Bloomberg News

Orica Says Ammonia Plant Closure Cost May Reach A$50 Million

December 15, 2011

(Adds closing share price in sixth paragraph.)

Dec. 15 (Bloomberg) -- Orica Ltd., the world’s largest industrial explosives maker, said the closure of a chemical plant in Australia because of safety issues may cost as much as A$50 million ($49 million) this fiscal year.

Outages at the Kooragang Island plant near Newcastle, which has been partially closed since August, cost about A$4 million a week, Chief Executive Officer Graeme Liebelt said today in a statement. Production of some ammonium nitrate, needed to make explosives used by mining companies, has resumed, Melbourne- based Orica said Dec. 13.

Orica halted the ammonia plant at Kooragang Island in August when a chemical leak affected the neighboring community while the ammonium nitrate facility was closed last month when vapor was released. The closures forced mining companies, Orica’s biggest customers, to source alternative supplies and modify operations to minimize losses.

“This is completely unacceptable, and again I offer sincere apologies to all of those who have been affected,” Liebelt said.

The cost of closing the plant in New South Wales state will be reported in the year ending Sept. 30, 2012, Orica said. The company last month forecast earnings before items this year will be higher than last year’s A$642 million profit.

Orica fell 0.9 percent to A$25.37 at the close of Sydney trading, paring this year’s gain to 1.9 percent.

Kooragang Island supplies about 80 percent of explosives to the state’s mining industry, New South Wales Minerals Council said last month. Rio Tinto Group said some of its mines were affected and Xstrata Plc, the world’s biggest exporter of thermal coal, said it was monitoring the outage.

--With assistance from Soraya Permatasari in Melbourne. Editors: Andrew Hobbs, Keith Gosman

To contact the reporter on this story: Robert Fenner in Melbourne at rfenner@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Andrew Hobbs at ahobbs4@bloomberg.net


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