Diversified Perth-based conglomerate Wesfarmers has approved additional investment to bring forward the $550 million expansion of its ammonium nitrate facility at Kwinana.
Diversified Perth-based conglomerate Wesfarmers has approved additional investment to bring forward the $550 million expansion of its ammonium nitrate facility at Kwinana.
Wesfarmers subsidiary CSBP today announced it had received board approval to spend $45 million on long-lead items and continued engineering work for the proposed 260,000 tonnes per annum expansion of the Kwinana plant.
The investment follows the completion of a $15 million front end engineering and design (FEED) study.
CSBP chemicals chief executive Ian Hansen said product off-take discussions were progressing well and the company was close to selecting a preferred contractor.
"The majority of our customers are signed to long-term supply contracts with CSBP to meet their current needs, and arrangements are being finalised to supply product from our new facility to meet demand growth forecasts, which will underwrite a significant volume of the increased plant capacity," he said.
"The positive response from customers has given us the confidence to order long-lead capital items necessary for the expansion.
Final board approval for the project is expected to occur later in the year, and will be subject to regulator approvals, but Wesfarmers said its current project timeline aimed for completion in the first half on 2014.
Mr Hansen said costs forecast for the design and construction of the proposed nitric acid an ammonium nitrate plants needed to bring total capacity up to 780,000tpa were around $550 million.
"While this is higher when compared to previous plant expansion projects we've undertaken, the forecast isn't surprising given recent increases in the levels of activity in the WA construction market," Mr Hansen said.
"Based on the capital cost estimates and our discussions with customers, the project remains viable and will, importantly, ensure that WA explosives customers will continue to have a competitive source of low-cost, locally manufactured product."
The timing of the additional funding will allow CSBP to take advantage of any delays Yara International experiences in the development of its $US700 million ammonium nitrate plant on the Burrup Peninsula.
Yara requires the backing of joint venture partner Pankaj Oswal to go ahead with its plans, but the fallen tycoon made it emphatically clear earlier this week he would not support its development.
Mr Hansen said the expansion of the Kwinana plant would allow CSBP to meet forecast demand for explosive-grade ammonium nitrate from the fast-developing WA iron ore sector.
It is not yet known how the expansion will affect Wesfarmer's proposed bid for Burrup Fertilisers, which was questioned by the Australian Competition and Consumer Commission for having the potential to squeeze competitors out of the market earlier this month.
