Israel Chemicals Quits Potash Project in Ethiopia

Israel Chemical potash
Fertilizer heavyweight Israel Chemicals abandons potash project in Ethiopia for good.

By TesfaNews,

Fertilizer heavyweight Israel Chemicals (NYSE:ICL) said on Thursday that its board of Directors have decided to abandon its potash project in Ethiopia citing failure by the government to provide the necessary infrastructure and regulatory framework for its Danakil project in northeast Ethiopia.

Israel Chemicals (ICL) also said the rejection by the Ethiopian tax authority of Allana Afar’s appeal regarding the “unjustified and illegal tax assessment, which Allana Afar (a unit of ICL) has declined to pay” as the second most reason that force the company to terminate the project.

ICL had acquired the project last year from the Toronto-based Allana Potash Corp. in a $137-million takeover bid.

As one of the largest suppliers of crop nutrient potash to China, India and Europe, the termination notice definitely comes with a shock to both Ethiopia and Djibouti governments besides its possible implications for the broader potash sector in the world.

Having ICL as a major customer with its expected 4 million tons of potash exports every year, the Djiboutian government have invested billions of dollars in the development of a dedicated potash terminal facilities in Tadjourah.

The Ethiopian government also borrowed billions of dollars to bring the potash product up to the Tadjourah potash terminal in Djibouti that includes the construction of a 120 km upgraded highway from the Djibouti side, a 300 Km highway road up to the project site along with a 216 Km Asayita – Tadjourah railway line.

None of these costly infrastructure developments have yet finalized and hence the primary reason for ICL to quite the project altogether.

Ethiopia would have had access to a sea outlet as short as 100 Km through the Eritrean borders than the planned 600 Km via Djibouti had it amicably solved its political and border issue with Eritrea.

President and CEO of Allana Resources, Farhad Abasov, once said,

“obviously it would make commercial sense to transport the material from Ethiopia across the border to Eritrea. It would be ideal if this could overcome any political tensions between the two countries, but should that be difficult, then Djibouti would be the alternative export route, with the potash trucked there.”