bhp withdraws from ethiopian potash project

This is bad news for ELM's competitors Allana, Ethiopian Potash & South Boulder.

Source: BMO Capital Markets

Subject: Fertilizers: BHP Reportedly Withdraws From Ethiopian Potash Project (Flash)

Impact: Neutral

According to local sources, we believe BHP (BLT:LSE; rated Outperform, target price GBP25, covered by Tony Robson) has decided to withdraw from its drill-stage potash project in the Dallol basin in Ethiopia, reportedly closing down the camp and in the process of auctioning off
equipment.

BHP had only started drilling in Ethiopia very recently and we always believed the project was more speculative. It is unclear if this development has positive or negative read-throughs for the Jansen potash project in Saskatchewan.

It is potentially positive because BHP is now focusing on Saskatchewan only with Ethiopian project assets, conditions and parameters deemed more challenging, but could be seen as negative because the importance BHP places on potash is decreasing.

There are likely negative read-throughs for adjacent Ethiopian potash pure-plays Allana Potash (AAA:TSX) and Ethiopian Potash (FED-TSXV), and possibly the adjacent private Ethiopotash potash project jointly owned by Yara (YAR:OL; rated Market Perform, target price NOK325) and Indian company Sainik.