13 February 2007
Dyno Nobel Moranbah (DNM) Ammonium Nitrate Plant to Proceed
Dyno Nobel Ltd (ASX: DXL) today announced its DNM Ammonium Nitrate (AN) plant at Moranbah, Queensland (formerly known as QNB) will proceed, having finalised long-term commitments with Anglo Coal, Rio Tinto and Xstrata.
Dyno Nobel CEO, Mr Peter Richards said, "DNM is a strategically compelling and financially attractive project that will deliver sustainable advantages and returns to Dyno Nobel and its shareholders. With long-term commitment from three major customers, the project fully satisfies the strict commercial criteria established to determine whether to proceed with the investment."
"The DNM project resulted from strong demand from key global mining companies in Australia and now has the required commitments from these companies to proceed. With its strategic location in the Bowen Basin, access to competitively-priced gas and customer support, DNM will provide Dyno Nobel with a long-term competitive advantage in our regional market".
The key highlights of Dyno Nobel’s customer commitments are:
Foundation customer contracts which account for 100 percent of total production;
Contracts are secured for a minimum term of 10 years;
Mechanisms for annual escalation based on cost drivers are in place; and
AN requirements that include ‘pull through’ of emulsions, services, initiating systems and accessories.
The plant will have production capacity of 330,000 AN tonnes per annum and has a total project cost in the vicinity of AUD520 million. This capital cost factors in the current tight raw material input and resource markets and projected cost growth over the construction phase. Additionally, Dyno Nobel has sufficient lead-time to complete the project and appropriate risk management and contingency has been built into the planning.
In addition, Mr Richards said that Dyno Nobel has considerable expertise in constructing and operating ammonia and AN plants. The company operates six AN plants in Canada and the USA as well as a joint venture managed plant in Queensland.
Mr Richards said DNM exceeds Dyno Nobel’s minimum financial returns with a target internal rate of return (after tax, ungeared) of 13 percent, excluding ‘pull through’ benefits from sales of additional products and services.
Dyno Nobel is assessing its funding options which include evaluating potential equity partners in DNM. The Company has also secured additional corporate debt facilities of USD300 million. This increased funding will support development of DNM well into 2007, in addition to other growth initiatives. Finalisation of the longer-term funding and evaluation of partner options will be completed in the first half of 2007.
The plant will complement Dyno Nobel’s existing operations and customer base. The location provides freight advantages and access to available infrastructure. Commissioning is set to commence in fourth quarter 2008 and production ramp up to commence from first quarter 2009.
Dyno Nobel has also made the following important progress with the project:
United Group Limited (ASX:UGL), through its Resources business has been appointed the construction contractor for the DNM plant;
Secured local and state Government support for the plant;
Front-end engineering and design completed with detailed engineering well advanced;
Environmental Impact Statement (EIS) submission closed in mid November. Dyno Nobel responses are completed and there are no major issues. Final clearance by the Queensland government is expected in the next few weeks;
Option exercised for the purchase of the land;
Long lead capital items ordered and the Ammonia plant has been purchased; and
Access to an experienced workforce able to commence construction of the plant.
For media enquires contact:
Gloria Barton, Cannings 0413 520 603
Peter Brookes, Cannings 0407 911 389