EuroChem Signs $634 Million Contracts for Potash Mine

[ 10.10.08 09:41 ]

EuroChem, Russia's largest mineral fertilizer producer, signed contracts totaling $634 million to build a potash mine and plant in southern Russia, seeking to take advantage of a jump in prices for the nutrient.

The company, which mixes potash with phosphate and nitrogen to make complex fertilizers, plans to tap business in central Asia, Iran and Iraq, Eurochem Chief Executive Officer Dmitry Strezhnev told reporters in Kotelnikovo, Russia, today.

``We see that region as an enormous new market growing by our side,'' Strezhnev said. EuroChem expects the potash market in Kazakhstan, Uzbekistan, Iran and Iraq will expand to 2 million metric tons a year, he said.

Potash prices have jumped more than five times in the last 18 months, with OAO Uralkali, Russia's second-largest producer, reporting sales of $1,050 a metric ton in Sri Lanka this week. Global demand is 2 percent more than supply, driving prices higher, according to Uralkali.

EuroChem expects potash demand to grow 3 to 5 percent a year, for the next five years, Strezhnev said.

The Gremyachinskoye deposit, which contains 1.2 billion tons of reserves, will make EuroChem only the third company to produce the mineral in Russia. EuroChem also paid 4.1 billion rubles ($18 million) in March for rights to develop part of the Verkhnekamskoye potash field in central Russia.

Verkhnekamskoye is the world's second-largest field after a site in Saskatchewan, Canada.

Investment Plan

EuroChem today signed a 205 million-euro ($325 million) contract with Thyssen Schachtbau GmbH and a $270 million contract with Shaft Sinkers Pty Ltd. to build a mine at the Gremyachinskoye deposit, the company said in a statement.

The Moscow-based company has raised spending plans for Gremyachinskoye by 25 percent to 50 billion rubles, Strezhnev said. The company plans to produce 2.3 million tons a year there in 2012, rising to 4.6 million tons in 2015, he said.

Gremyachinskoye can be mined for 50 years at an annual production rate of at least 5 million tons, Strezhnev said.

EuroChem also signed a 17 million-euro contract with Hatch Group to develop the plant project and a $12 million contract with Belarusian research institute OAO Belgorkhimprom.

EuroChem is ``technically ready'' to make an initial public offering, with a view to listing in Moscow, London or Frankfurt, Nikolai Filipenko, the chief financial officer, told reporters in Kotelnikovo today. EuroChem's controlling shareholder, billionaire Andrei Melnichenko, has no such plans for now, he said.

/Bloomberg, 17.07.2008/