Engineering & Mining Journal

APR 2017

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Page 61 of 83

RUSSIAN POTASH 60 E&MJ • APRIL 2017 Near the main building is a salt tail- ings pile of 1 million m 2 , designed for 10 million mt of tailings. According to Build- ing Supervision Officer Alexandr Golubid- chenko, the perimeter tailings pile will be surrounded with a special embankment, while the base of the tailings pile will be lined with a 2-mm geomembrane film to protect soil and underground waters from contamination. The first two years at the deposit will produce 8 million mt of ore. Therefore, this tailings pile will not suffice for long without other places for disposal. Euro- chem's mining strategy involves gradually putting tailings back underground. According to Galina Khihol, the chief of the sanitary department at the Federal Service for Supervision of Nat- ural Resource Usage, this is a unique approach for handling waste sludge from potash mining. She says that, ac- cording to her information, nobody else uses this method. Projects of such scale in Russia al- most always face the environmental con- cerns of the local citizens. In this case, Eurochem managed to avoid these issues, primarily due to the sparsity of population in the surrounding territories, but also thanks to significant measures company applied to protect the environment. One of the fears of ecologists is as- sociated with the landfill for disposal of wastes from the construction and the use of the facility. It was designed for an op- erating life of 40 years, and during this time it should receive 377,500 mt of var- ious wastes. Inspection of the landfill was carried out in June 2016 personally by Sergei Vasiliev, the head of the Federal Service for Supervision of Natural Re- source Usage, who said that this is one of the most effective waste disposal facil- ities in this part of the country. Commencement of operations also promises to raise some additional chal- lenges to Eurochem, in particular in the area of natural gas production. According to Sterznev, at the moment Eurochem pro- duces 1 billion m 3 of gas, but then also consumes 5 billion m 3 for fertilizer pro- duction. Launching Gremyachinsky will significantly increase this figure. The com- pany is currently evaluating plans for nat- ural gas production near Gremyachinsky at one of the deposits in Saratov Oblast. Sanctions, Price Caps and Loans Implementation of both projects has been negatively affected by Western sanctions and the devaluation of the Russian ruble, according to Dmitry Sterznev. He said that Eurochem re-invested 90% of all profits into new projects, and will contin- ue to until at least 2020. However, the chemical giant invests $1 billion into its new assets annually, while overall investment into current projects, not only in the potash segment, promises to reach $19 billion - $20 billion. As a result, the company faces the constant need for debt. Meanwhile, sanctions entered in the middle of 2014 against Russia have cut the ability of companies in the country to apply to foreign lenders. As stated by Sterznev, this problem has been coupled with exorbitant rates on loans from Russian banks and the absence of any long-term investors in the Russian equity market. At the time, Eurochem's debt portfolio consisted of 60% foreign loans, primarily from U.S. and European Union lenders. Eurochem therefore decided to attempt to reorga- nize its business structures, passing stra- tegic management responsibilities and operations on the capital markets to a specially created Swiss-based Eurochem entity. Moscow-based Eurochem is now its subsidiary, responsible for business in Russia and CIS. The company then could access foreign loans. Some experts said this step created risks for the company, including being caught up in the so- called de-offshorization campaign of the Russian government. Western sanctions caused the collapse of the Russian ruble against other curren- cies, which hurt companies with euro-de- nomiated balance sheets. Devaluation of the ruble also reduced the production cost for potash fertilizers at the Russian mines, increasing the margin for the ex- port contracts. Gremyachinsky have three mine shafts, including one man shaft and two skip shafts. Both projects are largest in terms of construction works in Russia mining industry over recent decades.

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