Rio Tinto eyes stake in potash miner Uralkali - paper

Wed Sep 8, 2010 2:57pm BST

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Polina Devitt and Eric Onstad

MOSCOW/LONDON (Reuters) - A team from Anglo-Australian miner Rio Tinto (RIO.L) (RIO.AX) is in Russia seeking a possible stake in potash producer Uralkali (URKA.MM), a newspaper reported, as competition for the crop nutrient heats up.

Rio's visit, reported by Vedomosti newspaper on Wednesday, comes as Potash Corp (POT.TO), the world's biggest fertiliser maker, fights off a $39 billion (25 billion pounds) hostile bid by BHP Billiton (BLT.L) (BHP.AX).

Both Rio Tinto (RIO.AX) and Canada's Potash Corp (POT.N) were considering buying into Uralkali, which has a market capitalisation of about $9.9 billion (6.3 billion pounds), sources told Reuters last month.

Vedomosti on Wednesday cited three sources close to Uralkali as saying the team from Rio Tinto had arrived in Russia. One of the sources said Rio was ready to buy 10 to 15 percent of shares in the Russian firm based on a valuation of $15 billion (9 billion pounds).

BHP Billiton's hostile bid for Potash Corp highlights the importance of the fertiliser component as crop production expands to meet growing demand from the world's rising population.

Shares in Uralkali were up 3.7 percent at 147.99 roubles in Moscow by 1344 GMT, outperforming the broader Micex index which was up 1.6 percent.

Rio Tinto shares were up 0.4 percent in London, in line with the FTSE 100 index .FTSE of top shares.

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Rio declined to comment on the newspaper report, but analysts say executives including Chief Executive Tom Albanese have recently said Rio is interested in potash.

"Rio Tinto does like potash according to Tom Albanese. And if the right opportunity presented itself they would consider it. But, again reiterated small to medium size acquisitions," UBS analyst Glyn Lawcock in Sydney said in a note dated August 25, following a round-table session Albanese held with analysts.

Analyst Charles Kernot at Evolution Securities said Rio Chief Financial Officer Guy Elliott made similar comments at an analyst roundtable in London this week.

Rio seems to have revived interest in potash since 2009, when it sold its undeveloped potash assets in Argentina and Canada to Brazil's Vale (VALE5.SA) for $850 million (549 million pounds).

"The fact that they sold it was based a lot more on their need for cash and probably the relatively long development time line (of the assets). It doesn't mean it's a commodity that's off the radar for them," Kernot said.

If Rio Tinto or another global miner bought into Uralkali, that could provide a potential exit strategy for the company's major shareholders, Renaissance Capital analyst Marina Alexeyenkova wrote in a note for clients.

Suleiman Kerimov, Russia's 19th-richest man and one of the three Russian tycoons who bought a combined stake of more than 53 percent in Uralkali, visited the company on Monday, a source close to Uralkali said.

But a Kerimov assistant in the Federation Council, the upper house of parliament where Kerimov serves as a legislator, said the mining and banking tycoon was in Moscow all week, Interfax news agency reported.

".. we believe Kerimov is a long-term investor in Uralkali, interested in the development of its business and consolidation of the sector," Alexeyenkova added.

(Reporting by Polina Devitt in Moscow; additional reporting by Eric Onstad in London; Writing by Toni Vorobyova, Melissa Akin; Editing by Sharon Lindores and Erica Billingham)

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