The world’s largest mineral fertilizer supplier Yara International will soon control a considerable stake in a Cyprus-Indian joint venture company which is involved in mining potash deposits in the Northern part of the country around the Dallol Depression.
The Norwegian-based Yara International is currently negotiating together with its partners to take a dominant stake in Ethiopotash.
A source close to the fertilizer giant, said that the company is under negotiations with the partners to take over about 90 percent of the total ownership of the Ethiopotash after previously holding a 51 percent stake in the company and taking over its management last May.
The source explained that technically Yara is the owner of the new fertilizer firm registered in Ethiopia, because it owns more than 50 percent of the shares.
“But the new deal which is expected to be disclosed to the public in the near future will allow the company to have dominant ownership,” the source explained.
In 2009 Yara entered into an agreement with two partners to participate with a 16.67 percent ownership in Ethiopotash. The partners were XLR Capital (Cyprus based with Indian promoters) with 57.33 percent ownership and management of the company, and Seftech Phosphate, an Indian firm, with 26 percent ownership. In April this year Yara agreed to increase its ownership to 51 percent and take over management of the company, while XLR will retain 49 percent ownership.
Ethiopotash is developing potash resources in Dallol at the Danakil Depression of Ethiopia. The Dallol project is said to have a significant advantage over potash projects in other parts of the world.
Drilling began in 2010 and has mostly been completed.
According to a statement from Yara the project development phase will be finalized with a feasibility study expected to be completed by the middle of 2013.
After the study is completed they will decide if they will begin production. That process is expected to occur three years later, around 2016. Estimated capacity for the Dallol project is 1-1.5 million tons of potash per year over 30 years of mining.
The letters of intent of Yara that released during the G8 Summit disclosed that the company has a plan to invest in Ethiopia, Ghana, Tanzania and Burkina Faso. It has committed to a broader sub Saharan Africa strategy, applying an integrated multi-country approach. The letter indicated that at pan African level, Yara is currently undertaking significant business development activity to identify the most competitive location to develop a world class fertilizer production facility, which if a suitable location can be found, could amount to a USD 1.5-two million investment. “In this work, a number of factors will be carefully analyzed, such as access to reasonably priced raw material, existing and future infrastructure developments, as well as location relative to market potential,” the company letter indicated.
Unconfirmed information indicated that the current share deal is related with the company plan to form the industry in Ethiopia.
“Most of the criteria Yara is looking for is very close to what Ethiopia has and they already have majority ownership of a fertilizer company in Ethiopia,” experts in the industry said.
Tadesse Haile, state minister of Industry, recently told Capital that he does not have any information about Yara’s interest in forming the fertilizer industry in the country. “But we will accept the company delightedly if they are interested in forming the fertilizer complex here,” the state minster explained.
Founded in Norway in 1905, Yara has a worldwide presence with sales to 150 countries. The company is also a major supplier of fertilizer.
The other fertilizer giant, Allana Potash, Canada based firm, is currently working adjacent to the Dallol site.
Allana has also recently announced a considerable increase, of some 90percent, in its mineral resource estimates. The measured and indicated mineral resources are estimated to be around 1.3 billion tonnes with an average grade of 19.32 percent Potassium Chloride (KCL) representing approximately 250 millions of tonnes of KCL.
Last November, the preliminary economic assessment of the project suggested an internal rate of return of 36.8 percent and a net present value of USD 1.85 billion based on a 12 percent discount rate.