Ethiopia: Potash and the Country Infrastructure Building

Ethiopia, sub-Saharan Africa’s second-most populous nation, is in the middle of a five-year plan to modernize and upgrade its infrastructure and industries. The government last year signed two agreements with Chinese companies to build a 4,744 kilometer rail network to Djibouti.

Landlocked Ethiopia lost its access to the sea after Eritrea voted for independence in 1993. The new rail line will run between the cities of Mekele and Hara Gebaya.

Toronto-headquartered Allana Potash Corp., Sainik Potash Plc of India, Ethiopian Potash Corp. and Melbourne-based BHP Billiton Ltd. are all developing projects to extract potash in the Afar region. Allana Potash Corp. is a junior mining company with a focus on the acquisition and development of potash assets internationally with its flagship in the Danakhil Potash property (also referred to as the Dallol Potash Project), which is a previously explored potash property in northeastern Ethiopia. The Ethiopian Potash Corp. is a mineral resources company engaged in the acquisition, exploration and development of mineral properties in Eastern Africa and in 2011 they acquired an interest in the Danakil Potash Permits. The estimated capacity for the Dallol project is 1-1.5 million tons potash per year, with resources of more than 30 years mining. A feasibility study work on the project is in progress and scheduled for completion in the third quarter of 2012. The study includes hydrogeological studies to identify large water sources, dissolution testwork, rock mechanical testwork, a pilot solution mining operation, and solar evaporation pond tests.

Ethiopia signed a US$ 1.5 billion agreement with state-run China Communications Construction Co. to build a railway to carry potash from mines being developed in the nation’s northeast. The 360-kilometer line will transport passengers and freight along a route to neighboring Djibouti’s Tadjourah port, which is being built. It should be completed by July 2015. The Chinese government-owned transportation infrastructure company CCCC will be mobilizing substantial resources to guarantee completion of the project. They have a market capitalization of about 12.8 billion dollar, and over 90,000 employees.

Global demand for fertilizer is rising steadily as tight market conditions for oilseeds and corn are giving farmers an incentive to boost production. But the nutrients increase will be higher for potash. According to Paris-based IFA, in the next years average annual growth in potash demand is seen at 3.7 percent, compared with 2.3 percent for phosphates and 1.5 percent for nitrogen fertilizer.

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