This report on compliance with the principles and recommendations of the Code of Corporate Governance was reviewed by the Company’s Board of Directors at its Meeting on 18 March 2020. The Board of Directors confirms that this report contains complete and reliable information regarding the Company’s compliance with the principles and recommendations of the Code of Corporate Governance for 2019.
Uralkali consistently follows the main principles of the Code of Corporate Governance and its recommendations by steadily complying with requirements of the relevant laws and using best corporate governance practices. The Company’s corporate governance structure (model) is a traditional one: the General Shareholders Meeting (GSM) comprises a superior management body, the Board of Directors is responsible for general oversight, the Management Board is a collegial executive body, and the CEO is the sole executive body. The Board of Directors has established five committees that are consultative and advisory bodies, four of which are chaired by independent directors, and one (the Strategy Committee) by a non-executive director. Committees and commissions (working groups) reporting to the CEO have been established for advancing various areas of Uralkali’s activities, and the decisions of these working groups are offered in the format of recommendation. The Company has a Corporate secretary who ensures compliance with necessary legal regulations and procedures, participates in information disclosure, and ensures cooperation between the Company’s governing bodies, shareholders and regulators. The Company has also created an internal audit division, the Internal Audit Directorate, which reports directly to the Audit Committee. Other significant aspects of the Company’s corporate governance models and practices are described in the Corporate Governance section of the Annual Report.
The Company assesses its compliance with the principles of corporate governance using a methodology that has been applied for many years; as the main principles and recommendations of the Code of Corporate Governance are related to the activities of the Company’s management bodies and the procedures for carrying out these activities, the Company, represented by the Corporate Secretary and the employees of the Corporate Governance department, who work closely with the Company’s management bodies, continuously monitors, collects and evaluates information in line with the format recommended by the Bank of Russia (below). Information on the Company’s key developments is disclosed in accordance with the established procedure in the form of essential facts or, in some cases, press releases and quarterly reports. The Company has a reporting system in place for its individual departments, which regularly submit reports to the meetings of relevant Board committees; the CEO also regularly submits reports on the results of the Company’s operations at Board meetings. By determining the status of the Company’s compliance with corporate governance principles and explaining any deviations from the criteria for assessing compliance with corporate governance, the Company presents the existing practices, and the Board of Directors discusses the Report and assesses its completeness and reliability. At present, the Company does not plan to bring about significant changes to its established corporate governance system and deems it relevant to the Company’s needs at the current stage of its development. At the same time, the Company remains up to date with the development of standard corporate governance practices both in Russia and abroad, and constantly monitors opportunities to apply new practices within Uralkali.
|№||Principles of corporate governance||Criteria assessing observance of the principles||Status of compliance with the principle of corporate governance||Explanation for deviation from compliance/non-compliance with the principles of corporate governance|
|1.1||The Company shall ensure the equal and fair treatment of all its shareholders in the course of exercising their rights to participate in the management of the company.|
|1.1.1||The Company shall create the most favourable conditions possible for its shareholders, enabling them to participate in general meetings and develop informed positions on issues on its agenda, as well as providing them with the opportunity to coordinate their actions and express their opinions regarding issues under discussion.||
|1.1.2||Procedures for the notification of GSMs and the provision of relevant materials should enable the Company’s shareholders to properly prepare for participation therein.||
The below comments apply to
paragraph 3 of the assessment criteria.
The shareholders are not provided with information about the persons who proposed agenda items for the GSM or those who have nominated a particular candidate to be considered for inclusion in the Company’s bodies. This is due to the fact that most of the questions to be considered by the GSM are stipulated in the Federal Law on Joint-Stock Companies (hereinafter – JSC Law), or, in accordance with the provisions of the JSC Law and the Charter of Company, are presented for consideration at the GSM by the Board of Directors with a recommendation for approval. The Company believes that it does not matter who has proposed the agenda issues, because proposals are accepted by the Board of Directors accept proposals, and extracts from the meeting minutes with recommendations are provided to the shareholders as part of the materials relating to the GSM’s agenda.
As far as candidates nominated for election are concerned, the Company discloses detailed biographical information about the candidates, their current employment and positions, as well as their current status (independent, non-executive or executive director). In our opinion, this information is sufficient for the shareholders to make a decision and elect certain candidates to the Board of Directors. The Company considers that there are no reasons to change the current approach in the foreseeable future.
|1.1.3||When preparing and holding a GSM, shareholders should be able to freely receive information in a timely manner about the meeting and its materials, pose questions to members of the Company’s executive bodies and the Board of Directors, and communicate with one another.||
Comment to paragraph 1 of the
The obligation of members of the Board of Directors to attend the GSM is neither by law nor in the Charter of the Company; nevertheless, Board members may be invited to participate. The Company has an e-mail address for shareholders to submit their questions to the Board of Directors. Traditionally, attendance in-person at GSMs is very low, despite the fact that these meetings have been held at the location of most of the Company’s shareholders (Berezniki, Perm Region), so the presence of Board members seems unnecessary. Some of the Board members, including the CEO, attend these meetings and are available to answer any questions that the shareholders may have.
Comment to paragraph 2 of the assessment criteria.
The position of the Board of Directors on agenda items is stated in the decisions adopted by the Board of Directors. Notices of essential facts disclosed by the Company reflect the quorum and the voting results for each Meeting of the Board of Directors. There were no dissenting opinions of Board members which had to be recorded in the minutes and subsequently disclosed. The Company discloses the position of the Board of Directors regarding all issues on which, in accordance with the law, the decision can be made only upon the proposal of a GSM by the Board of Directors. In other instances, the Company has a right to disclose its position and does so in some cases. We believe that disclosing the opinion of the Board of Directors regarding all issues to be reviewed by the GSM is not expedient as the Company generally discloses the information on the entire agenda voting of the Board of Directors, indicating that the decision is made by the required majority of votes. We consider it unnecessary to disclose information on the items that are not subject to disclosure according to the law in greater detail.
|1.1.4||There were no unjustified difficulties preventing the shareholders from exercising their right to demand that a GSM is convened, to nominate candidates to the company’s management bodies, and propose items for the meeting's agenda.||
Comment to paragraph 1 of the
Shareholders can propose items to be included in the agenda during a two-month period after the end of the financial year, as is stipulated in the Charter of the Company and the Regulations on the GSM.
|1.1.5||Each shareholder should be able to freely exercise the right to vote in a straightforward and convenient way||
|1.1.6||Procedures set by the Company for holding a GSM should provide equal opportunity to all persons present at the meeting to express their opinions and ask questions.||
Comments to paragraph 2 of the
See the comment to assessment criteria 1 p. 1.1.3
Comments to paragraph 3 of the assessment criteria.
See the comment to assessment criteria 1 p. 1.1.3 which also applies to the candidates nominated for management bodies
In addition, in 2019, the Charter of the Company was amended to allow the GSM to take place in Moscow. Previously, the majority of the Company’s shareholders resided in Berezniki, where the key production assets of the Company are located, and holding general meetings in in Berezniki was believed to be most convenient. However, following the share buyback, per the request of a shareholder of the Company (Rinsoco Trading Co. Limited) and in compliance with article 84.8 of the Federal Law On Joint Stock Companies, the Company has several major shareholders , including the Company's subsidiary that owns quasitreasury shares and is undergoing the process of merger into the Company. In this situation, the Company believes that GSMs may be held in Moscow, where the Company has a representative office. We would also like to point out that the Company’s major shareholders usually vote by mailing in their voting ballots. Therefore, at present, considering the current capital structure of the Company, the use of telecommunication systems to provide shareholders with remote access to their GSMs does not seem justified. The Company does not believe that the absence of such practice could result in any risks for either the Company or its shareholders.
|1.2||Shareholders should have equal and fair opportunities to share in the profits of the Company by means of receiving dividends.|
|1.2.1||The Company should develop and implement a transparent and clear mechanism for determining the number of dividends and their payment.||
Comments to paragraph 2 of the
In accordance with the Dividend Policy of the Company, when developing recommendations for the GSM concerning the size of the dividend, the Board of Directors is guided by the provisions of the Federal Law On Joint Stock Companies, and the Charter. The Board of Directors may also take other factors into consideration, such as the Company’s financial results according to its financial statements prepared in compliance with International Financial Reporting Standards (IFRS). Accordingly, despite the fact that the Company must rely on RAS indicators in accordance with Russian law, the Board of Directors has the right (and the Board usually exercises this right) to take the indicators of the consolidated financial statements into account.
|1.2.2||The Company should not make a decision on the payment of dividends if such a decision, without formally violating limits set by the law, is nevertheless unjustified from an economic point of view and might lead to the formation of false assumptions about the Company’s activities.||
|1.2.3||The Company should not allow deterioration of dividend rights of its existing shareholders.||
|1.2.4||The Company should strive to rule out any means through which the shareholders can obtain profit or gain at the company’s expense except dividends, and distributions of its liquidation value.||
|1.3||The system and practices of corporate governance should ensure equal terms and conditions for all shareholders owning shares of the same class (category) in the Company, including minority and international shareholders. Equal treatment should be unilateral and above dispute.|
|1.3.1||The Company created conditions which would force the management bodies and controllers of the Company to treat each shareholder fairly, including conditions ensuring that there is no abuse of minor shareholders by major shareholders.||
|1.3.2||The Company should not perform any acts which would or could result in a reallocation of corporate control by third parties therein.||
|In September 2016, the size of the quasi-treasury block of the Company exceeded 50% of the share capital. In this regard, holding the GSM (securing a quorum that makes the Meeting legally qualified), as well as taking decisions on a number of issues of the Company’s activities (in particular, approval of the revised Company Charter, due to the need to obtain a qualified majority of votes of at least 75% of shareholders registered for participation in the general meeting) became impossible without the use of the quasi-treasury block. However, in December 2019, the GSM decided to reorganize the Company through merging JSC Uralkali-Technologiya into the Company with the cancellation of the quasitreasury shares belonging to JSC Uralkali-Technologiya. Accordingly, we expect that the reorganization will be completed in the foreseeable future and the quasi-treasury block will be repaid.|
|1.4||Shareholders should be provided with reliable and efficient means of recording their rights in shares as well as with the opportunity to freely dispose of such shares in a non-onerous manner.|
|1.4||Shareholders are provided with reliable and efficient means of recording their rights for shares, as well as the opportunity to freely dispose of such shares in a non-onerous manner.||
|2.1||The Board of Directors is in charge of the Company’s strategic management, determines the major principles of and approaches to the creation of a risk management and internal control system within the Company, monitors the activity of the Company’s executive bodies, and carries out other key functions.|
|2.1.1||The Board of Directors should be responsible for decisions to appoint and remove members of executive bodies, including taking action in response to the failure of the latter to properly perform their duties. The Board of Directors also ensures that Company executive bodies act in accordance with the Company’s approved development strategy and main business goals.||
The Company believes that the
specified approach is generally
As for the specified assessment criteria of compliance with the principles, each of such criteria is observed partially.
Comment to paragraph 1 of the assessment criteria.
According to the Charter of the Company, the Board of Directors has the authority to appoint, terminate the appointment, and determine the terms and conditions of the employment contract only of the CEO (Sole Executive Body) of the Company. Forming the composition of the Management Board and early termination of the powers of its members also fall within the competencies of the Board of Directors.
Persons nominated to the Company’s Management Board based on the decision of the Board of Directors are Company employees. According to the Company's Charter, the approval of employment contract terms with employees and issuing orders for dismissal fall within the competencies of the CEO. The terms of employment contracts with Company employees are determined in accordance with the Company's internal documents (hereinafter – the remuneration policy) that regulates the payment of remuneration (including salaries and bonuses) of the relevant employee category.
The power to determine the terms of contracts with members of the Management Board (excluding the CEO) does not fall within the scope of the Board of Directors as members of the Management Board are acting in accordance with the Regulation on the Management Board implemented in the Company that stipulate the working procedure of the Management Board. Members of the Management Board are not remunerated for serving on the Management Board (the information is appropriately disclosed in this Annual Report).
The Company has no plans to change its position in terms of who is authorized to determine contract terms for members of the Executive Bodies in the foreseeable future due to the fact that 1) any employee may at any time become a member of the Management Board or be dismissed from it (the Company’s Charter does not stipulate which positions have to be included in the Management Board; the Management Board is traditionally comprised of heads of the Company’s key operations), and the number of members of the Management Board may vary); 2) members of the Management Board perform their duties based on the Regulation on the Management Board and they are not remunerated for performing these responsibilities; 3) employment contracts with members of the Management Board are signed and terminated by the CEO in compliance with the terms of reference stipulated by the Company’s Charter. Moreover, the terms of these contracts are determined in accordance with the Company’s current internal documents
Comment to paragraph 2 of the assessment criteria.
The Board of Directors regularly reviews reports on the results of the Company’s activities, which also include information on the progress of strategy implementation. These reports are presented by the CEO of the Company.
Members of the Company’s Management Board do not report on strategy issues. The CEO of the Company is the Chairman of the Management Board, representing the entire Management Board. The Company considers that such reporting is appropriate.
Individual members of the Management Board may be invited to present reports or comment on matters related to the areas that they oversee or other matters in separate meetings of the Board of Directors, committees of the Board of Directors or strategic sessions held annually by the Company.
The Company does not foresee any risks for the Company or its shareholders implied by the current practice, and does not currently plan to change its current practice, as it considers the current practice reasonable and relevant to the Company and its shareholders. The Board of Directors approves the Company’s strategy, and the management led by the CEO implements it. The Company believes that the CEO is the person who should present official reports to the Board of Directors.
|2.1.2||The Board of Directors sets long-term business goals, evaluates and approves key performance indicators as well as business objectives, the strategy, and business plans affecting the Company’s key operational areas.||
|2.1.3||The Board of Directors determines the principles of and approaches to developing the Company’s risk management and internal control systems.||
Comment to paragraph 2 of the
In line with the Regulation on the Audit Committee, monitoring the reliability and effectiveness of the risk management and internal control systems, assessing the effectiveness of the Company's internal control procedures (including making proposals for their improvement), analysing and assessing the implementation of the risk management and internal control policies, as well as preparing recommendations for approval of the Company's key risks map, monitoring the effectiveness of measures aimed at minimizing key risks and giving recommendations on amendments to such measures fall within the competencies of the Audit Committee. During 2019, the Audit Committee devoted considerable time to assessing the state of the risk management and internal control system and their improvement, as well as regularly informing the Board of Directors of the work performed.
|2.1.4||The Board of Directors determines the Company’s policy on remuneration and (or) reimbursement of costs incurred by its Board members, members of the executive bodies, and other key managers.||
|2.1.5||The Board of Directors plays a key role in the prevention, detection, and resolution of internal conflicts between the Company’s bodies, shareholders, and employees.||
|2.1.6||The Board of Directors plays a key role in ensuring that the Company is transparent, discloses information in full and in a timely manner, and provides its shareholders with unrestricted access to its documents.||
|2.1.7||The Board of Directors should monitor the Company’s corporate governance practices and play a key role in its material corporate events.||
|2.2||The Board of Directors should be accountable to the Company’s shareholders|
|2.2.1||Information about the Board of Directors’ work should be disclosed and provided to shareholders.||
|2.2.2||The Chairman of the Board of Directors should be available for communication with shareholders.||
|2.3||The Board of Directors is an efficient and professional management body of the Company, capable of making objective and independent judgements and passing resolutions in the best interests of the Company and its shareholders.|
|2.3.1||Only persons with impeccable business and personal reputation should be elected to the Board of Directors; candidates should also have the knowledge, skills and experience necessary to make decisions that fall within the jurisdiction of the Board of Directors and to perform these functions efficiently.||
|Comment to paragraph 1 of the
assessment criteria. |
The Company has a procedure in place to assess the performance of the Board of Directors; however, this does not include an assessment of the professional qualifications of Board members. The Company considers that the assessment of the professional qualifications of Board members is carried out by the shareholders when a candidate is nominated for election and when he or she is elected to the Board of Directors. The Company provides its shareholders with detailed biographies of members of the Board of Directors, including their professional experience, which allows the shareholders to elect the candidates of their choice.
Comment to paragraph 2 of the assessment criteria.
During the reporting period, the Board of Directors did not assess candidates from the perspective of them having the necessary experience, knowledge, and business reputation. The shareholders nominate and elect candidates to the Board of Directors; there is no legal procedure for the refusal to accept or elect candidates to the Board of Directors related to any particular absence of knowledge or skills. With regard to a potential conflict of interest: 1) such conflicts are identified at the stage of nomination as candidates are obliged to provide certain information about themselves, including disclosure of their affiliates; 2) the possibility of a conflict of interest after a candidate’s election to the Board is minimised by the fact that the members of the Board of Directors who are considered interested parties for the purpose of Company voting on approval of transactions do not take part in voting on these transactions because the law provides for the obligation of a Board member to inform the Company of his/her being an interested party; 3) in 2019, the Nomination and Remuneration Committee assessed the candidates for election to the Board of Directors against the independent criteria set by the Moscow Exchange Listing Rules. The information on compliance with the independence criteria and absence of a conflict of interest is acknowledged.
|2.3.2||Board members should be elected pursuant to a transparent procedure enabling the shareholders to obtain information about respective candidates sufficient for them to get an idea of the candidates’ personal and professional qualities.||
|2.3.3||The membership of the Board of Directors should be balanced, in particular in terms of the qualifications, expertise, and business skills of its members. The Board of Directors should receive the confidence of the shareholders.||
|See the comment to p. 2.3.1|
|2.3.4||The membership of the Company’s Board of Directors should enable the Board to organise its activities in the most efficient way possible, in particular, to create Board committees and enable substantial minority shareholders to put forward a candidate to the Board of Directors for whom they would vote.||
|Such assessment procedure was not
carried out by the Board of Directors.
The question of whether or not the
number of members of the Board
of Directors corresponds to the
Company’s needs has never been
raised in the course of the assessment,
as there have not been any requests
from interested parties prior to the
assessment to change this number.
The Company has no information on the matter of whether or not the number of members of the Board of Directors corresponds to the interests of the Company and its shareholders.
However, in December 2019, a shareholder of the Company requested that extraordinary general shareholders meetings be held to amend the Charter of the Company to increase the number of Board members from 9 to 10. This decision was adopted by the GSM on 13 January 2020. On 17 February 2020, the Board of Directors comprised of 10 members was elected.
|2.4||The Board of Directors should include a sufficient number of independent directors.|
|2.4.1||An independent director is any person who has the required professional skills and expertise and is sufficiently able to have his/her own position and make objective and fair judgements free from the influence of the Company’s executive bodies, any individual group of its shareholders or other stakeholders. It should be noted that, under , usual circumstances, a candidate (or an elected director) may not be deemed to be independent if he/she is associated with the Company, any of its substantial shareholders, material trading partners or competitors, or the government.||
|2.4.2||It is recommended to evaluate whether candidates nominated to the Board of Directors meet the independence criteria as well as to review on a regular basis whether or not independent Board members meet the independence criteria. When carrying out such evaluation, substance should take precedence over form.||
|2.4.3||Independent directors should account for at least one third of all directors elected to the Board of Directors.||
|2.4.4||Independent directors should play a key role in the prevention of internal conflicts affecting the Company and its performance of material corporate actions.||
|2.5||The Chairman of the Board of Directors should help to carry out the functions imposed thereon in a most efficient manner.|
|2.5.1||An independent director is elected as the Chairman of the Board of Directors, or a senior independent director is appointed from the independent directors who coordinates work of the independent directors and interacts with the Chairman of the Board of Directors.||
|2.5.2||The Chairman of the Board of directors should ensure that Board meetings are held in a constructive atmosphere, and that any items on the meeting agenda are discussed freely. The Chairman should also monitor the fulfilment of decisions made by the Board of Directors.||
|The role of the Chairman was not evaluated separately within the framework of the assessment; however, the work of the Board as a team and its effectiveness as a whole was. According to the Law, the Chairman of the Board of Directors organizes the work of the Board of Directors, and, overall, it is deemed effective. Therefore, the Company did not deem it necessary to assess the performance of the Chairman in 2019.|
|2.5.3||The Chairman of the Board of Directors should take any necessary measures to provide Board members with information required for making decisions on agenda items in a timely manner.||
|2.6||Board members must act reasonably and in good faith in the best interests of the Company and its shareholders, being sufficiently informed, with due care and diligence.|
|2.6.1||Acting reasonably and in good faith means that Board members should make decisions considering all available information, in the absence of a conflict of interest, treating shareholders of the Company equally, and assuming normal business risks.||
|Comments refer to paragraphs 1–2 of
the assessment criteria, as these criteria
According to p. 3.3 of the Regulation on the Board of Directors, Board members should provide the Board of Directors, the Revision Commission, and the Company’s auditor with the information specified in Article 82 of the JSC Law, as well as inform the Board of Directors in a timely manner of any changes in the indicated information. At the same time, there is no separate notion that if a Board member has a conflict of interest, he/she should abstain from voting on any issues of this nature. There were no cases of voting in the Company when a conflict of interest was present. The absence of such provision in the Company’s internal documents is, in our opinion, compensated by the provision of p. 3.3 of the Regulation on the Board of Directors of PJSC Uralkali, which obliges Board members to act reasonably, in good faith, and with appropriate consideration for the Company
|2.6.2||Rights and duties of Board members should be clearly stated and documented in the company’s internal documents.||
|2.6.3||Members of the Board of Directors should be given sufficient time to perform their duties.||
|Comment to paragraph 1 of the
During the procedure of Board assessment, an individual assessment of the Board members' performance, including attendance, was not carried out. Typically, meetings of the Board of Directors and Board Committees are attended by almost 100% of their members.
The Corporate Secretary administers the attendance statistics in a regular manner, which all members of the Board of Directors are aware of. The Company regularly discloses Board attendance statistics in its Annual Report, that is why the Company considers a formal assessment of attendance to be unnecessary. The Company does not intend to change its approach to the assessment of this criterion.
Comment to paragraph 2 of the assessment criteria.
The Company’s internal documents do not require Board members to notify the Board of Directors of their intention to take a position in management bodies of other entities. Board members should inform the Board of Directors of their appointment (election) to the management bodies of other entities in line with the law and sub clause 3.3 of the Regulation on the Board of Directors. The Company considers charging members of the Board of Directors with the duty to report their intentions is excessive, as: 1) up until the moment such an appointment occurs the information in question may be confidential and the Company should not be aware of it, 2) the appointment (election) may not occur for other reasons.
|2.6.4||All Board members should have equal access to the Company’s documents and information. Newly elected Board members should be provided with sufficient information about the company and its Board of Directors as soon as possible.||
|2.7||Meetings of the Board of Directors, preparation for meetings, and the participation of Board members therein should ensure efficient work of the Board.|
|2.7.1||Meetings of the Board of Directors should be held when needed, with due account of the Company’s scope of activities and its current goals.||
|2.7.2||The Company’s internal documents contain a set of procedures for the preparation and arrangement of the meetings of the Board of Directors, enabling its members to prepare for them properly.||
|Note: The Company’s internal documents require that notifications of meetings and materials thereto be provided to Board members at least three business days before the meeting (five calendar days at the most). In exceptional cases, materials may be provided one business day before the meeting.|
|2.7.3||The format of a meeting of the Board of Directors should be determined with due consideration of the importance of issues on the meeting agenda. The most important issues should be decided at meetings held in person.||
|The Company considers this principle
to be generally and substantially
observed. With regard to the
compliance/non-compliance with the
principle, the Company provides the
following information about its partial
compliance with the criterion.
The Company's internal document, i.e. the Regulation on the Board of Directors, stipulates that the Chairman of the Board of Directors or a person who calls a meeting, has a right to determine the format of the meeting, taking its agenda into consideration. The key issues of the Company and its affiliate operations are reviewed during in-person meetings of the Board of Directors.
It should be noted that correspondence decision of the Board that is made in absentia (by ballot) is frequently a continuation and logical closing of lengthy discussions held during previous meetings during which the committees and their members have formed a common opinion. In such situations, the Company is correct to restrict the Board of Directors from choosing the format of the meeting.
Moreover, a meeting in absentia (by ballot) does not relieve the Company of the obligation to present exhaustive information on the agenda items to the members of the Board of Directors, nor does it prevent directors from asking additional questions on items put to vote.
The Company does not plan to change the established practice. It considers the current policy of the Board of Directors towards holding meetings to be in the best interest of the Company and its shareholders. It does not imply additional risks.
|2.7.4||The decisions on the most important aspects of the Company’s operations are adopted in meetings of the Board of Directors by qualified majority or majority of all elected members of the Board.||
|The Company's Charter does not presume that the issues listed in the recommendation 170 of the Code shall be decided by a qualified majority vote. According to the law, all members of the Board of Directors should vote unanimously to adopt decisions pertaining to the conclusion of major transactions that fall within the jurisdiction of the Board of Directors. Other matters (with the exception of related-party transactions) are decided by a majority vote of Board members present at the respective meeting, as required by law. This approach conforms to the law and it seems excessive to establish other quorum requirements for Board meetings. Board meetings are attended by almost 100% of all Board members, and virtually all decisions are adopted by a majority vote of all elected members of the Board of Directors.|
|2.8||The Board of Directors should form committees for the preliminary consideration of the most important issues affecting the Company’s business.|
|2.8.1||For the purpose of preliminary consideration of any matters of control over the Company’s financial and business activities, it is recommended to form an Audit committee comprised of independent directors.||
|2.8.2||For the purpose of preliminary consideration of any matters of developing efficient and transparent remuneration practices, a remuneration committee should be established comprised of independent directors and chaired by an independent director who is not the Chairman of the Board of Directors.||
|Comment to paragraph 1 of the
Most members of the Nomination and Remuneration Committee are independent directors which complies with the Moscow Exchange First Listing Level, despite the fact that the Company shares are at the Third Level. For objective reasons, the Company cannot make the Nomination and Remuneration Committee consist exclusively of independent directors. The Chairman of the Board of Directors is not a member of Board Committees and heads only the Company's Board of Directors as a whole. Currently, the Regulations on the Nomination and Remuneration Committee fully complies with the requirements of the Moscow Exchange to the First Listing Level, which are, however, no longer obligatory for the Company as its shares are in the Third Listing Level.
|2.8.3||For the purpose of preliminary consideration of any items related to the human resources planning (plans regarding succession), highly-qualified personnel and efficiency of the Board of Directors, it is recommended to form a nominating committee (a committee on nominations, appointments, and human resources) with a majority of its members being independent directors.||
|Combined with the Nomination and Remuneration Committee. See the comment to p. 2.8.2.|
|2.8.4||Taking into account the
Company’s scope of activities
and level of risks, the Board of
Directors should be assured
that members of its committees
fully comply with the Company’s
The Company should form other committees or consider them to be unnecessary (a strategy committee, a corporate governance committee, an ethics committee, a risk management committee, a budget committee or a committee on health, safety, and environment, etc.).
|2.8.5||The membership of the committees should be determined in such a way that it would allow a comprehensive discussion of issues being stated on a preliminary basis with due consideration of different opinions.||
|Four of the five Board Committees of the Company are chaired by independent directors. In 2019, a Strategy Committee was established; it is led by a non-executive director. Considering the fact that there are no requirements to the composition of other committees, except for the Audit Committee and the Nomination and Remuneration Committee, we believe that the decision to appoint a nonexecutive director as chairman of the committee does not entail any risks.|
|2.8.6||Chairpersons of the committees should inform the Board of Directors and its Chairman about the work of individual committees on a regular basis.||
|2.9||The Board of Directors should make an assessment of the quality of its work and that of its committees and Board members.|
|2.9.1||The assessment of the quality of the Board of Directors’ performance is aimed at determining operating efficiency level of the Board of Directors, committees, and its members, and whether their work meets the Company’s development needs, as well as at intensifying their work and identifying areas of improvement.||
|The self-assessment did not include an evaluation of individual Board members – at this stage, the Company does not think it necessary. Most of the Board members have held their positions for several years. The Company's shareholders continue nominating and electing them as candidates to the Board of Directors which proves that the work of the Board satisfies the shareholders.|
|2.9.2||The assessment of the performance of the Board of Directors, committees, and its members is regularly carried out at least once a year. An external organisation (consultant) carries out an independent assessment of the operating quality of the Board of Directors at least once in three years.||
|The Company did not enlist the services of an external consultant. The culture of performance assessment is gradually being developed by the Company. At this stage, retaining an external consultant seems premature.|
|3.1||The Company’s Corporate Secretary shall be responsible for efficient interaction with its shareholders, coordinating the Company’s actions designed to protect the rights and interests of its shareholders, and supporting the efficient work of the Board of Directors.|
|3.1.1||The Corporate Secretary possesses the knowledge, experience, and qualifications sufficient to perform the assigned duties, as well as impeccable reputation, and enjoys the trust of the shareholders.||
|3.1.2||The Corporate Secretary is sufficiently independent from the Company’s executive bodies and has the necessary powers and resources for achieving the objectives.||
|4.1||The level of remuneration paid by the Company should be sufficient to enable it to attract, motivate, and retain persons having required skills and qualifications. Remuneration due to Board members, the executive bodies, and other key managers of the Company should be paid in accordance with a remuneration policy approved by the Company.|
|4.1.1|| The level of remuneration paid
by the Company to members of
the Board of Directors, executive
bodies, and other key managers
is sufficient to motivate them
to work efficiently enabling the
company to attract and retain
knowledgeable, skilled, and duly
At the same time, the Company avoids paying higher remuneration than necessary, as well as creating a big unjustified gap between the remuneration for individual persons and the Company’s employees.
|4.1.2||The Company’s remuneration
policy is developed by the
remuneration committee and
approved by the Company’s
Board of Directors.
The Board of Directors, supported by the remuneration committee, follows up on the introduction and implementation of the remuneration policy in the Company, and, if necessary, revises and amends it.
|The Committee saw no necessity in revising the policy related to the Company's executive bodies and top managers in 2019.|
|4.1.3||The Company’s remuneration policy contains transparent mechanisms for defining the size of remuneration for members of the Board of Directors, executive bodies, and other key managers of the Company, as well as regulates all types of benefits paid to indicated persons.||
|4.1.4||The Company determines
the policy of reimbursement
(compensation) of costs which
details the list of costs for
reimbursement, and the service
level which members of the
Board of Directors, executive
bodies, and other key managers
of the Company may claim for.
Such policy may become a part of the Company’s remuneration policy.
|4.2||The remuneration system for members of the Board of Directors ensures that the financial interests of directors get closer to the long-term financial interests of the shareholders.|
|4.2.1|| The Company pays out a fixed
annual remuneration to members
of the Board of Directors.
The Company does not compensate participation in individual meetings of the Board of Directors or its committees.
The Company does not apply short-term motivation and additional material motivation tools in relation to members of the Board of Directors.
|4.2.2||Long-term possession of the
Company’s shares the most
efficiently contributes to
bringing the financial interests
of members of the Board of
Directors closer to the long-term
interests of the shareholders.
At the same time, the Company does not restrict the right to sell shares by achievement of certain KPIs, and members of the Board of Directors do not participate in stock option plans.
|The Company's internal documents do not stipulate provision of the Company's shares to members of the Board of Directors. The information about share ownership by the Company’s directors is disclosed in the Annual Report.|
|4.2.3||No additional payouts or compensations are provided in the Company in the case of early termination of powers of members of the Board of Directors in connection with change of control of the Company or other circumstances.||
|4.3||The system of remuneration for the executive bodies and other key managers of the Company should provide that their remuneration is dependent on the Company’s performance results and their personal contributions to the achievement thereof|
|4.3.1||Remuneration of members of the executive bodies and other key managers of the Company is determined in a way that it ensures a reasonable and justified ratio of the fixed and variable parts of remuneration, where variable depends on the Company’s operating results and personal (individual) contribution of an employee to the final result.||
|Comments to paragraph 2 of the
The system of remuneration was not reviewed by the Board of Directors (Nomination Committee) in 2019. In the opinion of the Board of Directors, there was no need to revise this system in 2019. The Nomination and Remuneration Committee was charged with the responsibility to preliminarily review any issues concerning any additional payments (bonuses, rewards) that do not constitute payments indicated by the law and are not related to the calculation of payments per the performance scorecards. This was the only change made in the remuneration system.
Comments to paragraph 3 of the assessment criteria.
The Company does not have a formalised procedure for having wrongfully obtained award/bonus funds returned to the Company by members of the executive bodies and key managers. Bonuses are paid based on approved performance charts where the real KPI result is shown making wrongful payments impossible. There were no cases of wrongful payouts in the Company. Should any such error occur in the future, the necessary repayments will be made in compliance with the law.
|4.3.2||The Company introduced a longterm motivation programme for members of the executive bodies and other key managers of the Company involving the company’s shares (or options or other derivative financial instruments, the underlying assets for which are the Company’s shares).||
|Comments to paragraphs 1 and 2 of the
The Company does not observe the specified principle and assessment criteria for observing it.
The Company does not have a long-term motivation programme due to financial instability in Russia in general and a number of financial constraints in the Company; it believes that developing a long-term motivation programme is untimely.
The current Remuneration Policy for members of the executive bodies and key managers includes payment of salaries and annual bonuses based on the achievement of the objectives specified in the performance charts (which the Company reports of in the Annual Report). The Company does not consider this policy to be a mechanism or a tool to replace a longterm motivation programme. Nor does the Company apply any other corporate governance mechanisms or tools that would replace a long-term motivation programme.
The Company does not plan to introduce a long-term motivation programme for members of the executive bodies or key managers in the foreseeable future.
|4.3.3||The amount of compensation (golden parachute) paid by the Company in the case of early termination of authorities of members of the executive bodies or key managers upon the Company’s initiative and in case there is no fraud from their side, does not exceed its two-fold fixed annual remuneration.||
The Company's policies do not provide for the payment of “golden parachutes".
|5.1||The Company developed an effective risk management and internal control system aimed at providing reasonable confidence that the Company’s objectives will be achieved.|
|5.1.1||The Board of Directors determined principles of and approaches to the arrangement of the risk management and internal control system in place at the Company||
|5.1.2||The executive bodies of the Company ensure development and maintenance of functioning of the effective risk management and internal control system in the Company.||
|5.1.3||The Company’s risk management and internal control system ensures the impartial, fair, and clear understanding of the current state and prospective of the company, integrity and transparency of the company’s reporting, and rationality and eligibility of risks accepted by the Company.||
|5.1.4||The Board of Directors of the Company takes necessary measures to ensure that the risk management and internal control system of the Company functions effectively and complies with the principles and approaches defined by the Board of Directors.||
|5.2||To independently evaluate the reliability and efficiency of the risk management and internal control system and corporate governance practices on a regular basis, the Company should arrange for internal audits.|
|5.2.1|| The Company has established an
individual structural subdivision
or engaged an independent
external organisation in order
to carry out internal audit in the
Functional and administrative reporting lines of the internal audit subdivision are separated.
The internal audit subdivision functionally reports to the Board of Directors.
|5.2.2||The internal audit subdivision
carries out assessment of
efficiency of the internal control,
the risk management, and the
corporate governance systems.
In the area of internal audit, the Company applies common operational standards.
|6.1||The Company and its activities should be transparent to the shareholders, investors, and other stakeholders.|
|6.1.1||The Company developed and implemented an information policy enabling the information exchange between the Company and its shareholders, investors, and other stakeholders.||
|6.1.2||The Company discloses information on its corporate governance system and practices including detailed information on observance of the principles and recommendations of the Code.||
|Note: The Company does not have a controller. Over 50% of the Company’s shares are represented by quasi-treasury shares owned by PJSC Uralkali's affiliated company, which holds 100% of PJSC Uralkali's voting shares. The Company qualifies this affiliated company as a controlling entity approving related-party transactions to comply with the formal legal requirements. However, the affiliated company JSC "Uralkali-Technologiya" does not control PJSC Uralkali. In view of the above, we believe that Criterion 3 does not apply to the Company in 2019.|
|6.2||The Company should disclose full, updated, and reliable information about itself on a timely basis so as to enable its shareholders and investors to make informed decisions.|
|6.2.1||The Company discloses information in accordance with the principles of regularity, consistency, and timeliness, as well as accessibility, reliability, completeness, and comparability of disclosed data.||
|6.2.2||The Company avoids a formal approach when disclosing information and discloses the information on its operations even if such disclosure is not stipulated by the law.||
|Comments to paragraph 2 of the
The Company’s disclosure of information on the share capital structure does not fully comply with Recommendation 290 of the Code, but the Company considers that it fully characterises the share capital structure of the Company and does not require any additional details.
|6.2.3||The annual report, being one of the most important tools of information exchange with the shareholders and other stakeholders, contains information allowing to evaluate the annual performance of the Company||
|6.3||The Company should provide information and documents upon requests of its shareholders in accordance with the principle of equal and unhindered accessibility.|
|6.3.1||Providing the shareholders with information and documents upon their request is performed in compliance with the principle of equal and unhindered access.||
|The Company believes that the
principle stated above and the indicated
recommendation are generally observed. The
information policy of the Company indicates
that the Company’s shareholders must be
provided with information that is sufficient
for them to make decisions in relation to
their rights to participate in the Company.
The Company uses information channels
and means of information dissemination that
provide shareholders with a free, easy-to-use and indiscriminate access to disclosed
information, and provides all stakeholders
with information that enables them to form
a full understanding of the Company, which
does not exclude the possibility of providing
information on controlled persons. However,
please note that the Company has never
received requests to provide information on
The information on controlled organisations which are materially important to the Company, their business and the composition of their governance bodies is indicated by the Company in publicly disclosed issuer’s reports, while the key events concerning such organisations are also disclosed in the form of notices of essential facts.
The Company does not rule out a possibility that in the future a provision will be inserted in the information policy whereby the possibility of providing information on controlled persons based on shareholders’ requests will be directly indicated.
|6.3.2||When providing shareholders with information, the Company ensures reasonable balance between individual interests of its shareholders and the company’s own interests, as the company is committed to keep the confidentiality of the important commercial information that can significantly affect its competitiveness.||
|7.1||Any actions which can significantly affect the Company’s share capital structure and its financial position and, accordingly, the position of its shareholders (“significant corporate actions”) should be taken on fair terms and conditions ensuring that the rights and interests of the shareholders as well as other stakeholders are observed.|
|7.1.1||Material corporate actions shall be deemed to include the reorganisation of the Company, the acquisition of 30 or more percent of the Company’s voting shares (takeover), the Company entering into any material transactions, increasing or decreasing the share capital, the listing or delisting of shares, as well as other actions, which may result in material changes to the rights of shareholders or violation of their interests. The Company’s charter determines the list (criteria) of transactions or other actions that are significant corporate actions, and such actions are attributed to the competences of the Board of Directors.||
|Comments to paragraphs 1 and 2 of the
The Company believes that the outlined principle is generally observed. At the same time, the Company does not observe the indicated criteria, as the Charter of the Company does not specify the list of significant corporate actions.
Additionally, the Company’s Charter attributes the review of programs to purchase the Company’s shares and GDRs to the jurisdiction of the Board of Directors. At the same time, the Company approves such transactions regardless of whether or not the acquisition is carried out by the Company or its affiliates.
The Company believes that the additional regulation of significant corporate transactions would be excessive. The Company also believes that there is no need to lower the transaction threshold or attribute the transactions valued below 25% of the book value of the assets in terms of size and below RUB 500 million in terms of interest (as stipulated by the law) to the terms of reference of the Board of Directors of the Company.
The established practice used to approve transactions and significant corporate actions shows that the Company approves significant corporate actions with utmost responsibility and enters into transactions in compliance with the existing law and the best corporate governance standards. The Company believes that such an approach does not imply any additional risks for the Company. PJSC Uralkali does not have plans to change the established practice nor approve significant corporate actions, as it will continue to observe the law, handling each serious action with consideration of the relevant circumstances, to make the corresponding decisions and to ensure appropriate disclosure.
|7.1.2||The Board of Directors plays a key role in approving decisions or giving recommendations related to significant corporate activities; the Board of Directors relies upon the opinion of the independent directors.||
Subject to the comments to clause 7.1.1
|7.1.3|| When taking any significant
corporate action that would
affect the rights or legitimate
interests of the Company’s
shareholders, equal terms and
conditions should be ensured
for all of the shareholders; if
statutory mechanisms designed
to protect the shareholder
rights prove to be insufficient
for that purpose, additional
measures should be taken with
a view to protecting the rights
and legitimate interests of the
In such instances, the Company should not only seek to comply with the formal requirements of the law but should also be guided by the principles of corporate governance set out in this Code.
|The Company believes that the
specified principle is generally
Comments to paragraph 1 of the assessment criteria.
The Charter of the Company does not provide for less than that stipulated by the law, and employs the criteria of attributing the transactions to such significant corporate actions as: 1) most of the significant corporate actions provided by the Code of Corporate Governance have already been attributed to the jurisdiction of the Board of Directors by JSC Law and, as the Company believes, are deemed to be material by default, regardless of whether or not the Company’s Charter provides for it; 2) as a rule, any significant corporate actions are preliminarily reviewed by designated committees with mandatory participation of Board members; 3) the regulation stipulated by the law for performing such corporate transactions is believed to be sufficient for the Company (more detailed explanations are provided in the above cl. 7.1.1 of the report).
Comments for paragraph 2 of the assessment criteria.
A list of significant corporate actions is not defined in the Company’s Charter.
Major corporate actions underwent the approval procedure prior to their implementation or were subsequently approved in compliance with the requirements of current Russian law, which, in the Company’s opinion, does not entail any additional risks for shareholders.
|7.2||The Company should have in a procedure place for taking any significant corporate action that would enable its shareholders to receive full information about such actions in due course, and therefore be in a position to influence them, which would also guarantee that the shareholders’ rights are observed and duly protected in the event such actions are brought.|
|7.2.1||Disclosure of information on performing significant corporate actions is accompanied with explanation of the causes, conditions, and consequences of performing such actions.||
|7.2.2||Rules and procedures related to the significant corporate actions performed by the Company are reflected in the Company’s internal documents.||
|Comments to paragraphs 1 and 3 of the
The internal documents of the Company do not provide for an independent appraiser involvement procedure; the Company retains an appraiser in cases specified by the law and also, if necessary, in cases when the Company is taking significant corporate actions in line with the high standards of corporate governance adopted within the Company.
This is a report to confirm that SRK Consulting (UK) Limited (SRK) has reviewed all of the key information on which the most recently (1 January 2020) reported Mineral Resource and Ore Reserve statements for the Mining Assets of Public Joint Stock Company Uralkali (Uralkali or the Company) are based. Specifically, it sets out SRK’s view regarding the tonnes and grade of rock which has the potential to be mined by the existing and planned mining operations (the Mineral Resource), the quantity of product expected to be produced as envisaged by the respective Business Plan (the Ore Reserve) and the work done to derive these.
SRK has not independently re-calculated Mineral Resource and Ore Reserve estimates for Uralkali’s operations but has, rather, reviewed the quantity and quality of the underlying data and the methodologies used to derive and classify the estimates as reported by Uralkali and made an opinion on these estimates including the tonnes, grade and quality of the potash planned to be exploited in the current mine plan, based on this review. SRK has then used this knowledge to derive audited Mineral Resource and Ore Reserve statements according to the guidelines and terminology proposed in the JORC Code (2012 version).
This report presents both the existing Uralkali resource estimates according to Russian standard reporting terminology and guidelines and SRK’s audited JORC Code statements. All of these estimates are dated as of 1 January 2020. SRK assessment covers the Mineral Resources and Ore Reserves at Berezniki 2, Berezniki 4, Ust-Yayvinsky, Solikamsk 1, Solikamsk 2, Solikamsk 3 and Polovodovsky.
Table 1-1 below summarises the current licence status for each of the assets noted above.
|Asset/Deposit||Registration No.||Expiry Date||Licence Type||Area (km2)|
|Berezniki-2||2546||31st December 2024||Mining2||67.25|
|Berezniki-4||2545||1st January 2043||Mining1||185.5|
|Ust-Yayvinsky||2543||15th April 2024||Exploration and Mining3||83.676|
|Solikamsk-1||2547||1st January 2047||Mining1||44.47|
|Solikamsk-2||2548||31st December 2026||Mining2||50.38|
|Solikamsk-3||2549||1st January 2055||Mining2||110.01|
|Polovodovsky||2551||31st December 2054||Exploration and Mining1||381.01|
|Romanov||2550||25th July 2039||Exploration and Mining1||58.07|
|Solikamsk-1||2541||6th April 2035||Exploration and Mining4||8.58|
|Izversky (Berezniki 4 Extension)||2682||2nd November 2022||Exploration||49.11|
SRK has been provided with copies of all of the licences listed above and has confirmed that the Mineral Resources and Ore Reserves stated in this report fall within the boundaries of such licences. SRK notes that all licences have been re-issued and amended between 2015 and 2018 and the expiry dates amended/extended to the dates shown above. SRK notes that for the licence for mining of carnalite ore (#2541) which relates to an area adjacent to Solikamsk-1 and the extreme western portion of Soliamsk-3, Uralkali has indicated that this material is being accessed for mining of carnalite from the existing infrastructure of Solikamsk-1 and therefore SRK has reported this material alongside the sylvinite estimates given for this mine.
The licenses for some of the operating and development mines will expire within the term of the 20-year Business Plan, even though some of these mines are planned to continue operating beyond this time and have resources and reserves to support this. SRK, however, considers it reasonable to assume that Uralkali will obtain extensions to these licences in due course on application as long as it continues to fulfil its licence obligations and the Mineral Resource and Ore Reserve estimates given here reflect this assumption.
Uralkali has informed SRK that it acquired an exploration licence during 2014, termed Romanov (#2550), which covers an area to the south of the current Berezniki operations. SRK understands this licence area was explored historically and is currently estimated to have resources classified in the Russian P1 and P2 categories. SRK understands that Uralkali has plans in place to undertake further exploration drilling on this licence and to then re-estimate the resources based on this drilling with a view to increasing the confidence in the assigned classification. SRK considers there to be insufficient data currently available to report these P1 and P2 resources as Mineral Resources as defined by the JORC Code in this case and therefore this licence is not discussed any further in this report.
In addition to this, during 2017 Uralkali acquired a further exploration licence termed Izversky (#2682) which is immediately adjacent to the eastern portion of the current Berezniki-4 mine. SRK understands this has the potential to increase the Mineral Resources and therefore extend the Berezniki-4 operations to the east, however, there are currently no estimated resources on this licence. SRK understands that Uralkali has plans in place to undertake further exploration drilling on this licence and to then estimate the resources based on this drilling. There is therefore currently insufficient data currently available to report Mineral Resources as defined by the JORC Code and therefore this licence is not discussed any further in this report.
While not reflected in the current licences held by Uralkali, SRK understands that Uralkali is considering applying for an extension of its licence for Solikamsk-2 (#2548) to the west to encompass an additional area which would have the potential to increase the Mineral Resource associated with this licence (albeit that this would be done under a separate license). This became allowed following the adoption of the Decree of the Government of the Russian Federation No. 429 dated 3 May 2012, which means that it is now possible to increase the boundaries of subsoil plots granted for geological exploration and/or detailed prospecting and production of minerals in any spatial direction. This can be done repeatedly throughout the term of the mineral licence but applies only to the same mineral(s) as specified on the existing licence and, notably the amount of additional resource encompassed by the increase in area may not exceed 20% of the resources of the initial licence and as entered into the state balance. SRK understands that Uralkali is evaluating this further before applying for a licence extension. While the area under consideration was drilled previously in the Soviet era, and while this confirmed the presence of mineralisation, assuming this licence extension is applied for and granted, then further exploration and drilling will be required to determine the quantity and quality mineralisation present to the level of confidence that could then be potentially reported as a Mineral Resource.
The descriptions of data quantity and quality given in Section 2.2 below relate to the original Uralkali sites before the merger with JSC Silvinit; namely Berezniki-2, Berezniki-4 and Ust-Yayvinsky while those in Section 2.3 relate to the former JSC Silvinit sites; namely Solikamsk-1, Solikamsk-2, Solikamsk-3 and Polovodovsky. These are commented upon separately because the exploration process followed differs slightly between the two.
The resource and reserve estimates derived by Uralkali for the original Uralkali sites are primarily based on exploration drilling undertaken between 1972 and 1998. A specially laid out drilling programme was developed for each mine with the aim of enabling 10% of the contained resources to be assigned to the A category of resources as defined by the Russian Reporting Code, 20% to the B category and 70% to the C1 category.
The A category is the highest category in the Russian Reporting Code and only used where the stated tonnage and grade estimates are considered to be known to a very high degree of accuracy. The B, C1 and C2 categories are lower confidence categories, with C2 denoting the least level of confidence of the three categories. All of these categories, apart from C2, are acceptable for use in supporting mining plans and feasibility studies. In the case of the Uralkali assets, blocks have been assigned to the A category where the drillhole spacing is less than 1 km, to the B category where the drillhole spacing is between 1 and 2 km and to the C1 category where the drillhole spacing is 2 km. Areas drilled at a larger spacing than this, up to a 4 km spacing, have historically been assigned to the C2 category, although it is noted that as at 1 January 2020, there are no C2 resources reported for these assets.
As a result of the above process, each mine is typically drilled on a 2 km by 2 km grid or less before a decision is taken to develop the mine. This information is, however, then supplemented by underground drilling once the access development is in place. This typically creates a grid of intersections measuring 400 m by 200 m. While Uralkali does not regularly upgrade the categorisation of its resources based on this drilling, which it rather uses to optimise the mining layouts, it does periodically undertake a re-estimation calculation on specific areas and will take into account the available data from this underground drilling in doing this where relevant. The most recent update of the estimation for Berezniki-4, for example, was undertaken in 2006.
The drillholes, whether drilled from surface or underground, have been sampled at intervals of at least 16 cm and the samples were crushed and milled under the control of the geology department to produce an approximate 100 g sample prior to submission to the laboratory.
Assaying was carried out at an in-house laboratory. Approximately 5–6% of samples were repeat assayed internally while a similar percentage are sent to an independent third party external laboratory located in Berezniki (JSC Persil) for check assaying. All assaying was by classical wet chemistry techniques.
These deposits were discovered in 1925 and each has been subjected to a number of exploration and drilling campaigns as follows:
The resource and reserve estimates are therefore primarily based on exploration drilling undertaken between 1925 and 2002. There is no exploration drilling currently being undertaken from surface at the operating mines, however, exploration drilling has recently been undertaken at the Polovodovsky prospect and the resource estimate for this asset has been updated following two phases of work during 2013 and 2014 and this updated estimate has superseded the original estimate undertaken in 1975.
Exploration has generally been undertaken by State enterprises based in Solikamsk and Berezniki although the recent drilling at Polovodovsky has been undertaken by a third party contractor.
The total number of exploration holes and metres drilled at each mine/prospect is as follows:
The diamond drillholes, whether drilled from surface or underground, were drilled with a diameter of either 92 mm or 112 mm for surface holes and 50–76 mm for underground holes. Holes were sampled at intervals between 10 cm and 6 m, averaging between 105 cm to 130 cm. Core recovery through the sylvinite horizons is reported to be good at an average of 84–85%, while the recovery through the carnalite horizon at Solikamsk-1 is reported to be 74%.
Core was split in half with one half retained for reference and the other half crushed, milled and split under the control of the geology department to produce a small sample (100 g) for submission to the laboratory for assay.
Assaying has been carried out at an in house laboratory using classical wet chemistry techniques. Approximately 5–6% of samples were repeat assayed internally while a similar percentage were sent to an independent third party external laboratory located in Berezniki (JSC Persil) for check assaying, which SRK understands to be at the neighbouring Uralkali mine laboratory.
A total of 423 samples have to date been taken for density measurements using the water displacement method.
In the case of these former Silvinit mines, blocks have been assigned to the A category where the drillhole spacing is less than 1,200 m, to the B category where the drillhole spacing is between 1,200 m and 2,400 m and to the C1 category where the drillhole spacing is 2,400 m. Areas drilled at a larger spacing than this, but on average with a spacing of up to 4,000 m have been assigned to the C2 category, although it is noted that as at 1 January 2020, there are no C2 resources reported for these assets. Each mine is drilled on an approximate 2. 4 km by 2.4 km grid or less before a decision is taken to develop the mine. This information is, however, then supplemented by underground drilling once the access development is in place. This typically creates a grid of intersections measuring from 100 m by 300 m or in cases up to 400 m by 800 m. As is the case with the Berezniki mines, the Uralkali does not upgrade the estimation or categorisation of its resources for the Solikamsk mines based on this underground drilling on a regular basis but rather uses this to optimise the mining layouts. Notwithstanding this, a full re-estimation calculation was undertaken by Silvinit in 2006 (see below) for the Solikamsk mines and this took into account the available data from underground drilling where available. Furthermore, the Polovodovsky deposit resource estimate was updated in 2013/2014 following the completion of additional exploration drill holes.
The most up to date resource statements produced by Uralkali are those derived for the annual 5GR reports which give the status as of 1 January each year. The completion of 5GR reports is a statutory requirement. These estimates are produced using standard classical Russian techniques and are essentially based on calculations made in previous years and adjusted for mining during the prior year. Given that the estimates reported herein are being produced before the end of 2019 and before the formal submission of final full year 5GR reports by Uralkali, SRK notes that for the purposes of these estimates the depletion for mining is based on actual production data for January to August 2019 inclusive (8 months) and forecast data for September to December 2019 (4 months). This section comments primarily on these statements.
The first resource estimates undertaken and approved for each of the former Silvinit operations were as follows:
The resource estimates at each of the active mines have undergone various updates since this time, the most recent of which was in 2006. These estimates were approved by the State Committee for Reserves and take into account all surface and underground drilling data available at that time. As noted above, additional exploration drilling has recently been undertaken at Polovodovsky, and the original estimate produced in 1975 has been updated during 2013 and 2014.
Each seam and each mine is treated separately in the resource estimation procedure. In each case the horizons are first divided into blocks such that each sub-divided block has reasonably consistent borehole spacing within it; that is more intensely drilled areas are subdivided from less intensely drilled areas. Each resulting “resource block” is then evaluated separately using the borehole intersections falling within that block only.
Specifically, composited K2O and MgO grades are derived for each borehole that intersected each block and mean grades are then derived for each block by simply calculating a length weighted average of all of these composited intersections. No top cuts are applied and all intersections are allocated the same weighting.
A separate plan is produced for each seam showing the results of the above calculations, the lateral extent of each sub block, and any areas where the seams are not sufficiently developed. The aerial coverage of each block is then used with the mean thickness of the contained intersections to derive a block volume. The tonnage for each block is then derived from this by applying a specific gravity factor calculated by averaging all of the specific gravity determinations made from samples within that block.
The data for each resulting block is plotted on a Horizontal Longitudinal Projection (HLP). This shows the horizontal projection of the extent of each block as well as its grade and contained tonnage. The HLP also shows the block classification, this being effectively a reflection of the confidence of the estimated tonnes and grade.
Table 3-1 below summarises SRK’s understanding of the sylvinite resource statements prepared by Uralkali to reflect the status of its assets as of 1 January 2020. Uralkali’s statements are based on a minimum seam thickness of 2 m and a minimum block grade which, dependent on the mine, varies between 11.4% K2O (Polovodovsky) and 15.5% K2O (Ust-Yayvinsky). Table 3-2 below summarises SRK’s understanding of the carnalite resource statement prepared by Uralkali to reflect the status of its assets as of 1 January 2020. Uralkali’s carnalite statements (Solikamsk-1 only) are based on a minimum seam thickness of 2m and a minimum block grade of 7.2% MgO.
|Summary All Mines|
SRK notes that while Mineral Resources for carnalite are only shown in this report at Solikamsk-1, as this is the only operation that is currently mining and processing such and where there is a plan to mine this in the future as is reflected in the Business Plan, there is carnalite present at other Uralkali sites, in particular at Ust-Yayvinsky. This has been estimated by Uralkali and been assigned generally to B and C1 classification categories, however, as there is no plan currently to exploit this material at present this mineralisation has been excluded from this report.
Table 3-3 and Table 3-4 below present SRK’s audited Mineral Resource statements for sylvinite and carnalite respectively. SRK has re-classified the resource estimates using the terminology and guidelines proposed in the JORC Code. In doing this, SRK has reported those blocks classified as A or B by Uralkali as Measured, those blocks classified as C1 as Indicated and those blocks classed as C2 as Inferred. SRK’s audited Mineral Resource statements are reported inclusive of those Mineral Resources converted to Ore Reserves. The audited Ore Reserve is therefore a sub set of the Mineral Resource and should not be considered as additional to this.
SRK has not attempted to optimise Uralkali’s Business Plan. Consequently, SRK’s audited resource statements are confined to those seams that both have the potential to be mined economically and which are currently being considered for mining by Uralkali only.
|Measured + Indicated||140.0||25.1||35.2|
|Measured + Indicated||1,716.4||21.9||376.1|
|Measured + Indicated||1,290.6||19.7||254.4|
|Measured + Indicated||188.0||17.3||32.5|
|Measured + Indicated||773.5||17.2||133.00|
|Measured + Indicated||1,201.1||17.1||205.9|
|Measured + Indicated||1,574.7||16.7||263.34|
|Summary All Mines|
|Measured + Indicated||6,884.3||18.9||1,300.4|
|Measured + Indicated||173.7||9.3||16.1|
SRK has reviewed the estimation methodology used by Uralkali to derive its estimates, and the geological assumptions made, and considers these to be reasonable given the information available. SRK has also undertaken various re-calculations both of individual blocks and seams as a whole and has in all cases found no material errors or omissions.
Overall, SRK considers the resource estimates reported by Uralkali to be a reasonable reflection of the total quantity and quality of material demonstrated to be present at the assets and which has potential to be exploited as of 1 January 2020.
The audited Mineral Resource statement as at 1 January 2020 presented above is different to that presented as at 1 January 2019, as last reviewed and reported by SRK, largely as a function of mining depletion during 2019 and also some minor re-assessments completed over 2019 by Uralkali.
Uralkali does not report reserves as these are typically defined by reporting guidelines and terminology developed in Europe, North America and Australia; that is, estimates of the tonnage and grade of total material that is planned to be delivered to the various processing plants over the life of the mine. SRK has therefore derived estimates of such using historical information supplied by Uralkali and gained during its site visits regarding the mining losses and dilution experienced during mining to date. SRK has also restricted the resulting estimates to those areas planned to be mined by Uralkali in its Business Plan during the next 20 years, i.e. from 2020 to 2039 inclusive. The Business Plan assumes that Uralkali will successfully re-negotiate some its licences as required over this period and the Ore Reserve Statements therefore also assume this will be the case.
The Modifying Factors applicable to the derivation of reserves comprise estimates for ore losses and planned and unplanned dilution associated with the separation of the ore and waste. This is normally a function of the orebody characteristics and mining methods selected. The Modifying Factors considered by SRK to be appropriate for the sylvinite and carnalite being mined at each of the assets are shown below in Table 4-1 below. The Tonnage Conversion Factor takes into account both the percentage of material expected to be left behind in pillars and the amount of dilution expected to be included when mining the ore and is applied to the in situ resource tonnage to derive the tonnage of material expected to be delivered to the plants. The K2O/MgO Grade Conversion Factor accounts for the expected difference in grade between the in situ resource and the above plant feed tonnage as a result of incorporation within the latter of waste extracted along with this and is therefore applied to the in situ grade to derive the grade of ore expected to be delivered to the plants. Uralkali undertakes an annual reconciliation to compare the ore tonnes mined each year with the resource that has been sterilised by this mining and it is these figures for the last 12–14 years that SRK has reviewed to derive the Tonnage Conversion Factor. Similarly, Uralkali keeps a record of the in situ grade of the material sterilised by mining each year and SRK has compared these with the grade of material reported to have been fed to the plants over the last 12–14 years to derive the Grade Conversion Factor. Given this, SRK is confident that the Modifying Factors used reflect the geometry of the orebodies being mined and the mining methods currently being used. The Ust-Yayvinsky and Polovodovsky assets are both in development. Specifically, Ust-Yayvinsky is currently under construction and Polovodovsky is at an advanced stage of study/investigation and Uralkali has recently made a decision to develop this project. For these assets there is no production history and therefore SRK has derived modifying factors using information obtained from Uralkali from the studies it has undertaken on both these assets, but also taking cognisance of the historical information regarding the mining losses and dilution experienced during mining to date at Uralkali’s other existing and analogous operations.
As with its audited Mineral Resource statements, SRK’s Ore Reserve statements have been re-classified using the terminology and guidelines proposed in the JORC Code. To facilitate this, SRK has been provided with actual production and operating cost data for 2009 to 2019 and a production forecast for 2020 to 2039 inclusive reflecting Uralkali’s current plans regarding the refurbishment of some existing processing facilities and also the installation of additional facilities.
SRK’s audited Ore Reserve statement is therefore confined to those seams that are currently being considered for mining within the next 20 years only. Specifically, SRK has classed that material reported in the tables above as a Measured Mineral Resource, and which is planned to be exploited within the first ten years of the Business Plan, as a Proved Ore Reserve; and that material reported in the tables above as an Indicated Mineral Resource, and which is planned to be exploited within the Business Plan, and also that material reported above as a Measured Mineral Resource, but which is planned to be mined during the second 10 years of the Business Plan, as a Probable Ore Reserve. The exception to this reporting classification is for the Polovodovsky Ore Reserve as noted below, which is reported entirely as a Probable Ore Reserve.
SRK’s Ore Reserve statement includes an Ore Reserve for Ust-Yayvinsky even though this is still under construction. This is because SRK considers the work done to date has been completed to an advanced stage, detailed project documentation has been completed and the necessary permits are in place. Furthermore, work on shaft construction has been underway for a few years with the shaft sinking activities nearing completion.
In addition, and for the first time, SRK’s Ore Reserve statement as at 01 January 2020 includes an Ore Reserve for Polovodovsky. This is because SRK has reviewed the status of this project and available documentation and considers this work has been competed to a sufficiently advance level for the reporting of Ore Reserves (i.e. SRK considers this work to be between a Pre-Feasibility Study and Feasibility Study level overall). While further design work will be on-going on the Polovodovsky project as this progresses, which may change the forecast assumptions from those currently envisaged to some degree and therefore the reported Ore Reserve, SRK has undertaken a sensitivity analysis to the assumed production parameters, capital costs and operating costs and considers that this project demonstrates robust economic viability and positive cashflows justifying both its development and inclusion in the Ore Reserve statement. As only the first year of assumed production (i.e. minor ramp up quantities) in the current Business Plan falls within the first 10 year period (i.e. to 2029) and because SRK considers the level of work on this project is currently commensurate to a level of between a Pre-Feasibility Study and Feasibility Study assessment, SRK considers reporting this as a Probable Ore Reserve to be appropriate at this stage.
Uralkali plans to implement the Polovodovsky Project in two stages. The first stage includes the construction of two shafts, which is the most complex and time-consuming element of the project and which, based on the current project schedule, is expected to be completed by 2025. For the second stage of the project, Uralkali is considering two principal options, with a decision on which option to proceed with expected to be made by 2023. Option 1 comprises the construction of a new mine and related infrastructure but assumes that further processing of the extracted ore will be at one or more of Uralkali’s existing processing facilities. Option 2 comprises the construction of a new mining and processing complex inclusive of a new dedicated beneficiation plant at the Polovodovsky site. The Ore Reserves presented in Table 4-2 for Polovodovsky are reported on the assumption that this is developed under Option 2. Should this be the case then this is expected to be completed and the mine to have reached capacity by 2030 at which point the Uralkali Business Plan forecasts that the total annual production capacity of final product from all operations would increase to 17.8 million tonnes.
The completion of the Polovodovsky Project, including the timing and the results thereof (and along with the estimated increase in capacity) is subject to a number of factors, some of which may be outside of Uralkali’s control, for example, the timely completion of the work by contractors and subcontractors engaged, any geological complexities inherent in the implementation of the project and the general market condition. Accordingly, the exact timing and the effect of the implementation of the Polovodovsky Project may differ from that currently envisaged as noted above.
SRK can confirm that the Ore Reserve Statements presented in Table 4-2 and Table 4-3 below, for sylvinite and carnalite respectively, have been derived from the resource blocks provided to SRK and incorporate sufficient estimates for ore losses and dilution based on actual historical data. The break-even price required to support this statement over the period of the Business Plan is between USD90-115/tonne product produced, in January 2020 terms. This is calculated as the price required to cover all cash operating costs but excluding distribution costs (i.e. all on site mining, processing, maintenance, G&A operating costs and corporation tax).
|Summary All Mines|
SRK can also confirm that no Inferred Mineral Resources have been converted to Ore Reserves and notes that the Mineral Resource statements reported above are inclusive of, and therefore include, those Mineral Resources used to generate the Ore Reserves.
The large difference between SRK’s audited Mineral Resource statement and its audited Ore Reserve statement is partly a function of the relatively low mining recovery inherent in the Room and Pillar mining method employed and partly a function of the fact that SRK has limited the Ore Reserve statement to that portion of the Mineral Resource on which an appropriate level of technical work has been completed. In this case, this relates to the period covered by the next 20 years of Uralkali’s Business Plan (i.e. 2020 to 2039 inclusive).
Notwithstanding this, SRK considers that the actual life of some of the mines will extend beyond the current 20-year period covered by the Business Plan. In particular, at the currently assumed production rates, the following current operating mines have the potential to extend beyond that covered by the current 20-year Business Plan approximately as follows:
In terms of the Ust-Yayvinsky and Polovodovsky, projects under construction and development, at the currently assumed start-up dates and production rates, these have the potential to extend beyond the current 20-year Business Plan by approximately 15 years and 40 years respectively.
The overall audited total Ore Reserve statement as at 1 January 2020 presented above of 1,255.9Mt with an average grade of 16.5% K2O has a slightly higher total tonnage when compared to that presented as at 1 January 2019 of 1,123.7Mt with an average grade of 16.7% K2O (the previous SRK audited Ore Reserve Statement for the Uralkali Mineral Assets). While there are individual differences at each individual mine as a result of mining during 2019, extensions of, and revisions to, the forecast mined tonnages in the Uralkali 20-year Business Plan from 2020 to 2039 and revisions to the Mineral Resource statement, the principal reason for the overall increase is due to inclusion of Ore Reserves for Polovodovsky (some 131Mt at 15.2% K2O) for the first time in the current statement.
In summary, the following changes are noted between the 1 January 2019 and 1 January 2020 Ore Reserve statements:
While SRK notes that the forecast production assumptions at some of the mines and processing facilities are somewhat higher than that actually achieved at times in the last few years, we understand that this reduced production rate historically has primarily partly been driven by the prevailing market conditions rather than capacity constraints (with the exception of Solikamsk-2 due to the water inflow incident) at the various operations. SRK therefore assumes that the forecast increase in production levels at some of the facilities is warranted and justified based on Uralkali’s market expectations going forward.
SRK has reviewed the expansions and capital investment programmes proposed by Uralkali at a high level and considers the work proposed and the timeline assumed for the work to be completed to be generally reasonable and achievable and further considers the cost estimates to have been estimated to a sufficient level of accuracy to enable the reporting of Ore Reserves. Furthermore, SRK has undertaken a sensitivity assessment on the various key parameters and inputs to the Business Plan including the investment programmes costs in addition to assumed product prices and operating costs, which indicated that the Uralkali operations are robust to material changes in these.
Notwithstanding the above, SRK considers the timeframe for construction of the ‘new Solikamsk-2’ mine to be challenging and believes there is a risk this could be delayed. Should a delay in construction occur, it is however likely that Uralkali would be able to compensate for the resulting production shortfall by temporarily increasing production from other mines which have spare operating capacity. In some cases, the expansion projects are already underway and some of the increases to mining and processing capacities are assumed to be achieved by de-bottlenecking the existing facilities in addition to upgrading and adding new equipment (mining and processing) and processing lines.
SRK also notes that in order to achieve these increases in production, Uralkali will need to ensure that sufficient resources, management and staffing are available given that many of these expansions are taking place simultaneously and alongside major construction projects, such as that underway at UstYayvinsky, Solikamsk-2 and Solikamsk-3, and soon to be at Polovodovsky.
In SRK’s opinion the Mineral Resource and Ore Reserve statements as included herein are materially compliant with the JORC Code and are valid as at 1 January 2020. In accordance with additional reporting requirements of the JORC Code (2012), included in an Appendix to this report are the JORC checklist tables which include additional details and commentary on Sampling Techniques and Data, Estimation and Reporting of Mineral Resources and Estimation and Reporting of Ore Reserves.
SRK considers that should the Ore Reserves as presented herein be re-stated in accordance with the reporting requirements of the United States Securities and Exchange Commission (the “SEC”), specifically Securities Act Industry Guide 7 (“Industry Guide 7”), such Ore Reserves would not be materially different.
The Competent Person (as defined by the JORC Code) who has supervised the production of the Mineral Resource and Ore Reserve statements presented herein is Dr Mike Armitage C Geol., C Eng., who is a Corporate Consultant at SRK UK Consulting Ltd. Dr Armitage is a geologist with over 35 years’ experience in the mining industry and has been responsible for reporting of Mineral Resource and Ore Reserves on various properties internationally for almost 30 years.
Dr Armitage is a full time employee of SRK and has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he has undertaken to qualify as a Competent Person as defined by the JORC Code. He is a Member of the Institute of Materials, Minerals and Mining and a Fellow of the Geological Society which are ‘Recognised Overseas Professional Organisations’ included in a list promulgated by ASX from time to time. Dr Armitage has visited the Uralkali sites and operations a number of times between 2010 and most recently in 2018.
APPENDIX. JORC CHECKLIST TABLES
Section 1 Sampling Techniques and Data
|Criteria||JORC Code explanation||Commentary|
The Mineral Resource and Ore Reserve estimates
derived for Berezniki projects are primarily based on
surface exploration drilling undertaken between 1972
The Mineral Resource and Ore Reserve estimates derived for Solikamsk projects are primarily based on surface exploration drilling undertaken between 1925 and 2012.
Exploration was generally undertaken by State enterprises based in Solikamsk and Berezniki.
Further underground drilling is taking place at the operating mines and data from this is also used to update the Resource Estimates from time to time.
||The diamond drillholes drilled from surface and underground were drilled with a diameter of either 92 mm or 112 mm for surface holes and 50–76 mm for underground holes. In all cases holes were sampled at intervals between 10 cm and 6 m, averaging between 105 cm and 130 cm.|
|Drill sample recovery||
||Core recovery through the sylvinite horizons is reported to be good at an average of 84–85%, while the recovery through the carnalite horizon at Solikamsk 1 is reported to be 74%.|
Drill core samples are subject to the follow analysis:
For Solikamsk operating mines some 69,600 m of core from exploration holes have been logged.
|Sub-sampling techniques and sample preparation||
Core is split in half with one half retained for reference
and the other half crushed, milled and split under
the control of the Company geology department to
produce a small sample (100 g) for submission to the
laboratory for assay.
Assaying is carried out at an in house laboratory using classical wet chemistry techniques. Approximately 5–6% of samples are repeat assayed internally while a similar percentage are sent to an external laboratory for check assaying.
|Quality of assay data and laboratory tests||
||See comments above.|
|Verification of sampling and assaying||
See comments above.
Given that most of the quoted Mineral Resource and Ore Reserve relates to operating mines, verification is undertaken by means of annual reconciliations of actual production compared to the resource model. This informs the modifying factors used to derive the Ore Reserves (see Section 4).
|Location of data points||
Since 1939, topographic and geodesic surveys have
been undertaken to generate topographic maps scales
1:10,000 and 1:5,000.
Topographic and geodesic surveys are performed by specialist organisations under the instruction of Uralkali.
At present, the hole coordinate location is determined using satellite double-frequency and single-frequency instruments based on the State Geodesic Polygonal Grid Class 4, in static mode, within 20 minutes, under plane accuracy 5 mm and height accuracy 10 mm.
|Data spacing and distribution||
The general drill spacing of surface drill holes relative
to Russian Resource classification categories (see
Section 3 below) is as follows:
A Category: less than 1,000 m
B Category: between 1,000 m and up to 2,000 m
C1 Category: 2,000 m spacing
C2 Category: Up to 4,000 m spacing
A Category: less than 1,200 m
B Category: between 1,200 m and up to 2,400 m
C1 Category: 2,400 m spacing
C2 Category: Up to 4,000 m spacing
In addition to the above, underground drilling is undertaken at the operating mines on a general spacing of approximately 400 m.
|Orientation of data in relation to geological structure||
||All drill holes have been drilled vertically through a flat lying/gently dipping and undulating orebody, which SRK considers is appropriate.|
Core samples taken from surface holes are kept in
covered storage, until the State Examination is passed,
after which this is discarded.
Of the core material taken from underground holes, samples are prepared for chemical assays and physical and mechanic studies. Sample duplicates are kept in underground storages and are discarded after panels (blocks) are completely mined out.
|Audits or reviews||
The work undertaken by SRK represents an audit of
the Mineral Resource estimates derived by Uralkali.
SRK considers the sample collection and assaying
techniques to be appropriate for the style of geometry
and style of mineralisation and the data is suitable for
use in Mineral Resource and Ore Reserve estimation.
The Russian State authority RosGeoFond also reviews reports on resource re-estimations (via the 5GR statement submitted annually by Uralkali). The Russian State Reserves Commission (GKZ) also undertakes audits and reviews of the resources statements.
Section 3 Estimation and Reporting of Mineral Resources
|Criteria||JORC Code explanation||Commentary|
||SRK has reviewed the drill logs/assay results, plan view geological and resource block interpretations and resulting block listings and resource calculations and undertaken check calculations and found no material errors or omissions.|
||SRK has undertaken annual site visits between 2007 and 2015, 2018 and again in 2019 to the operating mines, processing plants and associated surface infrastructure facilities.|
There is high confidence in the geological
interpretation of the deposit based on various phases
of exploration and first hand observation from
underground mining operations.
The upper and lower limits of the mineralisation are well defined.
Each deposit is flat lying/gently dipping and with minor
Berezniki Mine 2 (Durmanski Licence Area). This licence extends for some 7.9 km north-south and 7.7 km east-west and covers an area of about 67 km2 . The average depth below surface of the seams mined is about 345 m and the average thickness between 2.5 m and 4.5 m. This is an operating mine
Berezniki Mine 4 (Bygelso-Troitski Licence). This licence extends for some 12 km north-south and 17 km east-west and covers an area of about 185 km2 . The average depth below surface of the seams mined is about 320 m and they have an average thickness of 3 m. This is an operating mine.
Ust-Yayvinsky Mine (Ust-Yayvinsky Licence). This is currently under construction. The licence extends up to some 10.8 km by 10.3 km and covers an area of about 84 km2 . The average depth below surface of the seams to be mined is about 390 m and they have an average thickness of between 3 m and 5 m.
Solikamsk Mine 1 (Solikamsk Lease Northern Part). This licence extends some 6.3 km by 6.3 km and covers an area of about 44 km2 . The depth below surface of the seams mined is between 260 m and 350 m with they have a thickness of between 3 m and 5.5 m. This is an operating mine
Solikamsk Mine 2 (Solikamsk Lease Southern Part). This licence extends some 8.6 km by 7.3 km and covers an area of about 50 km2 . The depth below surface of the seams mined is between 200 m and 300 m and they have a thickness of between 4.5 m and 6 m. This is an operating mine
Solikamsk Mine 3 (Novo-Solikamsk Licence). This licence extends some 16.4 km by 8.9 km and covers an area of about 110 km2 . The depth below surface of the seams mined is between 250 m and 380 m with they have a thickness of between 3 m and 4 m. This is an operating mine.
Polovodovsky This licence extends up to some 30 km by 29 km and covers an area of about 381 km2 . The average depth below surface of the seams is about 270 m and they have a thickness of between 3.4 m and 4.2 m. SRK considers the work undertaken on this project to be at an equivalent of between a Pre-Feasibility Study and Feasibility Study level of assessment overall and Uralkali has made a decision to construct this as a new mine and processing facility. Uralkali is considering two options for developing the project following construction of the shafts, with one assuming process of ore at existing facilities and the other assuming construction of dedicated facilities at the Polovodovsky site. A decision of which option to adopt is expected to be taken by Uralkali in 2023. Further studies are on-going by Uralkali.
|Estimation and modeling techniques||
Each seam and each mine is treated separately in
the resource estimation procedure. In each case the
horizons are first divided into blocks such that each
sub-divided block has reasonably consistent borehole
spacing within it; that is more intensely drilled areas
are subdivided from less intensely drilled areas. Each
resulting “resource block” is then evaluated separately
using the borehole intersections falling within that
Specifically, composited K2 O and MgO grades are derived for each borehole that intersected each block and mean grades are then derived for each block by calculating a length weighted average of all of these composited intersections. No top cuts are applied and all intersections are allocated the same weighting.
A separate plan is produced for each seam showing the results of the above calculations, the lateral extent of each sub-block, and any areas where the seams are not sufficiently developed. The aerial coverage of each block is then used with the mean thickness of the contained intersections to derive a block volume. The tonnage for each block is then derived from this by applying a specific gravity factor calculated by averaging all of the specific gravity determinations made from samples within that block.
The data for each resulting block is plotted on a Horizontal Longitudinal Projection (HLP). This shows the horizontal projection of the extent of each block as well as its grade and contained tonnage. The HLP also shows the block classification, this being effectively a reflection of the confidence in the estimated tonnes and grade.
SRK considers the Mineral Resource estimation methodology to be appropriate for the geometry and style of mineralisation and available data.
||The resource estimates are expressed on a dry tonnage basis and in-situ moisture content is not estimated.|
||Uralkali’s sylvinite Mineral Resource statements are based on a minimum seam thickness of 2 m and a minimum block grade which dependent on the mine varies between 11.4% and 15.5% K2 O. Uralkali’s carnalite Mineral Resource statements are based on a minimum seam thickness of 2 m and a minimum block grade of 7.2% MgO.|
|Mining factors or assumptions||
Five of the seven areas with a reported Mineral
Resource are underground mines (room and pillar)
which have been operating for a number of years.
Ust-Yayvinsky is under construction and studies have been undertaken to determine the economic viability of this. A Room and Pillar mining method is also planned for this mine. Refer to Section 4 for mining factors and assumptions for conversion to Ore Reserves.
SRK considers the Polovodovsky project is at an equivalent of between a Pre-Feasibility Study and Feasibility Study level of assessment overall. Uralkali has made a decision a decision to construct this as a new mine and processing facility albeit that further studies are on-going. A Room and Pillar mining method is also planned for this mine. Uralkali is considering two options for developing the project following construction of the shafts, with one assuming process of ore at existing facilities and the other assuming construction of dedicated facilities at the Polovodovsky site. A decision of which option to adopt is expected to be taken by Uralkali in 2023. Refer to Section 4 for mining factors and assumptions for conversion to Ore Reserves.
|Metallurgical factors or assumptions||
||Refer to comment above regarding mining factors and assumptions and also to Section 4 regarding Ore Reserves.|
|Environmental factors or assumptions||
||Existing infrastructure is in place at the operating mines including facilities to dispose of salt and slimes waste. Expansion of these facilities or construction of new ones will take place as required.|
||Bulk density measurements are taken from historical drill core samples and also actual measurements during the course of operations.|
SRK has reclassified the Russian classification
categories in accordance with the JORC Code.
Generally, SRK has reported those blocks classified as A or B per the Russian classification system as Measured, those blocks classified as C1 as Indicated and those blocks classed as C2 as Inferred.
SRK considers the quantity and quality of data that underpins the estimation and classification given to be appropriate for the categories used.
|Audits or reviews||
The work undertaken by SRK represents an audit of
the Mineral Resource estimates derived by Uralkali.
SRK considers the sample collection and assaying
techniques to be appropriate for the style of geometry
and style of mineralisation and the data is suitable for
use in producing Mineral Resource and Ore Reserve
The Russian State authority RosGeoFond also reviews reports on resources re-estimations (via the 5GR statement submitted annually by Uralkali). The Russian State Reserves Commission (GKZ) also undertakes audit and reviews of the resources statements.
|Discussion of relative accuracy/ confidence||
The Mineral Resource estimates have been prepared
and classified in accordance with the Russian system
of reporting resources and have been re-classified by
SRK using the terminology and guidelines of the JORC
The resource quantities should be considered as global estimates.
Five of the seven areas with Mineral Resources are operating mines and also have Ore Reserves declared. For these, Uralkali has undertaken annual reconciliations and SRK has used this information in deriving appropriate Modifying Factors for conversion to Ore Reserves (Refer to Section 4 below).
Section 4 Estimation and Reporting of Ore Reserves
|Criteria||JORC Code explanation||Commentary|
|Mineral Resource estimate for conversion to Ore Reserves||
The Mineral Resource estimates as presented in Table
3-3 and Table 3-4 of this report have been used as the
basis for conversion to Ore Reserves as presented in
Table 4-2 and Table 4-3 respectively.
The Mineral Resources presented are inclusive of those Mineral Resources converted to Ore Reserves.
SRK has restricted the Ore Reserves to the material planned to mined during the next 20 years.
||SRK undertook annual site visits between 2007 and 2015, then visited in 2018 and then again and 2019 to the operating mines, processing plants and associated surface infrastructure facilities.|
Berezniki Mines 2 and 4 and Solikamsk Mines 1, 2
and 3 are all operating mines and have a 20-year mine
plan. SRK has verified that the mine plans are both
technically and economically feasible for each mine
Ust-Yayvinsky is currently under construction and has been the subject of Feasibility Studies to determine the technical and economic viability of the mine which support the reporting of Ore Reserves.
SRK considers the Polovodovsky project is at an equivalent of between a Pre-Feasibility Study and Feasibility Study level of assessment overall. This work has demonstrated the technical and economic viability of the operation to a reasonable confidence level and Uralkali has already made a decision a decision to construct the shafts. Uralkali is considering two options for developing the project following construction of the shafts, with one assuming process of ore at existing facilities and the other assuming construction of dedicated facilities at the Polovodovsky site. A decision of which option to adopt is expected to be taken by Uralkali in 2023. Further studies are on-going by Uralkali.
||Refer to Section 3 above.|
|Mining factors or assumptions||
All mines are operated by room and pillar methods
using continuous miners which is a proven method
for this type of deposit and has been used at these
operations for many years.
The Modifying Factors applicable to the derivation of Ore Reserves comprise estimates for ore losses and planned and unplanned dilution associated with the separation of the ore and waste. This is normally a function of the orebody characteristics and mining methods selected. The Modifying Factors considered by SRK to be appropriate for the sylvinite and carnalite being mined at each of the assets are shown in Table 4-1 of this report. These have been derived by SRK from analysis of actual production data and from the studies undertaken on the non-operating assets (Ust-Yayvinsky and Polovodovsky).
No Inferred Mineral Resources are included within the Mine Plan.
Each mine requires access via shafts and is supported by appropriate surface infrastructure.
A new shaft complex is currently under construction for the Ust-Yayvinsky mine.
A new shaft complex and associated surface infrastructure is planned to be constructed for the Polovodovsky mine.
|Metallurgical factors or assumptions||
||There are 6 processing facilities in operation to
process the mined material from the various mining
operations. These utilise existing and proven
technology and have been operating for a number
of years. This gives a high level of confidence in the
assumed plant feed tonnages and recoveries to final
product assumed in the 20-year mine plans.
Mined material from Ust-Yayvinsky will be processed in one of the existing processing facilities located in Berezniki.
Uralkali is considering two options for developing the project following construction of the shafts, with one assuming process of ore at existing facilities and the other assuming construction of dedicated facilities at the Polovodovsky site. A decision of which option to adopt is expected to be taken by Uralkali in 2023.
||Waste in the form of salt residue and slimes waste are
disposed of in existing waste storage facilities and
have remaining capacity and/or can be expanded as
necessary. New facilities will be constructed for the
waste from the new Polovodovsky plant.
Uralkali has confirmed that all environmental permits currently required for all current and future operations are in place. This includes permits related to:
||The area around the Berezniki and Solikamsk mines and processing facilities are serviced with adequate power, water, transportation and accommodation infrastructure for existing and planned future operations.|
||Forecast operating costs are based on actual costs
incurred and adjusted as required.
Project capital costs are derived on a project by project basis in-house and by design institutes by a team of experienced engineers.
||For the purpose of the 20-year Business Plan, Uralkali assumes a long-term commodity price of some USD250/t (weighted average of domestic and export prices and net of distribution costs, i.e. rail, transshipment).|
||Detailed analysis on demand, supply and stocks for
the potash sector are widely available in the public
Uralkali has been successfully producing and selling potash products for a number of years.
||Uralkali has produced a 20-year Business Plan in USD
for the existing operations and the new Ust-Yayvinsky
mine and Polovodovsky mine and this has been
reviewed by SRK to confirm the economic viability of
Forecast operating costs are based on operating experience, current budgets and actual historical costs, adjusted as required. Project capital costs have been derived in-house and by design institutes.
||Uralkali’s social obligations are established by subsoil use terms and conditions (license agreements) to subsoil use licenses. Uralkali complies to the subsoil use terms and conditions established.|
|Other||To the extent relevant, the impact of the following on
the project and/or on the estimation and classification of
the Ore Reserves:
||The main technical risk to underground potash mines
is through water ingress. Uralkali has historically
closed two mines due to previous flooding incidents.
Berezniki Mine 1 operated from 1954 but flooded late
in 2006 while Berezniki 3 operated from 1973 until
flooding in 1986.
Solikamsk-2 experienced water ingress in November 2014 and this has been taken into account of in the current Business Plan. Extraction via the existing shaft infrastructure is to be temporarily suspended. A ‘new Solikamsk-2 mine’ is currently under construction.
Uralkali sells its product on both the domestic and international markets. The majority of sales are performed through off-take agreements with customers and these are typically renegotiated on an annual basis in terms of both quantity and price. Uralkali has an established marketing team that is responsible for all legal and marketing issues related to off-take agreements with customers.
The status of each Exploration and Mining Licence is summarised in Table 1-1 of this report. The licenses for the operating and development for some of the mines will expire within the term of the 20-year Business Plan, even though some of these mines are planned to continue operating beyond this time and have Mineral Resources and Ore Reserves to support this. SRK considers it reasonable to expect that Uralkali will obtain extensions to these licences in due course on application as long as it continues to fulfil its licence obligations.
||SRK’s audited Ore Reserve statement is confined to
those seams that are currently being considered for
mining within the next 20 years only.
Specifically, SRK has classed that material reported as a Measured Mineral Resource, and which is planned to be exploited within the first ten years of the Business Plan, as a Proved Ore Reserve; and that material reported as an Indicated Mineral Resource, and which is planned to be exploited within the Business Plan, and also that material reported as a Measured Mineral Resource, but which is planned to be mined during the following 10 years of the Business Plan, as a Probable Ore Reserve. The exception to this is the Polovodovsky project which is reported as a Probable Ore Reserve only.
|Audits or reviews||
||SRK has derived the Ore Reserve estimates presented in this report.|
|Discussion of relative accuracy/ confidence||
||SRK can confirm that the Ore Reserves presented in
Table 4-2 and Table 4-3 of this report, for sylvinite
and carnalite respectively, have been derived from
the resource blocks provided to SRK and incorporate
sufficient estimates for ore losses and dilution based
on actual historical data.
The break-even price required to support this statement is between USD90-115/tonne of product in January 2020 terms. This is calculated as the price required to cover all cash operating costs excluding distribution and including corporation tax. Including proposed capital investments over the period of the 20-year Business Plan gives a total break-even price of some USD125/tonne of product. Finally, SRK can also confirm that no Inferred Mineral Resources have been converted to Ore Reserves.
The large difference between SRK’s audited Mineral Resource statement and its audited Ore Reserve statement is partly a function of the relatively low mining recovery inherent in the Room and Pillar mining method employed. It is also partly a function of the fact that SRK has limited the Ore Reserve statement to that portion of the Mineral Resource on which an appropriate level of technical work has been completed. In this case this relates to the period covered by the remaining 20 years of Uralkali’s Business Plan. Notwithstanding this, SRK considers that the actual life of some of the mines will extend beyond the current 20-year period covered by the Business Plan.
|AHC||Administrative and household complex|
|Berezniki-1, 2, 3, 4||Uralkali’s potash production units in Berezniki|
|Bushel||A unit of dry measure in England (equal to 36.3 litres) and in the USA (equal to 35.2 litres); in agricultural commodity markets, bushel corresponds to a different weight, depending on the product type|
|CO2 -equivalent emission||The amount of carbon dioxide (CO2 ) emission that would cause the same integrated radiative forcing, over a given time horizon, as an emitted amount of a greenhouse gas (GHG) or a mixture of GHGs.|
|Halite waste||A by-product of processing of raw materials in the production of potash|
|GDR||Global depositary receipt|
|AGM||Annual General Meeting|
|The Group||PJSC Uralkali, its subsidiaries and affiliates|
|Carnallite||A hydrated potassium magnesium chloride with formula KMgCl3 х 6H2 O|
|KRI||Key risk indicator|
|KPI||Key performance indicator|
|CSR||Corporate social responsibility|
|LWS||Local warning system|
|VOCs||Volatile organic compounds|
|IFRS||International Financial Reporting Standards|
|Moscow Exchange||Public Joint-Stock Company "Moscow Exchange MICEX-RTS", Russia|
|Soil subsidence||A sinking or downward settling of a section of the ground's surface, which may occurred under the influence of underground mineral mining, shifts (horizontal and vertical) and deformations (inclination, curvature, tension, compression)|
|VAT||Value added tax|
|SRW||Scientific research work|
|HSE||Health, safety and environment|
|WDF||Waste disposal facility|
|RAFP||Russian Association of Fertilizer Producers|
|RAS||Russian Accounting Standards|
|CIS||Commonwealth of Independent States|
|Solikamsk-1, 2, 3||Uralkali’s potash production units in Solikamsk|
|SPP||Sylvinite processing plant|
|RMS||Risk Management System|
|RMICS||Risk Management and Internal Control System|
|Argus FMB||Fertiliser Market Bulletin, FMB Limited, UK|
|CFR||Cost and Freight, title transfers when goods pass the rail of the ship in the port of shipment|
|COSO ERM||Enterprise Risk Management Integrated Framework developed by the Committee of Sponsoring Organizations of the Treadway Commission|
|CRU||Fertiliser Market Bulletin, UK|
|CUSIP||Committee on Uniform Security Identification Procedures|
|Adjusted EBITDA||Adjusted EBITDA is calculated as operating profit plus amortisation of PP&E, intangible assets and right-of-use assets, depreciation of PP&E and non-recurring expenses|
|FAO||Food and Agriculture Organization|
|FCA||Free Carrier, title transfers when goods are loaded on the first carrier (railway carriages)|
|Fertecon||Fertiliser Economic Market Analysis and Consultancy, provider of fertiliser market information and analysis, based in UK|
|FIFR||Work related fatal injury frequency rate|
|FOB||Free On Board, title to goods transfers as soon as goods are loaded on the ship|
|GRI||Global Reporting Initiative|
|IFA||International Fertilizer Industry Association, France|
|IPNI||International Plant Nutrition Institute, USA|
|ISIN||International Securities Identification Number|
|JORC||Joint Ore Reserves Committee standards for public reporting on mineral resources and mineral (ore) reserves, Australia|
|K||Potassium, chemical element|
|K2 O||Potassium oxide|
|KCl||Potassium chloride (1 KCl = 1.61 K2 O)|
|LDR||Lost days rate|
|LTIFR||Lost time injury frequency rate|
|MSCI Russia||Morgan Stanley Capital International Russia Index|
|Scope 1||Scope 1 indicates direct greenhouse gas emissions from sources owned or controlled by the Company|
|Scope 2||Scope 2 indicates indirect greenhouse gas emissions caused by the production of electric power, heat or steam purchased by the Company|
Verification of PJSC Uralkali Integrated Report 2019
PJSC Uralkali Annual Report is approved by the decision of the Company’s Board of Directors of 18 March 2020 (the Board of Directors’ Meeting Minutes No. 376 dated 18 March 2020).
Data validity of the Annual Report is confirmed by the Revision Commission of PJSC Uralkali.