Russian potash producer Uralkali’s capital expenditure last year amounted to $347 million, down 8 percent on the prior-year capex of $378 million, according to the company’s 2020 annual report. The FY2020 capex spend was 13 percent below the reduced capex guidance of approximately $400 million issued by the producer in April 2020 amid weak potash market conditions (GM April 17, 2020). That new lower guidance was around a 30 reduction on the capex initially approved for FY2020 by Uralkali’s board in December 2019.
While maintenance capex was reduced by approximately a quarter year-over-year to $163 million, the company’s capex for production expansion actually increased last year by 16 percent year-over-year, reaching $184 million, according to the annual report. Over two-thirds of this production expansion spend was related to the construction of two new mines: Ust-Yayva and Solikamsk-2.
At the new Ust-Yayva mine in Russia’s Perm region, construction of the processing plant and the conveyor to Berezniki Plant 3, where the ore will be processed, and expansion of that plant, is continuing. Construction of the mine shafts was completed last year (GM July 10, 2020), and the power facility is also completed.
According to its annual report, Uralkali currently expects the mine to begin production in 2022, “albeit at a low rate” and “assuming access of ore,” with subsequent “ramping up in the years thereafter.” Ust-Yayva’s planned design capacity is 2.8 million mt/y of KCl.
At the new Solikamsk-2 mine under development, also in the Perm region, construction is continuing, including shaft sinking which started in 2018. The project will include building a conveyor system to transport the ore to the existing Solikamsk-2 processing plant. The new mine’s planned capacity is 2.3 million mt/y.
Back in late 2019, Uralkali planned a 2023 production launch for the new Solikamsk-2 mine, but the company last July said it was holding off starting work on the processing plant and ground facilities (GM July 10, 2020).
In its 2020 annual report, the potash producer said “there is a risk of a delay” in mining production commencing from the “New Solikamsk 2” mine from that currently envisaged in the Uralkali Business Plan. However, it said should a delay in construction occur, it is likely the company would be able to compensate for the resulting production shortfall by temporarily increasing production from other mines that have spare operating capacity.
Regarding its greenfield Polovodovsky project, Uralkali said it will make a further decision in 2023 whether to develop the project and process ore at one or more of the existing processing facilities or – as originally envisaged – to develop a new dedicated processing complex.
The project has been designed to have a production capacity of 12.5 million mt/y of ore (equivalent to some 2.8 mt/y of final KCl product) and assuming the option 2 development strategy is selected (i.e., a dedicated processing plant), it is anticipated to commence production in 2029 and reach 12.5 million mt/y capacity from 2030, the company said in its annual report.