By Alfred Kueppers
MOSCOW, Sept 28 (Reuters) - Mining giant Rio Tinto quashed reports it was eyeing a stake in potash producer Uralkali on Tuesday, setting the stage for the Russian miner to create a domestic potash giant with Silvinit.
Following are scenarios for Uralkali going forward.
RUSSIAN CHAMPION
Probability: Most likely
Investors friendly to Uralkali owner Suleiman Kerimov in August bought stakes in rival Silvinit, setting the stage for a merger of the two miners.
Analysts said a domestic merger is likely to be completed before 2011.
'At this stage I think we will see the consolidation of Silvinit and Uralkali, and that is all,' Uralsib analyst Anna Kupriyanova said.
Together, the two companies would control up to 45 percent of the global potash export market with partner Belaruskali.
Renaissance Capital estimates that the merged entity would have 11.5 million tonnes of capacity next year and 13 million tonnes in 2012.
In comparison, Canadian Potash Corp, the world's largest potash producer, expects to have 18 million tonnes of capacity online by end-2012.
EASTERN APPROACH
Probabilty: Possible
Rio Tinto's exit from a possible deal creates an opening for a Chinese or Indian firm, as both nations are major buyers of Russian potash.
'I strongly doubt Kerimov would consider a sale to a Chinese/Indian company, even though there could be clearly some interest, because it would jeopardise the supply-side discipline on the potash market,' Troika Dialog analyst Mikhail Stiskin wrote in an email.
China has reacted with particular concern to BHP Billiton's hostile bid for Potash Corp as well as a potential Uralkali/Silvinit merger, with Beijing regulators reportedly scrutinising both deals.
China's state-owned Sinochem has also hired banks in order to explore a counterbid for Potash Corp.
China imported slightly more than 5 million tonnes of potash in 2008. About 60 percent came from Russia and Belarus.
The BPC trading joint venture which sells output from Uralkali and Belaruskali last year sold about 2 million tonnes of potash to India, according to Citigroup analysts.
Uralsib's Kupriyanova did not rule out a Chinese or Indian firm taking a minority stake in Uralkali but said there was little advantage in doing so.
'... certainly Russia would sell such a stake at a high valuation,' she said.
GLOBAL PARTNER
Probability: Unlikely
Other foreign miners looking to expand their potash holdings are unlikely to bid for all or part of Uralkali, Deutsche Bank analyst Bob Kommers said.
'I think it's absolutely not possible that a foreign company will acquire Uralkali,' Deutsche Bank analyst Bob Kommers said. 'I also don't think that a foreign company would want to buy in Uralkali, given the high valuation and the risk of operating in Russia.'
Kupriyanova agreed, recalling oil giant BP's past disputes with its Russian partners in the TNK-BP joint venture.
'I don't understand foreign buyers if they purchase minority stakes at extremely high valuations. They understand they have no decision-making powers. We have seen this with BP as well.'
(Reporting by Alfred Kueppers; editing by Elaine Hardcastle) Keywords: SCENARIOS/URALKALI (alfred.kueppers@thomsonreuters.com; Tel +7 495 775 1242; Reuters Messaging: alfred.kueppers@thomsonreuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
MOSCOW, Sept 28 (Reuters) - Mining giant Rio Tinto quashed reports it was eyeing a stake in potash producer Uralkali on Tuesday, setting the stage for the Russian miner to create a domestic potash giant with Silvinit.
Following are scenarios for Uralkali going forward.
RUSSIAN CHAMPION
Probability: Most likely
Investors friendly to Uralkali owner Suleiman Kerimov in August bought stakes in rival Silvinit, setting the stage for a merger of the two miners.
Analysts said a domestic merger is likely to be completed before 2011.
'At this stage I think we will see the consolidation of Silvinit and Uralkali, and that is all,' Uralsib analyst Anna Kupriyanova said.
Together, the two companies would control up to 45 percent of the global potash export market with partner Belaruskali.
Renaissance Capital estimates that the merged entity would have 11.5 million tonnes of capacity next year and 13 million tonnes in 2012.
In comparison, Canadian Potash Corp, the world's largest potash producer, expects to have 18 million tonnes of capacity online by end-2012.
EASTERN APPROACH
Probabilty: Possible
Rio Tinto's exit from a possible deal creates an opening for a Chinese or Indian firm, as both nations are major buyers of Russian potash.
'I strongly doubt Kerimov would consider a sale to a Chinese/Indian company, even though there could be clearly some interest, because it would jeopardise the supply-side discipline on the potash market,' Troika Dialog analyst Mikhail Stiskin wrote in an email.
China has reacted with particular concern to BHP Billiton's hostile bid for Potash Corp as well as a potential Uralkali/Silvinit merger, with Beijing regulators reportedly scrutinising both deals.
China's state-owned Sinochem has also hired banks in order to explore a counterbid for Potash Corp.
China imported slightly more than 5 million tonnes of potash in 2008. About 60 percent came from Russia and Belarus.
The BPC trading joint venture which sells output from Uralkali and Belaruskali last year sold about 2 million tonnes of potash to India, according to Citigroup analysts.
Uralsib's Kupriyanova did not rule out a Chinese or Indian firm taking a minority stake in Uralkali but said there was little advantage in doing so.
'... certainly Russia would sell such a stake at a high valuation,' she said.
GLOBAL PARTNER
Probability: Unlikely
Other foreign miners looking to expand their potash holdings are unlikely to bid for all or part of Uralkali, Deutsche Bank analyst Bob Kommers said.
'I think it's absolutely not possible that a foreign company will acquire Uralkali,' Deutsche Bank analyst Bob Kommers said. 'I also don't think that a foreign company would want to buy in Uralkali, given the high valuation and the risk of operating in Russia.'
Kupriyanova agreed, recalling oil giant BP's past disputes with its Russian partners in the TNK-BP joint venture.
'I don't understand foreign buyers if they purchase minority stakes at extremely high valuations. They understand they have no decision-making powers. We have seen this with BP as well.'
(Reporting by Alfred Kueppers; editing by Elaine Hardcastle) Keywords: SCENARIOS/URALKALI (alfred.kueppers@thomsonreuters.com; Tel +7 495 775 1242; Reuters Messaging: alfred.kueppers@thomsonreuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.