Sydney, Feb 13: Australia's Dyno Nobel , the world's second-biggest explosives firm, said on Tuesda

Sydney, Feb 13: Australia's Dyno Nobel , the world's second-biggest explosives firm, said on Tuesday it will proceed with a proposed ammonium nitrate plant in Queensland state after it agreed commitments with major mining customers.

The plant will have a production capacity of 330,000 tonnes of ammonium nitrate a year, with the total project cost put at about A$520 million ($400 million).

''This capital cost factors in the current tight raw material input and resource markets and projected cost growth over the construction phase,'' Dyno Nobel said.

Dyno Nobel said it had finalised long-term commitments with major customers Anglo Coal , Rio Tinto Ltd./Plc.

and Xstrata Plc. , and had also agreed a construction contract with Australian services firm United Group Ltd. .

United said in a separate statement that the total value of work under the contract was expected to be worth up to A$220 million.

Dyno said it was assessing funding options, including looking at potential equity partners, and has secured additional corporate debt facilities of US$300 million to support development of the project into 2007.

Finalisation of longer-term funding and evaluation of partner options will be completed in the first half of 2007, it said.

Dyno Nobel, established by dynamite inventor and Nobel Prize founder Alfred Nobel, has a history of more than 200 years.

In 2005, a Macquarie Bank-led consortium paid $1.7 billion to buy Norwegian explosives maker Dyno Nobel Group from private equity investor Industri Kapital.

The consortium retained the Australian and North American business and sold the remaining assets to Orica for $685 million. It floated the business in April in an initial public offering.

Dyno Nobel stock closed at A$2.54 on Monday, 17 cents above its April 2006 listing price.

Reuters