China: Business Strategy Orica, Jiulian to Establish JV Firm for Manufacturing Explosives
Under the agreement, both the companies will contribute existing operating assets into the joint venture. Orica will contribute its equity stakes in its Orica Civil Explosives and Jiangsu Orica Banqiao Mining Machinery businesses, and 87 % of its equity stake in the Hunan Orica Nanling Civil Explosives business while Jiulian will contribute 85 % of its Shandong Yinguang Civil Explosives business.
China – Orica and Guizhou Jiulian Industrial Explosives (Jiulian) have recently signed final, binding documents to establish a joint venture for the manufacture and service delivery of explosives in China. This follows an agreement to work towards this outcome announced on July 16, 2018.
Under the terms of the binding agreements, each party will contribute existing operating assets into the joint venture. Orica will contribute its equity stakes in its Orica (Weihai) Civil Explosives and Jiangsu Orica Banqiao Mining Machinery businesses, and 87 % of its equity stake in the Hunan Orica Nanling Civil Explosives business. Jiulian will contribute 85 % of its Shandong Yinguang Civil Explosives business. Completion is anticipated in the next 2-3 months.
Orica will be the manager of the new joint venture and will own a 49 % equity stake. The balance of the equity will be held by Jiulian.
The joint venture will create coordinated mining services offering under Orica management, with an initial focus on the Shandong province. The joint venture will have control over end-to-end blasting services assets and capability, including:
• Detonator manufacturing;
• Bulk and packaged explosives manufacturing;
• Mobile Manufacturing Unit (MMU) production; and
• On-mine services
Alberto Calderon, Orica Managing Director and Chief Executive Officer, said “Jiulian is one of China’s leading players in the China explosives market. We expect that entering into a joint venture with a significant and credible market player will create an attractive platform to reinvigorate our operating assets in China. Over time, we expect to deepen our relationship and pursue new opportunities in the China market and beyond. The joint venture also better positions Orica to benefit from industry consolidation and technological changes underway in the China market.”