Yara halts US$700m Burrup project

A stand-off between Pankaj Oswal and his business partner, Norwegian company Yara International, has prompted Yara to halt its plans for a $US700 million ammonium nitrate plant on the Burrup Peninsula.

Yara announced last night that construction of the propsoed 330,000 ton p.a. technical ammonium nitrate (TAN) plant had been delayed due to the present uncertainty around the decision-making ability of the Board of Burrup Holdings.

"In 2008, Burrup Holdings and Pankaj Oswal assumed obligations which ensured the TAN project would be developed with Yara, and which established the key terms upon which the project will proceed," Yara said.

"Since that time Yara has been working hard to develop the TAN project, which would represent significant development and value creation for downstream processing in Western Australia.

"Yara recently invited all stakeholders, including Mr Oswal, to consider this attractive investment opportunity, but Mr Oswal did not support the project. Given the present uncertainty around the decision-making ability of the Burrup Board, approval of the TAN project has been delayed."

Mr Oswal issued a statement yesterday saying he would not back the TAN plant, and that pressure from Yara and the receivers of Burrup Fertilisers were an attempt to devalue his shares.

Mr Oswal said he believed Yara was attempting to "railroad" him into beginning development of the plant on Yara's terms, which were developed without consultation and based on inaccurate and out-of-date information.

"I am equally disappointed because I have made plain my view that Yara is seeking to lock the Burrup TAN plant in on its terms in order to make by Burrup Holdings shares less attractive to other buyers," Mr Oswal said.

"Given my view that Yara is currently paying below the market rate for ammonia hydrate from the Burrup Fertilisers plan, Yara clearly has a vested interest in obtaining control of Burrup Holdings so that it can continue to transfer value overseas."

Yara announced in March that it was keen to proceed with plans to construct the ammonium nitrate plant, but those plans remained subject to Burrup Holdings' approval.

Yara said it had signed a letter of intent with Spanish engneering and construction group, Tecnicas Reunidas, to construct the 330,000 tonnes per annum ammonium nitrate plant, in a deal worth around $US50 milllion.

Mr Oswal said he was "deeply disturbed" by the pressure the receivers and Yara had placed on him to accept Yara's terms for the plant's development, and the haste with which the receivers had proceeded through the bidding process for his Burrup Holdings shares.

"My understanding is that potential bidders have been given only one month to consider the purchase of my shares and no adequate information memorandum has been given to potential bidders," he said.

"Given the size and complexity of the assets owned by Burrup Holdings and the issues involved with them, the receivers do not appear to have followed a process designed or intended to maximise the value of my shares."

Mr Oswal said he had requested information from the receivers that would allow him to assess the impact oproceeding with Yara's plan or allowing a buyer to negotiatiate the terms of the development would have on his shares in Burrup Holdings.

"To date that information has not been provided, hence my decision not to proceed," he said.

"I am concerned that the receiver appears to have failed to objectively assess the value of the two
options available on the Burrup TAN plant.

"I am not aware that the receivers have followed up on my efforts to rectify that problem and
obtain a proper price for Burrup Fertilisers' product."

Indicative bids for Mr Oswal's shares in Burrup Holdings closed yesterday.

Yara and Mr Oswal have been at loggerheads over Burrup's financial dealings and off-take arrangements for months.

In November, Yara gained access to Burrup Holdings' financial accounts after taking it to the Federal Court.

ANZ Bank appointed receivers to Burrup Holdings in December after it was unable to broker a settlement between Yara and Mr Oswal.

Earlier this month, Mr Oswal stepped up his criticism of the sale process of Burrup Fertilisers, and revealed a $US500 million claim against the company.

Mr Oswal said that he and associated entities had paid "approximately $US500 million towards the construction costs of the company's liquid ammonia plant on the Burrup Peninsula in Western Australia, which is a claim I and those entities have against Burrup Fertilisers Pty Limited".