UPDATE 1-Potash suspends new sales, eyes Russia mine flood

By Roberta Rampton

WINNIPEG, Manitoba, Oct 25 (Reuters) - Potash Corp of Saskatchewan (POT.TO) is suspending new sales because a flood at major Russian competitor Silvinit could further tighten already tight world supplies, the world's biggest fertilizer company said on Thursday.

In the past day, Potash Corp learned that Silvinit, one of Russia's largest potash fertilizer producers, is concerned that a sinkhole caused by mine flooding is threatening the railway it uses to ship potash.

"This situation is currently unfolding and potash customers and producers are watching very closely as it could put significant pressure on an already tight supply situation," Potash Corp. Chief Executive Bill Doyle told analysts on a conference call.

"In light of these events, our company has suspended all new potash sales until further notice," Doyle said.

The news rocketed Potash shares more than 6 percent, or C$6.75, higher on the Toronto Stock Exchange to C$112.30. Earlier in the day, Potash shares had slid as much as 5 percent after third-quarter earnings fell short of market expectations.

Doyle said a bypass is being built around the Russian sinkhole, and is slated for completion in February. But a Silvinit representative told an industry conference that there is a danger that it will be unable to ship potash if the railway company fails to meet its deadline, Doyle said.

Doyle said Potash Corp would honor existing shipping agreements, but would not make any new sales to North American customers, or from its New Brunswick supplies, until it finds out more about the situation.

"I wouldn't be surprised to see Canpotex adopt the same strategy," he said, referring to the marketing agency for all Saskatchewan potash producers, of which Potash Corp is the largest.

Doyle also told analysts the unfolding situation could affect Russia's current potash price negotiations with China, the world's largest volume buyer.