Yara International ASA, Oslo, has signed a Share Purchase Agreement with Indian firm XLR Enterprises Ltd. to sell its ownership interest in the Dallol mining project in Ethiopia.
XLR Enterprises is a partner in the project, which comprises a planned sulfate of potash (SOP) mine in the Afar region in Ethiopia. Yara has been the majority shareholder in the development, with Liberty Metals and Mining Holdings LLC as a second partner.
Yara was last reported to have a 51.8% stake in the Dallol project, with XLR Enterprises holding a 23.2% interest and Liberty Metals and Mining Holdings a 25% interest (GM Nov. 10, 2017).
In a July 4 statement announcing the agreement, Yara said full legal ownership interest in Yara Dallol BV, together with all economic rights and all obligations and liabilities attaching or relating thereto, will be transferred to XLR Enterprises at closing. The transaction remains conditional on obtaining necessary local regulatory approvals and customary closing conditions.
As Yara recognized an impairment loss of $232 million in the fourth quarter of 2021 related to the Dallol potash mining project (GM Feb. 11, p. 27), the company said the impact on its second-quarter results is “immaterial” following the transaction.
Yara had said in its fourth-quarter and full-year 2021 earnings report that the recoverable value of the project is considered lower than its carrying value, and “with significant capital expenditures remaining, the project is exposed to ‘significant’ uncertainties.”
Dallol has been on hold since 2019 while working on structural solutions for the next stage of development of the project, prior to any potential build decision. Yara said at the time the aim was to “minimize any further capex” for Yara relating to the project (GM Feb. 14, 2020).
The Norwegian major had been looking at a potential production capacity of approximately 600,000 mt/y of SOP utilizing solution mining.
In response to the surprise of some analysts at a company earnings call on Feb. 8 about the impairment on the Dallol potash project, given the global potash commodity price trajectory, Yara International President and CEO Svein Tore Holsether said it was not about the global potash market, but more specifically about that the project and the location, with the situation in Ethiopia “highly uncertain.” In addition to war, other issues include geology and a railway to the port that never got built, he had said.
The Norwegian major said this week the divestment of the Ethiopian potash project supports Yara’s transformation by reallocating capital and risk appetite towards its strategic focus areas.