According to Interfax, Uralkali has until December 1 to show the Natural Resources and Ecology Ministry that it has sources to finance the building of a railway line around the sinkhole at its mine in Berezniki. The company received the order from Deputy Natural Resources Minister, Semyon Levi, who has until December 20 to determine the necessary amount of funding. A meeting has been held to discuss the involvement of Russian Railways in the construction of a detour railway line around the sinkhole at Uralkali’s mine No.1 in Berezniki.
In mid-November, Uralkali sent letters to the Russian government and Natural Resources and Ecology Minister, Yuri Trutnev, voicing its readiness to release additional funds to undo the damage caused by the accident in Berezniki in 2006. Russian Railways has estimated that RUB 13 billion would be needed. According to sources, Uralkali’s share is set at RUB 7 billion, or about USD 270 million.
We regard the news as moderately upbeat for the company in view of the growing likelihood of a favorable outcome in the case obliging the company to reimburse the state for losses from the accident at the mine. If the amount of the fine is restricted to the above amount, the company will be able to pay the fine and continue with its operations. Cash balances on the company’s accounts are projected at USD 300 million as of the year-end. However, final conclusions may only be drawn after the commission completes its work: Its task is to make a decision with regard to the culprit of the accident and finalize the amount of the claims against it.
This news has triggered positive reaction from investors. On November 28, Uralkali shares surged 27.8% on MICEX amid the news.
We currently do not have an official recommendation on Uralkali shares (RTS: URKA).
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