Israel Chemicals CEO warns phosphate reserves are shrinking

10 April 2013 21:07  [Source: ICIS news]

HOUSTON (ICIS)--Israel Chemicals (ICL) CEO Stefan Borgas said on Wednesday that reserves of phosphate are drying up, and he is appealing to the government to issue new licenses in order to expand mining operations.

Stating that the company must reduce operating cost and significantly increase volume in order to stay competitive, Borgas said the mining activities in the southern Negev desert are among the highest in cost when compared with other fertilizer operations around the globe.

Speaking at a ceremony marking 20 years of trade in shares of ICL, Borgas said the company is looking for an arrangement of 30 years especially in light of the capital investment it will require.

Analysts have pointed out that the only new reserves able to be mined economically are in the Sde Barir region, but such activities face strong public opposition as local residents are against increased mining ventures based primarily on concerns for public health.

“By allowing us to mine phosphates in Sde Barir, we will invest hundred of millions of dollars and will be able to secure reserves for around 30 years,” said Borgas. “But if we do not receive the licenses, it means that we will have to stop our Israeli phosphate activities within 10 years.”

Borgas also lamented the amount of taxes and royalties paid by the company, and despite shelling out 35% of its domestic profit, approximately $275m (€209m) a year, he expects that figure to increase with the onset on new taxation policies.

“We expect the government take to reach 45%, which is the highest government take paid by any fertilizer or chemical company in the world,” Borgas said.

ICL is currently the second-largest company by value traded on the Tel Aviv stock exchange and is controlled by conglomerate Israel Corporation.

Currently it is being eyed for a potential takeover by fertilizer titan PotashCorp. The Canadian producer wants to increase its stake from 14% to a larger share, if not a complete ownership, but has repeatedly stated it would not use a hostile takeover approach.

Since February when it announced the intention towards acquire more of ICL, PotashCorp has remained tight lipped about the situation but have reportedly considered an array of concessions to make their bid more favourable and lessen widespread opposition.

In attempt to spruce up the deal, PotashCorp is said to be willing to offer job guarantees, environmental safeguards and commitments to maintain unspecified capacity. Additionally it is thinking about recalculating the bid so it could offer a cash-based plan which would generate additional tax revenue for Israel. 

On Wednesday Israel’s new finance minister Yair Lapid was quoted saying he is opposed to the sale under any circumstances and promised to take an aggressive stance in order to preserve what many in the country view as a natural treasure.

To that end Lapid has established a public committee to review the national rights to the natural resources controlled or managed by private companies. He also has concerns about the loss of employment within the region if the transaction was to proceed.

“The state of Israel’s natural resources are a public asset and the Israeli public should benefit from them,” said Lapid.

Speaking on the situation and the related public criticism of ICL, Borgas said he has been taken back by the rhetoric and how the media and pundits are missing out on how it impacts those directly involved.

“I am quite frankly surprised about the large amount of nonsense that is publicly written and said about the company,” Borgas said. “This tweaking of the facts also really hurts our employees and business partners.”

($1 = €0.76)

By: Mark Milam
+1 713 525 2653

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