SRK Consulting (UK) Limited
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The Board of Directors
Joint Stock Company Uralkali
63 Pyatiletki Street
Berezniki
618426
Perm Territory
Russian Federation

Dear Sirs,

RE: Review of the Mineral Resources and Ore Reserves of Joint Stock Company Uralkali located in the Russian Federation

1. Introduction

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 2014) reported Mineral Resource and Ore Reserve statements for the mining assets of 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 resource and 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 2014. During 2011, Uralkali merged with JSC Silvinit (Silvinit) and the assets owned by Silvinit now fall under the ownership of Uralkali. SRK has restricted its assessment to the resources and reserves at Berezniki 2, Berezniki 4 and Ust-Yayvinsky (Uralkali’s original assets) and Solikamsk 1, Solikamsk 2, Solikamsk 3 and Polovodovsky (the former Silvinit assets now under the ownership of Uralkali).

Table 1 below summarises the current licence status for each of the assets noted above.

SRK has seen copies of the licences and confirms that the Mineral Resources and Ore Reserves stated in this report fall within the boundaries of such licences. SRK notes that the licences relating to Solikamsk 1, 2 and 3 were originally issued to Silvinit under registration numbers 01439, 01440 and 01441 respectively and were re-issued to Uralkali in October 2011 following the merger of the two companies.

Table 1: Uralkali Licence Summary

Deposit Registration No. Expiry Date Licence Type Area (ha)
Berezniki 2 01362 1st January 2021 Potassium salts and rock saltMining 6,725
Berezniki 4 01363 1st January 2018 Potassium salts, magnesium salts and rock saltMining 18,360
Ust-Yayvinsky 12328 15th April 2024 Potassium and magnesium saltExploration and Mining Not stated
Solikamsk 1 15231 1st January 2018 Potassium salts, magnesium salts and rock saltMining 4,447
Solikamsk 2 15232 1st January 2021 Potassium salts and rock saltMining 5,038
Solikamsk 3 15233 1st January 2018 Potassium salts and rock saltMining 11,001
Polovodovsky 02351 1st July 2028 Potassium salts and rock saltExploration and Mining 27,100

The licenses for all 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.

2. Quantity and quality of data

2.1 Original Uralkali Operations

The resource and reserve estimates derived by Uralkali 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 in 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 1km, to the B category where the drillhole spacing is between 1 and 2km and to the C1 category where the drillhole spacing is 2km. Areas drilled at a larger spacing than this, up to a 4km spacing, have been assigned to the C2 category, although only a very small proportion of Uralkali’s resources have been categorised as such.

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 drillholes, whether drilled from surface or underground, are sampled at intervals of at least 16cm and the samples are crushed and milled under the control of the geology department to produce an approximate 100 g sample prior to submission to the laboratory.

Assaying is carried out at an in-house laboratory. Approximately 5-6% of samples are repeat assayed internally while a similar percentage are sent to an external laboratory for check assaying. All assaying is by classical wet chemistry techniques.

2.2 Former Silvinit Operations

These deposits were discovered in 1925 and each has been subjected to a number of exploration and drilling campaigns as follows:

  • Solikamsk-1 — 7 phases between 1925 and 1990 (including exploration outside the current mining lease);
  • Solikamsk-2 — 7 phases between 1925 and 2002 (including exploration outside the current mining lease); and
  • Solikamsk-3 — 7 phases between 1957 and 1975;

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 is in the process of being updated from 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:

  • Solikamsk-1 — 53 holes for some 18,600 m;
  • Solikamsk-2 — 192 holes for some 5,700 m (of which some 95 are from underground);
  • Solikamsk-3 — 117 holes for some 45,250 m; and
  • Polovodovsky — 152 holes for some 50,800 m up to 1975 and 36 holes for some 12,650m between 2009 and 2012.

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 carnallite horizon at Solikamsk 1 is reported to be 74%.

Core is 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 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, 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 1,200m, to the B category where the drillhole spacing is up to 2,400m and to the C1 category where the drillhole spacing is up to 4,000 m. Areas drilled at a larger spacing than this, but on average with a spacing of no less than 4,000 m have been assigned to the C2 category. Each mine is drilled on an approximate 2.4km by 2.4km 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 100m by 300m or in cases up to 400 m by 800 m. As is the case with Uralkali, Silvinit does not upgrade the estimation or categorisation of its resources 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 relevant.

3. Resource estimation

3.1 Introduction

The most up to date resource statements produced by Uralkali are those derived for the annual 5GR reports produced earlier this year which give the status as of 1 January 2014. The completion of 5GR reports is a statutory requirement. These estimates were produced using standard classical Russian techniques and are essentially based on calculations made in previous years adjusted for mining during 2013. This section therefore comments primarily on these statements.

The first resource estimates undertaken and approved for each of the former Silvinit operations were as follows:

  • Solikamsk 1 and 2 — 1952;
  • Solikamsk 3 — 1962; and
  • Polovodovsky — 1975

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 a portion of the original estimate produced in 1975 has been updated during 2013. The resource estimate on the remaining area of Polovodovksy is also being updated and is due for completion during Q2 2014.

3.2 Estimation Methodology

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.

3.3 Uralkali Resource Statements

Table 2 below summarises SRK’s understanding of the sylvinite resource statements prepared by Uralkali to reflect the status of its assets as of 1 January 2014. Uralkali’s statements are based on a minimum seam thickness of 2m and a minimum block grade which dependent on the mine varies between 11.4% K2O (Polovodovsky) and 15.5% K2O (Ust-Yayvinsky). Table 3 below summarises SRK’s understanding of the carnalite resource statement prepared by Uralkali to reflect the status of its assets as of 1 January 2014. 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.

Table 2: Uralkali Sylvinite Mineral Resource Statement at 1 January 2014

Category Tonnage (Mt) K2O (%) K2O (Mt)
Berezniki 2
A 7.9 33.5 2.6
B 52.7 22.9 12.1
C1 213.1 24.9 53.0
A+B+C1 273.7 24.8 67.7
C2
Berezniki 4
A 285.5 21.6 61.8
B 424.2 22.5 95.6
C1 1,013.7 20.6 208.9
A+B+C1 1,723.4 21.3 366.4
C2 310.3 26.8 83.3
Ust‐Yayvinsky
A 169.9 19.0 32.3
B 311.0 19.8 61.7
C1 809.7 19.8 160.4
A+B+C1 1,290.6 19.7 254.4
C2
Solikamsk 1
A 105.4 18.0 18.9
B 14.2 15.4 2.2
C1 197.1 16.9 33.3
A+B+C1 316.7 17.2 54.5
C2
Solikamsk 2
A 113.7 19.3 21.9
B 80.5 13.9 11.2
C1 848.0 17.8 150.6
A+B+C1 1,042.1 17.6 183.8
C2
Solikamsk 3
A 101.9 17.5 17.8
B 208.6 17.0 35.4
C1 1,047.9 17.2 180.3
A+B+C1 1,358.4 17.2 233.5
C2
Polovodovsky
A
B 504.7 16.7 84.3
C1 1,696.8 17.3 293.5
A+B+C1 2,201.5 17.2 377.8
C2 260.8 15.3 39.8
Summary All Mines
A 784.2 19.8 155.5
B 1,596.0 18.9 302.4
C1 5,826.3 18.5 1,080.1
A+B+C1 8,206.5 18.7 1,538.0
C2 571.1 21.6 123.1

Table 3: Uralkali Carnalite Mineral Resource Statement at 1 January 2014

Category Tonnage (Mt) MgO (%) MgO (Mt)
Solikamsk 1
A 117.7 10.0 11.8
B 19.6 8.8 1.7
C1
A+B+C1 137.3 9.9 13.6
C2

3.4 SRK Audited Mineral Resource Statements

Table 4 and 5 below present SRK’s audited Mineral Resource statement 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 therefore 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 only.

Table 4: SRK Audited Sylvinite Mineral Resource Statement at 1 January 2014

Category Tonnage (Mt) K2O (%) K2O (Mt)
Berezniki 2
Measured 60.6 24.3 14.7
Indicated 213.1 24.9 53.0
Measured + Indicated 273.7 24.8 67.7
Inferred
Berezniki 4
Measured 709.7 22.2 157.4
Indicated 1,013.7 20.6 208.9
Measured + Indicated 1,723.4 21.3 366.4
Inferred 310.3 26.8 83.3
Ust‐Yayvinsky
Measured 480.9 19.5 94.0
Indicated 809.7 19.8 160.4
Measured + Indicated 1,290.6 19.7 254.4
Inferred
Solikamsk 1
Measured 119.6 17.7 21.1
Indicated 197.1 16.9 33.3
Measured + Indicated 316.7 17.2 54.5
Inferred
Solikamsk 2
Measured 194.2 17.1 33.1
Indicated 848.0 17.8 150.6
Measured + Indicated 1,042.1 17.6 183.8
Inferred
Solikamsk 3
Measured 310.5 17.1 53.2
Indicated 1,047.9 17.2 180.3
Measured + Indicated 1,358.4 17.2 233.5
Inferred
Polovodovsky
Measured 504.7 16.7 84.3
Indicated 1,696.8 17.3 293.5
Measured + Indicated 2,201.5 17.2 377.8
Inferred 260.8 15.3 39.8
Summary All Mines
Measured 2,380.2 19.2 457.9
Indicated 5,826.3 18.5 1,080.1
Measured + Indicated 8,206.5 18.7 1,538.0
Inferred 571.1 21.6 123.1

Table 5: SRK Audited Carnalite Mineral Resource Statement at 1 January 2014

Category Tonnage (Mt) MgO (%) MgO (Mt)
Solikamsk 1
Measured 137.3 9.9 13.6
Indicated
Measured + Indicated 137.3 9.9 13.6
Inferred

3.5 SRK Comments

SRK has reviewed the estimation methodology used by Uralkali to derive the above 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 2014.

The audited Mineral Resource statement as at 1 January 2014 presented above is different to that presented as at 1 January 2013. While this is partly a function of mining activity during 2013 and some re-assessments completed during the year by Uralkali, there are a number of significant changes to the Mineral Resource statement that have occurred during 2013 and these are summarised as follows:

  • A portion of Polovodovsky, in the southern area of the licence, has been re-estimated during 2013 (termed Polovodovsky 1st Stage by Uralkali). The net effect of this re-estimation has been to reduce the total Polovodovsky Mineral Resource by some 214Mt. The primary reason for this reduction is the exclusion of blocks in the southernmost part of the re-estimated area, which had been included in the original estimate, but which are in an area that has now been designated a ‘sanitary protection zone’ due to the presence of an underground aquifer above the mineralised horizons that is important for the town of Berezniki. Uralkali believes it would not be permitted to mine beneath this area for the foreseeable future and as such it has been removed from the Mineral Resource Estimate and SRK agrees with this approach.
  • As part of long term mine planning considerations Uralkali has also revised the mine boundaries at the Solikamsk mines and re-allocated the resources as follows:
    • A total of some 111Mt has been re-allocated from the northwestern part of Solikamsk-3 to the neighbouring Solikamsk-1 as this area is now planned to be accessed for mining in the future from Solikamsk-1;
    • A total of some 575Mt has been re-allocated from the southern part of Solikamsk-3 to the neighbouring Solikamsk-2 as this area is now planned to be accessed for mining in the future from Solikamsk-2; and
    • A total of some 665Mt has been re-allocated from the re-estimated area of Polovodovsky noted above (Polovodovsky 1st Stage) to the neighbouring Solikamsk-3 as this area is now planned to be accessed for mining in the future from Solikamsk-3.
  • The net effect on the total Mineral Resources for the Solkamsk licences for the above boundary changes is zero, however, this has resulted in the Mineral Resources at Solikamsk-1 and Solikamsk-2 increasing by an amount equal to the corresponding decrease from Solikamsk-3, and Solikamsk-3 increasing by an amount equal to the corresponding decrease from Polovodovsky.
  • A portion of the Solikamsk-1 carnallite resource has been removed from the estimate during the year (some 27Mt) for safety reasons and specifically due to the presence of infrastructure (mainly railway lines) above these blocks at surface. SRK agrees that it is appropriate to remove this material from the Mineral Resource statements as there is little potential for it to be extracted in the foreseeable future.

SRK has reviewed all the above changes and considers these to be reasonable and can confirm that these changes have been reflected appropriately in the above Mineral Resource Statements.

4. Ore reserve estimation

4.1 Introduction

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 gained during its site visit 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 from 2014 to 2033. The Business Plan assumes that Uralkali will successfully re-negotiate its Licences and the Ore Reserve Statements therefore also assume this will be the case.

4.2 Modifying Factors

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 6 below. The Tonnage Conversion Factor takes into account both the percentage of material left behind in pillars and the amount of dilution 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 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 six to eight years that SRK has reviewed to derive 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 six to eight 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.

Table 6: SRK Modifying Factors

Description Tonnage Conversion Factor
(%)
Grade Conversion Factor
(%)
Solikamsk 1 (sylvinite) 39% 93%
Solikamsk 1 (carnallite) 31% 97%
Solikamsk 2 47% 87%
Solikamsk 3 52% 87%
Berezniki 2 37% 82%
Berezniki 4 46% 85%
Ust-Yayvinsky 37% 85%

4.3 SRK Audited Reserve Statements

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 2013 and a revised production forecast for 2014 to 2033 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 following 10 years of the Business Plan, as a Probable Ore Reserve.

SRK’s Ore Reserve statement does not include any material from Polovodovsky, however, it does include an Ore Reserve for Ust-Yayvinsky which is currently under construction. In the case of Polovodovsky, the feasibility studies are at a relatively early stage and are on-going. In the case of Ust-Yayvinsky, however, the work 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 commenced. SRK sent a technical team to Berezniki during 2012 to review the Ust-Yayvinsky documentation and hold discussions with Uralkali personnel, and visited the shaft construction sites as part of this latest review, and considers that sufficient technical and economic assessment has been undertaken to enable Ore Reserves to be reported for Ust-Yayvinsky. SRK has therefore derived Ore Reserve estimates for Ust-Yayvibsky using information obtained from Uralkali but also taking cognisance of the historical information regarding the mining losses and dilution experienced during mining to date at Uralkali’s existing operations.

SRK can confirm that the Ore Reserve Statements presented in Table 7 and 8 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 USD92/tonne in January 2014 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 and G&A operating costs).

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.

Table 7: SRK Audited Sylvinite Ore Reserve Statement at 1 January 2014

Category Tonnage (Mt) K2O (%) K2O (Mt)
Berezniki 2
Proven 22.4 19.9 4.5
Probable 77.5 20.5 15.9
Total 99.9 20.3 20.3
Berezniki 4
Proven 173.9 18.9 32.9
Probable 162.3 18.7 30.4
Total 336.2 18.8 63.3
Ust‐Yayvinsky
Proven 32.0 16.6 5.3
Probable 105.3 16.6 17.5
Total 137.3 16.6 22.8
Solikamsk 1
Proven 45.8 16.4 7.5
Probable 46.1 15.7 7.3
Total 91.9 16.1 14.8
Solikamsk 2
Proven 91.3 15.0 13.7
Probable 132.2 15.6 20.7
Total 223.4 15.4 34.4
Solikamsk 3
Proven 127.1 14.9 19.0
Probable 132.7 15.0 19.9
Total 259.8 14.9 38.8
Polovodovsky
Proven
Probable
Total
Summary All Mines
Proven 492.4 16.8 82.8
Probable 656.0 17.0 111.5
Total 1,148.5 16.9 194.4

Table 8: SRK Audited Carnalite Ore Reserve Statement at 1 January 2014

Category Tonnage (Mt) MgO (%) MgO (Mt)
Solikamsk 1
Proven 12.9 9.6 1.2
Probable
Total 12.9 9.6 1.2

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. In particular, at the current assumed expanded production rates the following mines have the potential to extend beyond that covered by the current 20 year Business Plan approximately as follows:

  • Berezniki 4: 21 years
  • Solikamsk 1: 7 years
  • Solikamsk 2: 24 years
  • Solikamsk 3: 33 years

Furthermore, Ust-Yayvsinky is assumed to commence production in 2020, and while it is therefore operational over 14 years of the 20 years covered by the Business Plan, at the currently assumed production rates it has the potential to continue production for an additional 18 years beyond this.

4.4 SRK Comments

The audited Ore Reserve statement as at 1 January 2014 presented above is different to that presented as at 1 January 2013 as a result of mining during 2013, the extension of, and revisions to, the forecast mined tonnages in the Uralkali Business Plan to 2033 and the revisions to the Mineral Resource statements commented upon earlier in this report.

The most significant change in the Ore Reserve compared to the prior year statement is a reduction of some 123Mt at Solikamsk-3. The primary reason for this is that the prior year Business Plan assumed that the planned second stage expansion project at this mine and processing facility would be implemented by 2018 which would have increased the mining and processing capacity to some 21Mtpa from that point. However, due to strategic and marketing decisions made by Uralkali management, the second stage expansion project has been postponed for the foreseeable future and has therefore been removed from the Business Plan. As such Solikamsk-3 is expected to reach a capacity of some 13Mtpa from 2017 (following completion of the current first stage expansion project) resulting in the overall reduction in the total tonnage planned to be mined by the 20 year period of the current Business Plan compared to the previous plan, which correspondingly reduces the Ore Reserve estimate for this mine.

The 20 year Business Plan includes a number of expansions to both the Uralkali and former Silvinit operations (the capital costs of which have been taken into account in Uralkali’s Business Plan and which SRK has taken account of in determining the economics of the operations) and as such the Ore Reserve reported here takes into account the additional amount of material planned to be mined over this period. SRK notes that the forecast production assumptions are somewhat higher than that actually achieved in the last couple of years but understands that this reduced production rate has primarily been driven by the prevailing market conditions rather than capacity constraints at the various operations. SRK therefore assumes that the forecast increase in production levels at each of the facilities is warranted and justified based on Uralkali’s market expectations going forward.

SRK has reviewed the expansions proposed by Uralkali and considers the work proposed and the timeline assumed for the work to be completed to be reasonable and achievable. Further, while SRK has not reviewed the capital cost estimates in detail, SRK is confident that these are justified based on Uralkali’s current price forecasts. In some cases the expansion projects are already underway and some of the increases to processing capacities are assumed to be achieved by debottlenecking the existing facilities in addition to upgrading and adding new equipment and processing lines. SRK 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 forecast to take place simultaneously.

5. Concluding remarks

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 2014. In accordance with additional reporting requirements of the latest version 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. SRK however notes that certain terms as used in this letter, such as “resources” are prohibited when reporting in accordance with Industry Guide 7.

Mineral Resources Review – JORC Checklist Tables

Criteria JORC Code explanation Commentary
Section 1 – Sampling Techniques and Data
Sampling techniques
  • Nature and quality of sampling (e.g. cut channels, random chips, or specific specialised industry standard measurement tools appropriate to the minerals under investigation, such as down hole gamma sondes, or handheld XRF instruments, etc.). These examples should not be taken as limiting the broad meaning of sampling.
  • Include reference to measures taken to ensure sample representivity and the appropriate calibration of any measurement tools or systems used.
  • Aspects of the determination of mineralisation that are Material to the Public Report.
  • In cases where ‘industry standard’ work has been done this would be relatively simple (e.g. ‘reverse circulation drilling was used to obtain 1 m samples from which 3 kg was pulverised to produce a 30 g charge for fire assay’). In other cases more explanation may be required, such as where there is coarse gold that has inherent sampling problems. Unusual commodities or mineralisation types (e.g. submarine nodules) may warrant disclosure of detailed information.

The Mineral Resource and Ore Reserve estimates derived for Berezniki projects are primarily based on surface exploration drilling undertaken between 1972 and 1998.

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.

Drilling techniques
  • Drill type (e.g. core, reverse circulation, open-hole hammer, rotary air blast, auger, Bangka, sonic, etc.) and details (e.g. core diameter, triple or standard tube, depth of diamond tails, face-sampling bit or other type, whether core is oriented and if so, by what method, etc.).

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
  • Method of recording and assessing core and chip sample recoveries and results assessed.
  • Measures taken to maximise sample recovery and ensure representative nature of the samples.
  • Whether a relationship exists between sample recovery and grade and whether sample bias may have occurred due to preferential loss/gain of fine/coarse material.

Core recovery through the sylvinite horizons is reported to be good at an average of 84-85%, while the recovery through the carnallite horizon at Solikamsk 1 is reported to be 74%.

Logging
  • Whether core and chip samples have been geologically and geotechnically logged to a level of detail to support appropriate Mineral Resource estimation, mining studies and metallurgical studies.
  • Whether logging is qualitative or quantitative in nature. Core (or costean, channel, etc.) photography.
  • The total length and percentage of the relevant intersections logged.

Drill core samples are subject to the follow analysis:

  • detailed description based on visual identification of units, seams and layers;
  • field identification of mineral and lithological composition;
  • photography (recent years);
  • assaying (see below);
  • geophysical logging (for all holes since 1952).

During drilling from the surface, the following geophysical analysis is undertaken:

  • gamma-logging;
  • neutron gamma-logging;
  • caliper logging;
  • inclinometer survey;
  • electric logging;
  • resistivity metering;
  • thermometric measurements;
  • gas logging.

For Berezniki operating mines some 76,600m of core from exploration holes have been logged.

For Solikamsk operating mines some 69,600m of core from exploration holes have been logged.

Sub-sampling techniques and sample preparation
  • If core, whether cut or sawn and whether quarter, half or all core taken.
  • If non-core, whether riffled, tube sampled, rotary split, etc. and whether sampled wet or dry.
  • For all sample types, the nature, quality and appropriateness of the sample preparation technique.
  • Quality control procedures adopted for all sub-sampling stages to maximise representivity of samples.
  • Measures taken to ensure that the sampling is representative of the in situ material collected, including for instance results for field duplicate/second-half sampling.
  • Whether sample sizes are appropriate to the grain size of the material being sampled.

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
  • The nature, quality and appropriateness of the assaying and laboratory procedures used and whether the technique is considered partial or total.
  • For geophysical tools, spectrometers, handheld XRF instruments, etc., the parameters used in determining the analysis including instrument make and model, reading times, calibrations factors applied and their derivation, etc.
  • Nature of quality control procedures adopted (e.g. standards, blanks, duplicates, external laboratory checks) and whether acceptable levels of accuracy (i.e. lack of bias) and precision have been established.
See comments above.
Verification of sampling and assaying
  • The verification of significant intersections by either independent or alternative company personnel.
  • The use of twinned holes.
  • Documentation of primary data, data entry procedures, data verification, data storage (physical and electronic) protocols.
  • Discuss any adjustment to assay data.

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
  • Accuracy and quality of surveys used to locate drill holes (collar and down-hole surveys), trenches, mine workings and other locations used in Mineral Resource estimation.
  • Specification of the grid system used.
  • Quality and adequacy of topographic control.

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 performed 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
  • Data spacing for reporting of Exploration Results.
  • Whether the data spacing and distribution is sufficient to establish the degree of geological and grade continuity appropriate for the Mineral Resource and Ore Reserve estimation procedure(s) and classifications applied.
  • Whether sample compositing has been applied.

The general drill spacing of surface drill holes relative to Russian Resource classification categories (see Section 3 below) is as follows:

Berezniki Mines

A Category: less than 1,000m
B Category: between 1,000m and up to 2,000m
C1 Category: between 2,000m and 4,000m
C2 Category: ~4,000m (or greater) spacing

Solikamsk Mines

A Category: less than 1,200m
B Category: between 1,200m and up to 2,400m
C1 Category: between 2,400m and 4,000m
C2 Category: ~4,000m (or greater) spacing

In addition to the above, underground drilling is undertaken at the operating mine on a general spacing of approximately 400m.

Orientation of data in relation to geological structure
  • Whether the orientation of sampling achieves unbiased sampling of possible structures and the extent to which this is known, considering the deposit type.
  • If the relationship between the drilling orientation and the orientation of key mineralised structures is considered to have introduced a sampling bias, this should be assessed and reported if material.

All drill holes have been drilled vertically through a flat lying gently dipping and undulating orebody, which SRK considers is appropriate.

Sample security
  • The measures taken to ensure sample security.

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 results of any audits or reviews of sampling techniques and data.

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 the Mineral Resource and Ore Reserve estimates.

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 2 – Estimation and Reporting of Mineral Resources
Database integrity
  • Measures taken to ensure that data has not been corrupted by, for example, transcription or keying errors, between its initial collection and its use for Mineral Resource estimation purposes.
  • Data validation procedures used.

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.

Site visits
  • Comment on any site visits undertaken by the Competent Person and the outcome of those visits.
  • If no site visits have been undertaken indicate why this is the case.

SRK has undertaken an annual site visit since 2007 to the operating mines, processing plants and associated surface infrastructure facilities.

Geological interpretation
  • Confidence in (or conversely, the uncertainty of) the geological interpretation of the mineral deposit.
  • Nature of the data used and of any assumptions made.
  • The effect, if any, of alternative interpretations on Mineral Resource estimation.
  • The use of geology in guiding and controlling Mineral Resource estimation.
  • The factors affecting continuity both of grade and geology.

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.

Dimensions
  • The extent and variability of the Mineral Resource expressed as length (along strike or otherwise), plan width, and depth below surface to the upper and lower limits of the Mineral Resource.

Each deposit is flat lying/gently dipping and with minor undulations:

Berezniki Mine 2 (Durmanski Licence Area). This licence extends some 7.9km north-south and 7.7km east-west and covers an area of about 67km2. The average depth of the two seams mined is about 345m and the average thickness between 2.5m and 4.5m.

Berezniki Mine 4 (Bygelso-Troitski Licence). This licence extends some 12km north-south and 17km east-west and covers an area of about 183km2. The average depth of the two seams mined is about 320m and they have an average thickness of 3m.

Ust-Yayvinksy Mine (Ust-Yayvinsky Licence). This is currently under construction. The licence extends up to some 10.8km by 10.3km and covers an area of about 81km2. The average depth of the two seams to be mined is about 390m and they have an average thickness of between 3 and 5m.

Solikamsk Mine 1 (Solikamsk Lease Northern Part). This licence extends some 6.3km by 6.3km and covers an area of about 45km2. The depth of the two seams mined is between 260 and 350m with they have a thickness of between 3 and 5.5m.

Solikamsk Mine 2 (Solikamsk Lease Southern Part). This licence extends some 8.6km by 7.3km and covers an area of about 50km2. The depth of the two seams mined is between 200 and 300m and they have a thickness of between 4.5 and 6m.

Solikamsk Mine 3 (Novo-Solikamsk Licence). This licence extends some 16.4km by 8.9km and covers an area of about 110km2. The depth of the two seams mined is between 250 and 380m with they have a thickness of between 3 and 4m.

Polovodovsky. This licence extends up to some 30km by 29km and covers an area of about 271km2. The average depth of the two seams is about 270m and they have a thickness of between 3.4-4.2m. The Polovodovsky licence contains Mineral Resources only while all other licences have declared Ore Reserves (see Section 4 below).

Estimation and modeling techniques
  • The nature and appropriateness of the estimation technique(s) applied and key assumptions, including treatment of extreme grade values, domaining, interpolation parameters and maximum distance of extrapolation from data points. If a computer assisted estimation method was chosen include a description of computer software and parameters used.
  • The availability of check estimates, previous estimates and/or mine production records and whether the Mineral Resource estimate takes appropriate account of such data.
  • The assumptions made regarding recovery of by-products.
  • Estimation of deleterious elements or other non-grade variables of economic significance (e.g. sulphur for acid mine drainage characterisation).
  • In the case of block model interpolation, the block size in relation to the average sample spacing and the search employed.
  • Any assumptions behind modelling of selective mining units.
  • Any assumptions about correlation between variables.
  • Description of how the geological interpretation was used to control the resource estimates.
  • Discussion of basis for using or not using grade cutting or capping.
  • The process of validation, the checking process used, the comparison of model data to drill hole data, and use of reconciliation data if available.

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 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.

Moisture
  • Whether the tonnages are estimated on a dry basis or with natural moisture, and the method of determination of the moisture content.

The resource estimates are expressed on a dry tonnage basis and in-situ moisture content is not estimated.

Cut-off parameters
  • The basis of the adopted cut-off grade(s) or quality parameters applied.

Uralkali’s sylvinite Mineral Resource statements are based on a minimum seam thickness of 2m and a minimum block grade which dependent on the mine varies between 11.4% and 15.5% K2O. Uralkali’s carnalite Mineral Resource statements are based on a minimum seam thickness of 2m and a minimum block grade of 7.2% MgO.

Mining factors or assumptions
  • Assumptions made regarding possible mining methods, minimum mining dimensions and internal (or, if applicable, external) mining dilution. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential mining methods, but the assumptions made regarding mining methods and parameters when estimating Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the mining assumptions made.

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.

Polovodovsky is currently reported as a Mineral Resource only and feasibility studies are underway for the development of this.

Metallurgical factors or assumptions
  • The basis for assumptions or predictions regarding metallurgical amenability. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider potential metallurgical methods, but the assumptions regarding metallurgical treatment processes and parameters made when reporting Mineral Resources may not always be rigorous. Where this is the case, this should be reported with an explanation of the basis of the metallurgical assumptions made.

Refer to comment above regarding mining factors and assumptions and also to Section 4 regarding Ore Reserves.

Environmental factors or assumptions
  • Assumptions made regarding possible waste and process residue disposal options. It is always necessary as part of the process of determining reasonable prospects for eventual economic extraction to consider the potential environmental impacts of the mining and processing operation. While at this stage the determination of potential environmental impacts, particularly for a greenfields project, may not always be well advanced, the status of early consideration of these potential environmental impacts should be reported. Where these aspects have not been considered this should be reported with an explanation of the environmental assumptions made.

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 can take place as required.

Bulk density
  • Whether assumed or determined. If assumed, the basis for the assumptions. If determined, the method used, whether wet or dry, the frequency of the measurements, the nature, size and representativeness of the samples.
  • The bulk density for bulk material must have been measured by methods that adequately account for void spaces (vugs, porosity, etc.), moisture and differences between rock and alteration zones within the deposit.
  • Discuss assumptions for bulk density estimates used in the evaluation process of the different materials.

Bulk density measurements are taken from historical drill core samples and also actual measurements during the course of operations.

Classification
  • The basis for the classification of the Mineral Resources into varying confidence categories.
  • Whether appropriate account has been taken of all relevant factors (i.e. relative confidence in tonnage/grade estimations, reliability of input data, confidence in continuity of geology and metal values, quality, quantity and distribution of the data).
  • Whether the result appropriately reflects the Competent Person’s view of the deposit.

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 results of any audits or reviews of Mineral Resource estimates.

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 the Mineral Resource and Ore Reserve estimates.

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
  • Where appropriate a statement of the relative accuracy and confidence level in the Mineral Resource estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the resource within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors that could affect the relative accuracy and confidence of the estimate.
  • The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation. Documentation should include assumptions made and the procedures used.
  • These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.

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 Code (2012).

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. Uralkali undertakes annual reconciliations and SRK has used this information in deriving appropriate Modifying Factors for conversion to Ore Reserves (Refer to Section 4 below).

Section 3 – Estimation and Reporting of Ore Reserves
Mineral Resource estimate for conversion to Ore Reserves
  • Description of the Mineral Resource estimate used as a basis for the conversion to an Ore Reserve.
  • Clear statement as to whether the Mineral Resources are reported additional to, or inclusive of, the Ore Reserves.

The Mineral Resource estimates as presented in Table 4 and 5 of this report have been used as the basis for conversion to Ore Reserves as presented in Table 7 and 8 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.

Site visits
  • Comment on any site visits undertaken by the Competent Person and the outcome of those visits.
  • If no site visits have been undertaken indicate why this is the case.

SRK has undertaken an annual site visit since 2007 to the operating mines, processing plants and associated surface infrastructure facilities.

Study status
  • The type and level of study undertaken to enable Mineral Resources to be converted to Ore Reserves.
  • The Code requires that a study to at least Pre-Feasibility Study level has been undertaken to convert Mineral Resources to Ore Reserves. Such studies will have been carried out and will have determined a mine plan that is technically achievable and economically viable, and that material Modifying Factors have been considered.

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 this.

No Ore Reserves are declared for the Polovodovsky site.

Cut-off parameters
  • The basis of the cut-off grade(s) or quality parameters applied.

Refer to Section 3 above.

Mining factors or assumptions
  • The method and assumptions used as reported in the Pre-Feasibility or Feasibility Study to convert the Mineral Resource to an Ore Reserve (i.e. either by application of appropriate factors by optimisation or by preliminary or detailed design).
  • The choice, nature and appropriateness of the selected mining method(s) and other mining parameters including associated design issues such as pre-strip, access, etc.
  • The assumptions made regarding geotechnical parameters (eg pit slopes, stope sizes, etc), grade control and preproduction drilling.
  • The major assumptions made and Mineral Resource model used for pit and stope optimisation (if appropriate).
  • The mining dilution factors used.
  • The mining recovery factors used.
  • Any minimum mining widths used.
  • The manner in which Inferred Mineral Resources are utilised in mining studies and the sensitivity of the outcome to their inclusion.
  • The infrastructure requirements of the selected mining methods.

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 6 of this report. These have been derived by SRK from analysis of actual production data.

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.

Metallurgical factors or assumptions
  • The metallurgical process proposed and the appropriateness of that process to the style of mineralisation.
  • Whether the metallurgical process is well-tested technology or novel in nature.
  • The nature, amount and representativeness of metallurgical test work undertaken, the nature of the metallurgical domaining applied and the corresponding metallurgical recovery factors applied.
  • Any assumptions or allowances made for deleterious elements.
  • The existence of any bulk sample or pilot scale test work and the degree to which such samples are considered representative of the orebody as a whole.
  • For minerals that are defined by a specification, has the ore reserve estimation been based on the appropriate mineralogy to meet the specifications?

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.

Environmental
  • The status of studies of potential environmental impacts of the mining and processing operation. Details of waste rock characterisation and the consideration of potential sites, status of design options considered and, where applicable, the status of approvals for process residue storage and waste dumps should be reported.

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.

Uralkali has confirmed that all environmental permits required for all current and future operations are in place. This includes permits related to:

  • Harmful (polluting) emissions into atmospheric air;
  • Discharges of polluting substances and micro-organisms into water bodies;
  • Resolutions regarding use of water bodies;
  • Documents establishing limits of wastes generation and wastes disposal.

When the validity of issued permits expires, new permits are obtained as required.

Infrastructure
  • The existence of appropriate infrastructure: availability of land for plant development, power, water, transportation (particularly for bulk commodities), labour, accommodation; or the ease with which the infrastructure can be provided, or accessed.

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.

Costs
  • The derivation of, or assumptions made, regarding projected capital costs in the study.
  • The methodology used to estimate operating costs.
  • Allowances made for the content of deleterious elements.
  • The source of exchange rates used in the study.
  • Derivation of transportation charges.
  • The basis for forecasting or source of treatment and refining charges, penalties for failure to meet specification, etc.
  • The allowances made for royalties payable, both Government and private.

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 from first principles by a team of experienced engineers.

Revenue factors
  • The derivation of, or assumptions made regarding revenue factors including head grade, metal or commodity price(s) exchange rates, transportation and treatment charges, penalties, net smelter returns, etc.
  • The derivation of assumptions made of metal or commodity price(s), for the principal metals, minerals and co-products.

For the purpose of the 20 year Business Plan, Uralkali assumes a long term commodity price of USD212/t.

Market assessment
  • The demand, supply and stock situation for the particular commodity, consumption trends and factors likely to affect supply and demand into the future.
  • A customer and competitor analysis along with the identification of likely market windows for the product.
  • Price and volume forecasts and the basis for these forecasts.
  • For industrial minerals the customer specification, testing and acceptance requirements prior to a supply contract.

Detailed analysis on demand, supply and stocks for the potash sector are widely available in the public domain.

Uralkali has been successfully producing and selling potash products for a number of years.

Economic
  • The inputs to the economic analysis to produce the net present value (NPV) in the study, the source and confidence of these economic inputs including estimated inflation, discount rate, etc.
  • NPV ranges and sensitivity to variations in the significant assumptions and inputs.

Uralkali has produced a real terms 20 year Business Plan in USD for the existing operations and the new Ust-Yayvinsky mine and this has been reviewed by SRK to confirm the economic viability of the operations.

Forecast operating costs are based on operating experience and actual historical costs, adjusted as required. Project capital costs have been derived from first principles in-house.

Social
  • The status of agreements with key stakeholders and matters leading to social licence to operate.

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:

  • Any identified material naturally occurring risks.
  • The status of material legal agreements and marketing arrangements.
  • The status of governmental agreements and approvals critical to the viability of the project, such as mineral tenement status, and government and statutory approvals. There must be reasonable grounds to expect that all necessary Government approvals will be received within the timeframes anticipated in the Pre-Feasibility or Feasibility study. Highlight and discuss the materiality of any unresolved matter that is dependent on a third party on which extraction of the reserve is contingent.

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.

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 of this report. The licenses for 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 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.

Classification
  • The basis for the classification of the Ore Reserves into varying confidence categories.
  • Whether the result appropriately reflects the Competent Person’s view of the deposit.
  • The proportion of Probable Ore Reserves that have been derived from Measured Mineral Resources (if any).

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.

Audits or reviews
  • The results of any audits or reviews of Ore Reserve estimates.

SRK has derived the Ore Reserve estimates presented in this report.

Discussion of relative accuracy/confidence
  • Where appropriate a statement of the relative accuracy and confidence level in the Ore Reserve estimate using an approach or procedure deemed appropriate by the Competent Person. For example, the application of statistical or geostatistical procedures to quantify the relative accuracy of the reserve within stated confidence limits, or, if such an approach is not deemed appropriate, a qualitative discussion of the factors which could affect the relative accuracy and confidence of the estimate.
  • The statement should specify whether it relates to global or local estimates, and, if local, state the relevant tonnages, which should be relevant to technical and economic evaluation.
  • Documentation should include assumptions made and the procedures used.
  • Accuracy and confidence discussions should extend to specific discussions of any applied Modifying Factors that may have a material impact on Ore Reserve viability, or for which there are remaining areas of uncertainty at the current study stage.
  • It is recognised that this may not be possible or appropriate in all circumstances. These statements of relative accuracy and confidence of the estimate should be compared with production data, where available.

SRK can confirm that the Ore Reserve defined in Table 7 and 8 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 USD92/tonne in January 2014 terms. This is calculated as the price required to cover all cash operating costs excluding distribution. 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.