Incitec to Build Ammonium Nitrate Plant in Australia

By Madelene Pearson

July 28 (Bloomberg) -- Incitec Pivot Ltd., Australia's largest fertilizer maker, will spend A$935 million ($893 million) to build an ammonium nitrate plant in Queensland state to meet soaring demand from mining companies for explosives.

Engineering works at the Moranbah plant are expected to be largely completed by first quarter of 2010, with the plant reaching full capacity in the first quarter of 2011, Alan Grace, Incitec president of major projects, said today on a conference call. The plant will produce 330,000 metric tons a year of ammonium nitrate, the key ingredient in explosives.

Incitec is reviving a project mothballed by previous owner Dyno Nobel Ltd. after paying $2.5 billion this year to take over the company. Orica Ltd., the world's largest explosives maker, has said there's a ``looming shortage'' of ammonium nitrate as buyers including mining companies including BHP Billiton Ltd. expand output to meet Chinese demand for raw materials.

``It gives us great exposure to big growth markets which ties in very much with the super-cycle, a hard commodity and soft commodity super-cycle,'' Incitec Chief Executive Officer Julian Segal said on the conference call. Incitec sees demand staying ``strong for quite a number of years,'' he said.

Incitec rose A$1.71, or 1.1 percent, to A$153.85 on the Australian stock exchange at the 4:10 p.m. close of trade in Sydney. Stock of the Melbourne-based company has more than doubled in the past year.

Dyno Nobel's then-CEO Peter Richards said Dec. 11 that scrapping the project was ``the greatest disappointment.''

Gas Supplies

Incitec's decision to revive Moranbah reactivates a gas supply agreement with Arrow Energy Ltd., a Brisbane-based coal- seam gas producer. Gas supply under the accord, for 7 petajoules (6.6 billion cubic feet) a year for 15 years, is now due to start in the first quarter of 2010, Arrow said today in a statement to the exchange.

AGL Energy Ltd., Arrow's partner in its Moranbah coal-seam gas project, has the right to take a 50 percent interest in the gas contract, Arrow said.

Incitec's Moranbah project includes ammonia, nitric acid and ammonium nitrate plants, as well as infrastructure, utilities, power generation and housing, the company said. It hired a group including United Group Ltd., Bilfinger Berger AG and BCG Contracting Pty to build the project, Incitec said.

To contact the reporter on this story: Madelene Pearson in Melbourne on mpearson1@bloomberg.net