October 31, 1996

Article at Australian Financial Review

View original

MAGAZINE | Harvesting the Rich Sea-Change


Paspaley seaplane brings workers to the pearling hatcheries (Frank Lindner)

Four decades ago the founder of Paspaley Pearls sowed the seeds of a lucrative family operation. In a demanding business, his children have carefully nurtured their legacy and the Australian pearling empire is now extending its reach within the Asian market. 

By Wilson da Silva

Full fathom five thy father lies.
Of his bones are coral made;
Those are pearls that were his eyes;
Nothing of him that doth fade
But doth suffer a sea-change
Into something rich and strange.
- Shakespeare, The Tempest

THE WATER of the bay races up to the airplane and suddenly, disconcertingly, there’s a splash of seawater across the window. The plane begins to drift in the waves, and out of the droplet-speckled window you see an aluminium tender swinging around for a rendezvous.

This is Arnhem Land. The sun is bright, the air humid and the waters teeming with crocodiles and sea-snakes. Inside the plane, 11 unshaven men in shorts tease out foam earplugs and amble towards the stern. The pilot cracks open the hatch and a cloud of sea-spray rolls in.

It’s Friday. Another day in the pearl farming business.

And what a business. Paspaley Pearls, started by a Greek immigrant nearly 60 years ago, is these days a family-owned concern that spans eight wholly-owned farms, another two under joint management, a trio of 12-seater seaplanes, 81 boats, four onshore and three offshore base camps with satellite television, high-security pearl-grading rooms and 10 large vessels - ranging from ferry-sized farm-support craft to the 700-tonne supply ship Christine. It is an operation that works seven days a week, with only three recognised holidays: Christmas, New Year’s Day and Good Friday - and that’s if everything is running smoothly. Loyalty is prized, the highest efficiency expected. Those who cannot cut it quickly drop off.

“We’ve brought the pearling industry into the 20th century from its peasant beginnings in Japan,” says operations manager Richard McLean. “It’s been said before - we’ve ‘round-eyed’ the pearling industry.”

Paspaley is the leviathan of the industry. Around harvest time the company has 150 to 160 people on the farms, 100 out at sea and another 30 flying or supporting the aircraft. In all, it employs 600 people, and much of it is run like a military operation. There is only a hectic five-month window between success and failure. New Zealander McLean, a ship’s master and an ex-pearling diver, marshals his troops from a Darwin bunker in a high-rise building owned by the company. A large map of north-western Australia drapes most of one wall, marked with flags and pins and annotations. He knows where his resources are deployed at any one time and where they will be the day after tomorrow. Affable and courteous, he nevertheless reveals an underlying steel in his voice.

McLean’s memos cover the notice-boards of the remote base camps: warning that late arrival for the seaplanes will not be tolerated, that beer rations must be consumed on the day they are collected and not stocked, that anyone found with illicit drugs will be severely dealt with. The drill-sergeant tone from the corporate metropole seems aeons away from the realities of life on the steamy base camps.

Recovered Pinctada maxima shells are split on a work pontoon, with the pearls collected in the bucket on the workbench. The shells are sold for buttons and the innards as pearl oyster meat (Frank Lindner)

“Some of those panels can weigh up to 15 kilos, full of weed and whatever,” says Geoff Wessels, farm manager at Paspaley’s Raffles Bay operations in Arnhem Land. “When you are pulling 80 of them every line, you tend to develop your biceps and forearms.”

The business is as relentless as it is methodical. The Pinctada maxima shells are gathered by divers from the wild, mostly from sites off Broome such as Eighty Mile Beach, the world’s largest repository of pearl-producing molluscs. The shells, averaging 30cm in circumference, are shipped in the brine-filled and climate-controlled cargo holds of massive converted tuna boats, to underwater farms in Western Australia and the Northern Territory.

Once on location, the shells are gingerly cracked open by seeding technicians on specially-designed workbenches using specially-designed surgical tools. When a natural pearl is found, it is retrieved and a “nucleus” - a piece of ground American oyster shell - is inserted into the gonad along with a piece of mantle tissue. The shells are then rested to recover from the surgical trauma and eventually placed in wire-framed cages, or panels. The panels are lowered into the waters of the pearl farms, located in protected inlets, and attached to floating lines. Line after long anchored line can be seen from the air, each holding 70 to 80 panels, each panel holding six of the rocky shells.

The creatures sway in the waters for two years as they grow the pearls, filtering food through their dual feeding valves. Farm crews at each of the base camps devote their waking hours to pulling up the cages, cleaning them out and immersing them again. They run the cages through a specially-designed “dishwasher” developed by the Paspaleys, and then scrape the remaining seaweed and parasites off the shells.

Each shell can expect to live for six years before its pearl-producing capacity is exhausted. The creatures are then killed by hand, their fleshy innards stripped to sell as oyster meat, and the interior of the shells - containing the thick pearly lustre known as “mother of pearl” - is collected to be sold for furniture and jewellery ornamentation.

AS A BUSINESS, there’s nothing quite like it. It is magical, harsh, idyllic and treacherous. Men have died in pursuit of the milky orbs, their deaths perhaps the price Nature extracts for the single-minded industrial precision with which her treasures are liberated from their underwater coffers. Although it has been a year since the last fatality in Broome, there was a time, half a century ago, when a cruel sea and unregulated operations could take 300 lives in a single season.

Diving for pearls, Kuri Bay; Paspaley crew and Japanese technicians work in a partnership (Frank Lindner)

But it took his eldest son, Nicholas Theodore James Paspaley, to turn it into an industry powerhouse. Trained as an economist at the University of Sydney, Nick Jnr revamped the operations on his return to the company in 1970. He had grown up working summers in every facet of the business - from diving for shell and scraping pearl meat to captaining vessels when he was old enough. Nick Jnr got to know the business inside out, something that proved invaluable when he donned the mantle of company leadership with the death of his father in 1984.

Pearling consumes Nick Paspaley’s life. “I wouldn’t necessarily describe my feeling for pearls as a passion, but pearling is my whole life,” he says. “I really can’t think or imagine anything else. If you talk about something other than pearls, I fall asleep.”

That single-mindedness has helped him take the company to stratospheric heights. Northern Territory Chief Minister Shane Stone describes the Paspaleys as “the De Beers of the pearling industry”. The family’s companies control some 65 per cent of the market for the so-called Australian South Sea pearls, the largest and most sought-after in the world. Australian production, which generates some $200 million in revenue, accounts for most of the world’s production of South Sea pearls. Cultured pearls grown in Indonesia also fall into the South Sea pearls classification, although industry players say they are of poor quality and the die-off rate among the shells is around 60 per cent.

“In the old days, Burmese South Sea pearls were the best in the world, but today their pearls are just junk,” says Salvador Assael, a New York-based pearling trader once dubbed “The Pearl King” by Forbes magazine. “Australians, without a doubt, produce the finest white South Sea pearls.”

What is special about the pearls grown in Australia is their lustre and their size, and the fact that they are “natural”. They are created in the soft tissue of Pinctada maxima, a large bi-valve mollusc found in northern and north-western Australia. “Wild pearls” are created with the introduction of a foreign object, such as a grain of sand, which irritates the mollusc. The mantle, a layer of tissue between the shell and body mass, secretes layers of calcium carbonate that completely envelope it, creating the hard, rounded gem.

For millennia, pearling involved retrieving the rare gems by diving for molluscs such as pearl oysters, pearl mussels or abalone. It was a hit-and-run affair. But in 1888, a young Japanese entrepreneur, Kokichi Mikimoto, tried cultivating pearls by artificially introducing an irritant, in the form of a bead, into the mantles of Akoya shells. Five years later, he retrieved from a bamboo basket a semi-spherical pearl, the world’s first cultured pearl. Within a matter of years, the fished natural pearl business in Asia and the Middle East was fading, devastating the economies of nations like Kuwait. A boom in demand for pearls at the turn of the century saw New York’s Tiffany & Co sell a pearl necklace for $US1 million, a kingly sum which remained the store’s largest single sale until 1991.

The Japanese have dominated the market for pearls ever since. Their influence survives in the mainstream lexicon: “oriental pearls” are still thought of as more lustrous and valuable, and the measure of the quality of other gems. And yet Japanese Akoya pearls are smaller, between 6mm and 8mm in circumference, and are mostly bleached and colour-enhanced. Indonesian pearl farms use the same type of mollusc as the Australians but produce pearls between 8mm and 11mm in size. Australian South Sea pearls, on the other hand, average 13mm, are not bleached or coloured, and the shells are collected in the wild and cultured in the wild - in wire-framed baskets suspended in natural inlets. Within the Australian market, the Paspaleys hold the record for the largest pearls, with sizes of between 19mm and almost 21mm.

For two years the shells are held in wire-cage panels on anchored lines beneath the sea, where divers clean them regularly (Frank Lindner)

Despite the higher quality of the Australian product, the myth and the kudos still rest with Japan. The technique for seeding pearls is a patented Japanese secret; even Paspaley’s operations use Japanese technicians to carry out the task. The eight farms, although owned by Paspaley, operate on a production-sharing arrangement with Japanese partners Hamaguchi Pearling Ltd and the Kyokko Industry Company Ltd. Many of the terms used in the business are Japanese: standard measurements include a “momme”, equal to 3.75g, and 1,000 momme, which equals one “kan”.

But the power Japanese interests exercise over Australian pearling has been waning. Once they controlled the market and all Australian production was sold through Japanese middlemen to the rest of the world. The growing strength of Australian producers, coupled with a recession in Japan in the early 1990s, saw Australian companies like Paspaley find their own buyers in the US, Hong Kong and Europe. Now, less than half of Australia’s production goes to Japanese interests and much of it is sold at auction in markets such as Hong Kong.

“We are looking to other parts of the world, although the Japanese remain important clients,” says Nick Paspaley.

LIKE NICK JR, sisters Roslynne (now Ros Bracher) and Marilynne experienced the pearling industry first-hand as they grew up. Ros Bracher, 51, is the eldest sibling and works out of the company’s headquarters in Darwin. Marilynne, the youngest, left day-to-day operations for a time to pursue an acting career, landing roles in television series such as GP. Now aged 44, she divides her time between running the family’s Sydney operations and taking on occasional acting roles, including a recent stint in Water Rats. Vivienne Paspaley, the 83-year-old matriarch, sits on the boards of the various family corporations.

The ultimate holding company for the family’s fortune is the Pearl Corporation of Australia Pty Ltd, established at the time of the death of Nick Paspaley Snr 12 years ago. Each of the siblings holds a stake via three trusts, with Nick Jnr controlling 50 per cent.

When Nick Jnr joined the operations full-time a quarter of a century ago, he found an industry still using wooden lugger boats - gaffriggers with extendable masts. In 1974 he travelled to Japan and commissioned the construction of a purpose-built fibreglass ship based on a tuna boat design - an event that caused much mirth in Australian pearling circles. The boat, the Paspaley I, ended up revolutionising the industry.

“Nick is a visionary as well as a gambler,” says Brian “Snowy” County, a Broome pearler who has known Nick Jnr for many years. “Nick took his inheritance and put it all in the pearl industry. He used the money to buy a tuna ship in Japan and everyone laughed at him. Nobody had such a big ship with huge tanks for holding shell. Now, he’s very successful.”

Next, Nick concentrated on the growing problem of mortality. As production intensified, the die-off among shells gathered from the wild began to rise. It was a source of frustration and mounting concern for an industry trying to develop. “Mortality was a nightmare, just a nightmare,” says McLean. “At any one time, 50 per cent of the wild shell was dying off.”

Ross Mierendorff, manager of the Paspaley shipyard in Darwin; the oil rig tender behind him is being refurbished as an accommodation ship for farm workers (Frank Lindner)

The answer turned out to be shell trauma and bacterial infection. The shells react poorly to being moved and had to be handled carefully when in motion and then given time to recover in placid environments afterwards. Next, the underwater panels in which they were housed for two years had to be constantly scrubbed clean, to allow a good flow of nutrients to filter through and prevent bacterial infections from building up. These seemingly simple techniques were applied across the Paspaley operations, and fairly soon, across the industry. Mortality rates went crashing and profitability soared. Shortly after Paspaley Pearls hit on the winning formula, demand during the overheated 1980s exploded and the company began to grow at a phenomenal pace.

At that very point, the father who had brought up his children to love the trade passed away. “The day my Dad died, Nick brought back the most beautiful, the biggest, most perfect pearl we ever had at that stage,” recalls Ros Bracher. “I think it was an 18.5mm. That was the mark of the turnaround, really. And Dad died that day.”

AS THE Paspaley group prospered, the family’s holdings grew substantially. Twelve years later, they stretch across pastoral real estate in the Northern Territory and NSW, pig farms in Western Australia, a complex of holiday apartments in Darwin, caravan parks on the northern NSW coast, a shopping centre in Broome, commercial buildings in Darwin and even a portion of the city’s dockyards.

In Mudgee the company has a 122ha vineyard and in Scone 6,885ha of cattle as well as sheep bred for wool. The Paspaleys later bought Skywest Aviation from Ansett, a 32-plane fleet which once ran the Coast Guard contract in northern Australia but now flies air ambulance and medical services as well as charter flights.

The family says diversification was necessary, if only so they would not be held hostage to the fickle nature of luxury markets. “If you’re dealing with a luxury product, you feel a little bit vulnerable,” says Ros Bracher. “The most intelligent thing is to go to a basic need.”

Under the guidance of Nick Jnr, now 48, the family expanded its pearling interests. The group bought out Roebuck Pearl Producers Pty Ltd in 1986, snatching the Broome-based Australian company’s farms and its sizeable 55,000 quota for the harvesting of natural shell in the process.

But the most satisfaction came in 1990 when a very astute Nick Jnr seized on what must have seemed an opportunity impossible to pass up: acquisition of the American trading house Otto Gerdau Company. Established in 1872, it was once a large import-export business based in Manhattan, plying trade across the Orient and shipping exotica back to the US. In 1956, in a meeting now part of industry mythology, the Gerdau family struck a deal with the Kuribayashi family of Japan and a group of Broome-based Australian pearlers to apply the process for growing pearls in Akoya shells to Australia’s larger Pinctada maxima molluscs.

The American company, with Australian partners holding 24 per cent, established Pearls Pty Ltd in Broome. It used Japanese technical know-how in a profit-sharing deal to build a large-scale pearl cultivation operation. Although it was Nick Snr who had first floated the idea, he was never invited to join. So he sought his own links with Japanese pearlers and established profit-sharing schemes with them.

Thirty-four years later, Paspaley Pearls had grown large enough to swallow Otto Gerdau Company whole following the death of its chairman. Nick Paspaley cut a deal with the Australian minority stakeholders and then tracked down the Florida-based inheritors of the Gerdau fortune. He acquired not only Pearls Pty Ltd and its prized 80,000-shell quota for Pinctada maxima, but also landed himself a textile importing company in the US as well as an office building in Wall Street. The tables had been turned; Nick Snr would have been proud.

Nick Paspaley Jnr

“You’d never seem to get a fair run from the media,” says Ros Bracher. “They’d give you about a two-minute stint and always misquote. We just found it was better to say nothing than be misquoted. So we just got fed up, because the world wasn’t getting the true picture.”

But the Paspaleys are slowly, uncomfortably, coming out of their shells. They have established the South Sea Pearl Consortium, an international marketing venture aimed at breaking down the pearlescent halo surrounding the Japanese industry and building an appreciation for the higher quality Australian product. They have commissioned promotional films on the pearling process and are running advertising campaigns overseas.

“I preferred it when it was a little smaller,” admits Ros Bracher. “We knew everybody who worked for us, their families and their grandchildren. It was a much nicer feeling. I walk through the mall now and I don’t even know if people work for me or not. And it was a little bit more pleasant, in lots of ways. We’d go out to the pearl farms and actually help clean the shell. But it’s impossible now.”