Incitec Pivot – A tale of two plants

While the focus has been on the Queensland coalfields slowing down and job losses has the Hunter Valley slowed down more?

One of the best gauges for the growth and development of the mining sector is the demand for ammonium nitrate and explosives, as the more you develop the more you blast.

So a slow down in demand directly translates into a slow down in mining.

If people aren't buying ammonium nitrate then they aren't blasting, it's simple.

This slow down in demand has directly hit Incitec Pivot.

It recently announced that it had deferred its planned development of its new ammonium nitrate manufacturing plant on Kooragang Island, in Newcastle, while at the same time it pushed forward with production at its Moranbah ammonium nitrate plant.

So what does this mean for the prospects of the mining industry?

Is the Hunter in more trouble than is recognised?

Or was Incitec simply hamstrung in its development by local community and environmental groups?

From the start Incitec faced an uphill battle in the development of its Kooragang Island plant.

The community had already seen a number of serious incidents occur at the existing Orica ammonium nitrate plant, such as chemical leaks and vent flare ups.

In October last year the company, which manufactures explosives through its subsidiary Dyno Noble, met with locals to discuss the proposal its planned ammonium nitrate plant.

At the time Incitec said it would carry out an open consultation, with expectations of a year long feasibility study.
It then released its environmental impact statement, and opened it up to public comment.

According to the company it was seeking approval for a facility with a production capacity of up to 350 000 tonnes of ammonium nitrate per month.

Its proposal included a manufacturing plant, chemical storage tanks, product storage facilities, and associated infrastructure.

Soon after the proposal was opened local residents at Mayfield and Stockton came out in arms over the proposed $600 million plant.
Despite environmental studies stating that it will fall within existing standards, the Stockton Community Action Group believed that it poses a high risk.

"Incitec have blatantly ignored our requests to locate the plant elsewhere," Group spokesperson Keith Craig said.

"Nowhere in the world will you find two explosives plants, operating side-by-side, less than 800 metres from residents and three kilometres from a central business district. Governments and the Environment Protection Authority should not allow it."

Within two weeks of these objections, Incitec announced that it was deferring the feasibility studies and construction of the plant.

"The decision on whether to proceed with the development has been deferred for at least two years, reflecting the anticipated reduction in demand for ammonium nitrate and the high cost of construction in Australia," it said in a company statement.

The question soon arose of whether community or costs were the culprit behind the deferment.
Some in the industry pointed to the slow down blasting in the Hunter Valley, compared with the seemingly ever expanding

However the explosives manufacturer was quick to state that at this time "the project has not met Incitec's financial hurdles.

'The $17 million cost of the feasibility study will be expensed in the 2012 financial year."

Yet at the same time its Moranbah facility continues to grow, producing its first ammonium nitrate in July and commencing ammonia production in house in September.

The site is now on track to produce around 250 000 tonnes of ammonium nitrate in its 2012/13 financial year, rising to 330 000 tonnes of ammonium nitrate the following financial year.

So the question arises, in the case of its two ammonium nitrate plants, has community anger, or costs associated with the slow down in mining been the real culprit?

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