While volumes have yet to be determined, Smiler said the deal represented an opportunity for Miraka to further develop its burgeoning processing and marketing business, capitalising on Chinese appetite for fresh-milk products.
“Obviously the milk will not come from all Shanghai Pengxin’s farms, as not all are in the vicinity of our plant,” he said.
The Shanghai-Pengxin farms are run by Landcorp, as the sharemilking operator for the company and owner of about 16,000 cows across the 16 properties.
Smiler said the deal amounted to more than simply a toll-processing deal with Shanghai Pengxin, and the Maori-owned company would be making the investment in new plant for the process.
Under the deal Shanghai Pengxin will market the milk in China under its own brand.
The move by Shanghai Pengxin beyond farm ownership into processing marks a rapid move to fulfil goals it stated early in the Crafar farm-purchase process.
The company had always maintained it intended to work in partnership with established processors to develop and establish a range of value-added products, rather than building its own manufacturing operation.
The intention is to invest more than $100 million to market a range of products over the first five years, making use of Pengxin’s business contacts in China. Shanghai Pengxin would not comment on the deal.
The Miraka plant has been operating at full capacity, receiving milk from about 50,000 cows this season.
Smiler said the company had a number of plans in the pipeline to develop products and processes out of its plant and all funding would come from the Maori interests involved.
“We have a strong balance sheet,” he said.
He said there was a long waiting list of people wanting to supply to the company.
The signing of the deal in China provided an insight into how well regarded Shanghai Pengxin was in that country, he said.
“They are a significant player, and the deal was very well received at the entrepreneurs’ lunch in Shanghai.”
Maori Affairs Minister Dr Pita Sharples said the seeds of the Miraka-Shanghai Pengxin deal were sown during the last Maori business delegation trip to China.
Relate story: Miraka enters MoU with Shanghai Pengxin