By Rod Nickel
WINNIPEG, Manitoba May 22 Russia's Uralkali OAO
would delay two of its potash mine expansion projects
for as long as a decade if rival BHP Billiton
builds the world's biggest mine of the crop nutrient, Uralkali's
chief executive said in an interview.
Uralkali is aiming to become the largest global producer of
potash by 2021, leapfrogging Canada's Potash Corporation of
Saskatchewan in mining capacity.
But BHP's not-yet-final plan for a mine near Jansen,
Saskatchewan, that would produce 8 million tonnes annually,
would change the global supply and demand picture so
dramatically that Uralkali would rein in its own expansion plans
if BHP goes ahead, Chief Executive Vladislav Baumgertner said in
an email exchange with Reuters this week.
"This uncertainty is mostly due to (the) BHP project,"
Baumgertner said. "If Jansen is developed, then we will postpone
the realization of Solikamsk-3 expansion and Polovodovsky by
five to 10 years."
Uralkali is the second major potash producer in a week to
highlight BHP's decision as pivotal to its own expansion plans,
as miners aim to avoid a glut of the pink or white crop
nutrient, which is produced mainly in Canada and Russia.
U.S.-based producer Mosaic Co told Reuters last week
that it would reconsider a decision to shelve its Canadian
potash expansion if BHP scuttles Jansen.
The $1 billion Solikamsk-3 mine expansion would add 2
million tonnes of annual capacity, and the new Polovodovsky mine
would cost an estimated $2.4 billion to build and increase
Uralkali's capacity by 2.5 million tonnes. Uralkali has not yet
completed feasibility studies on the projects.
Uralkali expanded its Berezniki-4 mine last year by 1.5
million tonnes of annual capacity and is planning a new mine,
called Ust-Yayvinsky, that would yield 2.8 million tonnes per
BHP spokesman Ruban Yogarajah said the company's forecast on
Jansen has not changed -- BHP has said its board will decide
whether to fully approve the project in its next fiscal year,
which starts July 1.
BHP Chief Executive Andrew Mackenzie briefed analysts in
Australia on Wednesday, and some concluded that Jansen, which
industry sources have estimated to cost $14 billion, may not
"Jansen looks likely to be shelved," J.P.Morgan in Australia
said in a research note, adding that Mackenzie told analysts
that approved expenditures on the project will run out in the
next few months.
BHP, like other miners coping with an uncertain global
economy, is scaling back capital projects. The company expects
to spend $18 billion in capital and exploration work in 2014,
down from $22 billion this year, and with a target of $15
billion annually by 2015, according to a note from Investec
Securities, so Jansen will have to compete for funds with other
"(Jansen) is clearly the biggest decision Andrew Mackenzie
has to make, and so early into his term," said an industry
source familiar with BHP. "I can think of more ways Andrew can
get this wrong, than get it right. If you ask him what keeps him
up at night, he will say Jansen."
Potash, used as crop fertilizer, animal feed and for
industrial use, is a key nutrient for maximizing yields of crops
like corn and rice, by improving root strength, disease
resistance and water retention.
Shares of Uralkali were up 0.2 percent on Wednesday, while
BHP stock gained about 1 percent.