Sale of mineral resources as an alternative to privatization

April 22, 2016 17:58

The authorities plan to build the second potash plant with the capacity of 1.1 million tons per year and with USD1.5 billion of investment by 2017. Given the lack of privatization deals, the government is trying to get money from investors by offering to implement projects from a scratch, selling the mineral resources of the country.

It is planned that at the expense of a company GMC Global Energy plc, which is owned by Mikhail Gutseriev, the second potash plant will be built in 2017 with an annual production capacity of 1.1 million tons. Investment will amount to $ 1.5 billion. The Prime Minister said it would be a large-scale project concerning the development of the mineral resources of Belarus based on principles of public-private partnership. A company “Slavkali” which, according to the investment agreement between the Government of Belarus and the GMC Global Energy plc, will become the second largest manufacturer of potash fertilizers in the country and will be a 100% foreign capital company. Mikhail Gutseriev said the first installment of USD 32 million will be transferred as early as next month and that the sale of potash fertilizers from the new manufacturer will be made via the Belarusian potash enterprise.

Experts doubt that the new Belarusian manufacturer will produce 5, let alone 10 million tons of potash fertilizers annually. The payback period for a new Belarusian enterprise will depend on the situation at the global fertilizer market.

Comment

Experts doubt that the new Belarusian manufacturer will produce 5, let alone 10 million tons of potash fertilizers annually. The payback period for a new Belarusian enterprise will depend on the situation at the global fertilizer market. Today the prices for potassium chloride are rather high: USD 550-580 per ton however there are reasons to expect a reduction of prices for potash fertilizers.

The government plans to mobilize about USD 6-7 billion by opening access to the Belarusian mineral resources for investors. On the one hand, the transfer of mineral resources to investors will bring a lot of foreign currency into the country and on the other hand it will not require the privatization of the state-owned assets. The authorities plan to attract investors to develop Belarusian deposits of crushed stone, brown coal, shale oil, etc. in the future. The time will show whether these plans are realistic.

 

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