Uralkali to fund Ust-Yayvinsky mine project with a mix of cash and ECA loan facility, CFO says

10.07.2012
Geoff Spiteri / The Mergermarket (UK)

Russian potash producer Uralkali will use part of the capital raised through a planned export credit agency (ECA) loan facility to fund the construction of a mine shaft on its Ust-Yayvinsky project, said Viktor Belyakov, chief financial officer.

The ECA-backed facility will be signed before the end of 2012 or by the start of 2013 at the latest, he said, and the cost of construction is expected to come in at a "few hundred million dollars". Construction will be part-funded from the ECA loan and part-funded from cash on hand.

Separately, the company is in talks to raise up to USD 250m in pre-export financing (PXF), Belyakov confirmed.

A sector banker had earlier told this news service that the Russian company was planning to sign the PXF by the first week of July, although this was later revised to the end of July.

Belyakov said a final agreement was yet to be signed, but that "close discussions" were underway. He said the sum is likely to be closer to USD 200m than USD 250m — "mostly because we don’t feel that we need the money".

The company’s capex for this year and next should come in at around USD 700m annually, he said, all of which should be covered by current cash flows. But capex will rise from 2015 when Uralkali will work on two greenfield projects simultaneously.

For the first project, the Ust-Yayvinsky field, Uralkali has already started construction and has contracted German company Deilman Haniel Schachtostroi to build mineshafts. For the second project, the Polovodovsky field, a feasibility study is underway and should be ready to present to the board by 2014, said Belyakov.

On 2 July, Uralkali announced that it had spent USD 863m acquiring and cancelling its own shares as part of a buyback programme. Belyakov said the company, which has a free float of around 45%, had the headroom to spend up to USD 2.5bn on buybacks and that the daily turnover of shares of circa USD 100m had been largely unaffected to date. "We’ve monitored it closely and there’s been no negative impact from the share buyback programme," he explained. Because of this, he said, the programme would continue.

While Uralkali has no plans to diversify away from potash, it does have limited scope for disposals, Belyakov said. He refused to be drawn on details but said the company has service and construction subsidiaries that in the long term would be made independent.

The company has no plans for acquisitions, he said. "I don’t know of any significant potash company on the market for sale," he explained. "We’re not looking to purchase low-efficiency assets."

On the question of a possible primary London listing for Uralkali, Belyakov said this was one option but was "not an immediate priority".

Around 20% of Uralkali’s free float is in the form of GDRs listed in London. Belyakov pointed out that there was scope for an increase in the number of Uralkali shares listed in London since all shareholders are free to convert their MICEX/RTS-listed shares into GDRs.

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