Bloomberg News

Uralkali to Spend $5.8 Billion to Boost Potash Capacity 80%

October 25, 2011

(Updates with CEO’s comments in fifth paragraph.)

Oct. 25 (Bloomberg) -- OAO Uralkali, the largest potash producer by output, plans to spend $5.8 billion to increase capacity almost 80 percent in the next decade as prices rise.

Capacity will gain to 19 million metric tons in 2021 from 10.6 million tons at the end of last year, the company said in a statement today. Uralkali plans to expand its Berezniki and Solikamsk mines by 4.5 million tons a year and add 4 million tons of capacity with the introduction of untapped projects.

It will spend $2.4 billion on the Polovodsky project, $1.6 billion on Ust-Yayvinsky, $1 billion to expand the Solikamsk-3 mine, $700 million on Berezniki-4 and $200 million to eliminate bottlenecks in current production, according to the statement.

Uralkali overtook Potash Corp. of Saskatchewan as the largest producer of the fertilizer by output this year after buying rival OAO Silvinit in May. Berezniki-based Uralkali is seeking to take advantage of relatively low Russian costs to raise its market share. Average capital spending will be about $750 a ton of additional capacity for new projects and $420 a ton for current projects being expanded, Uralkali said today.

“Our long-term growth strategy aims to satisfy the constantly growing demand for potash, better serve our customers and increase value for our stakeholders,” Chief Executive Officer Vladislav Baumgertner said in the statement. The company’s expansion projects are “substantially less expensive than the industry average,” Baumgertner said.

Cash Flow

Spending will be funded from cash flow and loans, Uralkali said, reiterating a plan to maintain net debt at 1 to 2 times earnings before interest, taxes, depreciation and amortization.

Separately, Uralkali said its board recommended paying 12.4 billion rubles ($407 million) in interim dividends, two weeks after announcing a $2.5 billion share buyback to buoy the stock using a loan from state-run OAO Sberbank. Uralkali fell 0.9 percent to 253.22 rubles by 3:30 p.m. in Moscow trading.

Potash Corp. announced plans in 2003 to spend $7.5 billion to boost capacity to 17.1 million tons by 2015, developing projects in Saskatchewan and New Brunswick, according to its website. Mosaic Co. is seeking to increase capacity to 16.5 million tons by 2020, from 10.3 million tons, the company said in a presentation for investors in October.

--Editors: Tony Barrett, Alex Devine

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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