) seeks to end Wesfarmers' (
) monopoly in the manufacture of explosives in Western Australia
by planning to build a $700-million ammonium nitrate plant in
Pilbara through a joint venture with U.S. energy firm Apache.
Apache had confirmed on Monday that it plans to purchase a 65
per cent stake in Burrup Holdings, owned by Indian couple Panjak
and Radhika Oswal. Apache plans to develop the plant on a land
next to an 800,000 tonne per year ammonium project owned by
The U.S. firm admitted it is talking with Orica to sell most
of its interest in the ammonium nitrate project.
Panjak owns 30 per cent and Radhika holds 35 per cent of
Burrup Holdings. Their shares were placed on sale by Australia
and New Zealand Bank receivers in a bid to recover $900 million
loans of the Oswal couple.
Analysts estimate the deal is worth $600 million, which is
lower than the $800 million offer made by Wesfarmers in 2010.
Apache has been the supplier of natural gas to Burrup
Fertilisers since the facility started production in 2006. The
plant has a yearly production capacity of 760,000 metric tonnes
or 6 per cent of the global output of tradeable ammonia.
"After a year of significant turmoil surrounding the Burrup
plant ownership, Apache decided to make this investment in order
to stabilise the project and secure a long-term economically
viable market for our natural gas production in Western
Australia," Apache Chairman and Chief Executive Officer G Steven
Farms said in a statement.
To meet the growing demand for explosive-grade ammonium
nitrate from the WA mining industry, the Wesfarmers board inked a
$550-million expansion of its ammonium nitrate facilities at
Kwinana, located south of Perth.
With the expansion, Wesfarmers' CSBP production capacity would
go up to 780,000 tonnes a year.
Analysts said that Wesfarmers' expansion in Perth would tie up
client demand and makes it almost impossible to construct another
ammonium nitrate plant in Pilbara. Construction of either the
Burrup or Wesfarmers' plant would delay the other by up to five