Potash Producers Jump After Uralkali Evacuates Mine

http://www.bloomberg.com/news/2014-11-18/potash-producers-jump-after-uralkali-evacuates-mine.html
By Christopher Donville  Nov 19, 2014 2:31 AM GMT+0800

Potash Producers Jump After Uralkali Evacuates Mine

Shares of North American potash companies jumped after the world’s largest producer of the crop nutrient halted one of its mines, a move that may lead to reduced global supplies and higher prices.
Potash Corp. of Saskatchewan Inc. rose as much as 6 percent in New York, the most intraday in two years. Mosaic Co. gained 4.4 percent and Agrium Inc. (AGU) 4.1 percent.
Russia’s OAO Uralkali said today it evacuated the Solikamsk-2 mine and initiated an emergency plan after detecting an increased flow of brine. Such a situation can be hazardous in the potash industry because water can dissolve potassium-bearing salts and weaken a mine’s structure. Flooding has opened up sinkholes at other Uralkali properties in recent years, curbing production.
The Solikamsk-2 mine has an annual capacity equal to about 3 percent of the global market, said Neil Fleishman, an analyst at fertilizer-industry information service Green Markets. Any disruption could help potash prices, which have regained some ground lost after a slump in the middle of last year.
“With potash prices creeping up because of low inventories, this is another supporting factor,” Spencer Churchill, an analyst at Paradigm Capital Inc. in Toronto, said by phone.
Solikamsk-2, in Russia’s Perm region, has the capacity to produce 2.3 million metric tons a year of potash, according to Fleishman. Uralkali said in a statement that its other operations are carrying on as normal.

Russian Sinkhole

The company’s depositary receipts fell 7.4 percent in London, the most since July last year, when the company exited a marketing joint venture with a competitor in Belarus. Berezniki-based Uralkali accounted for 23 percent of global potash exports in the first half of this year, according to itswebsite.
Eight years ago, a 500-meter-wide (1,640 feet) sinkhole opened above Uralkali’s Mine 1 in Russia after water poured into the site. The hole swallowed part of a railway line and forced Uralkali to close the mine and write off about 5 percent of the company’s mineral reserves.
Potash Corp,, which is based in Saskatoon, Saskatchewan, rose 5.2 percent to $35.54 at 1:21 p.m. in New York. Mosaic is based in Plymouth, Minnesota, and Agrium’s headquarters are in Calgary. The three companies sell outside of North America via their Canpotex Ltd. export venture.
To contact the reporter on this story: Christopher Donville in Vancouver at[email protected]