One of the leading fertilizer manufacturers in the world, Israel Chemicals Ltd (ICL), is going to take over Allana Potash of Canada that owns a potash mine in Ethiopia.
Last year ICL bought 16 of the shares on Allana Potash. On Thursday Allana Potash announced that it reached an agreement with ICL to sell the remaining 84 percent of Allana’s share. The agreement was signed by the two parties in Toronto, Canada at the headquarters of Allana. Allana Potash is a publicly traded company registered in the Toronto Stock Exchange.
Co-founder and manager of Allana Potash Afar, Nejib Ababiya, told The Reporter that the deal was approved by the board of directors of Allana Potash. However, Nejib said the agreement is subject to shareholders’ approval.
According to Nejib, ICL will pay 0.50 Canadian dollars for each share of Allana’s outstanding shares. ICL will acquire additional 300 million shares valued at 150 million Canadian dollars. ICL will pay Allana around 150 million Canadian dollars in cash to Allana. In 2013 ICL paid 0.60 Canadian dollars for each share. Yesterday Allana informed the Ministry of Mines of the new deal.
Allana owns the first potash mine in Africa, in the Afar Regional State, in Dallol depression. The license area is 300 sq. km in total size. More than 200 sq. km of the area is underlain with potash material. After drilling fifty percent of the potash area, Allana discovered that there is 3.2 billion tons of potash deposit in the ground.
President and CEO of Allana, Farhad Abasov, commented “Allana’s Board and management believe that the Arrangement provides a very attractive opportunity for the Company’s shareholders to realize full liquidity at a substantial premium to the market price of Allana’s Common Shares. Allana has developed a very attractive project, but considering the generally challenging financial environment for junior mining companies we would expect the short and long-term financing needs of Allana to include potentially significant dilution to Allana’s current shareholders.”
According to the feasibility study conducted by Allana in 2012, the mine was valued at 1.2 billion dollars with a mine life of 25 years.
The declining price of the potash mineral in the global market and less interest to financing potash mines compelled the management of Allana to sell the company. The price of potash in the global market has been nose diving since 2013.
“We believe that this transaction provides the best liquidity opportunity for shareholders and firmly validates the efforts of the last six years of development by the Allana team. Allana thanks all shareholders and stakeholders for their support and encouragement over the years. We also congratulate the people and government of Ethiopia on this major milestone in the path to the full realization of the project for the benefit of the Ethiopian people,” Abasov said.
The price of potash, which was USD 570 per ton two years ago, plumbed by 50 percent to 280 dollars. The reason behind the price fall is the dispute between the potash cartel, Russia and Belarus which produce 40 percent of the world’s potash. After the dispute Russia and Belarus are dumping potash in the global market.
“Belarus is pumping more potash into the global market for cheap price. The demand for potash in the Chinese market is weak. Excess supply is coming to the market,” Nejib told The Reporter. “So finding financing for new potash mine is very difficult. The time is not right for a new venture,” Nejib said.
Following the price fall of potash in the global market the share price of potash companies soared in stock markets and Allana’s fate is no different. Allana’s share which was 2.8 Canadian dollars per share slashed to 0.34 cents in the last two years. Shareholders of Allana including Nejib lost a huge sum of money due to the fall of the share price.
However, Nejib says he is not depressed. “What is important to me is that the resource is going to be developed. I love my country and ICL is going to develop the potash mine and create thousands of jobs for my country men,” he told The Reporter in his office in Addis Ababa yesterday.
Allana Potash had a plan to invest USD 750 million dollars on the potash mine development. So far the company invested 130 million dollars on the exploration project. Allana had 200 employees during the exploration period but reduced its staff to 120. Nejib hopes ICL will keep most of the existing staff.
According to him ICL will invest more than one billion dollars and create 3000 jobs. The company plans to generate more than 300 million dollars annually from the potash export. “ICL is very committed to develop the potash mine. They have the knowhow and technical capability. They also have a deep pocket. They do not have to go anywhere to secure funding for the mine development. They can finance the project from their own coffer,” Nejib said.
The Ethiopian Ministry of Mines granted large scale mining license to Allana Potash that enables the company to develop the potash mine in October 2013. Production was planned to be launched this year.
Nejib is the first person to register an Ethiopian asset in international stock market. He is also the person that established the first potash mine in Africa. “I have worked for ten years to bring this project to fruition. I and my colleagues have been prospecting for the mineral in the hottest place on this planet,” Nejib told The Reporter. “When we commenced work on this project six years ago the site was a barren desert. It was a very difficult area to work in and Ethiopia was not considered as an investment destination. Our management board did a tremendous work in promoting Ethiopia and exploration work for the last six years,” Nejib said. “The project site has transformed and I am leaving a legacy.”
ICL operates potash mines in Israel and the UK. The economic life of ICL’s potash mine in the UK is expiring and the management will mobilize its experts who have been working there to Ethiopia. “They will start work immediately. They are excellent partners. I am happy that I am leaving the project in good hands,” Nejib said.
ICL is the 6th largest potash fertilizer, in the world and the 2nd in West Europe. ICL is a publicly traded company in Israel with a capital of 12 billion dollars. The company is recently registered in the New York Stock Exchange. The company was established by Israel’s richest person Idan Ofer. In an exclusive interview with The Reporter, Ofer expressed his interest to invest in electric power generation in Ethiopia. According to Forbes, the 59 year old Idan Ofer’s net worth currently stands at 4.8 billion dollars.
[TheReporterEthiopia]