Aquaculture pioneer goes fishing for compensation

Clean Seas Tuna is seeking compensation from two suppliers for the loss of kingfish stocks.

By InvestSMART · 15 Nov 2012

By InvestSMART ·
15 Nov 2012

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Clean Seas Tuna is seeking compensation from two suppliers for the loss of kingfish stocks.

IT WAS the feed all along, it seems. Pioneering aquaculture company Clean Seas Tuna has sought compensation worth tens of millions of dollars from two suppliers for the loss of kingfish devastated by the deficiency of an amino acid, taurine, in their feed.

Chief executive Craig Foster said Clean Seas had issued formal dispute notices to its two major feed suppliers after getting independent legal advice and assessment of kingfish feed protocols in Japan.

''The board has determined to invoke formal dispute resolution procedures with both feed suppliers to attempt to find a commercial compromise of the claims the company considers it has against both suppliers,'' Mr Foster said.

Clean Seas would not identify those companies it had notified, but industry sources said listed Ridley Corporation and Tasmania's Skretting were the two major feed suppliers in Australia. Neither Ridley nor Skretting returned calls yesterday.

Mr Foster said it had taken months to determine the cause of the kingfish deaths that struck Clean Seas this year, after two years of poor performance. By adding taurine to the feed, he said, ''simply, empirically, we can see we've reversed the whole health problem''.

Clean Seas shares have been in a prolonged slump and have fallen from a high of 8.3? in February to 2.4? at Wednesday's close.

Mr Foster said the dead fish stock was worth only a few million dollars but there was also lost productivity from the fish that did not go on to grow.

He would not quantify the total damages claim but said it was ''tens of millions of dollars''. He said further independent testing would be needed. At this stage blaming the feed deficiency was ''only our opinion''.

Clean Seas also said it had achieved early spawning of its southern bluefin tuna brood stock and was confident of achieving viable fingerlings for the transfer to sea cages in December.

BBY analyst Dennis Hulme welcomed as ''very positive'' both announcements, on the feed deficiency and tuna propagation. Clean Seas could now ''get back to being a money-making business ? [and] potentially a takeover target,'' he said.

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Frequently Asked Questions about this Article…

What is the dispute between Clean Seas Tuna and its feed suppliers about?

Clean Seas Tuna says a deficiency of the amino acid taurine in its feed caused mass health problems and deaths in its kingfish stocks. The company has issued formal dispute notices to two major feed suppliers and is seeking compensation after independent legal advice and feed-protocol assessments.

Which feed suppliers has Clean Seas Tuna notified about the kingfish losses?

Clean Seas would not publicly name the suppliers. Industry sources cited two major Australian feed companies, Ridley Corporation and Tasmania’s Skretting, but Clean Seas has not confirmed this and neither company had responded to calls at the time of the article.

How large is the compensation claim Clean Seas Tuna is pursuing?

Clean Seas’ chief executive said the dead fish stock itself was worth only a few million dollars, but the company is seeking damages described as 'tens of millions of dollars' to cover lost productivity and other impacts. He also said the total claim has not been precisely quantified and further independent testing is needed.

What evidence does Clean Seas have that taurine deficiency caused the kingfish deaths?

After months of investigation and assessment of kingfish feed protocols in Japan, Clean Seas reports that adding taurine to the feed 'simply, empirically' reversed the health problems. The company has sought legal advice and issued dispute notices, but it also acknowledges that blaming feed deficiency is currently 'only our opinion' pending further independent testing.

How has this issue affected Clean Seas Tuna’s share price and investor sentiment?

The article notes Clean Seas shares have been in a prolonged slump, falling from a high of 8.3 in February to 2.4 at the most recent close. The feed-dispute news and the tuna propagation update drew a positive reaction from at least one analyst, but uncertainty around the claim and required testing contributes to share-price risk.

What formal steps has Clean Seas taken to resolve the dispute with feed suppliers?

Clean Seas said it has issued formal dispute notices to its two major feed suppliers and the board has invoked formal dispute resolution procedures aimed at finding a commercial compromise to the company’s claims.

What progress has Clean Seas made on its southern bluefin tuna breeding program and why does it matter to investors?

Clean Seas reported early spawning of its southern bluefin tuna broodstock and said it is confident of achieving viable fingerlings for transfer to sea cages in December. Analyst Dennis Hulme described both the feed-discovery and the tuna-propagation news as 'very positive,' suggesting the company could return to profitability and even become an acquisition target.

What should everyday investors watch for next in this story?

Investors should watch for outcomes of the independent testing Clean Seas says is still required, any developments or statements from the named feed suppliers, updates on the formal dispute-resolution process, and progress on the tuna fingerling transfers. These items will affect the likelihood and size of any compensation and the company’s path back to profitability.