiting for pasture or forage growth

Leaf Area Index of pasture 2

Grazing feed utilization efficiency 0.8

Nutrient limitation multiplier 0.8

Digestibility of pasture or fodder 0.8

Metabolisable Energy/kg of Digestible Feed 3.6

Metabolisable Energy/kg of Feed in Mcal 2.88

kg/McalME/day - intake of Cattle 16.3

Market value $/kg of Live Weight Gain 2.2

Centre Pivot area (ha) 38

Live Weight Gain per day per beast kg/beast 1.2

Table 9: Model Assumptions


27/32

Mowanjum IrrigationBusiness Plan Commercial in Confidence

Page 27 of 32

7.2 Meteorological Data and estimate of Soil Water Deficit

The data inTable 10 is drawn from the Bureau of Meteorology.

Meteorological Data - Derby Airport Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual

Mean maximum temperature (C) 35.2 34.3 35.1 35.5 32.7 30.4 30.6 32.6 35.3 37 38.1 37.2 34.5

Mean minimum temperature (C) 25.7 25.4 25 22.7 18.8 15.6 14.8 16 19.5 23 25.5 26.3 21.5

Mean rainfall (mm) 198.8 201.1 135.3 25.7 19.5 8.5 7.5 0.8 1.1 2.6 12.8 71.6 690.7

Median monthly rainfall (mm) 168.2 178.8 86.8 10.2 0.2 0 0 0 0 0 5.1 47.6 706.2

Pan Evaporation (mm) 250 240 230 200 200 180 180 200 210 250 290 300 2730

Actual Evaporation (mm) 80 90 75 30 25 20 18 15 15 20 30 75 493

Soils water deficit (0.8 pan evap - rain) (mm) -1.2 9.1 -48.7 -134 -141 -136 -137 -159 -167 -197 -219 -168 -1498.7

Daily Solar Exposure Mean MJ m-2 23.2 22.6 22.9 21.8 18.9 17.3 18.6 21.6 24.7 26.8 27.4 25.3 22.6

Daily Solar Irradiance (1 cal cm-2day-1) 554 540 547 521 451 413 444 516 590 640 654 604 540

Table 10: Meteorological Data


28/32


Page 28 of 32

7.3 Herbage to Liveweight Gain Conversion

Herbage-to-LiveWeight Gain at $2.2/kg Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual

Potential Herbage Growth Rate( kg/ha/day) 194 192 193 189 176 168 175 188 199 206 207 201 68,620

Actual Herbage Growth Rate LAI of 2 (kg/ha/day) 102 101 102 100 93 89 92 99 105 109 110 106 36,253

Forage production (kg/ha) 3075 3040 3058 2991 2791 2664 2768 2978 3157 3259 3285 3187 36,253

Metab. Energy Mcal/kg/ha (3.6*Digestability) 7084 7004 7045 6891 6431 6138 6378 6862 7273 7508 7570 7343

LWG of 200kg Cattle kg/Month/ha. Sell at 300kg 435 430 432 423 395 377 391 421 446 461 464 451 5,124

Pivot Total /yr

Stocking Rate per Pivot for LWG of 1.2 kg LWG/day 362 358 360 352 329 314 326 351 372 384 387 375 971

Gross Return at $2.2/kg LWG per month/ ha 956 945 951 930 868 828 861 926 982 1013 1022 991 $428,399

Gross Margin (Gross Return less Direct Costs)/ha 344 333 339 318 256 216 249 314 369 401 409 379 $149,199

Table 11: Herbage to Liveweight Gain (at $2.2/kg)

Total forage production is predicted at 36 tonnes/ha/year. This compares with GWWs estimate of 35 tonnes/ha/year. Fe ed conversionefficiency was 7.07 kg of meat for each 1kg of pasture grown. This compares with 1 kg of meat for each 6 kg of pasture assumed by GWW.

These high levels of pasture production depends on precision management of water and nitrogen inputs. The high level of and feedconversion efficiency depends on high protein pasture and precision grazing management using a strip method that ensures a high levelof feed utilization by the animals.

What is actually achieved will probably be less that was is predicted above and this needs to be accounted for in the economic analysis.

7.4 Irrigation SchedulingPerennial Pasture Irrigation Scheduling Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual

Irrig. Reqn (0.8*Pan Evap less Median Rainfall) mm 31.8 13.2 97.2 149.8 159.8 144 144 160 168 200 226.9 192.4 1,687

Irrig. Water Megalitres/hectare per Month 0.318 0.132 0.972 1.498 1.598 1.44 1.44 1.6 1.68 2 2.269 1.924 17

Watering at 35 l/sec - days/month 4 2 12 19 20 18 18 20 21 25 29 24

Table 12: Irrigation Scheduling Requirements


29/32


Page 29 of 32

7.5 Summary of Costs from Section 2

SUMMARY OF COSTS - GWW estimate

RESEARCH, DEVELOPMENT and ADVISORY COSTS - Annual 122,300

DIRECT PRODUCTION EXPENSES plus Mowanjums Labour cost of 50,000 Annual 329,200

LEASING COSTS FOR PIVOT, PUMP and POWERAnnual 159,506

CAPITAL COST OF ESTABLISHING FIRST 38HA CENTRE PIVOT 1,127,301

Total Cost of establishing and operating the first Centre Pivot in the first year $1,738,307

Cost of adding an additional Pivot

GWW estimate $382,046Table 13: Cost of developing and operating the first Centre Pivot

To assess the ability of the Mowanjum Irrigation enterprise to service the costs of the proposed development the following economicparameters were calculated:

1. The Gross Margin as the Gross Income less the Direct production expenses without the Leasing CostThe Gross Margin is the amount of income to service the fixed or unavoidable costs of Leasing, Research, Development and Advisoryand Capital Development. Thus the following are also computed to determine how much of these costs the Mowanjum IrrigationEnterprise could support. Conversely to indicate the level of external financial support by the Government or Investor that wouldbe needed.

2. The Gross Margin less the Leasing Cost3. The Gross Margin less the Leasing and Research, Development and Advisory cost4. The Gross Margin less the Leasing, and Research, Development and Advisory cost and 20% of the Capital Cost.5. These Margins are calculated for market values of the meat on the hoof from $1.0 to $3.5/kg of Live Weight


30/32


Page 30 of 32

7.6 Financial Sensitivity Analysis

The financial results were analysed for sensitivity at three different levels of production.

Feed Conversion Efficiency of 1:7 and Pasture Production of 36 tonnes/ha

Price/kg Liveweight Gain $1.0/kg $1.5/kg $2.0/kg $2.5/kg $3.0/kg $3.5/kg

Gross Return from 38ha Pivot $194,727 $292,090 $389,454 $486,817 $584,181 $681,544

Gross Margin (Gross Return-Direct Costs) -$134,473 -$37,110 $60,254 $157,617 $254,981 $352,344

Gross Margin - Leasing Cost -$293,979 -$196,615 -$99,252 -$1,888 $95,475 $192,839

Gross Margin - R&D Cost -$416,279 -$318,915 -$221,552 -$124,188 -$26,825 $70,539

Gross Margin - 20% Capital Cost -$641,739 -$544,376 -$447,012 -$349,649 -$252,285 -$154,922

Table 14: Sensitivity to variations in price of LWG, for optimal feed conversion efficiency and pasture production

Feed Conversion Efficiency of 1:14


Gross Return from 38ha pivot $97,363 $146,045 $194,727 $243,409 $292,090 $340,772

Gross Margin (Gross ReturnDirect Costs) -$231,837 -$183,155 -$134,473 -$85,791 -$37,110 $11,572

Gross Margin - Leasing Cost -$391,342 -$342,661 -$293,979 -$245,297 -$196,615 -$147,934

Gross Margin - R&D Cost -$513,642 -$464,961 -$416,279 -$367,597 -$318,915 -$270,234

Gross Margin - 20% Capital Cost -$739,102 -$690,421 -$641,739 -$593,057 -$544,376 -$495,694

Table 15: Sensitivity to variations in price of LWG, for sub-optimal feed conversion efficiency and pasture production

From the above analysis it is evident that profitability is highly dependant on achieving a high level of pasture production of high proteinquality to ensure a feed conversion efficiency of at least 1:7 by grazing cattle (Table 13). Therefore a high level of technical advice andsupport along with the skilled management of Jason Russ will be needed to achieve this.

The lower level of production and feed conversion efficiency (Table 14) is not a viable option.

The potential value of hay or silage again will depend on the quality. The value of $36tonnes/ha converted to high quality hay at$300/tonne would be over $400,000 for the 38 ha Centre Pivot. Low quality hay at $60/tonne would only produce $82,000 return.


31/32


Page 31 of 32

7.7

Discussion of Economics of Mowanjum Irrigation Enterprise

The proposed Irrigation development would be an exciting complement to MowanjumsPastoral enterprise and would enable the full potential of their 55,000ha pastoral lease to berealised. It would offer immense social and economic benefits to Government in overcomingindigenous disadvantage. This alone would be worth $ millions to Government in reducedhealth, incarceration and policing costs. However the sustainability of this exciting initiativeultimately depends on the enterprise being profitable for Mowanjum.

The profitability of the irrigation enterprise is sensitive to the market value of the livestock gainof the weaners, the level of forage production and feed conversion efficiency. Grazed tropicalperennial pasture heavily fertilized with nitrogen is the most profitable option.

Mowanjum should be and must be able to cover the direct costs of the irrigation enterprise.

The Government would need to cover the Capital Cost of site preparation, the Research,Development and Advisory Costs of GGW and the leasing cost in at least the first two years.

Under optimum conditions Mowanjums Gross Return will only be able to cover the direct costsof production of $329,000 if Liveweight cattle prices are above $2/kg (Table 1). To cover theleasing cost would require that cattle prices to be above $3/kg or the direct costs to be reducedby about $100,000 per year.

Under sub-optimal conditions there would be no positive Gross Margin therefore achieving thepotential of this sub-tropical environment through state of the art irrigation, nutrient andgrazing management becomes critical for the success of this project.

The annual Research, Development and Advisory cost of $122,300 will yield up valuabletechnical and economic data for future investors in such irrigation enterprises in the region.This cost has traditionally been borne by Government for the public good. They havetraditionally made the Intellectual Property gained freely available to potential investors.

Therefore it is assumed that this cost will be borne by the Government. However in this situationGovernment would be sub-contracting their R&D&A role to GGW, who would subsequentlyneed to charge for access to their IP.


32/32


8 References

CRC, 2012. On the Mowanjum Community Resource Centre:

http://www.mowanjum.crc.net.au/

Marin, P. 2012, Recommended Mowanjum Corporate Structure. MLCS Corporate Pty. Ltd.

Morgan, 2012. P. Morgan, Mowanjum Aboriginal Corporation Strategic Plan 2012-22. BetterlinkGroup: Business Consultancy and Training Services. Suite 17, 133 Kewdale Road, Kewdale WA6105.

ORIC, 2012, Mowanjum Aboriginal Corporations Governance and Financial records at the Officeof the Registrar of Aboriginal Corporations:

http://www.orac.gov.au/document.aspx?concernID=100090

Shaw, 2012. Private communications from Russell Shaw, WA Department of Agriculture andFood.

VegetationWatch, 2012:

http://www.landgate.wa.gov.au/corporate.nsf/web/Vegetation+Watch

The Nutrient Requirements of Farm Livestock. ARC 1965. Figure 6.2 page 235

Smith, RCG and Williams, WA. 1973, Model Development for a Deferred Grazing System. JRange Management 26:464-460

Teitzel, JK, Gilbert, MA and Cowan, RT 1991. Sustaining productive pastures in the tropics, 6,Nitrogen fertilised grass pastures

Nixon, R. (2014) Global Groundwater, personal communication and spreadsheet.

Documents

Mowanjum Irrigation Business Plan 8.pdf