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Uralkali to buy back over $1bn of shares

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Uralkali, one of the world's largest potash miners, will sunk over $1bn into a share buyback scheme, in an attempt to distribute capital to shareholders at a time when Russian groups are finding the process tricky.

The Russian miner announced this week that it would buy back 11.9% of its shares, for a cash outlay of $1.12bn.

Dividend distribution

The buyback, announced in April 2015, tendered for up to 15.97% of shares at $3.20 share, or $16 per depositary receipt.

Uralkali ascribed the buyback to the fact that its dividend policy would not allow payouts to be distributed, due to foreign-exchange losses pushing it into the red.

A source familiar with the company agreed that Uralkali was attempting to distribute cash to shareholders after a difficult year.

Uralkali's shareholders include a number of influential Russian billionaires, as well as the sovereign wealth fund China Investment Corporation.

Russian fertilizer producer Uralchem will not be relinquishing its 20% stake in Uralkali.

Squeezed financing

The buyback threatens to deprive Uralkali of cash at a time when Russian companies find it extremely hard to raise capital.

Last month the ratings agency Moody's warned that Uralkali's buyback programme was "credit negative," noting that the company was surrendering a large amount of liquidity, at a time when it faced squeezed financing.

Uralkali faces billions of dollars in unusual expenditure after one of its mines flooded in November 2014.

The group's total potash production capacity of 13.3m tonnes was reduced by 20%, and Uralkali will need to invest elsewhere to make up for lost output.

Free float

The limited uptake of the shares has lowered the possibility that the group will be removed from the London Stock Exchange due to the small size of its free float.

Free float is the number of shares of a company held by small investors, and available in everyday trading.

Uralkali has suffered from the collapse of the Belarusian Potash Company (BCP), a cartel between the Russian miner and Belaruskali, a state-owned Belarussian producer.

The BCP, along with North American consortium Canpotex, set the pace of the potash market through closely watched contracts with major Chinese and Indian buyers.

Uralkali departed from the BCP in 2013, in protest at non-cartel exports of potash from Belarus.


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