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The concentration in the potash sector is increasing as Russia's biggest producer, Uralkali, is on the verge of merging with another Russian giant, Silvinit, and the combined company would be the world's second largest producer after Canada's Potash Corp. All of these giants are major rivals of Israel Chemicals.

Silvinit has a market cap of $6.9 billion.

Russia's Prime Minister Vladimir Putin has been informed of a merger between the country's two major producers of fertilizer component potash, said his spokesman Dmitry Peskov.

Peskov's comments effectively confirm long-standing speculation that the two producers may merge. No major merger or acquisition, particularly involving natural resources, goes ahead in Russia without the knowledge of Russia's powerful prime minister.

A spokesman for Uralkali could not immediately be reached for comment.

Uralkali and Silvinit have been widely tipped as merger partners since the Russian billionaire Suleiman Kerimov and associates bought controlling stakes in both companies during the summer. Together they produce around 11 million tons of potash every year, about 17% of world production. Potash Corp.'s share is 20% and may soon rise to 23%.

The companies are expected to set up a unified marketing company with a third firm from the former Soviet Union, Belarusian Potash, and the three would together hold over a third of the world market.

The potash industry took center stage on global markets earlier in the year when giant Australian miner BHP Billiton launched a hostile $39 billion bid for Potash Corp - a move eventually repelled following opposition by Canadian authorities. Privately held Russian fertilizer minnow Phosagro has also said it is interested in a stake in Potash Corp, but a firm offer is not expected imminently.

Potash prices have soared this year due to its importance in growing food for an expanding world population.