Russia's Uralkali announces $5.8bn potash expansion

25 October 2011 17:19  [Source: ICIS news]

LONDON (ICIS)--Uralkali is set to spend $5.8bn (€4.2bn) in the next decade to boost its potash capacity by nearly 80% to 19m tonnes/year, the Russian producer said on Tuesday.

The strategic investment would include both greenfield and brownfield expansions, with capital sourced from expected free cash flow and loan facilities, it added.

“With our unrivalled expansion programme we offer the fastest and most cost-effective solution to exploit the market opportunity as our brownfield and greenfield projects are, we believe, substantially less expensive than the industry average,” said Uralkali CEO Vladislav Baumgertner.

The investment would include substantial brownfield capacity made available by the companys merger with fellow Russian producer Silvinit in June, a combination that created the worlds leading potash manufacturer by output.

This would provide the company with the ability to add, in aggregate, 4.5m tonnes/year of capacity at a highly attractive cost including 1.5m tonnes/year of additional capacity at Berezniki 4; 1m tonnes/year from an efficiency increase and debottlenecking at Berezniki 2 and 3, as well as Solikamsk 2 and 3; and 2m tonnes/year from a two-phase expansion programme at Solikamsk 3.

Uralkali said it was also counting 5.3m tonnes/year of additional capacity that would stem from moving forward with the Ust-Yayvinsky and Polovodovsky greenfield projects. The company will lose some capacity at its Berezniki 2 mine.

The costing breakdown included $2.4bn for the Polovodovsky projects; $1.6bn for Ust-Yayvinsky; $1bn for the Solikamsk 3 expansion; and $0.7bn for Berezniki 4.

“The weighted average cost of the brownfield and greenfield expansion programme will amount to approximately $420 per tonne and approximately $750 per tonne of additional capacity, respectively, which the company believes will be the most cost effective in the potash industry,” Uralkali said in a press release.

The new greenfield projects are located in the immediate vicinity of Uralkali’s current operations, allowing the company to use existing infrastructure and leverage existing mining expertise, it added.

Uralkali is based at Berezniki in the Perm region of the Urals.

($1 = €0.72)

By: Will Conroy
+44 20 8652 3214

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