SeaDragon shares plummet as capital raised for factory

SeaDragon wants to produce higher value fish oils from salmon. Photo / Sarah Ivey

Shares in SeaDragon, which manufactures fish oils for health supplements, dropped after the company sold shares at a discount to raise capital for a new $4 million factory near Richmond.

Shares in SeaDragon closed down 36 per cent yesterday at 2.3c. After the market closed on Tuesday, the Auckland-based company agreed to issue 125 million new shares at 1.6c apiece, raising $2 million. The funds, combined with $1.8 million from the sale of a stake in Snakk Media, will enable the company to proceed with its new factory.

SeaDragon is investing in a new factory to allow it to diversify from its current production of squalene and shark liver oil products and ramp up production of higher value Omega-3 fish oils from hoki, tuna and salmon, enabling it to grow its share of the US$30 billion ($37 billion) market for fortified foods and drinks.

"Worldwide demand for Omega-3-rich fish oil is growing rapidly supported by a compelling body of scientific literature on the human health benefits of Omega-3-rich diets," said chairman Doug Wilson.

"SeaDragon's new refined fish oil plant will allow the company to take advantage of this opportunity and ensure we can meet demand well into the future."

SeaDragon, the largest producer of refined fish oils in Australasia, exports about three quarters of its products. The company expects to complete its new factory on the outskirts of Richmond in the fourth quarter of 2014 and will move production of shark liver oil, squalene and krill oil from its Nelson site when its lease expires.

The company's base in Nelson allows it access to Hoki fisheries as well as Salmon farmed in the Marlborough Sounds. Oil from both species is rare and attracts a premium over the anchovy oils that dominate the Omega-3 fish oil market, the company said.

SeaDragon said it also plans to offer shareholders the opportunity to buy as much as $15,000 of its shares at the same price as the share placement.

The company yesterday reiterated that it is unlikely to meet its earnings forecasts because of a delay in commissioning the new plant, which had been slated for completion in August 2014.