Eurochem in $630M Deal to Develop Potassium Deposit

KOTELNIKOVO, Volgograd Region -- Fertilizer maker Eurochem signed a $634 million deal with an international group of contractors on Thursday to help it develop a potassium deposit near the Volga River.

Eurochem won the rights to mine the Gremyachynskoye site in 2005 and has been developing it since 2006. The deposit contains potassium reserves of more than 1.2 billion tons, according to geological surveys.

"These deposits will raise the crop yields of Kazakhstan, Ukraine, China and Uzbekistan," Eurochem general director Dmitry Strezhnyev said at the signing ceremony.

The company, also known by its Russian name, Evrokhim, said it had signed a 205 million euro ($324.9 million) deal with Thyssen Schachtbau to construct the mining complex at Gremyachynskoye.

South Africa's Shaft Sinkers has been contracted to build a shaft for $270 million. The work should be completed by the end of 2012.

Canadian firm Hatch has been engaged for 17 million euros ($26.95 million) to study how to construct a refining complex capable of processing 2.3 million tons a year, and Belarussian firm Belgorkhimprom will carry out chemical surveys for $12 million.

Privately owned Eurochem aims to be the largest mineral fertilizer company in Russia and No. 4 in the world by 2012. It plans by then to spend $3.2 billion on developing production and infrastructure at its sites. Eurochem aims to spend around $2 billion in total to develop the Gremyachynskoye site.

The deposit, which has reserves of 1.2 billion metric tons, will produce 2.3 million tons a year in 2012, rising to 4.6 million tons in 2015, he said.

EuroChem paid 3.15 billion rubles in 2005 for the rights to the deposit. Gremyachinskoye can be mined for 50 years at an annual production rate of at least 5 million tons, Strezhnyev said.

(Reuters, Bloomberg)