Chemicals CEO Ian Hansen said that the additional investment had been approved following the completion of a $15 million Front End Engineering and Design (FEED) study into the project.

Mr Hansen also said that product offtake discussions with CSBP customers were progressing well.

“The majority of our customers are signed to long-term supply contracts with CSBP to meet their current needs, and arrangements are being finalised to supply product from our new facility to meet demand growth forecasts, which will underwrite a significant volume of the increased plant capacity,” Mr Hansen said.

"The positive response from customers has given us the confidence to order long-lead capital items necessary for the expansion."

Mr Hansen said that the proposed expansion would involve the construction of a new nitric acid plant and ammonium nitrate plant, and an upgrade of the existing prilling plant, initially increasing CSBP’s overall ammonium nitrate production to 780,000 tpa and enabling the company to meet forecast demand for explosive-grade ammonium nitrate from the growing Western Australian iron ore mining sector.

“While our additional production capacity will exceed demand from the State’s explosives sector until approximately 2020, our ability to divert surplus product into CSBP fertiliser products will enable us to maximise production in the early years,” Mr Hansen said.

Mr Hansen said refined cost estimates, forecast within 10 per cent accuracy, for the design and construction of the proposed nitric acid and ammonium nitrate plants indicated that, after taking account of anticipated escalation rates for labour and materials, the project is expected to cost approximately $550 million.

“While this is higher when compared to previous plant expansion projects we’ve undertaken, the forecast isn’t surprising given recent increases in the levels of activity in the WA construction market,” Mr Hansen said.

“Based on the capital cost estimates and our discussions with customers, the project remains viable and will, importantly, ensure that WA explosives customers will continue to have a competitive source of low-cost, locally manufactured product.”

Mr Hansen said that CSBP had commenced a tender process with major construction contractors in November 2010, and that the company was close to selecting a preferred contractor.

CSBP released the Public Environmental Review (PER) document for the proposed expansion late last year. Submissions closed on 31 January 2011, and CSBP is currently waiting for the WA Environmental Protection Authority’s report in regards to this.

Final Wesfarmers Board approval for the project is expected to be sought later this year and will be subject to regulatory approvals. Current project timelines indicate that the expansion would be completed in the first half of 2014.

A major manufacturer and supplier of chemicals, fertilisers and related services, CSBP Limited is a subsidiary of Wesfarmers Limited and part of the Wesfarmers Chemicals, Energy & Fertilisers division.