Dyno Nobel Ltd. said Feb. 25 that it is rethinking its December 2007 (GM Dec. 17, p. 1) announcement that it was indefinitely suspending the Moranbah 330,000 mt/y ammonium nitrate project in Australia. At the time, Dyno had sunk some A$280 million into the project. Since the December announcement, Dyno said progress has been made with respect to further evaluations of the project. As a result, it will continue to evaluate its options. Dyno said any decision to restart the project will require a de-risking of Dyno’s position and the economies of the project must meet internal financial criteria.
Dyno said Moranbah supply issues continue to be evaluated in the event that the project is not restarted and Dyno is confident of meeting its customer obligations for 2008-09 at an acceptable cost. Dyno said Moranbah’s potential customers are supportive and recognize the strategic importance of regional supply. It said active dialogue continues with excellent progress in ensuring continued customer commitment and improved contractual and commercial terms. Volume commitments with customers have been reduced for 2009, with continued work to refine long-term customer commitments. Customers for the project include Anglo Coal, Rio Tinto and Xstrata, with reports that another unnamed customer is interested.
The project’s gas supplier is also reported to be supportive, as is the local government.
Dyno also reported continued progress on refinement of capital costs, including contingencies. A new proposal has been received from the consortium of United Group, Bilfinger Berger and BGC. There is a potential to agree to partial risk sharing.
As for funding, there is limited capacity to fund the project with existing debt facilities. There is a preference to attract a project partner or sell down a share of the project. Potential partners have been identified with preliminary discussions underway.
As for other Dyno projects, the company says the Cheyenne, Wyo., facility expansion remains on budget and on schedule for completion in mid-2008. It says expanded production capacity of 200,000 st/y of ammonium nitrate solution (AMSOL) will position Dyno to leverage the strong short-term agricultural fertilizer demand and capture long-term growth in the Power River Basin region.
In addition, debottlenecking at the QNP ammonium nitrate plant in Moura, Queensland, will deliver an incremental 30,000 mt of ammonium nitrate into a supply-constrained Australian market. Project completion is slated for December 2008.
The indefinite suspension at Moranbah spurred a US$52.4 million ($74 million pre-tax) writedown at Dyno in late 2007 which took net profits for the year down 49 percent to US$42.7 million from the year-ago US$83.3 million. Without the writedown, profits were up 20.4 percent to $101.9 million. Revenues were up 12.9 percent to $1.4 billion. For now, Dyno continues to value Moranbah at $182 million; further writedowns are expected should it actually decide to scrap the project. Earlier estimates were that the project would cost some A$520 million, though others have speculated that those costs had run up as high as A$800 million.
There has been speculation that Incitec Pivot, which bought 13 percent of Dyno last August, might also intervene to make a takeover attempt at some point.
In other news, Dyno completed nine acquisitions and joint ventures in 2007, including investment in Fabchem which provides it with a foothold in the Chinese market, as well as a joint venture in South Africa. Seven other acquisitions expanded the company’s distribution system.