Israel Chemicals (ICL) has entered into an agreement with Allana Potash to develop the Danakhil potash project, situated in the Dallol region of the Afar province in north-east Ethiopia.
As part of the strategic alliance, ICL will invest around $23m in units of Allana.
ICL will hold around 16% of Allana's regular shares on a non-diluted basis, following the completion of its initial investment in Allana. The company will have the chance to increase its holding to about 37%, upon exercising of warrants that are part of the units.
With respect to the Danakhil project, in which ICL will purchase and market the output of the mine, the alliance also includes an offtake agreement between the parties.
The proposed mine is expected to produce around one million tonnes of potash annually over a period of five years, according to the feasible study.
To develop and operate the Danakhil mine, ICL will also provide technical assistance to Allana.
ICL CEO and president Stefan Borgas said the Danakhil mine will provide potash for Ethiopia and Africa and will enable local farmers to increase agricultural output and food for the region.
"Our co-operation with Allana delivers a step in our previously announced 'next step forward' strategy to broaden our sources of raw materials worldwide, as well as our intention to deepen and significantly increase our activities in emerging markets such as the African continent," Borgas said.
Allana Potash president and CEO Farhad Abasov said: "ICL possesses broad experience in, and knowledge of, the global potash market, as well as in the development of large scale potash projects. Likewise, Allana will benefit from ICL's existing global and regional marketing and distribution networks."
ICL sold around five million tonnes of potash worldwide in 2013 and is a producer and marketer of potash with mines in Israel, Spain and the UK.