Orica Creates New Potential for Explosives Business

1st October, 1999

Orica Limited managing director and chief executive officer Philip Weickhardt announced that negotiations had been completed to form three new ventures which will position the explosives business to achieve further earnings growth. Each of the ventures represent key developments in the underlying strategy to maintain world leadership in commercial explosives as the basis for growth in shareholder value. The ventures are:

• a 49 per cent holding in a joint venture with Dynamit Nobel GmbH Explosivstoff und Systemtechnik (DNES) of Germany as a source of electronic detonator production for global markets;
• a 49 per cent holding in a joint venture with ICI India for the production and sale of commercial explosives in the growing Indian market;
• a 27.7 per cent holding in a joint venture with Nelson Brothers of the United States to expand the distribution of Orica products in this important market.

Mr Weickhardt commented, "Each of these ventures are important parts of the overall strategy and they will enable Orica to develop opportunities for the explosives business through technology, market expansion and product distribution efficiencies.

"The joint venture with DNES creates the opportunity to combine their proven automated detonator production capability with Orica’s leading technology in electronic detonators. Detonators produced by the joint venture for Orica’s requirements will be brought to global markets by Orica.

"Orica's entry into the Indian market with ICI India, which will include ICI India's 70 per cent interest in an explosives initiating systems venture with Ensign Bickford, expands the business and geographical reach of the explosives business. Orica will be joining partners with whom it enjoys good relationships and who have established market leadership in the growing Indian market. Orica will bring a wide range of innovative products and value-adding services to customers in India.

"The joint venture with Nelson Brothers in the United States will provide increased access at improved margins to the key Powder River Basin area and is expected to lift sales of commercial explosives products, including initiating systems. Both partners are committed to the continued development of blasting technology and its delivery to improve customer productivity."

Mr Weickhardt said, "We are excited by the prospects these new ventures offer. They will not materially affect the company’s results in the immediate future but they are further evidence of Orica’s strategy and determination to grow value in its core business platforms."

BACKGROUND

German JV

A JV between Orica Europe Limited, a wholly-owned subsidiary of Orica Limited, and Dynamit Nobel GmbH Explosivstoff und Systemtechnik (DNES), a wholly owned subsidiary of Dynamit Nobel Aktiengesellschaft (DNAG), will develop and manufacture advanced electronic detonator systems at the DNES plant in Troisdorf, Germany. DNES is the leading manufacturer of quality electric detonators.

The electronic detonators which will be manufactured by the new JV have been developed in a collaboration between the companies. The detonators can be individually programmed with a precise delay time and are fully testable while in the blast hole. The result is an efficient and cost-effective blast which exactly mirrors the most exacting of blast design specifications.

Orica Explosives CEO Peter Clinch said, "Over several years of research Orica has developed advanced electronic blasting systems based on a unique chip design and software. These provide precise control of the individual blasthole firing times and sequences in a well-designed blast pattern, optimising blast results and reducing costs."

DNES managing director Juergen Zimmerman said, "DNES currently produces and markets the world’s leading quality electronic detonator. We believe the combination of our capability, together with Orica's new electronic detonator technology, will service the global mining industry's need for outstanding technical performance and productivity improvements."

The formation of the JV is subject to obtaining German Government and EEC approval.

US JV

A JV between Energetic Solutions Inc., a subsidiary of Orica (US) Inc. which is a wholly-owned subsidiary of Orica Limited, and Nelson Brothers Inc. of Birmingham, Alabama will service open-pit mining customers in the key western US markets of Wyoming, Montana, North Dakota and South Dakota.

Headquartered in Gillette, Wyoming and known as Nelson Brothers Mining Services, the JV incorporates the major assets and operations of the two shareholders' surface mining businesses in these states. Benefits include low cost production capabilities along with a combination of local resources in the form of personnel, equipment and technology.

Orica's North American businesses and Nelson Brothers have independently built strong reputations for leadership in the application of blasting products and technology to drive cost reductions and productivity improvements in their respective customers’ operations. This JV now brings together the collective strengths of both organisations for the benefit of producers in the Powder River Basin and open pit mine operators in the surrounding region.

Indian JV

The Indian JV, Indian Explosives Limited, was finalised this week. It will manufacture and market commercial explosives to service the growing Indian market. The JV’s assets include a major manufacturing site at Gomia in Bihar State and two other bulk emulsion explosives sites. ICI India's 70 per cent shareholding in IES India, an explosives initiating systems joint venture with Ensign Bickford, have also transferred to the new company.

All ICI India's explosives interests have transferred to the JV between Orica Limited and ICI India. Total turnover for these businesses was RS160 crores (AUD$62 million) in the 1998-99 fiscal year. Orica paid Rs722.6m (approximately A$26m) for its 49 per cent stake in the new company. The balance is owned by ICI India.

ICI India, which is 51 per cent owned by Imperial Chemical Industries PLC, is a leader in the Indian commercial explosives market.