This could lead to a significant reduction in supply (23% plus the possibility of a second mine being flooded) from one of the world's biggest Potash producers. i.e. upward pressure on the price of Potash..
OAO Uralkali halted a Russian potash mine and evacuated workers because of rising inflows of brine into the site. The shares fell the most in more than a year.
The world’s biggest potash producer is monitoring the Solikamsk-2 site in the region of Perm, while its four other mines are operating normally, it said today in a statement. Flows of water and dissolved salts are a risk for potash mines.
A flood at the mine would be “sensitive” for the company, Kirill Chuyko, head of equity research at Moscow-based BCS Financial Group, said by phone. It’s hard to say immediately whether the brine inflow will cause significant damage, he said. The mine produced 23 percent of the ore the company used to make potash last year, according to BCS.
The Solikamsk-1 mine, connected to Solikamsk-2, may also be affected, ZAO Raiffeisenbank analyst Konstantin Yuminov said.
“We see the chance of both mines being flooded as high,”VTB Capital analyst Elena Sakhnova said by phone today. “It will be good for the markets as potash prices may rise ahead of talks with China on a new deal” to supply the commodity.
Uralkali dropped 9.2 percent to 163 rubles by the close of Moscow trading, the biggest decline since July 30, 2013.
Competitors including Potash Corp. (POT) of Saskatchewan Inc. andAgrium Inc. (AGU) rose on news of the stoppage at Uralkali’s operation, which contributes 6 percent of global potash supply, according to VTB. Potash Corp. jumped as much as 6 percent and Agrium rose up to 4.1 percent today in New York trading. Old Sinkhole
A 500-meter (1,600-foot) sinkhole opened above Uralkali’s Mine 1 eight years ago, swallowing part of a railroad and forcing it to write off about 5 percent of its mineral reserves, after water poured into the site 1,600 kilometers east of Moscow. Berezniki city, near Uralkali’s Solkamsk operations, said in August it relocated residents from 11 houses due to signs of increasing subsidence.
Uralkali prompted a slump in world potash markets in 2013 after breaking up a venture with state-run Belaruskali controlling $20 billion of global exports.
It also led to a change in the ownership at Uralkali.
Billionaire Suleiman Kerimov and his partners sold their stakes in the company to OAO Uralchem and billionaire Mikhail Prokhorov’s Onexim Group, which used loans to fund the deal.
The Uralchem and Onexim press services declined to comment on the brine inflow today, while Uralkali was unable to provide further information beyond the company’s statement.
To contact the reporters on this story: Yuliya Fedorinova in Moscow at [email protected]; Anatoly Medetsky in Moscow at [email protected]
To contact the editors responsible for this story: Torrey Clark at [email protected]Tony Barrett, Sarah McGregor
KPC Price at posting:
23.5¢ Sentiment: Buy Disclosure: Held
