recent eventsHey guys, not going to lie. As soon as the news hit, I was perplexed and shocked. I did sell about 1/3 of my holdings on the spot. Before this news, I thought Allana was actually a very very attractive investment with actually failry low risk and great return probablility. I still think it is a good play. There is a bit of a silver lining to this IF i mean IF Urakali is serious about this. This will weed out all of the high capex juniors and probably Jansen. I believe this is a fairly good positive and shows that in the future, prices should rebound over time. We have to remember too that the reason why potash consumption is not higher than what it is, is because it is "too expensive". If prices fall to 300 per tonne, I believe Many indian farmers will pickup alot of potash. I believe the rest of the world will start using much more, and consumption will increase dramatically, raising the price of potash. Because Urakali is the lowest cost producer, I actually think this strategy makes sense for them. I wish this news was at a different time though, after we got financing and the liscence. Before the announcement, it was looking like allana was gaining some steam. Now, it seems like its dropping back in the dulldrums of the slow, lower shareprice each day. Having said this, I have spoken with Richard Kalertas. We do have to take his take with a grain of salt but what he said seemed fairly positive. I asked him:
if our lenders are running to the doors, and/or equity investors etc..
I asked if Farhad was going to make a statement about the recent events
What he said was that the lenders and institutions have all indicated that this news does not affect their process and their decision making they are all on board.
He indicated that they will be issuing an update to the street very soon. (my opinion, next week)
I believe that if Urakali is serious, What could reverse the negative cash flow in the future would be the reduction of the tax to 25 from 30, rail, and power. I believe that our opex would be very low, at about 65-70 per tonne. This would put us at about 30% irr in the low 300's Which i do not believe would stay there very long.
I also want to mention that what this announcement really did, if it goes through is price stabalization to the upside. (bad for us) It essentially limits future big profit gains by potash shortages from high demand. eg. 1000 peak in 2008 would never happen again.