Oil billionaire Gutseriev turns to China for Belarus potash mine

Gutseriev, 57, expects his new potash mine in Belarus to start production in 2020. China, the biggest consumer of the crop nutrient, is helping to finance his plan to supply it with as much as 1.8 million metric tons a year when the mine reaches full capacity.

For now, the market is oversupplied. Prices in Brazil, one of the largest spot markets, dropped about 8 percent this year and Fitch Ratings Ltd. last month said it expects potash to remain low over the next five years as new production from low-cost factories exceeds demand. Uralkali PJSC, the largest producer, sees global demand falling 6 to 8 percent this year from a record 63 million tons in 2014.

"China is guaranteeing the purchases of all the volume produced until at least investments are recouped,” probably by 2029, Gutseriev said in an interview in Moscow last week. "The potash price decline is temporary. One should plan such projects for the long term.”

Potash has slumped from almost $1,000 a ton set in 2008 before the global financial crisis and the 2013 demise of a trading venture between Uralkali and a Belorussian partner further hurt prices.

Chinese prices are still down about 20 percent since 2013, even as the country agreed an increase of about 3 percent this year to $315 a ton. The nation has the biggest contract market.

Other Projects

There’s more supply coming, with Eurochem Group AG’s fields in Russia due to start in late 2017, while BHP Billiton Ltd. is looking to build the Jansen project in the next decade.

Gutseriev, the largest shareholder of closely held Russian oil producer OAO Russneft, controls the Minsk-based company Slavkaliy that was created for the potash mine at the Starobin deposit in Belarus. He said his B&N Bank will invest about $250 million into the project.

China Development Bank will provide $1.4 billion of financing for 14 years at a 4.3 percent rate and Slavkaliy will start paying that back after five years, Gutseriev said. Belarus is a guarantor under that loan, according to a memorandum signed in May. The state trader Belarus Potash Corp. will export Slavkaliy’s output, Gutseriev said.

The billionaire, who spent about three years exiled in London amid charges of tax evasion and illegal business in Russia before they were dropped in 2010, said he’s confident about starting a new business in Belarus.

"It’s very comfortable to do business in Belarus,” he said. "It feels the same as in western countries.”

 

(Bloomberg)