Take a close look at both the economics and science of the foreign investment proposal that entails the destruction of an invaluable fossil site dating back 23 million years. Rod Oram did, and is far from reassured.

Some offers by foreign investors to bring their capital to New Zealand promise such riches, at least for them, that their forecasts soar into the realms of implausibility.

Such are the promises of Plaman Global, an Australian/Malaysian company with its highly controversial proposal to turn the unique, invaluable and fossil-rich Foulden Maar in Otago into an animal feed supplement.

When it hits full production three years after starting up, Plaman reckons its mining and processing operation will generate US$1 billion a year in revenues and US$780 million in EBITDA earnings.

Given it’s promising 100 jobs, that works out at revenues of US$10m and EBITDA of $7.8m per employee. That would be fabulously profitable for the investors, while the locals would earn only typically modest mining, trucking and processing wages.

By way of comparison, OceanaGold’s Macraes mine, just 25km to the northeast of Foulden Maar, employees 559 people. A low cost and highly profitable gold mine by NZ standards, it generated US$449,732 of revenue and US$259,210 of EBITDA profit per employee last year.

Thus, Plaman’s claims for its Foulden Maar opencast mine turn out to be 22 times the revenue and 30 times the profit per employee of our most profitable gold mine. For the next 27 years.

No wonder the Overseas Investment Office is taking so long to decide whether to approve Plaman’s application to buy an additional 432 ha of land at Foulden Maar. This would lift Plaman’s estimated resource from 6.1m tonnes on its current 42 ha site, which is still not in production three years after buying it, to 31m tonnes of fossil-rich earth. Under the Overseas Investment Act, the OIO has to decide, among other issues, whether an investor’s bona fides are acceptable and its project of economic benefit to New Zealand.

Over the past 10 days, Newsroom colleagues have written about the importance of the fossils, the ownership of Plaman, the deep scepticism among scientists of its claims for its animal feed, and the rapidly growing opposition to its proposal. In addition, we have produced with RNZ this podcast.The issues are being heavily canvassed by other media too.

The mystery of the finances

This column will look at the economics of Plaman’s proposal and its abilities to deliver. The verdict is far from reassuring. As such, this column is the antithesis of last week’s which analysed three recent, large foreign investment proposals which will benefit the New Zealand economy, albeit with varying degrees of risks, downsides and impact.

Plaman’s claims for the economic upside of its project come from the report on the project written by the NZ branch of Goldman Sachs, the Wall Street investment bank, which has lent Plaman US$20m as seed funding for the project. Simon Hartley, a journalist at the Otago Daily Times, received a leaked copy of the report. He reported some of the highlights of it on April 20.

As for its ability to deliver on its promises, Plaman faces at least three substantial challenges of coming up with the expertise, capital and product required. It is still a skeletal company founded in 2014 to acquire the original 42 ha site at Foulden Maar. It bought it from the receivers of Australian owned Featherston Resources which had bought the asset in 2011 but had gone broke trying to turn it into an economic mine.

Plaman, led by people with investment banking and real estate experience, has hired a few senior executives with animal nutrition and mining experience. Its sole NZ employee so far is Craig Pilcher, a veteran of coal sales then mining operations in the South Island, most recently as Bathurst Resources’ GM for its mines producing coal for the domestic market.

On the issue of capital, Peter Plakidis, Plaman’s co-founder and chief executive, told RNZ’s Nine to Noon programme on Tuesday that if the OIO approves the land acquisition, Iris Corporation, its 50.9 percent Malaysian shareholder with links to palm oil plantations, would exit. Most of the other 49.1 percent of the company is owned by its other co-founder and chief financial officer, Geordie Manolas and his family, who are wealthy real estate investors in Australia.

The Malaysian exit would only deepen the mystery of the finances of Plaman. Given its plans to build a $36.8m processing plant at Milton, 100km south of the opencast mine, and to buy out Iris, the US$20 m of seed funding from Goldman Sachs will be far from adequate. Even more curious is the Goldman Sachs view that that the project’s cashflow will fund the US$470m of capex needed to achieve the rapid scale up over three years to 500,000 tonnes of finished product a year.

Product promises

Delivering on its product promises is even more daunting for Plaman. Its website says the black diatomaceous earth deposit it owns at Foulden Maar, which it hopes to expand with its additional land purchase, is unique. There are many large and long-mined diatomaceous earth deposits elsewhere in the world, likewise formed from fossilised remains of tiny aquatic life. But depending on their purity, they range from white to grey.

Plaman says its is black because it is “rich in natural organic matter (which contains humics, such as humic and fulvic acid) and other valuable nutrients, which have been shown to be beneficial in animal nutrition. Plaman Global is the only supplier of Black Pearl. No other known deposits of Black Pearl’s® unique composition have been discovered, nor are any comparable products being commercially developed for animal feeds.” (Black Pearl is a trademark it has registered in a number of countries for fertiliser and in some cases animal nutrition.)

In June 2018, Plaman’s Pilcher gave a presentation to the Strath Taieri Community Board, the part of Dunedin City Council which covers Foulden Maar and its neighbouring town of Middlemarch.

One of his slides claims that Black Pearl benefits animals in 10 ways. It “increases average body weight gain; reduces Mycotoxin via its binding qualities; safe and effective ingredient and safe for human consumption; slows oxidation in feed; reduction in waste released into the environment; increases feed conversion and improves carcass yield and meat quality; lower mortality; organic feed additive; increased nutrient absorption and improves gut health; and reduces prevalence of salmonella and E.coli.”

Five months later Plaman received a strong and long letter of support from the chief executives of Dunedin City Council and Clutha District Council, respectively Sue Bidrose and Steven Hill; and a letter of support from Dave Cull, Dunedin’s Mayor, although this past week his support has become more equivocal.

Indeed, diatomaceous earth is used in a wide variety of industrial, construction, agricultural and horticultural uses, and some brands are registered as organic here and elsewhere in the world.

However, Plaman is claiming it offers additional and unique qualities for the benefit of animals, even though the previous owner of the deposit struggled to find many uses beyond an additive to concrete.

A number of animal nutrition scientists are deeply sceptical, or even dismissive, of Plaman’s claims, as Newsroom’s Farah Hancock reported last week.

Last August, Plaman told the NZ Quarrying and Mining magazine that “Black Pearl is a unique product with proven efficacy from trials conducted by AHPharma Inc, one of the world’s leading animal nutrition research houses based in the USA.”

Seeking to verify that, I discovered from AHPharma’s website that it has facilities that could possibly do such tests, although it specialises in poultry. However, it had only 38 employees and revenues of US$7.5m last year, according to business directory ZoomInfo. It seems improbable it has the global standing or range of skills Plaman claims it has. Four of AHPharma’s executives, including its chief executive and VP business development, have failed so far to return my calls.

The only online reference I could find to any study for Plaman was one last June on Animal Pharm, a UK-based agribusiness newsletter. It said: “The company has already confirmed ‘outstanding’ efficacy in a 42-day study for Black Pearl in broiler chickens and similar results in a swine trial. Additional trials in turkeys and layer chickens are ongoing.”

Plaman has yet to reply to my request for information on the research studies it has commissioned, which organisations did them, and what the findings were. These would need to prove Plaman’s yet-to-be produced Black Pearl product had considerable and unique benefits over other diatomaceous earths to justify the substantial price premium and eye-popping business model it is promoting.

If our farmers let their animals chew through such a unique and important fossil record, they would struggle to justify their vandalism to their fellow Kiwis and their customers abroad.

Even if the product is as extraordinary as Plaman claims, New Zealand farmers would damage their own brand and the country’s if they used it. Foulden Maar is a unique fossil record which so far has only been explored in limited and shallow ways by scientists. They believe it has far more insights to yield about, for example, the first glaciation of Antarctica and the last time carbon dioxide levels spiked in the atmosphere, and how those changed life on this part of the planet. These are insights that will help us cope with the climate catastrophe humankind has unleashed now.

Plaman this week offered to preserve some 20 percent of the site for science and to employ one geologist on its staff full time to watch over the mining of the rest. The latter offer is laughable given the large volume of material that would be excavated every day. And even if the part reserved was the middle, which is the deepest part of the former volcanic cone lake, that would still deny scientists the full fossil record.

If our farmers let their animals chew through such a unique and important fossil record, they would struggle to justify their vandalism to their fellow Kiwis and their customers abroad.

Three examples of how we can find the true value in Foulden Maar are:

– The proposed Waitaki Whitestone Geopark, some 125 km northeast of Foulden Maar. Last year, the Waitaki District Council made a submission to UNESCO for the project to be declared a Global Geopark. Currently there are 147 in 41 countries but none yet here. The submission is well worth reading.

– The Messel Pit in Germany is perhaps the only close comparators in the world to Foulden Maar; likewise the country’s Vulkaneifel is a good example of the value of UNESCO’s designated Global Geoparks.

– Above all, Te Papa has just opened Te Taiao, a major new permanent exhibition on our unique land and biological heritage. This link gives you a flavour of it, but best of all, go visit as I did this week.

It would be far better for the world and New Zealand if Middlemarch, which is at the end of the Otago Rail Trail, offered people from home and abroad such knowledge and amenity, rather than the destruction in less than 30 years of an invaluable fossil site dating back 23 million years.

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