The recovery operation at Russia-based potash producer
Uralkali OAO’s Solikamsk-2 mine continues,
although industry experts believe that a complete shut down
of the mine is more than likely.
The company suspended all work at the Solikamsk-2
potash mine in the Perm region of Russia in November, following
the detection of higher levels of brine inflow.
Following the suspension, images appeared of a
substantially-sized sinkhole at the east of the production
site. Originally estimated at 30-40 metres in diameter, it grew
to 50 by 80 metres. The accommodation located near to the
sinkhole is a currently unoccupied summer cottage village.
Alexander Baryakh, director of the Mining
Institute of the Urals branch of the Russian Academy of Science
said that the risk of a complete mine shutdown, despite rescue
"We are taking all necessary measures to save
[the] Solikamsk-2 mine and minimise the consequences of the
accident, fully complying with Federal Service for Ecological,
Technological, and Nuclear Inspectorate (Rostekhnadzor)
requirements and recommendations of leading Russian and
international specialists," Yevgeny Kotlyar,
Uralkali’s chief engineer said.
With the assistance of mine rescue specialists,
Uralkali’s employees are pumping brine from the
inflow area east of the mine field to the western part of the
minefield, to prevent flooding in the shaft area.
"We now understand the factors that caused the
accident. We are employing a wide range of instruments to
analyse, forecast and prevent negative consequences," Baryakh
Further to the pumping operations, a brine
diversion channel is under construction. The concrete cut-off
walls between Solikamsk-1 — an adjacent and as yet
unaffected potash mine — and Solikamsk-2 are being
strengthened, backfilling to strengthen the mine structure, and
preparatory works for the plugging of the brine inflow channels
are being carried out, the company said.
"Our team continues to analyse various scenarios
and assess our possible future actions. The safety of our
employees and other specialists involved remains our top
priority," Kotlyar added.
A large sinkhole opened up to the east of
Solikamsk-2 in November
as brine inflow levels increased.
Source: Uralkali OAO public
Potash industry significance
The flooding of a mine is a serious occurrence in
any industry, but for salts like potash, the importance of
unwanted water flow is magnified by the solubility of the
mineral group, which can lead to supportive columns and other
structural mine components effectively being dissolved
A complete mine write-off is therefore a sobering
prospect for Uralkali.
Solikamsk-2 represents around a fifth of
Uralkali’s annual potash capacity, according to
Sakhnova and Gazprombank OAO senior fertiliser and transport
analyst, Mikhail Ganelin.
The mine forms 3% of global production capacity
according to Fitch Ratings Inc.; the temporary, possibly
permanent reduction in output at Solikamsk-2 has caused
knock-on effects in the bargaining of pricing contracts in the
Because the long term effects of the mine
problems are still unknown, the industry is cautious about
basing decisions on an assumption of the outcome.
Uralkali’s share price, which saw a
19% fall the day after the news at Solikamsk-2 broke, has
continued to slide, falling 36% in total since 17 November
2014, partially driven by a fear that events will play out
similarly to those of Uralkali Mine 1, which was forced to
close after 10 days of rescue efforts that followed increased
brine inflow levels in 2006.
The company has considered bringing forward the
development and opening of its Ust-Yayvinsky and Polovodovsky
projects to make up for potential Solikamsk-2 capacity
Other Russian fertiliser companies saw
substantial share price rises between 17 November and 10
December, as the fall in the Russian rouble against the US
dollar reduces domestic production costs, which are then
realised in dollar export revenues.
Uralkali may see a positive effect from the
currency factor in its upcoming finances release in its EBITDA*
figures, despite the company’s current Solikamsk-2
troubles and the likely drop in associated sales volumes and
Uralkali confirmed that the average level of
brine flow measured between 18 November, the date of the first
detection of elevated brine flow levels, and 10 December, was
more than 700 cubic metres per hour.
Water inflow is being recordedthrough brine level
checks, additional water monitoring wells are being drilled,
the air is being continuously observed for escaping mine
gasses, while the sinkhole associated with the flooding is
being surveyed by drones and seismic monitoring of the sinkhole
area has intensified, the company said.
Raised production volumes
Potash Corp. of Saskatchewan
(PotashCorp.)’s CEO, Jochen Tilk, suggested to
delegates at the Citigroup Inc. Basic Materials conference in
New York in December that the accident could be linked to
Uralkali’s increased 2014 production volumes.
"As a mining engineer, I’m not
surprised [by the occurrence of the problems] — I can
tell you every time you crank up your operations to a higher
limit you will encounter issues," Tilk said.
"Whether it’s a breakdown in
equipment, whether it’s due to technical failure:
this is what we live by. This is what we have management
systems in place for to prevent," he added.
Uralkali said that the 1,266 mine and associated
plant employees — of which 771 are mine workers
— who are not involved in the rescue efforts are on
leave until 15 January 2015, and are being paid two thirds of
their average salary. The company is seeking to employ them at
the other facilities that it owns.
*Earnings before interest, taxes, debt and