Dyno Nobel on Dec. 11 announced that it has suspended indefinitely its Moranbah Project in Queensland, Australia, saying it no longer meets its financial criteria.
“The company continued to face substantial delays in the project and difficulty in reliably forecasting the project costs in a tight Queensland construction market,” said Peter Richards, Dyno Nobel CEO.
To date, the company has sunk A$280 million into the Moranbah Project.
Dyno is investigating options to satisfy obligations to those customers that agreed to purchase ammonium nitrate to be supplied from the proposed facility. The plant was expected to produce 330,000 mt/y of industrial-grade ammonium nitrate for the explosives industry. Dyno had signed long-term contracts to supply product to Rio Tinto, Anglo Coal Australia, and Xstrata, reportedly for a minimum of ten years starting in 2009. “We have obligations to supply them from 2009 and we’ve got to now work very hard to ensure we can meet those obligations,” Richards was quoted in the Herald-Sun.
Dyno has retained a project team to consider alternative options for the project. However, Richards was quoted as saying there would have to be a significant change in the environment for the project to be revived.
The company reported delays and higher production costs at the facility back in August (GM Aug. 27, p. 1). At the time, it said it was evident that the costs would be significantly higher than the previous estimate of A$520 million.
On Dec. 10, Dyno had requested a trading halt of the Australian Securities Exchange due to the pending announcement. After the news, Dyno shares were off 13 percent. In the meantime, shares of Incitec Pivot were up, as that company, which bought 13 percent of Dyno back in August (GM Sept. 3, 2007) is now seen a possible bidder for all of the company. Orica, another ammonium nitrate supplier, also benefited, with speculation that it will see higher ammonium nitrate prices and more heightened interest for its own expansions, with one on the table for Indonesia.
CSBP Wesfarmers, Dyno’s earlier partner in the Moranbah Project, bailed out over a year ago. Since proceeding alone, sources said Dyno was unable to gain concessions from contractors or increased support from buyers, who might eventually wind up paying higher prices as a result.
Also in August, Dyno reported delays and cost increases at an AN expansion in Wyoming. At the time, the company said the costs estimates there were increased from $50 million to $80 million, with completion pushed back to 2008-2010 from the fall of 2007.