NAMOI Cotton Limited has today made public its agreements with Kimberley Cotton Company Limited (KCC) to build and operate a new gin at Kununurra to service the Ord River Irrigation Area in Western Australia’s Kimberley region.
Namoi announced at its AGM in July that it had entered into a Memorandum of Understanding with KCC to support the construction and operation of the gin.
Under this arrangement, Namoi expects to supply ancillary ginning equipment fabricated at its engineering workshop at Wee Waa in New South Wales, and install gin equipment as supplied by Lummus Corporation in the US.
Namoi will also be the contract operator of the gin, with full operating cost recovery.
The arrangements is expected to provide operating and financial benefits to KCC and Namoi by leveraging Namoi’s existing ginning capability and unlocking synergies with the Ord River’s later harvest and ginning season.
“We have been working with KCC shareholders since 2020 and are delighted to reach this important milestone,” Namoi CEO John Stevenson said.
Namoi is Australia’s largest cotton ginner, and has 10 gins in New South Wales, and one just over the NSW-Queensland border at Goondiwindi.
“Our partnership with KCC is aligned with our 4PP Strategy to grow our ginning footprint into northern Australia and diversifying our geography to manage variable cotton production.”
Ginning by 2024 seen
KCC has been established by agricultural industry parties in the East Kimberley, and plans to build the $40 million gin to process cotton from up to 15,000 hectares in the Ord.
The gin is expected to be operational by 2024, and will will be funded by equity from local growers and other investors and a $32 million long-term debt facility from the Northern Australia Infrastructure Facility.
Cotton grown in the Kimberley is currently trucked to Queensland for ginning, and the KCC facility is expected to significantly improve gross margins for Ord cotton growers by reducing cartage costs on cotton to be exported through Darwin or other ports.
It will also make cottonseed extracted during the ginning process available to the local cattle industry as a feed supplement.
Namoi to take 10pc stake
Namoi has executed a Convertible Note Agreement with KCC to acquire a 10-per-cent interest in KCC for $1.01 million, comprising convertible notes and ordinary fully paid shares.
This investment will be paid in two instalments by mid-2022.
KCC is obligated to pay interest on the convertible notes, at an above market coupon rate until they are converted into shares in KCC or until they are repaid in full by 31 December 2031.
Payment and timing is subject to the satisfaction of various local and operational conditions on or before March 2022.
Source: Namoi Cotton