#1 KEY MARKET DEVELOPMENTS AND DRIVERS

  • Global MOP production decreased 2% in 2013 to 54.1 MMT of KCl. During the same period, total potash fertilizer consumption went from 28.4 MMT K2O in 2012 to 28.6 MMT K2O in 2013. Although demand declined in North America and Southern Asia, it nonetheless expanded in Europe, Latin America and Eastern Asia. In terms of MOP, the IFA estimated that global potash sales were 53 MMT of MOP, including 13 MMT of domestic deliveries and 40 MMT of global exports;
  • While global potash sales showed 10% annualised growth in the first six months of the year, the second half was impacted by the market turbulence in the wake of Uralkali’s decision to quit the Belarusian Potash Company in favour of a volumes-over-price strategy;

 

  • Uralkali’s revised sales strategy led to a significant drop in potash prices. From US$ 410-450/t (FOB Baltic, spot) and US$ 400-425/t (FOB Baltic, contract) at the beginning of 2013, prices declined to US$ 300-330/t (FOB Baltic spot) and US$ 240-350/t (FOB Baltic contract);
  • While demand levels remained healthy in Brazil, import volumes into China and India, the two largest potash consumers globally, registered declines.
    – According to data from China Customs, imports declined to 6.0 MMT KCl in 2013 (vs. 6.3 MMT in 2012).
    – According to FAI data, India MOP imports fell by 9% year-on-year and amounted to 2.8 MMT. Overall, potassium fertilizer consumption in the country was adversely affected by lower subsidies for potash (vs nitrogen) and the devaluation of the national currency with the Rupee weakening some 15% against the US dollar.
    – Brazil remained one of the most active potash markets in 2013, with MOP demand benefiting from favourable crop economics. Potassium fertilizers consumption, according to IFA, rose 2.5%, pushing 2013 imports to 7.6 MMT of KCl.
  • Global potash production capacity rose 9% year-on-year to reach about 50 MMT K2O (or about 85 MMT of product).The main additions to MOP capacity in 2013 were:
    – Canada: PotashCorp – 2.3 MMT pa KCl, Mosaic – 1.15 MMT pa
    – Russia: Uralkali – 1.5 MMT pa
    – Belarus: Belaruskali – 0.6 MMT pa
    – China: Zhonghang Sanjia Guiye – 0.45 MMT pa
Total potash CAPEX (US$m)

Total-potash-CAPEX-(US$m)

  • In 2014 global potash capacity is projected to expand moderately (+2%), to 50.4 MMT K2O (86 MMT product). The majority of this extra capacity consists of brownfield expansions at North American (Mosaic, Intrepid) and CIS (Uralkali, Uzkimyosanoat) producers;
  • Global demand in 2014 may be close to 57 MMT, driven by firmer import demand in the United States, China, South East Asia – and possibly India;
  • In January 2014 Uralkali announced that it had signed a new semi-annual supply contract with China for 305 US$/t (CFR). The new floor price represented a 24% discount to the previous year.

potash

#2 VOLGAKALIY (GREMYACHINSKOE DEPOSIT)

PROGRESS AS OF 5 MARCH 2014 (metres)

potash-diagram

  • JORC proven and probable reserves: 420 MMT (30.8% KCI content)
  • Useful life of mine: +35 years

For illustrative purposes only, not to scale.

 DEVELOPMENT

 EuroChem VolgaKaliy (Gremyachinskoe deposit, Volgograd region)

With the cage shaft bottom cleared of water and debris, we resumed sinking in the fourth quarter and had progressed to a depth of -178 metres as of 5 March. As previously announced, the restart of sinking was delayed by several months. Once the shaft was cleared, detailed surveying revealed that corrections to the shaft liner were required. These issues were inherited from our initial contractor for the project and included the need to remove and replace eleven tubing rings and the concrete backing.

Work also continued on schedule at the skip shaft 1 where the freeze wall was completed in December. Sinking operations resumed after extensive testing of the water and pressure below the bottom concrete plug. The plug was then removed and sinking operations resumed from -572 metres. As of 5 March, the skip shaft 1 had reached a depth of -630 metres out of its planned -1,147 metres.

The freeze wall for the skip shaft 2 was further developed and had achieved its designated thickness at the time of this release. Sinking efforts on our phase 2 skip shaft are scheduled to start shortly.

On the surface, we saw good progress on the construction of the main process beneficiation building, warehousing facilities, and loading and shipping facilities. The main electrical substation is essentially complete and undergoing rigorous commissioning checks prior to start-up.

VolgaKaliy CAPEX (US$m)

VolgaKaliy-CAPEX-(US$m)

#3 USOLSKIY POTASH (VERKHNEKAMSKOE DEPOSIT)

PROGRESS AS OF 5 MARCH 2014 (metres)

6532-EuroChem-AR13_Front_HR-38

  • JORC proven and probable reserves: 420 MMT (30.8% KCI content)
  • Useful life of mine: +35 years

For illustrative purposes only, not to scale.

DEVELOPMENT

EuroChem Usolskiy Potash (Verkhnekamskoe deposit, Perm region)

We successfully completed cage shaft sinking operations in October 2013 and expect to wrap up skip shaft sinking efforts in the first half of 2014. The abandonment of the site’s two freeze walls, which were designed, installed, and operated by Thyssen Schachtbau is underway, a programme also contracted with the German mining specialists.

Above ground, our teams were engaged in the construction of the tailings pond and railroads. The landscape of the site further evolved with the erecting of the foundations for various buildings including the administration building, mine rescue building and permanent canteen.

Usolskiy capex (US$m)

Usolskiy-capex-(US$m)