The aquaculture company broke its trading halt this morning when it announced the cost of the first stage of its Project Sea Dragon has increased by as much as 49%.

As can be expected, the market has reacted poorly to today's news from Seafarms.

At the time of writing, the Seafarms share price is 5.2 cents, 8.77% lower than its previous close.

However, that's better than its intraday low of 4.8 cents. Then, it was sporting a 15% drop.

Let's take a closer look at the project's increased cost estimates.

Seafarms' budget blowout

The Seafarms share price is sliding after the company announced the expected cost of its Project Sea Dragon's stage 1a has soared by as much as $135 million.

Sea Dragon is a proposed, large-scale, prawn aquaculture project being developed in various sites across northern Australia to supply high-quality prawns to export markets.

Last time the company updated the market on the project's costs, it outlined it expected to spend $275 million to $290 million for its first stage.

Today, that estimate has increased to between $370 million and $410 million.

The company has once more flagged that it will need additional equity funding to finish the project's first stage.

However, Seafarms made it clear the original estimate didn't include contingencies or escalation. The company also believes the true cost will be at the lower end of the new range.

Additionally, Seafarms has given another $17 million worth of work to the head contractor of the Legune section of the project in the Northern Territory. Canstruct was originally contracted to provide $78 million worth of work.

The extra funds will cover the project's jetty hardstands, roads, and quarry services.

Of the construction works now awarded to Canstruct, the price, in aggregate, is within 8% of company's budget estimates. That represents around 54% of the capex required at the Legune site.

Further, Canstruct is only authorised to do $57 million worth of work so costs remain within the limits of the company's recent capital raise.

Seafarms is also making progress with its construction debt facility. Agreements for construction facilities of between $100 million and $150 million and between $15 million and $35 million of working capital are targeted for the final quarter of 2021.

Finally, the company's experiencing some construction delays at the project's Exmouth and Bynoe sites. It's also keeping an eye on the incoming wet season and COVID-19-related border closures, which could cause more delays.

Seafarm share price snapshot

Today's dip has added to Seafarms' recent struggles on the ASX.

The company's share price has fallen 38% since the start of 2021. It is also 51% lower than it was this time last year.

The post Here's why the Seafarms (ASX:SFG) share price is plunging 8% today appeared first on The Motley Fool Australia.

Upon requesting that its shares are halted from trade today, Seafarms noted it was aware of information regarding project costs. However, it was unable to prepare a market release before trade began on Thursday.

As a result, the Seafarms share price has remained unmoved from its previous close of 5.7 cents.

Let's take a closer look at what we know of the prawn aquaculture company's trading freeze.

Why is Seafarms frozen on Thursday?

The Seafarms share price's trading halt has continued all day while the market awaits news of the company's project costs.

Investors who are on the edge of their seats waiting for the update might have a while left to bite their nails. The company has until trade begins on Monday to release its update.

If it doesn't do so, the company's stock will be back to normal when the ASX opens on Monday.

Seafarms is currently working on Project Sea Dragon.

Project Sea Dragon will see the company developing 10,000 hectares of prawn production ponds and facilities across 5 separate locations. The project is expected to provide year-round production of black tiger prawns.

The company provided an update on the project within its results for financial year 2021.

Then, the company said it was seeking $150 million worth of construction debt and needed further debt for the development of Project Sea Dragon's stage 1a.

Seafarms also recently completed a capital raise that saw it banking an additional $107.5 million, allowing it to begin construction on part of the project.

Project Sea Dragon's first production is expected to occur in the third quarter of 2023. It has major project status from the federal, Western Australia, and Northern Territory governments.

Seafarms share price snapshot

This year hasn't been good to the Seafarms share price.

It has fallen 36% since the start of the year. It is also 52% lower than it was this time last year.

The post Why is the Seafarms (ASX:SFG) share price frozen on Thursday? appeared first on The Motley Fool Australia.

The Seafarms share price was trading down 5.68% at 8.3 cents at the close of market today.

Why is the Seafarms share price sinking?

In its release, management said that the overall financial performance for the period reflected the company's investment in pursuing its expansion in aquaculture operations. As such, Seafarms reported a large decline in revenue, and its net loss widened.

For the six months ending 31 December 2020, Seafarms reported revenue of approximately $14.937 million (down 30.7%) and a net loss of $12.8 million. The results reflect the cash contributions of Queensland operations while fully expensing all Project Sea Dragon (PSD) development costs.

The loss was also affected by a significantly reduced pond stocking in response to market uncertainty and COVID-19. In regards to PSD, the high level of required investment to develop the plant and train staff is proving expensive, with total costs coming in at more than $138 million to date.

As a result of the reduced pond stocking, total production for the period was down 47% from 1H FY20. Coming in at 321 tonnes. This reduction in stocking drove structural change across Queensland operations.

The company advised its cash balance reduced from $6.466 to $5.523 million across the two periods.

Project Sea Dragon

Seafarms is seeking to transform itself from Australia's largest prawn producer into a low-cost global producer. In doing this, it is continuing to progress Project Sea Dragon in Northern Australia.

While not providing specific details on PSD, Seafarms stated that the project was 'shovel ready':

PSD is a world-class industrial-scale Tier 1 project with an operating life of 90 years which will be developed and constructed in stages with production ponds located at Legune Station in the Northern Territory. 

Once completed, the company said PSD would target high-quality year-round volumes for export markets and have a production capacity of up to 150,000 tonnes of prawns.

Looking ahead

Seafarms provided an outlook in its report, outlining its expectations for 900 tonnes of production this year. This is in line with the reduced stocking strategy for FY2021.

Furthermore, the company will look to Japan and Europe for investment in its sea dragon project.

The post Why is the Seafarms (ASX:SFG) share price sinking 5% today? appeared first on The Motley Fool Australia.