UPDATE 1-Incitec Pivot approves A$935 mln Australia project

(Adds details)

SYDNEY, July 28 (Reuters) - Incitec Pivot Ltd (IPL.AX), Australia's top fertiliser maker, said on Monday it had approved the construction of an ammonium nitrate plant at Moranbah in Queensland state at a cost of A$935 million ($890 million).

The project was abandoned in 2007 by Dyno Nobel, which Incitec acquired earlier this year, because of cost blow-outs, but demand for ammonium nitrate, used as an explosive by the booming mining sector and by farmers as a fertiliser, is now threatening to outpace supply.

The project involves building a 330,000 tonnes a year ammonium nitrate manufacturing complex including ammonia, nitric acid and ammonium nitrate plants.

A spokesman for Incitec Pivot said the project would be internally funded. Last week Incitec denied media reports that it was considering an equity raising of up to A$1 billion.

Operations at Moranbah are expected to begin in the first quarter of calendar 2011.

In a seperate announcement, construction and engineering firm United Group Ltd (UGL.AX) said it had agreed a deal worth A$683 million to help build the plant.

Incitec Pivot said the project has long-term contracts from three mining companies, which will take about half of planned output.

Last week Incitec rival Orica Ltd (ORI.AX), the world's biggest explosives maker, said it was forecasting a global shortage of ammonium nitrate and it planned to expand plants to meet demand. ($1=A$1.05) (Reporting by Victoria Thieberger; Editing by James Thornhill)