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April 22, 2016

China

Sino Agro Food’s Mega Prawn Farm Update

 

Sino Agro Food, Inc. (SIAF), which is developing a huge freshwater prawn farm (Macrobrachium rosenbergii) in China, reports:

 

“We have an offer from our construction subcontractor, one of the largest in China, on new terms to build the second phase of the Zhongshan MegaFarm (Prawn Farm 4).  It was also communicated that “The estimated cost of $240 million to complete construction of Prawn Farm 4 will be carried by the builder/contractor firm...”

 

“It is not a firm contract.  When it becomes a finalized contract, an 8-K will be issued.  Second, the quoted figure of $240M is the total cost to the company for Prawn Farm 4.”

 

“Construction will proceed in 6 modules over a period of roughly 3 ½ years.”

 

“For Prawn Farm 4, the understood terms call for deferred payments for each module to commence 6 months after construction completion for that module.  Therefore...cash flow from sales of goods will already be well underway to service deferred construction costs.”

 

“The local government is subsidizing the project by absorbing the majority of finance costs, and by helping to offset some of the upfront financing needed to complete the project.”

 

“Of salient interest to the company is the degree to which operations self fund each module.”

 

“By way of example, and for illustrative purposes, each module’s total cost will be $40M on average.  On average the designed production capacity of each module is 10,000 metric tons of prawns per year.  Therefore construction costs will likely average $4.00 per kilogram.  Assuming a conservative estimated sales price of $12.00 per kilogram, each module will potentially generate approximately $120 million in revenue per year.  Of course, while there can be no guarantees that these projected numbers will materialize, at this moment they are best method derived from experience to date.”

 

“Assuming one month of testing, 6 months of “grace period,” and 7 months to complete payments, the company will accrue one year’s production and cash flow from each module while completing payment of that module.”

 

Source: Email to Shrimp News International.  Subject: Additional Information on Prawn Farm 4 Contractor Offer.  Peter Grossman, Investor Relations (Phone 1-775-901-0355, Email info@sinoagrofood.com) and Erik Ahl, Nortic Countries (Phone +46-(0)-760-495-885, Email erik.ahl@sinoagrofood.com).  April 22, 2016.

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