Norway's Yara is expanding in the mining explosives market by building an ammonium nitrate plant in Australia in a joint venture that creates closer ties with estranged partner Burrup Holdings.

The fertilizer and industrial chemicals giant said on Wednesday the plant, in Burrup, Western Australia, would cost about $700 million and have a production capacity of 330,000 tons per year of technical ammonium nitrate (TAN).

"We see the mining industry in general increasing and this technical ammonium nitrate taking market share from less cost-effective explosives," Yara spokesman Torgeir Kvidal said.

TAN is the main raw material for the most widely used civilian explosives. The new plant would supply fast-growing iron ore mining operations in the Pilbara region of Australia, Yara said.

The construction project will be a 50/50 joint venture between Yara and Burrup Holdings and will require approval by the Burrup Holdings board.

"We expect the approval by the board will come quickly," Kvidal said.

Yara already owns 35% of Burrup Holdings and said it would own 67.5% "directly and indirectly" of the new business, to be called Burrup Nitrates.

The Norwegian firm has previously said it hoped to buy a larger share of Burrup, which is at the center of an ongoing financial scandal and is under receivership as questions grow over alleged financial irregularities.

In November Yara said it would initiate legal action against Burrup Holdings, as Yara sought to inspect Burrup's books but was prevented.
"This market segment is growing strongly, and Yara refuses to let the ownership conflict delay a project they've considered for some time," Agilis Securities analyst Are Grongstad said. "It's a positive move from Yara."

"It's obviously interesting to us given the uncertainty regarding the Burrup plant and the upcoming expected auction for the remaining 65%  ownership share of Burrup," said Haakon Reistad Fure, analyst at DnB NOR Markets.

Receivers for Burrup said earlier this year they had received more than 20 inquiries from interested parties seeking to buy all or some of the company's assets.

"It's interesting that they're venturing into a new business deal with Burrup in advance of that," Reistad Fure said. "The takeaway is that Yara is increasing its ties with Burrup. They are looking to win the auction, obviously."