Oysters in Vågstranda

Table of contents Oysters in Vågstranda Oysters in Vågstranda page 3 Vågstranda page 4 Oysters exclusive food for royal palates page 5 Vågstranda the pearl amongst oyster polls page 6 Modern production page 8 Oysters the best fast food in the world page 10 Research and development page 11 The market for flat oysters page 12 Oyster spat Vågstranda's gold page 13 The future of Royal Oysters AS in the Vågstranda poll page 14 Budget figures page 17 Royal Oysters AS produces top quality Norwegian oysters in the Vågstranda poll in the county of Møre og Romsdal. The company aims to become Norway's leading oyster producer by 2015 and a leading player in the European market for European flat oysters Ostrea edulis by 2016. Oyster farming, and particularly spat cultivation, has longstanding traditions in the Vågstranda poll. The poll was, and still is, known far beyond Norway's borders as possibly the best location for the industrial production of oyster spat in Europe. Between 1931 and the early 1970s, millions of spat were supplied every year, particularly to Limfjorden in Denmark, which at the time produced top quality oysters for the European market and beyond. Due to disease in southern Europe, the production of European flat oysters has shrunk considerably from 30,000 tonnes every year in the early 1960s to fewer than 5,000 tonnes today. This means that a disease-free Norway has a significant advantage as it seeks to establish industrial production on a large scale. The Vågstranda poll has great potential and a proven track record, giving it the very best starting point for being successful. Publisher: Royal Oysters AS 2 3

Vågstrandapollen Vågstranda The Vågstranda poll in the county of Møre og Romsdal enjoys a spectacular setting surrounded by majestic mountains. As the map shows, the towns of Molde and Ålesund are nearby. Large salmon shipments pass through the local village daily via route E136, and transportation to the continent is easy. Air freight to Asia is also an option. Financially viable oyster production has taken place here in the past. Mother Nature has created something unique in the Vågstranda poll, giving it the opportunity to become Europe's leading producer of flat oysters in a matter of years. It is the vast access to oyster spat that makes it so exceptional at a time when European producers are battling disease in their oyster populations disease which threatens survival from the spat stage to a fully grown product for consumption. The aim is to place Vågstranda at the heart of Norwegian oyster farming and to build a brand based on the outstanding qualities that the Vågstranda oyster has to offer in terms of looks, flavour and richness of the meat. The strategy for achieving this goal will be implemented with full force in the years to come. Oysters exclusive food for royal palates Oysters a dish for royal palates. The European flat oyster Ostrea edulis continues to be an exclusive shellfish, unlike the Pacific oyster Crassostrea gigas which is a common product in Europe and, to some extent, also in Norway. The latter is more resistant to disease and easier to breed but also achieves a much lower price. There is a market for European flat oysters, but because of disease, only around 5,000 tonnes are sold every year in Europe not enough to meet demand. The biggest producers in Europe are France, Spain, Ireland and Britain. Until the early 1970s Denmark's Limfjords-Østerskompagniet was a major supplier of flat oysters thanks to regular deliveries of Norwegian spat from Vågstranda. Vågstranda delivered spat to Limfjords- Østerskompagniet in Denmark for the final time around 1970. After that the company was unable to keep up its extensive production, which was then suspended a few years later. Even with a dedicated hatchery in Limfjorden, it has to this day not been possible to generate profitable production because of insufficient quantities of viable spat. Incidentally, the King of Denmark banned all fishing of wild oysters in Limfjorden at the beginning of the 1850s when it was discovered that there were oysters in the fjord. The Crown had held the sole rights to collecting oysters in Denmark after a royal monopoly was introduced on the collection and sale of oysters in 1587. King Frederik IX of Denmark enjoying oysters from Limfjorden. It is highly likely that the oysters depicted are the results of spat supplied from Vågstranda. Photo: Morsø Lokalhistoriske Arkiv. Vågstranda There are around 100 varieties of oyster, and 3 4 million tonnes of oysters are produced worldwide every year. China is the largest producer. Europe used to produce around 160,000 tonnes a year, although this figure has fallen sharply. The US produces around 220,000 tonnes. They are mostly Pacific oysters gigas. However, the figures show that there is a large market for this type of product, and although most consumers buy oyster varieties at everyday prices, there is still a need for luxury varieties, just as in any other market. The European flat oyster fits into the top segment of this market. If you have tried this oyster variety, you are unlikely to go back to other varieties. A delicious plate of oysters! Pieter Claesz: Still Life with Roemer and Oysters, 1642. National Gallery of Art, Washington, D.C. The Vågstranda oyster is considered to be the best in Norway, a fact that has been confirmed by scientists. Stein Mortensen from the Institute of Marine Research in Bergen told SAS Magasinet in 2002: The village of Vågstranda is located in the county of Møre og Romsdal. Route E136 to Ålesund is only a few hundred metres from the plant, and salmon shipments pass through the village round the clock. It appears there are two factors that significantly affect the flavour: the salt content and the type of algae living in the waters where the oysters are farmed. While Norwegian oysters in general are of varying quality, oysters from Vågstranda are unique in terms of both quality and flavour. There are vast quantities of phytoplankton living in the waters there. This combined with the relatively high temperature is probably the main reason why the oyster grows so quickly and the reason why it is so meaty, according to Mortensen. Vågstranda oysters at their best! Delicate in colour and full of food. Delicious, straight from the sea! 4 5

Vågstranda the pearl amongst oyster polls The Vågstranda poll has long-standing traditions. According to scientists, it is a site of national interest and a unique location in terms of the size and type of oysters that can be found there. It is thought that today's oyster strain dates back to the last Ice Age. In a letter dated November 1998 the County Governor of Møre og Romsdal writes the following about the oyster population in the poll: As far as we know, oyster farming in the Vågstranda poll began in 1906. Things did not really start happening until 1930, however, when Norsk Østersselskap AS was formed with Bjarne Eidsvik as a key player. From then on until the early 1970s there was continuous production of oysters and spat. The spat was mostly exported. We should also mention that in the 1850s and 1860s there was a decline in natural oyster populations across Norway. The reasons may have been a colder climate and lower sea temperatures along with overtaxation. In the Romsdal region the decline probably did not become noticeable until the 1860s. Henrik Ibsen, who visited Vestnes in 1862, writes that there was a great number of oyster reefs there. He does not describe where they were, but locals believe he must have been referring to Flatevågen, which is the other major oyster poll (the Vestnes poll) in Romsdal. Conditions were still normal when Ibsen visited the village. 1946 was a bumper year for the company, delivering 20 million spat, thought to weigh a total of 60 tonnes. The spat were delivered to the continent by train. Not every year was as good as this, and in 1954 Eidsvik was quoted by the Åndalsnes Avis newspaper as saying: When cultivating oysters you have to be prepared for both big disappointments and great pleasures, but we strive for stability. 6 The Vågstranda poll is by far Norway's largest oyster poll with a unique production potential, and it is therefore a poll of national interest. It is also important on an international scale since polls in other countries are either polluted, or the oysters there have contracted diseases. With the knowledge we currently have we believe that the oyster population in the Vågstranda poll has been there since the ice cap melted and, adopting a principle of caution, we must assume that the oyster in the Vågstranda poll is endemic. The oyster is a shellfish belonging to the bivalvia family. In former times oysters would occur naturally along the southern and western coasts of Norway. Humans have always collected oysters, and in some villages they were part of the staple diet. In high society oysters have been deemed a delicacy. Up until the last World War it was common for the upper classes to eat oysters, but changes in eating habits after the war and dwindling supplies of oysters led to a fall in consumption. However, this trend has been changing in recent years, including in Norway, and consumption is now on the increase, although it is still the export markets that will generate big volumes. It is thought that the Japanese were the first to start cultivating oysters. The Romans were first out in Europe around 100 AD. The art of cultivating oysters was almost forgotten during the Middle Ages, until production picked up again during the 18th century. France did not start cultivating oysters until around 1850. In Norway there were numerous oyster farms by the end of the 19th century. Back then oysters were almost seen as an everyday snack, and there was a great number of oyster bars and stalls in most large European cities. Norway also had a few oyster companies before interest began to wane. The tradition is now being taken up by many businesses, but in terms of quality and quantity nobody can compete with the Vågstranda poll, which is planning a sharp increase in production in the coming years. Oysters delivered from the Netherlands being taken by rowing boat to the Vågstranda poll in 1930. This was the start of a 4-year period of continuous oyster and spat production. Oyster spat from Vågstranda being shovelled from boats onto the Limfjords Østerskompagniet oyster reefs in Denmark. The picture is from the 1930s. Ottar O. Bjørke and Oddvar Bakken holding home-made oyster baskets with oysters inside. Oyster spat have attached themselves to the baskets. The picture is probably from the late 1940s. A certain Amund Helland quotes S. A. Buch, who in 1883 concluded that while Romsdals Amt was until a few years ago known as one of the regions most abundant with oysters in the country, the fact of the matter is that even here, oysters must now be considered a rarity. This is still the case, adds Helland in 1911. Research into oyster cultures began as early as the 1870s. The idea was to find out why the natural oyster strains died out and how to artificially farm oysters in Norway as they did further south in Europe. The Association for the Advancement of Norwegian Fisheries became heavily involved in the issue, and in the 1880s spat production in Norwegian polls began. Research showed that spat production relied on high temperatures. The most favourable conditions could be found in land-locked fjords (polls) with a suitable mix of seawater and freshwater (with a freshwater layer above the seawater). The information provided above is taken from sources such as the Romsdal Museum annual. Using this, we have provided a background for understanding what an outstanding resource the Vågstranda poll actually is. This poll should become the backbone of a broad, nationwide increase in flat oyster cultivation in Norway because of its ability to produce large and viable spat that can be released into rougher waters. Spat production in Møre og Romsdal began in earnest in 1930 with the above-mentioned Bjarne Eidsvik from Ålesund. He had several oyster farms, but the largest was in the Vågstranda poll. Even before the Second World War the company had produced good results: It has the largest oyster farm in the country and exports 10 15 million spat to Sweden, Denmark, the Netherlands and England. It also exports significant quantities of edible oysters. After a number of experiments, Eidsvik succeeded in cultivating a Norwegian variety that not only coped with the Norwegian climate but that also turned out to be better than any other oyster variety. The old boss, Bjarne Eidsvik, with a spat collector made from birch twigs, full of spat. From the 1950s. Bjarne Eidsvik with oysters cemented onto a piece of rope as an alternative to placing the oysters in crates. The picture is from the late 1940s or early 1950s. Collectors made from birch twigs produced in the region between Lesja and Sunnmøre. At times there were 8,000 such collectors in use. The building was erected just after the second world war. This is how it looked in 1993. 7

Eidsvik had to close down his operation in the early 1970s, supposedly after an unfortunate experiment to make the poll even more productive. In other small Norwegian polls it is sometimes necessary to dam up the tidal currents in order to make the water warm enough for the oyster to spawn. This neither was nor is necessary in Vågstranda. But this is what was done, with the result that the spat died from a lack of oxygen because the water was not being replaced. The company collapsed. Limfjords Østerskompagniet, which was wholly dependent on spat from Vågstranda, was therefore only able to supply oysters for a few more years, and that was the end of vast quantities of famous Limfjords Østerskompagniet oysters. This says something about Vågstranda's position in former times. With the plans now being drawn up, Vågstranda can once again become a major supplier of oysters and spat to Europe. Several attempts have been made since Eidsvik's days to start production, but the resources put into the projects were insufficient. The poll has always been there with its natural assets. It is only now that Royal Oysters AS is becoming involved that significant capital can be put up to build what will become a leading European supplier of flat oysters. Modern production A determined effort was made in the years after 2000 to develop different and better methods for preserving oyster spat from the poll. It led to a land-based nursery for oyster spat being built in 2000/2001. This was discovered to be so effective that a larger nursery was erected in April 2005. Extensive work was carried out, and the entire old part of the plant was also upgraded with a view to rearing significant numbers of spat until they reached a healthy size and stood a good chance of survival. Spat are still collected using tried and tested methods with spat collectors suspended from longlines across the poll. Royal Oysters AS will be procuring spat directly from hatcheries to ensure a high degree of control from larvae stage to complete spat and then to oysters for consumption. The oyster in the Vågstranda poll is unique compared with the rest of Norway. For example, it spawns at much lower temperatures than normal 15 16 C compared with the normal temperature of 18 24 C. Since the poll is particularly warm at depths greater than 2.5 metres between June and August, the oysters rarely skip a year of spawning. On the contrary, oysters have been found to spawn twice during warm years, and even year-old juveniles have been discovered to spawn. It also provides steady and stable access to larvae, which attach themselves to the spat collectors placed in the poll in June. Timing is important, and the water temperature is carefully monitored from early June onwards to identify the right time to release the collectors. They should not be released too early, as they can quickly become overgrown with algae etc. The current production building with the old wing on the left and the new extension from 2005/2006 on the right. There is plenty of room for further expansion towards the north along the beach (on the right). The oyster raft at work. Lantern nets full of oysters are hauled up for cleaning on land ahead of the spawning season. The oyster raft working its way along the lines full of oysters. You can spot the oyster crates onboard. Cleaning is important and necessary for the oyster to grow. When the oysters start spawning the larvae float around in the sea for 8 9 days. Then they find a place to settle and begin to grow. If they find a spat collector, there is a good chance that they will survive and be collected later in the autumn. In September the collectors are retrieved and cleared of oyster spat. Spat that have attached themselves to the outside are usually the largest, while those inside the collector may be slightly smaller due to more restricted access to food. The pace of growth will even itself out as soon as they are removed and placed in the nursery, however. The largest spat are returned to the poll in crates, while the smallest spat are kept in the nursery over the winter and then released the following summer to make room in the nursery for new spat. This way, small spat are protected and many more shells can be reared for consumption over a period of 2 3 years. Growth rates in the Vågstranda poll are legendary, and it is estimated that the time from spat to ready-to-eat shell is only 2 1/2 years for the smallest shells, compared with 3 4 years in other polls. The markets often demand different sizes, and spat released into the poll will reach minimum consumption size after three seasons. Some will be left to grow further, as some markets prefer larger shells. The food content is not necessarily greater than in younger shells, however. The smaller shells often yield top quality consistency and are preferred by oyster connoisseurs. Because of the unusually fast pace of growth in the Vågstranda poll, spat can reach a weight of 20 30 g during their first autumn a growth rate that continues in the next few years. Overall, the Vågstranda oysters are ready for sale much sooner than oysters from other locations, be it in Norway or in Europe. The unique access to algae with a good sea temperature make all the difference. The use of spat collectors is a labour-intensive operation. The collectors are made from wire mesh stuffed with wood shavings and then dipped in a mixture of lime and cement. The long-term aim has been to do away with this part of the job, which along means that a hatchery needs to be built in Vågstranda. This will complement a large nursery perfectly. The oysters grow fast during the summer, and work during this period consists of cleaning existing oyster crates and nets in order to optimise nutritional intake. A specially designed raft is used for this purpose. The oysters are placed in crates or nets suspended from longlines, filtering sea water. If the crates become overgrown, the oysters will not get sufficient nutrition, preventing rapid and healthy growth. This is time-consuming work, and efforts are underway to research new solutions, including automated crate washing and methods for flushing and brushing the oysters. Oysters from Vågstranda always fetch top prices, not least because of the good quality of the meat, but also because efforts are made to give them a clean appearance. The product must look appealing, both at the shop counter and on the restaurant table. The oyster raft at quay. A traversing crane is used to unload the crates. Views towards the north and the outlet of the Vågstranda poll. The oysters are placed in lantern nets after cleaning. These nets allow for slightly better water flow than crates and are useful during spawning, which begins in mid-june. Spat collectors made from wood shavings wrapped in wire mesh. These are ready to be dipped in a mixture of lime and cement to give the wood shavings the right consistency for optimal spat capture. 8 9

Oysters the best fast food in the world Open wide and eat! A fresh, delicious and healthy culinary experience in under 15 seconds! People all over the world have realised what oysters are all about. More than one million tonnes of oysters a year are not to be scoffed at. This is food production on a very large scale. Production in China, Korea, Japan, the US and France combined has almost reached one million. Most of them are eaten fresh. Oyster consumption dates back a long time to the beginning of mankind. In Norway oyster shells have been excavated from Stone Age waste piles. The flat oyster is indigenous to our waters. It is a genuine part of European fauna, an exclusively European species, found from the coast of Morocco to Trøndelag in Norway. The flat oyster has a more or less round and flat shell with a smoother surface than the Pacific oyster. It is considered the best edible oyster in the world. At its best in winter it can be very sweet, rich and flavoursome. In France two thirds of the annual production of oysters is eaten during December. In Norway oysters are not an established part of modern food culture, and there is therefore no particular season for it, as is the case with crab, for example. But the flavour and food content of the oyster change during the year, and the variations can be quite significant. The quality changes with the sexual maturity of the shell and with its food intake. From early spring through the summer to early autumn there are usually plenty of algae in the poll. The oyster stores up food which it can dip into during winter. Much of this stored food is the polysaccharide glycogen. When a good autumn begins to draw to a close, the sea temperature drops, the copious algae growth is gone and winter is approaching, the oyster is sweet, flavoursome and full of food. contains little food. But there are always exceptions to the rule: oysters require fairly high water temperatures to reach sexual maturity and to spawn. Norway rarely sees such temperatures outside the oyster polls. The oyster can therefore still be acceptable for consumption even in the low season, but winter remains the best oyster season, even in Norway. Ready steady Research and development Some research has already been carried out into the shellfish industry in Norway, some of it specifically with regard to oysters. The following is taken from a prospectus published by Akvaplan-niva AS (a Tromsø-based aquaculture consultancy firm) in 1999 about oyster farming in the Vågstranda poll: European flat oysters are an established and highpriced bivalve in the EU market, and business opportunities in respect of this species are considered to be good. However, one of the barriers to establishing an oyster industry in Norway has been the lack of stable spat production. The Vågstranda poll is in a unique position in terms of industrial-scale production of oyster spat, with 8 million specimens produced as recently as 1990. The poll covers an area of 440,000 m2 and is the largest natural oyster poll in northern Europe. The poll is surrounded by agricultural land and forest and contains a natural population of European flat oysters, Ostrea edulis, which is the naturally occurring oyster species in Norway. The poll is described by experts as being unique in terms of bivalve farming (Mortensen and Strand, the Institute of Marine Research) and is unrivalled in Norway with regard to the production output of oyster spat. This is because of favourable conditions such as high temperatures, access to freshwater, access to and composition of algae, and the size of the poll. The Vågstranda poll is the only poll in Norway that has managed to produce significant volumes of spat. Growth times depend on the temperature, but in a good poll the oysters will reach a saleable size of 60 80 g 3 4 years after spawning. Test samples from the Vågstranda poll (1987 89) have shown that the first juveniles reach 60 g just two and a half years after hatching. before transferring the spat to the nursery for further cultivation. European bivalve hatcheries are small businesses with limited capacity to carry out extensive research on their own. Stable and increased production of bivalve spat will help build a European knowledge-based bio-economy and help create sustainable aquaculture production. The cultivation of quality spat is important to the production of healthy food, and the growth of bivalve farming will help businesses thrive in rural and coastal regions. These are images from the spat hatchery run by Scalpro, Royal Oysters' business partner. Small oyster spat in columns with water flowing upwards. In cold weather the oyster will tap into its energy reserves, but it is also running in hibernation mode and can retain its high quality throughout winter. When spring arrives, things begin to change: the sun gradually heats up the seawater, and the algae begin to blossom in the nutrient-rich water. Nature comes back to life, and the shells change their metabolism. Now they need to reproduce quickly. The energy reserves in the shells are used to create eggs and sperm, and fat is fed to these reproductive cells. Simply put, the flavour of the oyster changes from sweet to fatty. It is now less attractive, at least when eaten fresh. After spawning the oyster usually go! Scalpro AS in Bergen has been carrying out research into spat production for some time, and it has participated in several large-scale EU programmes. An EU-funded project entitled Conditioning and settlement keys to competitive bivalve hatchery production (SETTLE) was carried out in 2008 2010. The aim of the project was to stabilise production of species such as oyster spat in hatcheries by boosting the conditioning of broodstock and increasing survival rates during and after metamorphosis and settlement. In short, it will generate further knowledge about what is required to achieve stable hatchery production of the particular Vågstranda oyster Oysters eat algae, and they are fed in the hatchery before spawning. Combined with the right water temperature, algae composition is important for successful spawning. 10 11

The market for flat oysters There is a large market for flat oysters worldwide, and 3 4 million tonnes are produced every year, in all varieties and sizes. However, production of European flat oysters is negligible. You can see the major producing countries on the map on the right. For the time being, these countries are the same as the countries in which this oyster variety is consumed, but interest from other affluent markets is growing, including from eastern Europe and Russia. Good times mean all types of luxury products are seeing growing demand. And what is better than a product which, for natural reasons, can only be produced in limited quantities? The fact is that disease is causing high levels of mortality in southern Europe, while Scandinavia and particularly Norway are geographically far away from these regions. Since Norway is already a major exporter of seafood, it already has the necessary sales channels and knowledge required to build a brand. Focusing on new fish species, and eventually bivalves, will increase Norway's dominance in the seafood market. Its proximity to Arctic waters adds to the image of clean, healthy food. With regard to oysters and European flat oysters in particular Norway has every opportunity to become the leading producer in Europe, perhaps even in the world. Given the change in the climate that is taking place, with warmer oceans across large parts of the globe, Norway's coasts may once again start to emerge as attractive areas for oysters to settle. Just as with salmon, cod, halibut etc, production must still be organised, and an industrial approach must be taken in the long term. In the case of oysters, this means that it must be possible to cultivate them in places where growth is even, regardless of weather and temperature. Despite changes to the climate, there is no guarantee of warm weather every year, which is why the poll systems in Norway, and particularly Vågstranda, are necessary to achieve stable growth. If more polls are put into production by way of a national initiative in the years to come, it will be possible to achieve stable deliveries, primarily for export to Europe, although affluent Asians are also an interesting market. After all, Norway is already sending salmon by air freight to countries such as Japan, and with the top quality and price of Norwegian oysters today, there is nothing to prevent oysters from being delivered via the same channels. This is a case of building a separate brand in the years ahead and aiming to satisfy the market in respect of appearance and flavour while being able to document the very highest degree of environmentally-friendly production. This will generate optimal prices for producers. The diagram on the right shows how we may have reached the bottom in terms of flat oyster cultivation. Once the Vågstranda poll is in full production, it may affect statistics in that the curve will gradually rise. The market is there, it is large, and Royal Oysters will deliver the goods! The main producers of European flat oysters. Ostrea edulis European flat oysters. Production of flat oysters in Europe. Production peaked in 1961. Since then, disease has made production difficult in southern Europe. In the long term a disease-free Norway could therefore become a major producer in a market where demand is high. Source: The Food and Agriculture Organization of the United Nations. Oyster spat Vågstranda's gold The production of spat is key to any future industrial-scale oyster production in Norway. Spat production based on broodstock from the Vågstranda poll will take place at the Scalpro AS hatchery in Øygarden and then be transferred to the company's onshore nursery in Vågstranda. Largescale operation would involve collecting spat on collectors. From the hatchery and nursery stage the production will become intensive. This is the long-term aim for the Vågstranda poll simply because it is less time-consuming and gives better control. Other polls in Norway do produce some spat, but so far the quantities have been negligible. Large volumes of phytoplankton are present in the Vågstranda poll during spring, summer and autumn, and Norwegian waters are generally richer in algae than coastal regions further south in Europe. Sufficient quantities of spat for industrial-scale production are in any case lacking, especially in Norway but also elsewhere in the Nordic region. There are several poll systems in Norway suitable for cultivating oysters for consumption, but sufficient volumes of spat are difficult to produce in these locations. This is where Vågstranda comes in by working with other farmers in other polls to establish a large oyster industry in Norway. Even if large quantities of oysters for consumption are cultivated in other polls, sufficient volumes of spat will be in short supply. Hatcheries are currently able to provide spat, but they are so small that they often do not cope with the transition to cold water and tough conditions very well. These are spats up to 10 mm or usually even smaller. They must be transferred to a nursery for further cultivation, but once again it is only the Vågstranda poll that has managed to do this on a large scale thanks to the abundance of algae in the water. The Vågstranda spat ready for sale or for further cultivation in crates in the Vågstranda poll are 25 mm or larger. These spat are of course considerably more robust than their much smaller relatives under 10 mm. This means that farmers in places other than Vågstranda can also expect to see good results when trying to cultivate oysters for consumption. In other words, it will be financially sensible to purchase large spat rather than small and fragile spat. This type of spat is currently fetching high prices. The Vågstranda poll could produce large quantities of spat alongside the ordinary cultivation of oysters for consumption. However, this requires investment in a hatchery and a large nursery that can supply the rest of the country with large spat. Experts agree that Vågstranda is the obvious location for such production in Norway, and in the current circumstances, industrial-scale domestic production depends on a good location. We are likely to see rising interest in oyster cultivation in Norway once Royal Oysters signals that it also wants to focus on spat delivery. This would give the sector the necessary predictability and stability in relation to spat supply. The new nursery for oyster spat. Royal Oysters is expecting a great deal from this nursery! A golden handful! Good-size spat stand a much better chance of survival, and should be an attractive product. Vågstranda's gold! Spat the size of a 2 coin. Large quantities of such spat are cultivated in the poll during the summer months. They are placed in the nursery in September. 12 13

The future of Royal Oysters AS in the Vågstranda poll Limfjords-Østerskompagniet in Denmark Royal Oysters AS is looking to the future. As the market focuses on the environment and demands more environmentally friendly production, what is better than bivalves that are neither medicated nor fed, simply living off what nature feeds them? With the added status of the oyster as one of the most exclusive types of seafood, there is every opportunity to create a profitable and exciting business. Growth is a key criterion, and one that Royal Oysters has taken into account. More specifically, it is possible to grow into a major company by Norwegian standards by using only the Vågstranda poll. The company aims to be the largest Norwegian oyster supplier within a few years. This will probably also make it one of the largest suppliers in Scandinavia. If the poll is fully exploited, the company could also become a major player in the European market both as a spat supplier and as a producer of oysters for consumption. Smooth and elegant oysters lined up in crates. Having been cleaned and sorted by size, the oysters are ready for further cultivation in the poll. Royal Oysters aims to become an exponent of a brand that enjoys a high status around restaurant tables across Europe and in Asia. The company is prepared to adopt a long-term strategy to achieve this by linking up with scientists and industry experts with in-depth knowledge of oysters and by attracting appropriate financing partners. Royal Oysters is still in a phase where investments are financed by owners' capital, which means future capital increases are necessary. An obvious future step would be to make the company's shares marketable. At the same time, the company has come far enough to start a dialogue with Innovation Norway and other agencies concerning the financing of activities such as research and development as well as marketing. Royal Oysters is convinced that an investment in large-scale production of oysters in Norway is viable. The new part of the building. View towards the poll, where Royal Oysters has a site suitable for building a larger nursery and hatchery. The concrete blocks are used to weigh down the oyster lines. What is the conclusion? The scientists have said the following: Royal Oysters AS really has the potential to become one of Europe's leading suppliers of flat oysters. A royal purveyor of quality bivalves! Southerly view of the poll. The plant can be seen on the right. Royal Oysters is looking forward to the day when most of the poll is once again used for cultivating oysters and oyster spat. 14 15

Vågstranda in the media newspaper cuttings New initiative in Vågstranda why and how! Royal Oysters AS' initiative is based on the tradition of oyster cultivation (flat oysters, Ostrea edulis) in Vågstranda since the early 1900s. The Vågstranda poll has been a large (440,000 m2) and good site for bivalve production. The last company to manage the poll was Arctic Oyster AS, which has now gone bankrupt. The company also collected spat but had drawn up plans to move into the production of bivalves for consumption. They were unsuccessful in raising capital, however. Royal Oysters AS wants to take advantage of the progress that has been made with controlled spat production in hatcheries in recent years and base its business on spat produced in hatcheries while using new technology to boost growth and to clean shells and production equipment. The company also wants to exploit the market opportunities created by a fall in the production of oysters and particularly flat oysters (Ostrea edulis). The company's business idea is based on the following factors: 1. Demand for seafood is rising sharply both in the Nordic countries and in Europe. 2. Fishing and harvesting of existing products are increasingly complemented by aquaculture (cf. the growth of salmon farming since 1960). 3. The cultivation of fish and other marine organisms is developing rapidly. 4. The cultivation of shellfish is a more environmentally friendly method of food production. 5. Nutrients from aquaculture products are considered to be very useful to humans. 6. The cultivation of oysters is sustainable and environmentally friendly in the sense that it makes use of nature's own system for feeding the oysters. 7. Aquaculture can lead to the creation of sustainable businesses away from urban areas and help build vibrant communities in rural regions. 8. Aquaculture draws upon age-old knowledge that is further developed by research and new knowledge. 9. The launch of Royal Oysters AS should benefit from the development of oyster farming in Norwegian waters and make use of the new knowledge that is being acquired. 10. The Ostrea edulis flat oyster is seen by many as being the best oyster due to its meat content and flavour. 11. The fact is that the price of flat oysters, Ostrea edulis, in the European market is 2 4 times that of the Pacific oyster, Crassostrea gigas. 12. Royal Oysters AS will serve the French market alongside the Norwegian market. The former has a capacity of more than 100,000 tonnes of oysters a year. 13. The Pacific oyster, which took over following parasite attacks on the Ostrea edulis now accounts for 99% of production volumes. The flat oyster, which before 1950 accounted for 100% of production volumes (now only 1%) has retained its reputation as the best oyster. 14. In the last 2 3 years a new epidemic has ravaged French gigas production and reduced saleable volumes significantly. 15. The volumes offered to the market do not meet demand. Prices are therefore rising sharply. 16. Royal Oysters AS has the logistics knowledge required to secure access to the French market. 17. Royal Oysters has a well established network of seafood wholesalers in France (the Paris Rungis wholesale market). Rungis is capable of covering all of France. The areas covered by Rungis have a combined population of more than 15 million people. Rungis has more than 600 fish/seafood wholesalers. Royal Oysters AS has established good relationships with a dozen of these. 18. Royals Oysters AS will offer oysters grown in Norway both to the Norwegian and to the French market. Production and harvesting will be quality assured. 19. Quality assurance includes the following areas: size, form, internal and external cleanliness, health, packaging and branding. 20. Demand in Norway and France is deemed to be such that Royal Oysters' production can expect to fetch good prices. 21. The production of oysters in the Vågstranda poll has been described as outstanding in a Nordic context. 22. The Council of Western Norway has documented in reports produced by SINTEF that oyster farming in Norway has good commercial potential, although pricing issues represent an uncertainty factor with regard to the extent of this potential. 23. FHL has documented that the production cost of a 4- year production cycle using old crate technology was NOK 2.75 and would be profitable at a sale price of NOK 4.20. 24. Bømloskjell AS and Net-skjell have shown that they were able to sell all available flat oysters in the weight range 55 80 g for NOK 12.50 each. 25. The price depends on several factors, including size and quality. Norway already has existing expertise on quality assurance in the form of the Institute of Marine Research and NIFES, which has also issued a quality standard for flat oysters. 26. Prices on the French market vary a great deal, but O. edulis prices to wholesalers will be above the estimated price required to be profitable. 16 17

We are planning an annual production output of 100 tonnes of oysters in the poll. The poll is thought to have a production capacity of 200 tonnes per year. It has been documented that 60 tonnes of spat were harvested in a single year alongside 200,000 broodstock in the poll. There are also other polls in the area for a potential expansion of the business. Growth in the poll is good. The flat oyster grows by 20 g every year, which goes to show that the poll is ideal for the production of flat oysters. The idea is that after three years the distribution of shells will be 25, 50 and 25% in the weight classes <60, >60 and >80 g respectively. Production will take place in lantern nets, which can be cleaned while suspended from longlines. The shells must be sorted every year to check the biomass and to thin them out before switching to new equipment. The company will use 10,000 nets in its production. The company will base its operation on three key changes to the production: production of oysters for consumption as opposed to large-scale spat production, spat from hatcheries as opposed to spat collection in the poll, and new technology for effectively cultivating and cleaning shells for consumption. Oysters for consumption Use the potential offered by the good location and documented annual growth as well as facts relating to market opportunities. Access to spat production of Pacific oysters, (Crassostrea gigas) which were produced at a rate of 150,000 200,000 tonnes a year until three years ago. Production output is now considerably lower as a result of high levels of mortality early in the grow-out phase. Flat oysters fetch 3 5 times higher prices in Europe compared with gigas oysters. Production of flat oysters in Norway is limited (5 tonnes). Demand for oysters in the market is currently met by the import of gigas oysters. Flat oysters in Norway currently fetch around NOK 12 per oyster for sizes above 60 g. The same price will be achieved in Europe for larger oysters (120 g). We have used the following FOB prices in our calculations: NOK 5 (>60 g) and NOK 6 (>80 g) on the assumption that 70% of the spat survive until the sales stage. The company will not undertake sales and marketing itself, but rather form a partnership with Ostrea AB in Sweden and some of the large fish exporters in Norway. Progress Royal Oysters AS (corporation no. 996 814 823) was established in spring 2011. It then took over the oyster plant at the Vågstranda poll and reached an agreement with the landowner on establishing production in the poll. The registered title deeds were received in March 2012. In November 2011 the company was granted a licence for the production of flat oysters both in the poll and in the onshore plant. The company has conducted two share offerings and is planning a further two. The company's owners and founders are Thorolf Magnesen and Karl Johan Smedman, each with a 50% stake. Finance When regular operation begins (2016) the company will have around 1 million x 60 g oysters and 350,000 x 80 g oysters for sale, which should generate NOK 8.2 million in sales revenue. Operating costs that year are estimated at NOK 5.4 million and operating profits at NOK 2.6 million. Risk assessment: 1. Access to spat. Scalpro AS has previously produced up to 6 million oyster spat per year. In recent years it has produced 2 million per year. Scalpro has previously produced spat from broodstock from Vågstranda, and the risk is therefore deemed to be low. 2. Disease. The oysters in this location are free from disease, and we will be basing production on this strain. Other strains will not be introduced, and the risk is therefore low. 3. Production capacity. Production of 100 tonnes has been documented in the past. Capacity will be monitored under a separate monitoring programme. Changes in the area may have reduced capacity, but this is not thought to be likely. 4. Loans. The availability of bank loans for new species in the Norwegian seafood industry is limited. A loan is more likely to come from Innovation Norway, but the problem is that the company has few assets apart from its oyster biomass. The risk is uncertain but can be clarified. 5. Workload. When in full operation the company is planning to employ six people. The workload is calculated on the basis of figures from scallop production and similar techniques. The availability of skilled staff may pose a risk in the beginning. 6. Sales. Flat oysters are only found in small volumes in the European market and achieve a higher price than competing varieties. We believe that flat oysters are a popular variety with great market potential. 7. The financial aspect is primarily determined by survival rates and market prices. Survival rates are a function of monitoring and cleaning, which are controllable. A low market price has been set in the budget (50% of what is achieved in Norway currently). Do not hesitate to contact us for further information: Thorolf Magnesen scalpro@frisurf.no or telephone +47 95927754 Karl Johan Smedman karljohan.smedman@ostrea.se or telephone +46 705642159 Broodstock from the Vågstranda poll have been transferred to Scalpro AS' hatchery in Rong for production of the endemic oyster strain. The strain in Vågstranda has previously been examined and found to be free of disease. 5 mm spat will be returned to a separate nursery in Vågstranda for further cultivation before being transferred to the poll. Expertise acquired through a number of international projects will be utilised. Effective cultivation Exploit and adapt technology from scallop cultivation to suit cultivation in the poll. Effective cultivation and cleaning of equipment results in low labour costs. Marketing and sales Flat oysters in Europe were almost eradicated by disease early in the 1960s. Production is now less than 5,000 tonnes. The drop in production was replaced by new Capital requirements The company needs to invest NOK 3.9 million in the first five years. The main investment (NOK 1.8 million) will be made in the first two years, while the second phase takes place in the fifth year. The majority of the investment will be related to the purchase of cultivating equipment. Sales of shells for consumption will commence in the third year, but late in the year. The company will therefore require operating capital for 3 1/2 years totalling NOK 5.5 million. The company's total capital requirement is therefore NOK 10 million. Financing The aim is to finance the capital requirement with share capital (NOK 6 million) and loans (NOK 3 million) as well as public funding (NOK 1 million). 18 19