Israel Chemicals Ltd. (TASE: ICL) is continue to expand its operations outside of Israel. Israel Chemicals and Canada's Allana Potash Inc. (TSX: AAA) will jointly develop Allana's Danakhil potash project in Ethiopia. The proposed mine's feasibility study indicates that it will produce approximately one million tons of potash annually within five years.
Under the strategic partnership, Israel Chemicals will acquire 16% of Allana for $23 million, and will increase its stake to 37% after exercising warrants that were issued it. Allana will use the proceeds to develop the mine, located in Ethiopia's Afar Province. Israel Chemicals will provide technical assistance to develop and operate the Danakhil mine, and will purchase and sell the mine's output.
The alliance with Allana is part of Israel Chemicals' Next Step Forward strategy to broaden its sources of raw materials globally while reducing its production costs and focusing on emerging markets, which will lead the company to significant growth over the next decade. In addition to its potash mines in Israel, the company owns mines in Spain and the UK.
Israel Chemicals says that the investment in the development of sources of raw materials worldwide is as an important strategic objective, especially in light of its need to ensure additional alternatives when the time comes to extend its potash production franchise from the Dead Sea, which expires in 2030, and in view of the uncertainty in the Israeli business and regulatory environment. The planning and development process for industry, in general, and the potash industry, in particular, requires ten years and the company has therefore begun to evaluate and develop alternatives.
"The Danakhil mine will provide potash for Ethiopia and Africa," said Israel Chemicals CEO Stefan Borgas. "Our cooperation with Allana delivers a step in our previously announced Next Step Forward strategy to broaden our sources of raw materials worldwide, as well as our intention to deepen and significantly increase our activities in emerging markets such as Africa. The agricultural fertilizers market in Africa is evolving into one with the highest growth potential in the world. In addition, the location of the Danakhil mine will provide us with fast and easy access to the Indian Ocean which will enable us to even better serve our customers in India and Southeast Asia."
Published by Globes [online], Israel business news - www.globes-online.com - on February 13, 2014
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