Production at the mine was halted last week after an inflow of water at the mine, which accounts for a fifth of the company’s output and 3.5 per cent of global capacity, and a huge sinkhole appeared at a nearby mine as a result.

The sinkhole, stretching 30 by 40 metres and found at an abandoned mine 3.5 km to the east, increased concern about the future of Solikamsk-2.

An inflow of water and the resulting sinkhole in 2006 forced another Uralkali operation to shut permanently.

The governor of the Perm region where Solikamsk-2 is located said the inflow of water at the mine had “practically stopped” and there was no danger to residents of the area from any possible expansion of the sinkhole.

“The possibility of starting work at half of the Solikamsk mine is being discussed,” CEO Dmitry Osipov told reporters in Berezniki in the Perm region.

Later, the company clarified that this referred to maintenance work, and said there had not been any discussion with authorities about restarting full or partial production at the mine.

It quoted Osipov as saying that the company was discussing the possibility of starting “the backfilling of areas which could be considered potentially hazardous”.

Regional governor Viktor Basargin said: “Fortunately everything is unfolding under a different scenario to a week ago. There is practically no inflow.”

“We can say today that it’s possible to start work at the second mine, up to a level of about 50 per cent,” Basargin said.

Uralkali’s Moscow-listed shares pared gains after the company said it was not considering restarting production, and closed up 3.8 per cent.

Shares in Uralkali fell sharply last week after the water inflow forced the company to halt operations at Solikamsk-2.

— Reporting for Reuters by Timothy Heritage and Vladimir Soldatkin.

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The break-up of the Belarusian Potash Company (BPC), a joint venture with Belarussian partner Belaruskali, leaves North America’s Canpotex as the dominant potash export venture.

It could lead to cancellations of projects by rivals as the industry weighs the effect of lower prices, but may bring better deals for farmers.

“It is as if Saudi Arabia decided to leave OPEC — oil prices would fall immediately,” said Dmitry Ryzhkov, equity sales trader at Renaissance Capital.

In negotiations with big buyers like India and China, BPC and Canpotex usually settled for deals at similar prices, and they had no qualms about turning off the supply spigot when the buyers looked likely to gain the upper hand. Together the two accounted for almost 70 per cent of global potash sales.

That clubby system is now under threat after a falling out between BPC’s members. Uralkali promised to bolster production and sales, even as potash prices are already in decline.

U.S.-listed shares of the Canpotex owners — Potash Corp of Saskatchewan (POT.N), Mosaic Co (MOS.N) and Agrium Inc (AGU.N) — plummeted, cutting their market value by nearly $12 billion by early afternoon.

In the last few years, BPC and Canpotex raised potash prices well above their production cost, a senior official at a major Indian potash firm said, asking not to be identified because of the sensitivity of the matter.

“It hurt Indian companies, Indian farmers and the Indian government,” the official said. “The break-up will limit their power … Certainly this will bring down potash prices.”

Uralkali is pulling out of the venture after reaching “deadlock” over sales and will export potash via its Swiss-based Uralkali Trading, chief executive Vladislav Baumgertner said.

“In the near future we expect (global) competition to become stronger — that will push prices down,” Baumgertner said.

The decision to quit BPC may cut the global potash price to below $300 per tonne in the second half of 2013, from the current $400, Uralkali said. Lower fertilizer prices could mean rising demand from price-sensitive farmers in Asia.

Shares of Uralkali, part-owned by tycoon Suleiman Kerimov, plunged 19 per cent, prompting the Moscow bourse to suspend trading in the stock.

Shares of Germany’s K+S, a rival fertilizer firm, sank by 24 per cent to a six-year low.

Potash Corp shares fell 19 per cent, while Mosaic and Agrium lost 18 and five per cent respectively. Agrium’s fall was less steep as it is more focused on nitrogen production than potash.

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