Allana Potash Corp (TSX: AAA.TO) is getting plenty of attention on Monday following speculation that mining giant BHP Billiton is ready to abandon their potash development in Ethiopia. According to several reports BHP is already in the process of closing down the camp and auctioning off equipment, a move that many see as a bad sign for Allana. Without any word from BHP it is difficult to say with any certainty why they are exiting given the fact they have long put a premium on potash.
Of course BHP’s decision to exit Ethiopia is probably more about their planned project in Saskatchewan, Canada, a project that some analysts say could produce about 8 million metric tons a year of agricultural-grade potash and has already been granted approval by the environment ministry and could begin production by 2015.
There are those investors who see BHP’s exit from Ethiopia as a bad omen for AAA.TO, a sign that the potash deposits may not produce the kind of returns shareholders expect.
AAA.TO hasn’t said much of late, distributing a press release last Thursday announcing that they had filed a National Instrument 43-101 compliant Technical Report dated April 30, 2012, not exactly breaking news. That Technical Report is in regards to the company’s Updated Resource Estimate completed on at their Danakhil Potash deposit, located in the Afar State, Ethiopia.
Farhad Abasov, President and CEO of Allana, said of this filing, “This resource estimate represents a significant increase in almost all categories from the 2011 mineral resource estimate and will form the resource base for our ongoing Feasibility Study. Since this resource was calculated, 14 additional exploration holes have been completed and Allana anticipates completing another resource update in Q4 2012.”
Among the highlights listed of the Danakhil Potash deposit resource update:
– Total Measured and Indicated Mineral Resources of 1.297 Billion tonnes
from all four potash horizons with an average grade of 19.3% KCl for a
total of 251 Million tonnes of contained KCl.;
– An additional Inferred Mineral Resource of 588.2 Million tonnes from all
four potash horizons with an average grade of 18.6% KCl for a total of
109 Million tonnes of contained KCl;
– Total Measured and Indicated Sylvinite Resource of 171.4 Million tonnes
with an average grade of 31% KCl for a total of 53 Million tonnes of
contained KCl.;
– Total Inferred Sylvinite Resource of 46.6 Million tonnes with an average
grade of 30.3% KCl for a total of 14 Million tonnes of KCl.
Two days prior to announcing the filing of the NI 43-101 Allana announced that they were continuing to intersect strong potash mineralization throughout its Dallol potash project located in Ethiopia.
Unfortunately for AAA.TO they aren’t seeing a lot of investor enthusiasm concerning their developments as the company’s share price remains flat, right around the 0.59 level while trading volume is steady. While the current share price is slightly higher than the 50-day moving average of 0.57 it is still a distance from their 200-day moving average of 0.82 and a far cry from their 52-week high of 2.27 set last June.
It’s difficult for investors to predict the value of AAA.TO given the fact that the company is still exploring properties, making any estimates concerning the global demand for potash irrelevant at this time. Additionally, when a company like BHP opts to pack up their bags and concentrate on newer projects that may not be a very good indicator for the remaining potash companies.
