ICL runs the Boulby mine in North Yorkshire, which sits within a stone’s throw of Sirius’ Woodsmith project.
Sirius is currently in the process of raising the final £2.6-£2.7bn (US$3.4-US$3.6bn) it needs to complete development of the mine, which is scheduled to achieve first production by the end of 2021.
Citing comments made by ICL bosses at a conference last week, Shore Capital analyst Yuen Low reckons the company will look to move out of the polyhalite space should Sirius be successful in raising its Stage 2 financing, as he firmly expects it will.
“In a conference last week, CFO Kobi Altman admitted that ICL is currently in a ‘wait and see mode’ at Boulby and would ‘probably try to exit’ polyhalite if Sirius is successful (as we expect it will be) in raising its Stage 2 financing,” read a note to clients.
“The reason is that ICL’s stated strategy is to be a (cost) leader in all its key business areas, whereas if Sirius is successful, ‘[ICL] will not be able to be [a leader]’.”
Berenberg cuts price target
Low added: “Interestingly, earlier this month, at ICL’s Q3 2018 financials, Mr Altman had noted that ‘the only business that [ICL] have that is not a world leader at this point in time’ is the Specialty Fertilizers business, ‘and so probably, any significant M&A will have to come from that division’.”
Sirius shares were down 1.7% in late-morning trading on Thursday, weighed down by a price target cut from Berenberg analysts.
The venerable German bank trimmed its target by 10p to 40p, which is still comfortably above the current price.