Coal India Ltd., the world’s largest supplier of the fuel, will add production of a key ingredient used in explosives for mining as it aims to tackle surging costs.
The company plans to produce around 700,000 tons a year of ammonium nitrate, about half the amount it consumes, amid efforts to protect profit margins, according to people familiar with the details, who asked not to be identified as they aren’t authorized to speak publicly.
Coal India didn’t immediately respond to an emailed request for comment.
Miners globally have been flagging pressures from rising costs of energy, labor and chemicals for months, with copper and gold giant Freeport-McMoRan Inc. among those to specifically call out higher ammonium nitrate prices. Concerns about supply of the chemical compound — also used as a fertilizer — escalated in February after Russia, a major producer, curbed exports.
Along with rising input costs, Kolkata-based Coal India is contending with higher salaries and a spike in the price of diesel. Some units are finding it “difficult to survive without a price hike,” and need to amend long-term supply agreements, Chairman Pramod Agrawal said on a call with analysts last month.
Agrawal said last month the company would study plans to convert coal into ammonium nitrate, though any decision would depend on the viability of the proposals.
Coal India is likely to issue a tender around the middle of the year seeking an operator to build and operate ammonium nitrate production facilities, according to the people. The raw materials would be available to the firm’s existing explosives suppliers including Indian Oil Corp., Solar Industries Ltd. and Gulf Oil Corp, the people said. – Bloomberg