Vertically Integrated Phosphate Producer

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Phosagro's vertically integrated structure maximises value and minimises risk

1. Managing the entire production chain from raw materials to finished products

The vertical integration of PhosAgro’s operations allows the Company to combine production, processing and logistics for its phosphate-based fertiliser products. The Company has successfully integrated the mining of apatite-nepheline ore, the production of high-grade phosphate rock and the production of key feedstock including phosphoric acid, sulphuric acid and ammonia into the overall production process. This structure enables PhosAgro to manage costs effectively throughout the entire value chain, and to benefit from the synergy of investing in the development of each of its business units.

2. Fully self-sufficient in phosphate rock, with access to proven reserves

Thanks to its unique resource base, PhosAgro was, on the basis of 2011production data, fully self-sufficient in phosphate rock, phosphoric acid and sulphuric acid, and 92% self-sufficient in ammonia. The Company’s ability to source raw materials internally,and phosphate rock and ammonia in particular, provides it with stability in the face of fluctuations in the prices of raw materials, and thus benefits its margins. In addition, PhosAgro’s downstream operations provide a reliable source of demand for companies located further upstream, thereby enhancing the stability of their operations. The high quality of PhosAgro’s phosphate rock also enables the Company to ensure that only phosphate rock with known and desirable qualities is introduced into the production process, so helping the Company to maintain the high quality of its products.

Self-sufficiency in key feedstocks

PhosAgro DAP production cash costs1. Phosphate rock: 100% self-sufficient, kt
2. Ammonia: 92% self-sufficient, kt3. Sulphur: access to local supplies
 
Source: PhosAgro

3. Access to low-cost feedstock 

PhosAgro benefits from relatively low-cost raw materials, such as phosphate rock, natural gas and sulphur. Approximately 65% of PhosAgro’s DAP production cash costs are attributable to phosphate rock and ammonia, both of which the Company itself produces. Also, PhosAgro works with a diversified base of suppliers. It purchases natural gas from Russian natural gas suppliers and sulphur from Russian and Kazakhcompanies at low prices, giving the Company an advantage over its competitors. Significant cost advantage for integrated producers
Comparative DAP production cash costs, FOB



Source: Fertecon, PhosAgro, companies’ data

4. Strong distribution network in Russia, combined with cost-efficient logistics and transportation operations

PhosAgro’s production and distribution facilities are conveniently located to take advantage of relatively low-cost sea and rail transport. The Company also has its own distribution network in Russia consisting of seven distribution centres located in the major agricultural regions. These regions consume up to 70% of the MAP and NPK sold in Russia. PhosAgro also owns and operates 17 storage facilities in Russia with a total storage capacity of more than 270,000 tonnes of fertilisers. Additionally, ourfertiliser production facilities are located close to Russia’s core agricultural regions, enabling the Company to optimise its domestic transportation costs. The Company’s phosphate rock production facilities are located near the Murmansk sea port, through which PhosAgro exports its phosphate rock. Furthermore, PhosAgro’s enterprises, Ammophos and BMF, have river transportation capacities, which allow them to receive raw materials and to ship their products by river during navigable periods. We also benefit from well-developed rail links and operate approximately 6,000 railcars, which further enhances ourtransportation capabilities.

5. Benefiting from one of the biggest internal power generation capacities among Russian fertiliser producers

PhosAgro has been implementing a power generation and saving programme since 2003, intended to reduce our reliance on third-party energy suppliers. This has been done by constructingpower generation facilities at Ammophos and BMF that produce electricity utilising steam generated from sulphuric acid production. As a result of these initiatives, Ammophos is fully energy self-sufficient and also sells energy to third parties, while BMF produces enough energy to satisfy approximately 70% of its requirements. At a group level, PhosAgro is more than 35% energy self-sufficient.