UNITED Farmers Cooperative has finalised a multi-million dollar contract with Anaconda Nickel to supply feedstock for a new fertiliser processing plant.
United signed contracts last Friday with key equipment suppliers for the plant, which chief executive Tony Usher said would cost “just under” $10 million.
Anaconda will gain a handy cash flow boost from the supply agreement. It is expected to earn up to $10 million a year from the sale of ammonia sulphate to United.
The new plant, combined with the completion next month of United’s new 80,000 tonne import shed, will add to the level of competition in WA’s fertiliser market.
United is currently the third ranked supplier in the $400 million to $500 million market, behind Summit Fertilisers and market leader Wesfarmers CSBP.
Mr Usher said the new plant “will be the biggest thing we’ve done”.
The decision to proceed with the plant is good news for St George Bank, which will provide the funding.
It is understood that United Farmers is already St George Bank’s largest client in WA and funding for the plant will boost its exposure to the State.
Mr Usher said United would buy Anaconda’s entire output of ammonia sulphate, which is a by-product of its Murrin Murrin nickel plant.
He currently anticipated buying about 75,000 tonnes each year, but this figure could rise to 105,000 tonnes if Murrin Murrin operated at full capacity.
Mr Usher said the annual cost would be between $5 million and $10 million.
United will process the ammonia sulphate, via compacting and granulation, into a more user-friendly format for farmers.
United, which commenced operations in 1992, has hitherto imported all of its fertiliser.
Summit Fertilisers, which also started purely as an importer, has progressively introduced a range of processing technologies, including coating and compaction processes.
Wesfarmers CSBP is the only fertiliser supplier with fully-fledged manufacturing facilities in WA.
Mr Usher said about one third of the work on the plant, including steelwork, elevators and polishing drums, will be manufactured in WA or interstate.
He said the original plan was to import 100 per cent of the material for the fertiliser plant.
“A lot of the equipment was going to come from America, but we’ve negotiated for that to be manufactured in Australia,” Mr Usher said.
The main supplier will be US-based design engineer Feeco International, while the compacting rollers will be imported from France.
“We expect to save money and time as a result of finding local suppliers,” Mr Usher said.
“It’s also good for ongoing support.”
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