Israel Chemicals Ltd (ICL) plans to halt magnesium production at its metallurgical arm Dead Sea Magnesium (DSM) by 1 January 2017, after an Israeli government committee recommended levying a tax of 42% on the production of natural resources in the country.

The Board of Directors has instructed management to make preparations for the closure of the Company's magnesium plant at the Dead Sea, commencing from January 1, 2017, unless the discussions with the State of Israel regarding the tax and royalties issues will support the continuation of the activities of the magnesium plant. Management has been instructed to support all existing and future customer orders and commitments in order to avoid any interruptions until the final closure of the plant. The main economic justification for continuation of the activities of the magnesium plant at the Dead Sea, stems from the plant's synergies with other facilities of the Company in Sodom, which provide it with, and receive from it, raw materials (the "Synergies"). The net value of the Synergies has declined due to the increase in the tax burden on production from natural resources in Israel that have already been implemented, and will further decline if the interim recommendations of the Sheshinski Committee are enacted into law. As a result of the abovementioned tax burden, the Company has halted all investments in the magnesium plant (other than investments required by law). In 2013, the Company's total sales of magnesium were approximately $115 million and the gross profit of the magnesium company in 2013 was approximately $1 million, the net book value of the assets of the magnesium company as of June 30, 2014 was approximately $35 million and the depreciation expenses in 2013 were approximately $ 6 million.

• [Editor:Phillip.Feng]