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Incitec Pivot to revive Moranbah project; inks long-term methane supply agreement

News

Incitec Pivot Ltd. (IPL) said July 28 that it has approved the construction of an ammonium nitrate manufacturing complex at Moranbah in Central Queensland at a cost of A$935 million. The Moranbah project involves the construction of a 330,000 mt/y fully-integrated AN complex comprising ammonia, nitric acid, and ammonium nitrate plants, plus infrastructure, utilities, power generation, and housing to support the permanent workforce.

IPL, through its wholly-owned subsidiary, Dyno Nobel Moranbah, on July 28 signed a project agreement with United Group Resources Pty Ltd., Bilfinger Berger Services (Australia) Pty Ltd., and BCG Contracting Pty Ltd. The agreement is based on a cost reimbursable model incorporating a risk reward regime to ensure best project outcomes. It also has a signed 15-year coal seam methane supply agreement with Arrow Energy Ltd. Mechanical completion is targeted for the first quarter of Calendar 2010, and beneficial operation for the first quarter of Calendar 2011. The project has the support of long-term contractual commitments from three foundation mining company customers for about half of planned output.

IPL Managing Director and CEO Julian Segal said the project would exceed the company’s financial criteria of 15 percent internal rate of return and deliver an 18 percent return on net assets in the fourth year of operation.

“This investment will expand Incitec Pivot’s core nitrogen manufacturing capability based on a world scale manufacturing plant at the bottom of the cost curve in its market and builds a strong position in the eastern Australian commercial explosives market,” he said. “The project is based in the heart of Australia’s largest metallurgical coal region and adjacent to some of the largest coal mines in the world, providing a substantial freight advantage over alternative domestic suppliers. Many new coal projects and brownfield expansions are proposed for development in the region over the next few years. Additionally, we have the advantage of the gas supply agreement, which was negotiated prior to escalating world energy prices.”

The project was abandoned by Dyno Nobel in December 2007. IPL bought Dyno Nobel in June 2008 (GM Archives).

PotashCorp, union in mediation

News Briefs, Saskatchewan

Saskatoon-After a brief work outage on Monday, July 28, members of the United Steelworkers (USW) at PotashCorp’s Cory mine in Saskatchewan returned to work and the negotiating table. The USW said Monday’s action was the first in a possible series of rotating strikes at the three mine sites. It said it ended the action Monday to accept an invitation from PotashCorp to get back to the bargaining table at 4 p.m. USW said it suspended the escalating job action as long as talks continue, but will not lift a ban on overtime. “This is a hopeful sign,” said USW Western Canada Director Stephen Hunt. “But our members are ready to resume their action if there is no progress toward a settlement.” The Cory mine was in the process of coming back up on July 27 after a two-week maintenance shutdown. Workers at two other mines, Allan and Patience Lake, have also voted to strike (GM July 28, p. 12). However, both of those are currently down for maintenance, with Allan down July 27-Aug. 9 and Patience Lake June 15-Oct. 4. Some 500 workers work at all three mines. Later in the week, sources said negotiations continued and PotashCorp proposed mediation and USW accepted. It is to begin Monday, Aug. 4. Citing PotashCorp earnings, USW argues that for the first six months of the year the company has an after-tax profit of $1.5 billion, which would be $300,000 per employee. It argues that PotashCorp is receiving far more profit per worker than most mining companies, and paying lower wages than many other major Canadian mining operations. PotashCorp says the deal already offered to USW would make them the highest paid potash miners in the industry.

Meherrin eyes expansion with Coolidge

Aurora, NC, News Briefs

Severn, N.C.-Meherrin Agriculture & Chemical, already with 22 locations in five southeastern states, apparently is headed for a takeover of smaller Coolidge Fertilizer & Farm Supply. The deal could be closed as early as Sept. 1, according to a Coolidge official. A source at the Meherrin offices in Severn, who didn’t want to be identified, told Green Markets the papers haven’t been signed yet, but that it will probably happen because Coolidge, with locations in Coolidge, Meigs, and Quitman, Ga., would be a good crop fit and would increase Meherrin’s geographical footprint. “Their’s is very similar with a combination of peanuts and cotton,” he offered. Coolidge General Manager Wendell Quick commented that the sale is still in negotiation and nothing has changed at this point. “I anticipate at some point in time, probably sooner than later, there will be an agreement between the two parties,” he suggested. Coolidge has been in operation since the 1980s and has between 70-75 full- and part-time employees. Meherrin has less than 500 employees, and its fertilizer and wholesale business in 2007 reportedly was in the neighborhood of $250 million.

Compass points in right direction

News Briefs, Southern Plains

Overland Park, Kan.-Compass Minerals reported net earnings of $1.6 million ($.05 per diluted share) on sales of $162.0 million for the second quarter ending June 30, 2008, compared to a year-ago loss of $3.2 million on sales of $127.5 million. Second-quarter fertilizer operating earnings were $21.7 million on sales of $53.9 million, versus the year-ago $8.9 million and $35.5 million, respectively. Volumes were off 4 percent, to 111,000 st from 115,000 st due to timing of shipments. Average prices were up 58 percent, to $484.81/st from $307.62/st. “Compass Minerals posted record second quarter revenue and cash flow and generated a second quarter profit for the first time in the company’s history,” said Angelo Brisimitzakis, Compass president and CEO. “This significant achievement illustrates the success of our strategies to strengthen our non-winter, non-seasonal applications coupled with the company’s minimal exposure to economic cycles. We are very optimistic about the growth opportunities for our sulfate of potash specialty fertilizer segment and the solid outlook for our salt segment.” Six-month net earnings were $50.7 million ($1.53 per share) on sales of $542.0 million, versus the year-ago $22.9 million ($.70 per share) and $391.7 million, respectively. Six-month fertilizer operating earnings were $38.8 million on sales of $101.6 million, up from the year-ago $16.6 million and $67.6 million, respectively. Volumes were 234,000 st, up from 222,000. The average price was up 25 percent, to $434.25/st from $304.23/st. “We continue to be very encouraged by the dynamics of the global agriculture industry,” said Brisimitzakis. “Potash fertilizer demand remains very robust, which continues to drive price acceleration. Our multi-phased sulfate of potash capacity expansion program will systematically increase our ability to meet the mounting need for our organic, specialty fertilizer in coming years.”

LOL reports improved results

News Briefs, Northern Plains

St. Paul-Land O’Lakes Inc. reported net earnings of $102.8 million on sales of $3.33 billion for the second quarter ending June 30, 2008, compared to the year-ago $79.5 million and $2.02 billion. Six-month net earnings were $164.1 million on sales of $6.6 billion, versus the year-ago $132.1 million and $4.2 billion. LOL year-to-date earnings were up 24 percent, and are up 76 percent for the quarter and 48 percent YTD if the $21.2 million gain from the year-ago sale of Cheese and Protein International is excluded. Second-quarter agronomy earnings totaled $37.1 million, versus the year-ago $12.8 million. YTD agronomy reports $26.3 million in pretax earnings, versus $11.2 million one year ago. Year-over-year comparisons are difficult due to the restructuring of Agriliance LLC in late 2007, with its crop protection business going to LOL. LOL said YTD crop protection sales were $1.5 billion, adding that agronomy is having a strong year, driven by increased demand, strong margins, and effective inventory management.

Extra charges hammer Scotts

Eastern Cornbelt, News Briefs

Marysville, Ohio-The Scotts Miracle-Gro Co. was hammered by extra charges during the third quarter ending June 28, 2008, which took net earnings down 83 percent to $22.6 million ($.35 per diluted share) compared to the year-ago $129.7 million ($1.98 per share). Excluding extra charges, second-quarter earnings would have been $130.7 million. The charges included $10.2 million of pre-tax costs incurred due to recent recalls and registration issues, as well as a non-cash pre-tax impairment charge of $123.3 million related to certain intangible assets. Scotts said like many companies, the recent decline in its equity value forced it to accelerate normal impairment testing. Scotts said it does not believe the impairment is indicative of long-term expectations for the business, though it is reflective of an accounting process that is significantly driven by the company’s recent share price. On the positive side, sales were up 7 percent, to $1.17 billion from the year-ago $1.098 billion. Sales in the global consumer segment increased 6 percent to $930.1 million. This was led by strong growth in lawn fertilizer, grass seed, and growing media in the U.S. Consumer purchases in those categories improved 17, 21, and 9 percent, respectively. Global professional and Scotts LawnService sales were up 32 and 3 percent, respectively. Nine-month net income was $23.8 million ($.36 per share) on sales of $2.44 billion, compared to the year-ago $153.7 million ($2.28 per share) and $2.36 billion.

Innophos moves into plus column

News Briefs, Northeast, Phosphate

Cranbury, N.J.-Specialty phosphate maker Innophos Holdings Inc. reported second-quarter net income of $59.3 million ($2.74 per diluted share) on sales of $264.0 million, compared to a year-ago loss of $5.2 million ($.25 per share) and $151.9 million. Six-month net income was $68.5 million, up from the year-ago loss of $7.2 million. Citing higher raw material costs, Innophos said it has had to pass these costs on to customers, with some five price increases so far this year, the last slated for Aug. 1. It expects these to be fully realized in the fourth quarter and says they are expected to result in a revenue increase of 120-130 percent of 2007 annual sales, or approximately $695-$755 million on an annualized basis.

The Andersons upgrades guidance

Eastern Cornbelt, News Briefs

Maumee, Ohio-The Andersons Inc. said July 30 that it expects full year earnings per share to exceed previous guidance. The full year 2008 guidance is expected to be within the range of $5.00-$5.40 per diluted share, up from the previous estimate of $4.40-$4.80 per diluted share announced in June. The company’s earnings per diluted share for 2007 were $3.75, which set a company record. The increase is primarily attributed to the Plant Nutrient Group’s continuing performance trend this year.

More concerns raised over rail ban on anhydrous

News Briefs

Washington-The National Corn Growers Association has joined the fertilizer industry in voicing concerns to the Surface Transportation Board over the railroad industry’s request to discontinue shipping anhydrous ammonia. The Fertilizer Institute testified at STB’s recent hearing, stressing the importance of the fertilizer and TFI’s efforts to seek a solution to the railroads’ concerns about transporting anhydrous. NCGA presented its case in written comments July 23, pointing out that without anhydrous ammonia U.S. farmers would be unable to produce the amount or quality of food the world has come to rely on. “Anhydrous ammonia is a vital and essential plant nutrient that is critical to the nation’s food supply,” stated NCGA President Ron Litterer. “Rail is the safest and most efficient method for transporting this critical agricultural product.” NCGA pointed out that according to the Interstate Commerce Act and reaffirmed by the Staggers Act, railroads cannot be selective in determining which commodities to transport based purely upon their self-interest. NCGA believes that while the STB may have an advisory role in making recommendations to Congress on railroad common carrier obligation, only Congress has the authority to change this obligation.

Rio Tinto eyes potash growth in Argentina, Canada

Australia, News Briefs, Potash

Melbourne-Mining giant Rio Tinto recently outlined its potash assets in Argentina and Canada, saying its Potasio Rio Colorado project in Argentina could start production in 2012. The company expects to spend $242 million on the project through the end of this year. It says that completion of the 4.3 million mt/y mine, along with other infrastructure, would cost $3.5 billion. It expects the mine would serve the Brazil market, which currently accounts for 14 percent of global demand, adding that Brazil consumption is expected to increase from 7.5 million in 2007 to 10.3 million mt in 2015. In August Rio Tinto will begin the target testing stage, with drilling and evaluation of its Regina Potash mine, east of Belle Plaine in Saskatchewan. Previous drilling has been positive, according to the company. Rio Tinto says both of its projects would have the lower-cost solution mining advantage.