RE: RE: Stress Testing Potash Prices:Ronin, I will take this one. Mylie as I did respond to you earlier I will try one more time as I never want to be accused of speaking to the deaf....to be very clear, Farhad has several choices now....we have enough money for the next year to move us closer to mine construction....so why jump too quickly...hold your cards close to your chest and wait for the best opportunity. Hole #7 should be good as they are in the zone where Parsons hit 60% KCL in the Kainite layer....in 3 holes and over 7 meters deep...
As far as our future share price is concerned, we will have to wait and see...if Adam is right and our share price would be twice what it is now if we had a signed agreement with ChinaCo for the 35% Capex for mine and 20% offtake for five years...only imagine what the share price will be with a signed long term Credit Line for the full cost of Mine Construction and paid back over 5 years...you do the math...
I believe we should not consider a second off take agreement until after the 101N1 Resource Report is completed this coming spring. As we will likely offer shares as part of the deal, it will be more prudent to wait until our share price is much higher post resource report results. Farhad may not want a second offtake agreement as a Credit Line for mine construction may be more favourable for shareholders. Farhad said: "We are delighted to be forming a strategic relationship with China Minerals this marks an important milestone in the development of our potash project. We believe that this approach will result in near-term value creation for Allana shareholders while at the same time, preserve long-term shareholder value going forward.
Don’t be surprised if Farhad reconsiders the proposed 1st Offtake Agreement with ChinaCo if he can secure long term financing for the full $800 million for mine construction once we have a released 101N1 Resource Report that allows an investor to come forward and invest in Allana?…..then the sales of KCL will be at current world market, and could be much higher in 2 years…
$800 million dollars = Projected Capex for Mine Construction
$280 million dollars = ChinaCo assuming 35% of mine costs
$520 million dollars = Credit Line Financing 65% of mine costs
(Liberty or other Financier Lender)
5 year total payback from operating revenue. Lender gets $70 million in total interest payments over 5 years.
$520 million dollars at 5% interest per year = $26 million dollars interest payment + $104 million dollars principal payment = $130 million dollars per year payments to Credit Line x 5 years.
Assume $450 per ton potash - $100 opex per ton = $350 net per ton
2 million tons mined x 20% KCL = 400,000 tons KCL x $350 per ton = $140 million dollars
So, $140 million dollars from sales - $130 million to Credit Line per year = $10 million balance to Allana per year for 5 years.
After five years, Allana realizes the full $140 million dollars from sales of Potash for the balance of the mine life….. Speaking of Liberty, I hope Allana considers naming our first mine in Ethiopia "The Liberty Belle Potash Mine"...in recognition of our largest shareholder....