Potash

While we report potash as a separate segment, we are developing our capacity to manufacture and supply this nutrient. We have already begun sinking the mineshafts that will operate as part of phase I of the Gremyachinskoe deposit, which, once completed, will have an initial annual capacity of 2.3 MMT of KCl. Work on the social infrastructure to support the new enterprise is also well underway: employees of Volgakali, the EuroChem subsidiary responsible for this project, have already received the keys to new houses that will make up the new district serving the Gremyachinskoe mine and processing centre.

The market downturn in 2009 did not force us to stop or even significantly slow our capital expenditure programme in the potash segment and, even at current potash prices, our investment in the Gremyachinskoe deposit remains a highly viable and attractive project.

During 2009 EuroChem and its parent company increased their combined stake in the leading German potash producer K+S AG, and George Cardona, a EuroChem Director, was appointed to the K+S supervisory board. Our investment in K+S AG has both strategic potential to facilitate a number of possible forms of cooperation between our two companies.

While new entrants to the potash segment, including international mining players like BHP Billiton and Vale, represent a significant threat to the current status quo, EuroChem aims to be at the most efficient end of the potash production cost curve, allowing it to be among the best-positioned in the new market situation even if a significant portion of the planned new capacity does come online in the foreseeable future.

We expect that low transportation costs from our Gremyachinskoe potash development to our bulk terminal in Tuapse will help us rank among the cost leaders in the potash segment.