Uralkali Drops Mine Plans As State Denies Land Rights

Uralkali dropped plans to build a new $3 billion mine after state agencies blocked the use of forest land.

The company on Friday sought the government's approval to develop the Ust-Yaivinsky deposit using an existing mine instead, the producer said in a statement.

Uralkali's application, which can be turned down by the state's subsoil agency, also asked for an extension of the Dec. 15 deadline for submitting the documentation on plans to develop the deposit. The company said it needs another 18 months to revise the proposals, which involve mining the Ust-Yaivinsky deposit from the existing Mine 2 unit.

The potash producer also said it had the right to apply for a revision of the terms to develop the Ust-Yaivinsky deposit.

Mining the deposit from the Mine 2 unit "is likely to cost less" than the $3 billion construction of a mine at the deposit, CEO Vladislav Baumgertner said Friday.

Separately, he said the company would retain its plan to raise annual production capacity to as much as 7 million metric tons of potash by 2010. Next year, Uralkali "won't work in full capacity" as demand is "very weak on the market," he added.

Capital expenditure will total $400 million in 2009, according to Baumgertner. Uralkali will use about half of that amount for "maintenance" and the rest on boosting production, with about $125 million to be spent on expanding the Mine 4 unit, he said.