VANCOUVER — Just four months after releasing a feasibility study on its wholly-owned Dallol potash asset in Ethiopia’s northeastern Danakil Depression, Toronto-based junior Allana Potash (AAA-T) has followed up with a new resource estimate that significantly boosts contained potassium chloride (KCl) tonnage at the project.
The update marks the first new resource estimate at Danakil in over a year — with the last being released in April 2012 — and incorporates 60 drill holes Allana has completed since 2010, as well as historic drilling completed at the site in the 1950s and 1960s. In addition, Allana tacked on 28 drill holes from its wholly-owned Nova project, which occupies roughly 132-sq.km adjacent to its Dallol concessions and was picked up in a merger with Nova-Ethio Potash in November 2012.
Allana issued around 48 million shares to pick up the Nova property, and needs to spend US$5 million in exploration at the site. Nova had 21 drill holes complete when the company acquired the asset, and Allana has punched an additional seventeen holes since closing the merger — with three additional holes pending. Under terms of the acquisition the company must complete 20 drill holes at Nova and meet its exploration expenditure requirements by November.
Overall measured-and-indicated potash resources at the project have jumped by over 85% to 2.4 billion tonnes with an average grade of 17.9% KCl, which represents around 438 Million tonnes of contained KCl. In addition to firming up its measured-and-indicated resources, Allana continues to successfully delineate a larger global potash base in the Danakil Depression, with inferred resources jumping over 90% to 1.1 billion tonnes grading 15.9% KCl, which represents a 63% boost in contained potash to roughly 178 million tonnes.
“We are excited to see the large increase in total mineral resources on the project and the significant conversion of inferred mineral resources into measured and indicated mineral resource categories,” commented president and CEO Farhad Abasov. “Potash resources continue to expand with our exploration activities which are ongoing on the Nova license. We are encouraged that significant additional mineralization of [carnallite and kainitite] has been delineated and will initiate further study on these resource estimates.”
Perhaps the biggest benefit for Allana, however, was a steep jump in measured-and-indicated sylvinite resources, which rose over 90% to around 327 million tonnes grading 28.3% KCl. The sylvinite mineralization extends to depths of roughly 750 metres, and forms the backbone of the company’s recent feasibility study.
Back in February, Allana modelled a 25-year mine that would carry a US$642 million price tag and crank out one million tonnes of muriate of potash (MOP) annually at operating cash costs of US$98.75 per tonne. And that study was based on proven sylvinite reserves totalling 33 million tonnes grading 28% KCl, and probable reserves totalling 61 million tonnes averaging 28.8% KCl, which combined contain around 24 million tonnes of MOP.
Allana’s initial operation would carry a US$1.32 billion after-tax net present value and 33% internal rate of return at a 10% discount rate. Dallol would carry a three-year payback period, and the company modelled its economic study on a US$430 per tonne of MOP, though potash prices have been trending closer to US$390 per tonne on a spot basis since the end of May.
Allana reported US$18.75 million in working capital at the end of April, which should give the company more than enough cash to complete ongoing exploration work at Nova and move ahead with pilot-plant test work in a bid to get Dallol into production by early 2016. Allana closed up 8% at 49¢ per share at the time of writing, and maintains 276 million shares outstanding for a $135 million market capitalization.