Fertilizer Markets and Finance

Norwegian fertilizer giant Yara won’t play the Russian card looking for options for ways to process the phosphorus ore from the planned new mine in Sokli in Finnish Lapland. It was last February BarentsObserver reported about Yara’s plan to build a 55 kilometer tube- or railway line across the Russian border to Kovdor.

Yara says the existing refinery in Kovdor is not technically suitable for handling ore from Sokli and upgrade would be as expensive as building a brand new plant, reports Helsingin Sanomat. The plan to bring ore from Finland to Russia for processing was also met by protests from environmental organizations both in northern Finland and on the Kola Peninsula, as reported by BarentsObserver. The claimed environmental standards in Russia are weaker than in Finland.

Possible exploration of the ore reserves in Sokli depends on finding a good refinery solution.

When dropping the Russian option, Yara has to find another way to process the ore. One solution is to build a refinery in conjunction with the mine. If so, the question is how to transport the processed fertilizer out from the area without crossing the Nature protection area close by.

YLE Lapland reports that a railway tunnel under the protected nature area is now under consideration. Yara estimates that Sokli railway project would cost over one billion euros. A decision will be taken later this year, and the mine would then open in 2014 or 2015.

Yara International ASA (YAR), the Norwegian fertilizer producer, will soon decide whether to transport phosphate ore from Sokli, Finland for refining via pipeline or train, Kauppalehti reported today.

Reports on both options to supply a refinery in Kovdor, Russia will be finished in the coming weeks, said Eero Hemming, Yara’s spokesman, according to the Helsinki-based newspaper. Transporting the ore will be challenging due to temperatures which drop as low as minus 45 degrees Celsius (minus 49 degrees Fahrenheit), said Kauppalehti.

Sokli is estimated to contain 120 million tons of rich 15- percent phosphate ore, which would last for 20 years, Kauppalehti said. Deposits of 4-percent ore may last as long as 100 years at the Lapland site, which could be operational in 2015 at the earliest, Kauppalehti reported.

To contact the reporter on this story: Kasper Viita in Helsinki at kviita1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net