EXPLOSIVES AND BLASTING
Blasting into the future
MAXAM says it is becoming an
integrated provider of blasting
solutions, principally by focusing on allround energy optimisation systems
The explosives industry is
enduring market conditions
along with its mining
customers but continues to
innovate and evolve,
reports Paul Mooree
A
s the global leader in mining explosives
supply, as well as being the most
geographically diverse supplier, Orica’s
detailed results for the six months to end March
2016 are a good summary of the overall state of
the industry and how it is faring the current
climate.
The company reports that in its home market
of Australia, Pacific & Indonesia (566,000 t AN
and emulsion sales of which emulsion 59%),
sales revenue decreased by 11% due to lower
demand from coal and base metal customers as
well as pricing impacts. However, the
composition of sales revenue by mining
commodity remained stable with thermal and
coking coal continuing to comprise 50% of sales
revenue. Gold, which represents 18%, was
slightly down due to lower cyanide and
explosives volumes. Iron ore was stable at 12%.
Explosives volumes were down 9% with lower
demand impacting Eastern Australian surface
coal (down 6%) and the West (excluding Pilbara
region) down 23%. Volumes to PNG were down
64%, due to unfavourable weather conditions.
Volumes to third party suppliers were down
15%, however this was offset by improved
volumes of 13% in Indonesia. Emulsion products
International Mining | AUGUST 2016
were 4% lower with lower demand from Eastern
Australia surface coal customers due to a
combination of customer mix and weather
conditions. In contrast to the reduction in AN
volumes, sales of Initiating Systems, particularly
Electronic Blasting Systems (EBS) products were
higher, notably from surface coal customers in
Australia. Revenue from services decreased 11%
in the period, impacted by lower volume,
contract losses and a decrease in service levels
requested by customers due to cost pressures.
Also revenue from advanced products and
services as a percentage of total explosives
revenue declined to 21% from 25%, while
pricing for explosives was lower reflecting
market conditions and contracts renegotiated
for tenure extensions. However Orica countered
that “these arrangements ensure volume and
pricing certainty in future years.”
In North America (572,000 t AN and emulsion
sales of which emulsion 37%), sales revenue
decreased by 4% being reflective of lower
demand, particularly from coal customers, as
well as some pricing impacts, offset by
favourable foreign exchange translation. By
mining commodity, sales to gold customers and
quarrying markets continue to represent the
largest proportion at 27% and 19% respectively
due to firm commodity prices and ongoing
projects. Sales to coal customers reduced to
comprise 17% of revenue. This was due to lower
demand from thermal coal customers which
have been impacted by energy substitution to
lower cost natural gas combined with a mild
winter. Iron ore sales have increased due to
higher sales in Canada as well as contract wins.
Explosives volumes were down 5% as a result
of lower volumes into US coal markets (down
18%), partially offset by higher volumes into
Canadian metals markets (6%). The reduction in
US coal market volumes was largely through
indirect channels as a result of reduced
customer production, and a number of mine
closures. Quarrying volumes were slightly down
in Canada and Mexico while showing some
growth in the US.
Revenue from services increased 13% in the
period, with increased service levels to
quarrying customers in the US as well as metals
customers in Canada. Revenue from advanced
products and services as a percentage of total
explosives revenue increased to 28% from 25%.
Pricing for explosives was lower reflecting
market conditions and contracts renegotiated
for tenure extensions. Approximately 75% of the
pricing impact was negotiated during the 2015
year.
In Latin America (304,000 t of AN and
emulsion sales, of which emulsion 61%), sales
revenue decreased by 13% due to lower
demand, some customer pricing impacts, and
lower commodity indices, offset by favourable
foreign exchange translation.
The composition of sales revenue by mining
commodity remained relatively stable with
major changes in line with key commodity
pricing. Sales to gold customers, which now
represents 25% of revenue, increased slightly
on the back of firm gold prices. Sales to copper
customers were slightly down, however still
represent the most significant portion of
revenue at 45%.
Explosives volumes were down 15% (55,000
t) with lower volumes in Chile and Colombia as a