Israel Chemicals Ltd. (ICL; Tel Aviv) says it will invest up to $500.0 million for 50% ownership of a joint venture that will operate a fully integrated, world-scale phosphate business in China and a 15% strategic holding in Yunnan Yuntianhua (Kunming City, China), Asia’s leading producer of phosphate rock.
Stefan Borgas, CEO of ICL, says the agreement “will enable us to double our phosphates business and transform ICL from a smaller and regional player in the phosphates industry into a global leader with access to competitive phosphate reserves suitable for each market.”
The jv will include a mine that produces about 2.5 million m.t./year of phosphate rock with deposits expected to last 30 years. The jv will result in an integrated, world-scale phosphate operation with annual capacity of approximately 1.85 million m.t. of sulfuric acid; 700,000 m.t. of phosphoric acid; 850,000 m.t. of fertilizers; 60,000 m.t. of purified phosphoric acid; 120,000 m.t. of specialty fertilizers; and 65,000 m.t. of specialty phosphates for the food and engineered materials markets. ICL will nominate the jv’s CEO, COO, and a v.p./sales and marketing, while Yunnan Yuntianhua will nominate the jv’s CFO and v.p. human resources. The transaction is expected to close in the first quarter of 2016 subject to closing conditions which include government approvals.
The alliance will allow ICL to transfer the phosphates and specialty phosphates business model it has developed into faster-growing Asian and Chinese markets, ICL says. ICL will “adapt to Asian market conditions by combining ICL’s highly developed specialty phosphates know-how in production and marketing with Yunnan Yuntianhua’s strong backward-integration and scale.” Additional benefit will come from ICL’s ability to balance supply from two integrated sites, one in Israel and the other in China, to serve customers in Europe, the Americas, and Asia.
ICL says it has identified significant expansion opportunities that will allow the jv’s revenue to grow from approximately $500 million/year to more than $700 million/year over five years. Opportunities include upgrading and expanding purified phosphoric acid production facilities, expanding downstream operations by using ICL’s know-how, offering higher-value products, such as water-soluble monoammonium phosphate, and specialty phosphate salts for food and engineered materials, as well as formulations in the specialty nonagricultural market. “Our respective positions in the global phosphates market will benefit from integrating Yunnan Yuntianhua’s infrastructure and large-scale raw material reserves with ICL’s broad know-how, unique technologies and proven expertise and will enable us to conduct activities along the entire value chain—from mining to manufacturing downstream products,” says Ta Shenghua, chairman of Yunnan Yuntianhua.
The deals come a month after the Israeli cabinet approved the the country’s Sheshinski Committee II’s recommendations on fiscal and tax policies for Israel’s natural resources. The recommendations would mean a large tax increase on the profits of companies exploiting natural resources, as previously reported by CW. ICL warned in May that it would cut investments in Israel if the Sheshinski Committee recommendations were approved.
“ICL’s strategic deal with Yunnan Yuntianhua joins other accomplishments achieved by ICL over the past year, including securing other raw material sources outside of Israel, [such as] potash in Spain and Ethiopia, and laying a strategic foundation for activities in major growth markets in China, Africa, and Brazil. ICL continues to actively seek additional strategic growth opportunities, especially outside of Israel,” says Nir Gilad, chairman of ICL.
By Francinia Protti-Alvarez