An Australian management fund has nabbed another slice of historic Tasmanian farmland from billionaire Chinese businessman Xianfeng Lu and his troubled dairy company.

Prime Dairy, the dairy arm of Melbourne-based fund manager Prime Value Asset Management, will fork out $15 million for a 700-hectare dairy farm inside the gates of the historic Woolnorth property in the far north-west of Tasmania.

The sale equates to about $21,400 a hectare, which is less than the region’s median price of $25,583 a hectare.

Kirsti Keightley, the general manager of Prime Dairy’s dairy investments, has called it “a good deal”.

“This latest ‘inside the gate [of Woolnorth]’ purchase adds significantly to our Tasmanian holdings, which are some of the best dairy-producing lands in Australia,” she said.

A fresh start

Ms Keightley said the property was an organic dairy licensed for 600 cows, which Prime Dairy intended to return to conventional farming.

“We’re probably looking to be milking 900 to 1,000 cows, so we will have to do some work on the effluent system,” she said.

“Generally, the farm’s in reasonably good condition.”

Ms Keightley said the sale would mark the end of Prime Dairy’s expansion in the area, where it had already experienced a 35 per cent improvement in production since last year.

“We have achieved what we set out to do in 2019, having built a dairy business across 5,000 hectares in north-west Tasmania and south-west Victoria,” she said.

“We expect significant further growth to come.”

Cows culled, milk contract pulled

The sale comes after a troubled three months for Van Dairy Limited (VDL).

In February, major dairy processor Fonterra pulled the pin on a 25-million-litre milk contract with Van Dairy, citing several “unresolvable commercial factors”.

As a result, at least 700 cows, or about 10 per cent of the herd, were sent to slaughter.

The ABC understands that number is now in the thousands.

At the time, Fonterra’s director of farm source Matt Watt said the company would seek to replace the lost milk from other Tasmanian farms.

“We stopped collecting milk from all VDL farms on February 1 after providing VDL with several months’ notice to mitigate the impact on their business and supporting them in determining their next steps,” he said.

Mr Lu was contacted for comment.

Historic property carved up

The deal marks yet another break up of what was Australia’s largest dairy operation, run since 2016 by Chinese-backed Moon Lake Investments, rebranded as Van Dairy Limited.

Historic Woolnorth, which covers 143,500 hectares of high-rainfall farmland, was owned by the British Van Diemen’s Land Company for about 170 years.

The property was slowly whittled down before it was snapped up by a New Zealand company in 1993, and then bought by Mr Lu in 2016.

In 2021, amid widely publicised issues with effluent problems, alleged animal welfare and farm management problems, Mr Lu sold off 12 properties outside the Woolnorth gates, including 11 to Prime Dairy.

Later that year, Mr Lu sold 6,000 hectares of “inside the gate” farmland to family-owned TRT Pastoral Group for $120 million.