Free-Range Goats Promise 12% Private-Equity Gains in Australia

By Rudy Ruitenberg

July 3 (Bloomberg) -- Free-range goat farming in rural Australia is a low-cost investment that may offer annual returns of as much as 12 percent, said Peter Hannen, chairman of private-equity firm MG Capital Plc.

MG Capital has invested about $12 million to buy 600,000 acres of land in Australia’s outback populated with 50,000 feral goats, Hannen said yesterday in an interview at the World Agri Invest Congress in London.

“Is it an industry or is it a hobby?” said Hannen, a former sugar trader and ex-chairman of Celtic Resources Holdings Ltd., the gold producer acquired by OAO Severstal in January 2008. “We’re not losing money. That’s a good start.”

Australia exported 27,000 metric tons of goat meat last year, and the U.S. is the world’s largest buyer, according to Hannen. London-based MG Capital expects to produce about 50,000 goats a year from its herd, the executive said.

The goats are harvested by fencing off watering holes that are accessible via “tiger traps” which can be shut to trap the animals, Hannen said. Land can be bought for A$10 ($7.96) an acre, and the project’s biggest investments are in fencing and water supply, he said.

“Goats being goats, basically you have a low-cost enterprise in an arid land, and the world is becoming more arid,” Hannen told the conference. “You have to keep probing at the frontiers.”

‘Startup Market’

MG Capital expects cash returns “over time” of 8 percent to 12 percent from goat farming in the outback, “in line with general farming,” Hannen said in the interview. The firm first invested in Australian goat farming three years ago, he said.

“This is a startup market,” he said. “It’ll be five years before we know if there’ll be a goat industry.”

The firm also has invested between $5 million and $6 million in farming of merino sheep in Uruguay for wool, which generated annual post-tax returns of 14 percent in the five years through May 2008, according to Hannen.

“My most profitable operations in South America have been my sheep operations, and my most profitable land there has been that with the lowest productivity index,” he said. “There is life in livestock. Sheep do offer a very good investment.”

To contact the reporter on this story: Rudy Ruitenberg in London at rruitenberg@bloomberg.net.