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Posts tagged ‘Allana Potash Corp (AAA)’

Potash in perspective

February 21st, 2014

The long-term outlook and an advanced-stage project bring Asian interest to Western Potash

by Greg Klein

The long-term outlook and an advanced-stage project bring Asian interest to Western Potash

As the world’s population grows, arable land shrinks, causing greater demand for fertilizer.

 

It’s an opportunity best characterized as “a marathon, not a sprint.” That’s how Western Potash TSX:WPX VP of corporate development John Costigan refers to his company’s Milestone project. The high-grade potash solution mine proposed for southern Saskatchewan achieved full feasibility in December 2012 and final environmental approval last April. Then came tumultuous times, with what Costigan calls the “Russian-Belarusian debacle” that took down the commodity’s price. Now, with solid Asian investment and indications of a market revival, the advanced-stage project might be seen as an early-stage opportunity emerging anew.

Understandably, enthusiasm for potash plunged with the price following Uralkali’s breakup with cartel partner Belaruskali last summer. Late last year, however, JP Morgan pronounced a more optimistic outlook for 2014. By January analysts were saying prices might have bottomed in the Chinese contracts signed by Uralkali and Canpotex, the marketing arm of PotashCorp TSX:POT, Agrium TSX:AGU and Mosaic NYE:MOS.

More recent news suggests funding’s picking up. On February 18 Verde Potash TSX:NPK reported significant progress in its application for US$105 million in loans, grants and investment from the Brazilian government for the company’s Cerrado Verde project. Six days earlier came news that fertilizer giant ICL was buying a $25-million stake in Allana Potash TSX:AAA, with potential up to $84 million, along with an offtake agreement for the company’s Danakhil project in Ethiopia. Last June Western got a $31.98-million cash injection from a Chinese joint venture.

The attraction was the full-feas, fully permitted Milestone. The operation calls for solution mining, in which water is pumped into underground caverns and then retrieved as potash-rich brine. A relatively simple but highly effective technique, solution mining would allow Western to build the greenfield operation in about 40 months.

The long-term outlook and an advanced-stage project bring Asian interest to Western Potash

Just 60 kilometres away the same approach is being taken by the giant K+S Group. Now under construction, the Legacy project is scheduled to begin potash solution mining in 2016.

Milestone benefits from Saskatchewan’s mining-friendly policies and rich infrastructure. Two continental railways pass through the 35,400-hectare property, as do roads, power and gas lines. An agreement with the city of Regina, 30 kilometres away, provides a supply of treated waste water to extract the potash—enough water, in fact, to flush out 2.8 million tonnes per year for the mine’s projected 40-year life.

Those benefits have already attracted a $31.98-million investment from CBC (Canada) Holding Corp, a JV comprised of fertilizer producer China BlueChemical and Benewood Holdings, a subsidiary of the Hong Kong investment firm Guoxin International Investment Corp. The deal comes with a 20-year offtake agreement for the lesser of 30% of Milestone’s production or a million tonnes a year.

With a 19.9% stake in Western, CBCHC plays an active role in the strategic alliance. One China BlueChemical appointee serves on Western’s board and another acts as an observer. The alliance has struck two six-person committees, one to study Milestone’s technical, construction and procurement details and another to recommend financing strategies, meet potential financiers and evaluate proposals.

The alliance brings technical synergies. It also offers potential financial flexibility that could help the junior put together the $2.91-billion capex—a considerable sum but substantially less than K+S is spending 60 kilometres away. One possible Milestone scenario could involve Chinese investment banks which, Costigan points out, can structure finance agreements with a 3:1 debt-to-equity ratio. With one or more additional partners, Western could make the transition to a potash producer.

The company already has mining expertise, most notably with project director Richard Lock. In fact his career has been based on projects much more challenging than a southern Saskatchewan solution mine. While with Rio Tinto NYE:RIO, Lock took the Northwest Territories’ Diavik diamond mine from exploration to production. Among other accomplishments, he also acted as project director for Arizona’s Resolution project, now in pre-feasibility and potentially North America’s largest copper mine.

As for potential partners, discussions have picked up, Costigan says. “There’s renewed interest now. People think the market has settled. If we see prices rise, there’ll be even greater interest.”

The commodity’s long-term fundamentals remain strong, he says. Nothing’s stopping population growth. Meanwhile the global decline of arable land calls for ever-higher crop yields.

“Look at the growth in Chinese potash consumption—it’s definitely why our partners came in,” Costigan says. “They recognize they’re going to see big increases in their consumption. China’s ramping up their domestic supplies, they’re in Thailand, Africa, Kazakhstan. But when you look at the projects out there, there’s nothing that compares with Milestone for volume, quality, cost, location, infrastructure and political stability. There’s nothing that compares globally.”

Allana VP Jack Scott on Ethiopia potash resource estimate

May 3rd, 2012

Resource Clips - essential news on junior gold mining and junior silver miningAllana Potash Corp TSX:AAA announced an updated NI 43-101 mineral resource estimate for its Dallol Potash Project in the Danakil Depression, northeast Ethiopia. The project now has measured and indicated resources of 1.29 billion tonnes at an average grade of 19.32% KCI (potassium chloride), representing approximately 250 million tonnes of contained KCI. The project has inferred resources of 588.15 million tonnes grading 18.56% KCI, representing approximately 109.2 million tonnes KCI.

Senior VP Strategic Projects Jack Scott tells ResourceClips.com, “The region has been known as a potential potash production area since the early 1900s. The Italians first started developing it then, and over the years it’s been off and on. In the 1950s and 1960s the Ralph M Parsons Company did extensive exploration and brought some production into operation to serve the North American market at the same time as the Saskatchewan Basin came into extensive production. Parsons sort of packed up at that point—in the late 1960s—and various people have looked at it off and on. Ethiopia and that region has been stable for the last 15 years or so, so in the mid-2000s a number of companies went in to start development in the region.

We’re looking for strategic off-takers. That’s part of the work program through the summer this year. We’re in discussion with a number of players—Jack Scott

“Allana has been working in the region since 2008 on the option properties there and we’ve fulfilled the options and now the license is consolidated under our company. We began exploration in early 2010 after raising our first substantial amount of capital in the markets. We began a drilling program and came through with a first resource estimate in June of last year. We’ve continued drilling, both infill drilling and step-out drilling to confirm the resource and more so to move it from inferred to the indicated category. In the back half of 2011, we started a feasibility study. Basically, we knew the resource was good enough and shallow enough so rather than doing the prefeasibility we went straight to full feasibility and that’s ongoing right now.”

Scott notes that the new estimate represents a 90% increase to the measured and indicated resource, “And an overall expansion of the total resource as well. We want to move as much as possible into measured and indicated, so as we go through the feasibility study we can roll that into potential reserves. Our exploration has been predominantly in the shallow, western region of the property.

“We know that potash extends across the basin. We did seismic work early in our exploration just to get a profile of the basin, and we’ve done some drilling from the eastern to the western edge. The centre part of the basin is a bit deeper, so we know there is potash there, but that’s for later production. We’ll focus on the shallow regions—where, with this new resource estimate, we’ve proven we have a long-term resource—so that when the feasibility study comes out we’ll have an appreciation of the economics.

“Right now our timeline is focused on continuing the feasibility study and some pilot work. Pilot solution wells, pilot evaporation ponds—pre-production analysis due for completion at the end of this year. So the feasibility study, including all that pilot work, is due for completion at the end of this calendar year. We’re doing our environmental and social impact assessment work in concert with one of our major shareholders, the International Finance Corporation, and that’s proceeding and due for completion at the end of this year as well. In parallel with all that work, we’re working through BNP Paribas, our financial advisor, to bring our lenders along through that technical and environmental and social evaluation process so we’re ready to work towards an accelerated close on the project at the end of this year.”

Allana intends to take the Dallol Project to production. Scott adds, “We’re looking for strategic off-takers. That’s part of the work program through the summer this year. We’re in discussion with a number of players, people that bring access to market demand for potash. Those are our targets for strategic partners. People that, perhaps, can bring some operating expertise as well.

“Ethiopia is very stable and has been stable for quite a number of years,” he continues. “They’ve been focused since the early 1990s on creating and refining a well-understood, stable, legal and regulatory infrastructure for mine development. So the mining laws are well defined, and we know the financial implications of all of our developments [in terms of] royalty, tax, duty and customs access. All of those elements are clearly defined. From the perspective of infrastructure, the country sees this potash region as being strategic. They’ve been very progressive in terms of building infrastructure. When we first started our exploration the government built gravel access roads of very high quality so we could get truck access. They are now in the midst of upgrading the road infrastructure to paved highways sufficient for our production plans. That is ongoing and due for completion, likely in the middle to end of next year.”

Allana has raised approximately $75 million over the last two years. “We’ve got somewhere north of $60 million in the bank still, and we’ll need about half of that to complete all of our feasibility, environmental, pre-financial close work. So we’ll have some capital available to ramp up into construction, to fund deposits on long-lead equipments, to scale up some of our pilot work into pre-production, then move—on financial close—into the full construction process.

“We had a preliminary economic assessment done by our technical consultants back in November of last year that put a valuation on the project north of $1.5 billion dollars. Right now, our shares are trading at basically twice cash-value; we have a market cap of somewhere around $150 million with $60-plus million in the bank. So we’re getting a valuation on the project now somewhere around $90 million to $100 million when the thing is worth 10 times that.

“There is a high demand for potash. It’s the underused element of fertilizer applications. It’s critical for some of the larger cash-crops in the world. If you look at the growth in India and China and Southeast Asia—markets that our resource is close to geographically—the demand is increasing. You’ve got three major elements of fertilizer: nitrogen, phosphorous and potassium. The potassium element is growing at a bit faster rate than the other two because it has been traditionally underapplied in balance with the other two elements.”

Scott concludes, “The resource has been well-defined now. And with this most recent resource estimate, we clearly have something of extent and depth from a duration perspective. I think it validates that whole region as a very good global-potash asset. From our perspective, we’ve managed to move the technical side of things, now looking at the development of our production processes. We’ve been very successful in terms of securing infrastructure—port and road and looking now to accelerate the development of Ethiopian rail in support of the project. So I think, all in all, we see this as being a well-advanced project in a strategic part of the world, serving some strategic markets which are in very close proximity.”

View Company Profile

Contact:
Farhad Abasov
President/CEO
416.309.2691

by Ted Niles

Allana increases Ethiopia Dallol Potash Resource Estimate

May 2nd, 2012

Resource Clips - essential news on junior gold mining and junior silver miningAllana Potash Corp TSX:AAA announced an updated NI 43-101 mineral resource estimate for its Dallol Potash Project in the Danakil Depression, northeast Ethiopia. The project now has measured and indicated resources of 1.29 billion tonnes at an average grade of 19.32% KCI (potassium chloride), representing approximately 250 million tonnes of contained KCI. The project has inferred resources of 588.15 million tonnes grading 18.56% KCI, representing approximately 109.2 million tonnes KCI.

Senior VP Strategic Projects Jack Scott tells ResourceClips.com, “The region has been known as a potential potash production area since the early 1900s. The Italians first started developing it then, and over the years it’s been off and on. In the 1950s and 1960s the Ralph M Parsons Company did extensive exploration and brought some production into operation to serve the North American market at the same time as the Saskatchewan Basin came into extensive production. Parsons sort of packed up at that point—in the late 1960s—and various people have looked at it off and on. Ethiopia and that region has been stable for the last 15 years or so, so in the mid-2000s a number of companies went in to start development in the region.

We’re looking for strategic off-takers. That’s part of the work program through the summer this year. We’re in discussion with a number of players—Jack Scott

“Allana has been working in the region since 2008 on the option properties there and we’ve fulfilled the options and now the license is consolidated under our company. We began exploration in early 2010 after raising our first substantial amount of capital in the markets. We began a drilling program and came through with a first resource estimate in June of last year. We’ve continued drilling, both infill drilling and step-out drilling to confirm the resource and more so to move it from inferred to the indicated category. In the back half of 2011, we started a feasibility study. Basically, we knew the resource was good enough and shallow enough so rather than doing the prefeasibility we went straight to full feasibility and that’s ongoing right now.”

Scott notes that the new estimate represents a 90% increase to the measured and indicated resource, “And an overall expansion of the total resource as well. We want to move as much as possible into measured and indicated, so as we go through the feasibility study we can roll that into potential reserves. Our exploration has been predominantly in the shallow, western region of the property.

“We know that potash extends across the basin. We did seismic work early in our exploration just to get a profile of the basin, and we’ve done some drilling from the eastern to the western edge. The centre part of the basin is a bit deeper, so we know there is potash there, but that’s for later production. We’ll focus on the shallow regions—where, with this new resource estimate, we’ve proven we have a long-term resource—so that when the feasibility study comes out we’ll have an appreciation of the economics.

“Right now our timeline is focused on continuing the feasibility study and some pilot work. Pilot solution wells, pilot evaporation ponds—pre-production analysis due for completion at the end of this year. So the feasibility study, including all that pilot work, is due for completion at the end of this calendar year. We’re doing our environmental and social impact assessment work in concert with one of our major shareholders, the International Finance Corporation, and that’s proceeding and due for completion at the end of this year as well. In parallel with all that work, we’re working through BNP Paribas, our financial advisor, to bring our lenders along through that technical and environmental and social evaluation process so we’re ready to work towards an accelerated close on the project at the end of this year.”

Allana intends to take the Dallol Project to production. Scott adds, “We’re looking for strategic off-takers. That’s part of the work program through the summer this year. We’re in discussion with a number of players, people that bring access to market demand for potash. Those are our targets for strategic partners. People that, perhaps, can bring some operating expertise as well.

“Ethiopia is very stable and has been stable for quite a number of years,” he continues. “They’ve been focused since the early 1990s on creating and refining a well-understood, stable, legal and regulatory infrastructure for mine development. So the mining laws are well defined, and we know the financial implications of all of our developments [in terms of] royalty, tax, duty and customs access. All of those elements are clearly defined. From the perspective of infrastructure, the country sees this potash region as being strategic. They’ve been very progressive in terms of building infrastructure. When we first started our exploration the government built gravel access roads of very high quality so we could get truck access. They are now in the midst of upgrading the road infrastructure to paved highways sufficient for our production plans. That is ongoing and due for completion, likely in the middle to end of next year.”

Allana has raised approximately $75 million over the last two years. “We’ve got somewhere north of $60 million in the bank still, and we’ll need about half of that to complete all of our feasibility, environmental, pre-financial close work. So we’ll have some capital available to ramp up into construction, to fund deposits on long-lead equipments, to scale up some of our pilot work into pre-production, then move—on financial close—into the full construction process.

“We had a preliminary economic assessment done by our technical consultants back in November of last year that put a valuation on the project north of $1.5 billion dollars. Right now, our shares are trading at basically twice cash-value; we have a market cap of somewhere around $150 million with $60-plus million in the bank. So we’re getting a valuation on the project now somewhere around $90 million to $100 million when the thing is worth 10 times that.

“There is a high demand for potash. It’s the underused element of fertilizer applications. It’s critical for some of the larger cash-crops in the world. If you look at the growth in India and China and Southeast Asia—markets that our resource is close to geographically—the demand is increasing. You’ve got three major elements of fertilizer: nitrogen, phosphorous and potassium. The potassium element is growing at a bit faster rate than the other two because it has been traditionally underapplied in balance with the other two elements.”

Scott concludes, “The resource has been well-defined now. And with this most recent resource estimate, we clearly have something of extent and depth from a duration perspective. I think it validates that whole region as a very good global-potash asset. From our perspective, we’ve managed to move the technical side of things, now looking at the development of our production processes. We’ve been very successful in terms of securing infrastructure—port and road and looking now to accelerate the development of Ethiopian rail in support of the project. So I think, all in all, we see this as being a well-advanced project in a strategic part of the world, serving some strategic markets which are in very close proximity.”

View Company Profile

Contact:
Farhad Abasov
President/CEO
416.309.2691

by Ted Niles