This e-mail just crossed my desk at work. It's a nice recap with a few insights into the possible milestones to come..
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Allana Potash weighs partnerships on flagship Ethiopia project, has CAs
signed, CEO says
Could see stake sale or company sale in third quarter of 2012, according
to analyst
Company could be targeted for JV or sale by Indian, Chinese players; Rio
or BHP; or non-potash companies
Danakhil project has net present value of USD 1.85bn, according to the
company
Allana Potash (TSX:AAA) has confidentiality agreements signed with
potential strategic partners interested in its Ethiopia project, CEO
Farhad Abasov said.
The Toronto, Ontario-based miner developing a flagship project in
Ethiopia is considering a possible joint venture partnership or offtake
agreement - in which an end-user would secure a supply of eventual
production at the Danakhil project - with parties in China and India.
Allana, with a market cap of CAD 187.25m (USD 183.70m), has also been
approached regarding possible joint ventures and a corporate acquisition
by diversified industrial sector players from the Middle East and Asia,
as well as companies from those regions that are not focused on potash
or fertilizer but looking to move into the space, according to Abasov.
Discussions and negotiations are underway on the strategic partnership
and a decision on incorporating a potential partner could come by the
third quarter of 2012, when the company expects a feasibility study to
be completed on the project, Abasov said. The company is an attractive
target at this point in its development and could potentially be sold
after it releases its feasibility study, an industry analyst said, as
reports of that kind typically strengthen the value proposition for the
company. Abasov said Allana was attractive and agreed the company could
be targeted in earnest after that.
Allana Potash would be a very attractive target to major Chinese
fertilizer makers such as Sinofert Holdings, State Development &
Investment Corporation and Sino-Agri Holdings, a sector banker in China
said. Chinese companies would have great interest in controlling much
more overseas potash resources via acquisition, the banker said. China's
potash reserves are insufficient to meet domestic demand and to support
its large farming industry, the banker explained.
Sinofert is well aware of Allana Potash and has approached the company
before, a Sinofert source said. Sinofert would hold off on a strategic
investment in Allana Potash prior to a feasibility study on the Ethiopia
asset, the source said.
Sino-Agri Holdings could be interested in Allana Potash, a source said,
but its M&A strategy is still mainly focused on domestic potash
resources. Sino-Agri is tweaking the strategy and would like to review
more overseas potential targets, the source added.
India is one of the world's largest potash importers; both state-owned
and privately owned fertilizer companies that have been looking at
overseas acquisitions to secure supplies could be interested in Allana,
two sector bankers said. Large players such as IFFCO, Rashtriya
Chemicals and Fertilizers, Coromandel International, Zuari Industries,
Nagarjuna Fertilizers and Chemicals are some of the largest potash
importers and could be keen on acquiring mines, forming joint ventures
or entering off-take deals, the first banker said.
This news service had earlier reported that IFFCO, Rashtriya Chemicals
and Coromandel International are looking at potash acquisitions overseas
and especially in Africa.
Also, Indian government-owned iron-ore mining company NMDC has been
looking at acquiring potash and phosphate mines overseas and could show
interest, the second banker said. NMDC, according to reports, was
looking at bidding for Saskatoon, Saskatchewan-based PotashCorp as well
as mines in Zimbabwe.
Chinese and Indian companies are logical buyers, the analyst agreed, but
companies in Europe and Australia -- such as Rio Tinto and BHP Billiton
-- could also take a look at Allana.
Danakhil - located in the Danakhil Depression in northeastern Ethiopia
and also called the Dallol project - has a NI43-101 complaint resource
of 673m tonnes of KCI, or potassium chloride. It has an additional 596m
tonnes of inferred material. The company has decided that it will use
solution mining at Danakhil. As of the completion of a preliminary
economic assessment in November, Danakhil has a net present value of USD
1.85bn and a projected capital expenditure under USD 800m.
Allana hired BNP Paribas in October 2011 to secure debt financing for
the project, as previously reported by media sources.
An updated NI43-101-compliant resource estimate is due on the site in
this quarter, according to Abasov, and should prove up resources there.
In September 2011, Allana announced it had adopted a shareholder rights
plan, which would require confirmation by the company's shareholders by
23 March.
On 10 January, Allana announced a CAD 20m financing on a bought deal
basis. Dundee Securities acted as lead underwriter and National Bank
Financial, Cormark Securities, Macquarie Capital Markets and Frazer
Mackenzie Limited participated. On 1 March, the company announced it
closed a CAD 38.3m financing. CAD 32.1m was raised on an underwritten
basis, with Dundee Securities acting as sole-bookrunner with Wellington
West Capital Markets as co-lead underwriter and including Cormark
Securities and Fraser Mackenzie limited. The rest was a previously
announced private placement with Liberty Metals & Mining Holdings, a
part of Liberty Mutual Group.
Allana also wholly owns 154,000 acres in Nequen province in Argentina
that is close to Vale's Rio Colorado project.