Russia Uralkali, Silvinit to Mine 10.6 Million Tons of Potash

Russian potash miners Uralkali and Silvinit expect to produce a combined 10.6 million tons of potash this year, up from 10.3 million tons in 2010, Uralkali's CEO said.

The two companies, controlled by Russian billionaire tycoon Suleiman Kerimov and associates, announced a $23.9 billion merger earlier this year.

Uralkali Chief Executive Officer Vladislav Baumgertner also said that its Belarussian Potash Co (BPC) export joint venture will sign a new contract with India in the coming months at a sharply higher price.

"The contract will be signed in the next few months and the price increase will be serious," he said.

Demand for potash and other fertilizers is up as farmers rush to maximize yields with grain prices at fresh highs, and Kerimov is looking to increase Russia's clout on global markets by creating a single national champion.

BPC in January signed a deal to sell 600,000 tons of potash to two major Chinese buyers at $400 per ton.

It signed deals with Chinese firms at $350 per ton in 2010 and $370 per ton with Indian buyers.

The combined Uralkali/Silvinit group will be the world's second-largest producer after Canada's Potash Corp.

A Russian court last month issued an injunction against the $23.9 billion merger following a complaint over the merger terms by Russian fertilizer group Acron, which holds 6% of Silvinit. Baumgertner did not comment on the legal complications surrounding the merger.

However, he said that the combined group would invest about $200-$250 million in its operations annually in 2011 and 2012.

"The company will have significant cash flows, and it is more effective to distribute this to shareholders than to accumulate the funds," he said.

He did not say how much the combined company could pay out to shareholders annually.