Verkhnekamsk Potash Company, LLC (VPC), a subsidiary of JSC Acron, won the March 12 auction to develop the Talitsky license area at the Verkhnekamsk potassium-magnesium salts deposit located in Perm Krai.
VPC made a wining bid of RUB 16.802 billion to mine an area whose starting price was RUB 620 million.
On the east, the 69.56 km2 Talitsky area is adjacent to areas being developed by JSC UralKali. Talitsky has proven sylvinite reserves (А+B+C1 categories) of 681 million tonnes.
Commentary from Sergei Fedorov, Acron Vice President for mining and chemical production:
"Raw material security is strategically essential for long-term corporate development planning. Acron set up CJSC North-Western Phosphorous Company (NWPC) and LLC Verkhnekamsk Potash Company as a way to establish our own mineral resource base providing our production facilities with phosphate and potassium raw materials. In 2006, NWPC obtained a license to mine apatite-nepheline ore deposits at Oleniy Ruchey and Partomchorr in the Khibiny mountains and broke ground on a mining and processing plant in the Murmansk region. Now VPC will start designing a new facility to produce potassium chloride at the Talitsky area in Perm Krai.
"Under the first license agreement, construction of the mining and processing plant at Oleniy Ruchey has to start no later than 2009, with the first stage put into operation by 2013. Pursuant to the auction terms for the Talitsky lot, we have to start construction there no later than 2012. The staggered start dates for the two projects make it possible for us to target our capital investments, first at the Oleniy Ruchey project and then at the Talitsky project.
"Construction of a mining and processing plant at the apatite-nepheline ore deposit will require investments of RUB 13.5 billion over ten years; the potassium facility will cost up to RUB 40 billion. However, we expect Talitsky to be less investment-intensive than the other lots sold at the March 12 auction because the average depth of its productive layers is less (between 173 and 383 m) and it has a higher content of potassium chloride and potassium dioxide than the other lots.
"There are no hydrocarbon deposits at Talitsky, which will simplify production of potassium salts. Another plus is that the there are no specially protected natural reservations and archaeological sites at Talitsky. That will facilitate development and reduce maintenance costs.”
Commentary from Aleksandr Popov, Acron Senior Vice President
“The license wasn’t cheap, but we were ready to pay a higher price to enter the potassium market, which is new for us. We were motivated by the market’s profitability and the opportunity to have a guaranteed raw material source for our production facilities. We aren’t put off by the fact that we don’t yet have the infrastructure and expertise. We faced the same situation with our phosphate project. Nobody is sceptical any more about our potential in the new sector.
"Most importantly, Acron will no longer worry about the risk of UralKali completely monopolizing the sector. JSC Silvinit got one lot that was strategically important and two other potentially strong players appeared.
"As a sizeable shareholder of JSC Silvinit, we congratulate them on winning the Polovodovsky lot, which gives them an excellent opportunity for further development and a chance to become a national leader in the industry.
"In addition, I want to emphasize that investments in developing our own deposits will not jeopardize Acron’s investment programme through 2015, which is aimed at upgrading existing facilities and building new production lines at our main sites.”