What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
The cooperative last week confirmed work on a second dryer will start next month, taking daily capacity from the 2.2 million litre/day scheduled to come on stream in August this year, to 6.6 million litres/day in 2013.
"Once completed Darfield 2 will be one of the largest, if not the largest plant in the world," Fonterra trade and operations manager Gary Romano told Rural News.
THE $300 million project will be Fonterra's single largest investment for a plant. Romano says it will be similar in size to Edendale's dryer 4, built for $212m and commissioned in February 2010.
Fonterra's board gave the green light to the Darfield 2 project last week, including warehousing and rail access.
"Since we first announced plans for Darfield in 2009 we've seen even more increases [in milk production] in the region than anticipated," adds Romano.
"At this rate the first dryer will be full within a few years so we need to act now to help meet the existing demand and further growth."
Darfield is Fonterra's first greenfield processing development for 14 years. The cooperative's next nearest large-scale plant is just over 100km to the southwest at Clandeboye, South Canterbury.
That's been at capacity for several seasons forcing some peak milk from Canterbury to be tankered hundreds of kilometres to Edendale, Southland.
"The location of Darfield means our tankers don't have to travel as far for collections."
In its consent application to Selwyn District Council and Canterbury Regional Council, Fonterra said the second dryer would reduce tanker travel by about 10,000km/day at peak, over and above the 20,000 km/day saved by the first dryer's construction.
There would also be substantial savings in outward goods road travel as product would be railed to Lyttelton.
Romano says the second dryer will create 60 new jobs on site, in addition to the 100 anticipated with the first dryer.
"This is an important development for the region and an integral part of Canterbury's rebuild."
The consent application indicated a monthly average construction force of 300 for stage two, with a peak on site team of 700.
