Orica (ORI) $23.65IT'S a natural Pavlovian response for...

Orica (ORI) $23.65

IT'S a natural Pavlovian response for investors to desert the world's biggest explosives maker -- and top provider of other consumables such as cyanide -- when mineral commodity prices flatline.

But CEO Ian Smith has other ideas on the supply and demand dynamics and yesterday aired them to a sympathetic crowd at a Melbourne Mining Club nosebag.

In the short term, we suspect he will face a tougher gig selling the message to investors who have seen the value of Orica shares retreat. Smith contends that even if commodities demand abates -- and he doesn't think it will -- miners are digging and blasting deeper and deeper for lower-grade deposits.

The cycling enthusiast also knows about commodity cycles and he's unconvinced that old king coal in the US is about to relinquish its throne, as coal and (unsustainably cheap) gas prices start to equalise.

Big Smithy's big picture is certainly heartening, but it holds out little short-term relief from Orica's woes that include subdued ammonium nitrate (AN) prices and a poor showing from its acquired Minova mining consumables business in the US.

It remains to be seen whether Smith -- who took over from Graeme Liebelt in February last year -- possesses the requisite magic wand. Smith cast a dazzling spell at his former employ Newcrest Mining, but since then the fairy dust has vanished as a result of the Smith-era purchase of Lihir Gold.

Still, Smith looks to be doing the right thing by ensuring that Orica's AN supply arrangements are more flexible. For instance, its Bontang plant in Indonesia can supply Pilbara iron ore miners, a sector in which Orica is underweight.

Smith maintains that so far this financial year Orica has retained "nearly all" of its existing customer accounts and snared 58 per cent of rivals' accounts up for grabs. He adds this wasn't because of price low-balling but other factors such as "product differentiation and certainty of supply".

Criterion had Orica as a long-term buy at $24.05 last November, after the company wiped $237 million off the value of Minova.

We'll stick with the call, given the September balance date Orica hasn't tweaked its vague guidance of improved current-year earnings. But there's little to detonate the share price in the short term.

http://www.theaustralian.com.au/business/opinion/fat-fighting-firm-worth-a-guernsey/story-e6frg9lo-1226618621089