Analysts tout possible ICL Ethiopian investment

TelAviv—While Israel Chemicals Ltd. (ICL) is still not confirming that a deal involving an investment in Allana Potash Corp.’s Ethiopian mine project is due to be signed soon, Israeli analysts say the deal makes sense for ICL. “There are several factors that make this deal interesting for ICL, including low production costs, diversification of production, and the possible increase of royalties on potash production in Israel,” said Jonathan Kreizman, director of research at Bank of Jerusalem. In addition, he noted that ICL’s franchise for mining at the Dead Sea expires in 2030. “This may seem a long way off, but the company has to take this into consideration,” he said. According to an updated estimate, the cost of production in Ethiopia is $125/mt. That is considered very low, and substantially below the cost at ICL’s three production sites in Israel, Spain, and Britain. According to Israeli analysts, that compares to $180/mt in Israel, $250/ mt in Spain, and $290/mt in Britain. ICL currently produces 3 million mt in Israel, 0.9 million in Spain, and 0.7 million in Britain. ICL has announced plans to reduce costs at its potash operations. The goal for Spain is to reduce production costs to $220/mt, and in Britain to $250/mt. Access to Asian markets, which are key for ICL, is also another important factor. “Ethiopia can serve as a great base for sales to China and India,” said Michal Alshech, chemical industry analyst at Leader Capital Markets. She said that the project would enable ICL to reduce its production costs. Transport costs from Ethiopia to the Far East would also be lower than from Israel, providing an additional advantage for ICL. Allana is said to be interested in ICL’s expertise, as the means of extraction is similar to that used at the Dead Sea. The Canadian company has raised $85 million so far for the project. Initial plans call for the mining of 1 million mt/y. The cost of the project, including necessary infrastructure, is estimated at $642 million. It is unclear at this point just how much ICL will invest.