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Uralkali Receives Report of the Investigation into the Causes of Mine 1 Accident

04.02.2009
Uralkali (Berezniki, Perm Territory) has received the report of the re-opened investigation into the causes of the accident that occurred at Uralkali Mine 1 in October 2006. As stated previously, the second investigation was conducted by a commission, established by Russia s mining safety watchdog, Rostekhnadzor, on November 11, 2008 by order of the Russian Deputy Prime Minister Igor Sechin.

This is a second commission, appointed by Rostekhnadzor to examine the circumstances of the accident at Mine 1. The first investigation was conducted in the autumn of 2006. The commission then concluded that the accident was caused by “new kind of previously unknown anomaly of geological structure” and that “the combination of circumstances preceding the accident, in terms of the source, scope and strength can be classified as being extraordinary and unavoidable events under prevailing conditions not dependent on the will of the parties involved.”

The new investigation report, received by Uralkali, states that “the commission has concluded that the cause of the accident was a combination of geological and technological factors.” Several key factors listed in the report reiterate the conclusions of the first investigation; in particular, the new report confirms that the accident was caused by an anomaly of geological structure.

However, the new “commission points to the fact that, if the subsoil user had been systematically conducting geological surveys, the abnormal structure of the water-resistant section in the area of the accident could have being detected earlier, including at the time of the most intense distortions of the ground surface near the accident area.”

Several additional technological causes are cited in the new report, including a “failure to leave a protective pillar under the railroad and a substantial delay in and incomplete scope of backfilling operations. The technological factors comprise the subsoil users operations related to salt processing, backfilling, monitoring of protective pillars and the ground surface, and insufficient study of the water-resistant sections in the accident area during the course of the mining operations.”

The report received by Uralkali lists the expenses related to managing the consequences of the accident as at the time of the investigation. These are the expenses incurred by the different levels of the government, including expenses related to the resettlement of Berezniki residents and the construction of a 6-kilometer railroad bypass. Overall, these expenses totaled about 3.1 billion roubles as at the time of the investigation.

Additionally, “upon consideration of the information obtained during the investigation with respect to the expenses related to managing the consequences of the accident, the commission points out that the future expenses, including:

- expenses associated with the resettlement of residents;
- expenses related to the utilities relocation;
- expenses incurred by Russian Railways and other companies;
- budget expenses;
- losses of mineral resources;
- other expenses,

as well the damage caused by the accident should be subject to reimbursement in accordance with the procedure established by the current legislation. The calculation of the amount reimbursable by the subsoil user will be based on the source documents at the time when damages are payable by Uralkali.”

There has to date been no judicial decision requiring Uralkali to reimburse the expenses listed in the report. However, the company cannot give any assurance that claims will not arise for such reimbursements, which could exceed 3.1 billion roubles.

According to the report, “the calculations of the expenses incurred and the approximate amounts of future expenses and damage caused by the accident, and information about the booked reserves of chloride salts as at January 1, 2007, opinions of commission members and experts” are contained in appendices to the report. Uralkali has not yet received these appendices and continues to study the accident investigation report. In the absence of the appendices to the report Uralkali is not able to comment upon the commissions conclusions and the materials they are based on. Uralkali will continue to monitor the situation, including in the context of any claims for damages that might arise and will make further announcements at the appropriate juncture as the situation develops.

At the same time Uralkali reiterates its previously stated proposal to compensate voluntarily, in line with the company's strong commitment to corporate social responsibility, expenses incurred by all levels of the government to manage the consequences of the accident, including the costs of relocating 850-meter and 6-kilometer railway routes. According to the company's estimates, these expenses totaled around 3 billion roubles.

For further information please contact:

Investor Relations

Anna Batarina
Director of Corporate Finance
Tel.: +7 (495) 730 2371
E-mail: Anna.Batarina@msc.uralkali.com

International Media Relations

Larissa Belyaeva
Head of International Media Relations, Uralkali
Office: +7 (495) 730 23 73
Mobile: +7 (916) 129 12 92
E-mail: Larissa.Belyaeva@msc.uralkali.com

Finsbury

Brian Cattell
Alex Simmons
+44 (0) 207 251 3801

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