Dyno Nobel last week reported delays and higher costs at its ammonium nitrate expansion at an existing facility in Cheyenne, Wyoming (GM Nov. 20, 2006), and at its new greenfield project in Moranbah, Queensland, Australia.
The Wyoming expansion was initially expected to cost approximately $50 million and come online as early as the fall of 2007. However, the company now sees a cost of $80 million and a pushback of completion to 2008-2010. The company said that due to changing market conditions it has had to re-examine the Wyoming expansion, both from a scope and schedule perspective. Subject to confirmation of external cost estimates and the timing of customer expansion plans, the likely revised plan will see ammonium nitrate solution (AMSOL) and nitric acid plants commissioned in the second quarter 2008, and a deferral of the AN prill tower until 2010.
Dyno Nobel said the revised plan would also involve expanding AMSOL capacity from 150,000 st to 250,000 st/y, while the new prill tower would have a capacity in the vicinity of 250,000 st/y. The company said the expanded AMSOL output would allow it to leverage strong agricultural fertilizer demand during the interim period until the prill tower is commissioned.
Dyno Nobel said that the development costs at the new Moranbah project have substantially increased due to a delay in detailed engineering, increased project management costs, increased costs in critical trades, and labor and significant additional contingencies. The company said until the engineering and construction contracts are finalized, it will not be practical to estimate the likely final capital cost. However, the company said it is now evident that these costs will be significantly higher than the previous estimate of A$520 million. The project is now expected to be completed in the first half of 2009.
“We are obviously very disappointed with the increased cost for the Moranbah project,” said CEO Peter Richards. “We are not alone in being caught up in the tight labor and construction market; however, we have taken actions to help mitigate the extent of the additional costs. The project remains a strategic priority for the company and the economics of the Moranbah project remain attractive, despite these increases, and are underpinned by long-term customer commitments to ammonium nitrate volume.”
To date, the company says considerable progress has been made at Moranbah. Specifically, it says the ammonia tank foundation is complete, ammonia plant foundations ahead of schedule and 60 percent complete, relocation of ammonia plant to Moranbah 55 percent complete, and that direct man hours and procurement costs are in line with original estimates.
Dyno Nobel reported an 8.2 percent increase in revenues for the six months ending June 30, to US$669.4 million. The company cited six acquisitions in the period, as well as the opening of a new office in Indonesia. Richards touted the increased revenues in spite of a deteriorating US housing market and tightening labor availability and port availability in Australia. While net profit after tax was off 1.4 percent to US$43.4 million, when adjusted for non-recurring charges it was $48.4 million, up 22 percent from the year-ago $39.6 million.