Potash slump raises stakes in Russia legal battle
The deal accounted for a large share of Shaft Sinkers' order book, enabling the company to float in London in 2010.
Shares in the company have slid 80 percent since the halting of work on the shaft a year later and the start of litigation.
Volgakaliy is one of two Russian projects that Eurochem is developing from scratch and wants to bring into production from 2017. Combined annual potash output should be ramped up to 8.3 million tonnes by 2022.
Eurochem based its October 2012 claim on the $160 million it says it paid to Shaft Sinkers and an appraisal of the cost of lost output caused by a two-year delay. Shaft Sinkers has made a $15 million counterclaim for unpaid inventory.
The Dutch writ filed this year by Eurochem against IMR claims that it and Shaft Sinkers were responsible for concealing an expert report that said its "grouting" method to seal the shaft would not work.
At a preliminary hearing on July 19, the Amsterdam District Court found that Eurochem's claim against IMR was well grounded, stating also that IMR effectively controlled Shaft Sinkers. It granted Eurochem the right to freeze IMR assets worth $1.2 billion pending main proceedings in the case.
IMR declined to comment in detail but said it would make a robust defence in the main hearings on the case, for which no date has yet been set.
Eurochem has since restarted work on the Volgakaliy cage shaft and says it is committed to commissioning its two Russian expansion projects - the other is the Usolskiy project in the Perm region - on schedule by 2017.
"These are very important long-term projects for Eurochem as we continue to pursue our strategy to become one of the few global players present in all three nutrients - nitrogen, phosphates and potash," Eurochem spokesman Vladimir Torin said.
Torin dismissed suggestions that Eurochem's Russian projects were at risk from price declines resulting from the exit by Uralkali from the Belarussian cartel that had controlled two-fifths of world potash sales.
Uralkali is unconnected to the Eurochem legal battle. Its main owner, Suleiman Kerimov, has declined through his investment firm to comment on reports of a possible Uralkali sale.
Sector analyst Boris Krasnojenov, of Renaissance Capital in Moscow, has forecast that Uralkali's sale prices to China, on a cost-and-freight basis, will fall to $300 per tonne in 2014 from $350 this year and $470 in 2012.
"No price collapse has occurred," Torin said. "The Volgakaliy project is not scheduled to commence commercial production until mid-2017, by which time it is expected that potash prices will have further increased."
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