ICL and AAA a good fit? REASONS WHY ISRAEL CHEMICALS MAY SEE ALLANA POTASH AS A MOST ATTRACTIVE TARGET (UPDATED)
By cambodine
ICL to issue $275 million debentures (amount approximate to Allana’s stated 35% equity raise target toward $642 million CAPEX)
A revisit and update to this article from August 12, 2013 https://www.haaretz.com/business/.premium-1.541051
With consideration to Israel Chemicals‘ stated expansion strategy I submit the following reasons as to why ICL and Allana Potash make a perfect fit….
+ ICL is perfectly suited to operate a solution mine and is more knowledgeable and experienced than any other company re: Allana’s location and resource
+ The cost of obtaining and/or JV-ing Allana Potash is very appealing even at the current NPV and likely buyout or buy-in outlay
+ The vast majority of exploitable carnallite and kainite resource comes at next to nothing and ICL has the expertise to monetize both
+ ICL would secure the logistical and price advantages to their primary existing markets of India and China (while eliminating Suez Canal costs and security and passage blockage risks) as well as gaining a strong presence in the high potential COMESA region where Ethiopia alone is on track to absorb 40% of production at start up
+ $1 billion expense ICL is committed to spending on dredging the Dead Sea is about equal to what would be needed in Capex to build a 2 mtpa mine in Dallol
+ Environmental and other pressures on their Dead Sea operations, as well as a 2030 hand back of assets to the Israeli government make a deal to secure strategically located replacement reserves increasingly necessary
+ All developmental work, costs and permits are done, the project is shovel ready, and potential financing and off take agreements are already highly advanced
+ Synergies, timing and valuations are currently optimal from an Israel Chemicals perspective
and this through IM….
Israel Chemicals to partner Allana Potash in Ethiopia project
ICL confirms JV deal and sets sights on expanding African markets
By Allan Bariyo - 29 August 2013
Israel Chemicals Ltd (ICL) has formed a joint venture (JV) with TSX-listed Allana Potash for the development of
potash reserves in the Danakil Valley, north-east Ethiopia, ICL confirmed to IM.
The possibility of a JV was raised in mid-August, when ICL management met with Allana’s CEO, Farhad Abasov,
in Tel Aviv to discuss the construction of a mine at the Dallol site.
Both companies have now agreed to participate in the venture, which will see ICL and Allana increase their potash
output, despite the recent turmoil in the global potash market.
“ICL has recently announced its new strategy and cited an intention to develop potash capacity beyond its current
mines,” an ICL spokesperson told IM.
Talks aimed at determining an investment framework for the mine are now underway. The project is slated to cost
approximately $642m to construct, according to Allana Potash’s estimates, with operating costs pegged at around
$124/tonne.
These costs include haulage to the Indian Ocean port of Tadjoura and annual maintenance, Allana said.
Allana has already raised $85m towards the project, and in May received environmental approval for the mine’s
development.
Advantages of Danakhil Valley project
The Danakil Valley mine holds proven reserves of 185m tonnes potash, with further potential reserves estimated to
be in excess of 400m tonnes. The potash is to be extracted over a period of 25 years at an anticipated output of 1m
tpa.
Although questions have been raised about the timing of the deal, given the recent market volatility and the forecast
by Russian potash giant, Uralkali, that prices could fall below $300/tonne, ICL is optimistic that the prices and
demand will pick in the long term.
“ICL is discussing many opportunities and projects around the world,” the ICL spokesperson told IM. The
company also stated separately that the mine in Dallol, in the Danakil Valley, will be cheaper to develop than other
potential sites, and is closer to ICL’s main markets.
As well as existing large consumers such as China and India, the JV will also target emerging African markets.
Africa’s potash demand alone is expected to hit 5-7m tpa, up from present consumption of around 1m tpa,