Shock The MarketThe market is well aware of all the good things that management and the board have achieved thus far. So why is the share price over 50% less than a comparable recent take out offer or analysts targets? We might want to look at the larger picture and try to understand that the market wants to know how Allana is “different from the herd” and not just drilling up a good resource for a take out bid. Farhad has stated and shown by his actions that this is not his intentions, but I think he will have to give the market a “shock” or two so that there is no doubt he is serious about taking this junior into production and benefit from the 10 times multiple for the earnings per share. He has brought on Liberty Metals and the IFC and has stated that they are here to assist with capital for the mine and processing plant. We know he is working on an Off-take Agreement as we speak. Maybe he should confirm one Off-take Agreement with the Indians with the same terms as were in place with China Minerals. 35% Mine Capex for 20% Off-take at fixed price
If you think about it…what is wrong with a conditional 2nd and 3rd Off-take Agreements for 35% Mine Capex for an additional 20% Off-take and
30% Mine Capex for15% Off-take Agreement? The second and third off-take agreements would be conditional for 1 year, and allow Farhad time to secure the Lead Bank to raise the 60% Debt Financing that he has spoken about.
If he secures the 60% Debt Financing within the next year then the second and third off-take agreements become void…if he does not raise the 60% debt financing then we end up with 3 off-take agreements for 55% of our KCL and get 100% Mine Capital paid for and no long term debt….and no share dilution….
The market will have to sit up and pay attention to that reality…
Current estimate $900 million dollars total cost for mine and processing plant / $150 discount per ton = 6 million tons of KCL or (3 years of mine life at 2 million tons of KCL per year) or spread over 10 years at 0.6 million tons discounted. Remember we still get current market price for the 45% of KCL we produce.
A second “shock” that Farhad could deliver is signing the first agreement with the Ethiopian Government for up to 2 million tons of KCL per year to be shipped on the new rail lines to port. This will validate that the railway is being built and we have put in our reservation for our mine capacity.
A third “shock” he could deliver would be a 5 for 1 share consolidation at these undervalued levels…understanding that the current share price is not reflective of the long term value of the company, or our current asset value. You would see some of this manipulation and shorting would be reduced immediately as the share value would be 5 times higher…$7.50 per share….and we would be on the TSX Big Board….Having 40 million shares at time of production is much better for the multiples for EPS or Free Cash Flow than our current 200 million shares outstanding…just a logical thought…don’t shoot the messenger. Just think about it for a minute: $350 net per ton x 2 million tons per year of KCL =
$700,000 / 200 m shares = $3.50 EPS x10 times forward EPS = $35 per share
$700,000 / 40 m shares = $17.50 EPS x10 times forward EPS = $170 per share
No that is not a typo…it would trade at $170 per share…think we would fall apart with a share consolidation…think again…go and look at KRN Karnalyte Resources…potash miner in Sask…IPO last year and it has 20 million shares outstanding and traded today at $12.35 per share….wanting to produce 2 million tons per year of MOP and has a Capex tag of $1.5 Billion Dollars….I would much rather take a consolidation at these undervalued levels and tell the market that we want to get full benefit of our future earnings per share….
And to finish this shock off…a Shareholders Rights Program that tells the market that we are not for sale and do not need a rich uncle to pay for our mine construction…period.
If you open the attached Dundee link and look at the mine results table you can see that 8 of our drill holes have shallow potash layers between 70 meters deep and 200 meters deep…receptive to Open Pit Mining or Strip Mining techniques. Water table is below 200 meters. With Strip Mining, Allana will mine all layers including the Kainitite Layer that contains the valuable SOP. Strip Mining allows for the non desirable overburden soil to be dumped into the previously mined section….the strip mine can go on for miles in a strait line and remove all 200 meters of soils and layers of potash.
https://research.dundeesecurities.com/Research/AAA070611.pdf
If you look at the map with the drill holes, you can see that our shallow holes were right at the “ western shoreline”…and in the NR today, Farhad said that roads were being built eastward so that they could drill even further East…or nearer to the “eastern shoreline…(very good decision)…if geology is correct and potash lays in continues layers, and if you consider South Boulders shallow drill holes on their portion of the eastern shoreline…then we should get comparable shallow results of Kainitite…receptive to open pit or strip mining…
Go ahead Farhad….”Shock the Market”...and show them your serious....
Karma