Potash is hot. Allana’s potash might be just a little hotter.
That’s because Toronto based Allana Potash’s (TSXV:AAA) property is located in the Danakil Depression of Ethiopia, one of the lowest places on earth not covered by water, and, with temperatures routinely soaring to over 60 Celsius, the hottest.
When Potash was discovered in this basin near the Red Sea in 1918, most wouldn’t blame anyone for simply turning their back on it. But the quality and amount of potash available here, as Allana’s short experience in the region is already proving, means the appeal is simply too lucrative, even in the excruciating heat of the Danakil Desert.
Potash production began in the Danakil in 1918 after a railway was completed from the port of Mersa Fatma in Eritrea to an area 28 km outside of Dallol. But when large-scale supplies from Germany, USA, and USSR came to market the region sat dormant for decades.
But just a few years ago, with Potash high in demand again, Etiopia and Eritrea governments granted a number of licenses. Allana’s property surrounds Sainik’s Crescent Potash Project and is adjacent to BHP Billiton’s holdings in the Depression. When Allana acquired its Ethiopian potash concessions in September, 2008 the transaction was supported by a NI-43-101 compliant technical report from ERCOSPLAN Ingenieurgesellschaft and North Rim Exploration. That report showed an inferred mineral resource of 105,200,000 tonnes of potash mineralization (Sylvite and Kainite) with a composite grade of 20.8% KCl with near surface mineralization was presented.
Since acquiring the concessions Allana has been busy developing the project, attracting a $12.3 million strategic investment from Liberty Metal and Mining; 17% ownership stake, and a two million dollar investment from China Mineral United Management. Then, On March 1st, Allana completed $38 million in financings from a syndicate of brokers and an over-allotment option from Liberty Metals.
Recently The MiningFeeds.com talked to Farhad Abasov, President and CEO of Allana Potash about their experience in the Danakil and the 154,000 hectares land position the company holds in the Nequen province of Argentina.
The Danakil Depression in the Afar Region of Ethiopia is noted as the hottest place on earth and, based on the photos I’ve seen from the area, is one of the most visually stunning. Could you tell our readers a bit about the region and the people who inhabit the area.
The Danakhil Depression is truly one of the most interesting locations in Ethiopia. The Dallol area is very hot and is approximately 125 metres below sea level. In the centre of the Dallol area sits Dallol Mountain which contains active hot springs that spew smoke and sulphur and form terraces with unique geological features. Surrounding the Dallol Mountain, which is really just a small hill, is a very flat white salt plain similar to other salt plains around the world. The area is virtually uninhabited due to the hot climate where year round temperatures average 40°C and lack of rainfall. On the flanks of the depression Afari nomads come to the area in the cooler months with their goat herds and to mine salt and export it to market in camel caravans. Allana currently employs approximately 25 Afaris and we have found them to be reliable workers, keen to learn and very friendly.
From 1998 to 2000 Eritrea and Ethiopia were at war and in 2007 there was a hostage taking by Eritrean militia in the area along the Eritrea and Ethiopia boarder – what is the current political state concerning the disputed border region?
The border is very quiet now although Ethiopia does maintain a military presence near the small village of Hamadela. The border is approximately 20 km from our camp but for the past three years that Allana has been working in the area there have been no incidents whatsoever.
By way of background, could you explain the genesis of Allana Potash and talk about some of the early challenges and successes your company faced?
Allana Potash grew from Allana Resources which was a company formed in Canada. Allana entered into an agreement in 2008 to earn 100 % of the project and began field studies in 2008 and 2009 followed by camp construction and drilling in 2010. The main early challenges faced by the company were related to the poor infrastructure in the region and the climate. Early in the program it was recognized that a modular camp complete with air conditioning, kitchen, showers etc. would be necessary to conduct advanced exploration on the project. While the project had been drilled in the 1950s and 1960s, additional drilling by Allana would be necessary. To facilitate our exploration efforts the government of Ethiopia rehabilitated and modified about 60 km of road to provide good access to the area and allow heavy machinery to make it to site.
The company experienced many successes in 2010 including the completion of the first drill holes in the region in almost 40 years, completion of a seismic program in the evaporite basin and expanding our land position. To date Allana has completed 11 drill holes all of which intersected potash and some at fairly shallow depths, as shallow as 110 metres.
In March last year it was reported that that China Investment Corp and their $300 billion Sovereign Wealth Fund was looking at your Dallol potash project – where is the company at with these discussions?
Allana was actually not directly involved in these discussions. However, we have been actively discussing our project with other potential development partners. We are looking at partners who can contribute to the development of the project either financially or technically. And in the last 6 months, Allana has succeeded in bringing two strong partners to the table to support our project.
Would you mind telling us more about your partners and their value to Allana?
In November 2010 Liberty Metals and Mines, a private equity fund that is a part of Liberty Mutual Group based in Boston, invested over $12 million in Allana and showed a strong commitment to assist Allana at the construction stage financing. And recently, on March 24, Allana announced a strategic investment of $10 million by a very strong group, IFC – part of World Bank Group. IFC is one of the largest multilateral financing organizations contributing to the development of key mining, infrastructure and industrial projects worldwide. In fiscal 2010, IFC invested $18-billion internationally and our board believes the support that IFC can provide to us in Ethiopia is significant.
This interview appeared in 5 Potash Stocks to Watch in 2011 – Part 1 – CLICK HERE for the article.