Israel Chemicals Drops to 2011 Low Amid BofA Cut: Tel Aviv Mover

Israel Chemicals Ltd. fell to the lowest level since 2011 after Bank of America Merrill Lynch lowered the fertilizer maker’s rating on concern a government review of natural-resources royalties may lead to higher taxes.

Shares of the company which extracts minerals from the Dead Sea to make fertilizers and potash dropped 2.5 percent to 37.01 shekels, the lowest since December 2011, at the close in Tel Aviv. Volume climbed to 3.5 million shares, more than twice the three-month daily average. Controlling holder Israel Corp. declined 3.3 percent to 2,110 shekels and the benchmark TA-25 Index decreased 0.4 percent.

Israel Chemicals shares have decreased 7.6 percent in the three days since the government appointed a panel led by Eytan Sheshinski to review tax and royalty policies. The stock was cut to neutral from buy at BofA, which lowered the price estimate by 14 percent to 43 shekels. Twelve analysts have a hold rating on the shares, while six recommend buying, data compiled by Bloomberg show.

“It would seem that under the relatively new government, further hikes are yet again a live agenda,” Andrew Stott, a BofA chemicals analyst, wrote in a note e-mailed today. “The shares may struggle to outperform given the uncertainty over the outcome and a likely lengthy review and approval process.”

Israel Chemicals said on May 27 that a lack of clarity about government policies risks driving away foreign investors. The company has also said said it opposes increases in royalties. Sheshinski led a committee three years ago whose recommendations formed the the foundation for the government’s decision to more than double its share of gas and oil profits.

Finance Minister Yair Lapid, who took office in March and is seeking to narrow the nation’s budget deficit, said in April that natural resources are a public asset and the people should be the first to benefit from them. New taxation would mean revising an agreement the government signed with ICL last year that raised royalties on potash sales to 10 percent from 5 percent.

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