Ubika Research on Allana On October 9th, Allana Potash announced that it has received the Mining Licence for the Danakhil Potash Project from the Ethiopian Ministry of Mines, after receiving approval from the Ethiopian Council of Ministers. The Company stated that Allana's Mining Licence was issued after a detailed review by the Ministry of Mines and other Ethiopian government departments of the Project's Feasibility Study and Environmental, Social and Health Impacts Assessment (ESHIA), which was approved in May 2013 by the Ethiopian Environmental Protection Authority and Ministry of Mines.
With the receipt of the Mining Licence, Allana now has the required regulatory approvals to complete the development phase of the Project and move directly to contracting, construction and operations. This concludes a major step towards the move to become a potash producer by the Company.
We believe that this announcement cements the maturation of Allana’s potash project in Ethiopia. Earlier this year, the Company released a positive independent Feasibility Study prepared by Ercosplan on its Danakhil Potash Project in Ethiopia. The feasibility study put the after tax net asset value of $1.32 billion on the project with an internal rate of return of 33%. The company is moving ahead with the plan to get into production by 2015 and to reach a fully targeted production of 1 million tonnes per year by 2017. The successful procurement of the mining license now removes the last regulatory hurdle for the Company and will likely expedite the move towards actual production.
The potash industry is facing some headwinds due to the recent break of one of the two large potash cartels. We believe that potash is a unique commodity and even after this breakup; at least 50% of total potash supply will still be under some type of price control and will result in a floor for the potash prices around $400/tonne in the medium to long term.
Once in production, Allana’s potash project has the potential to be one of the lowest cost productions. It is strategically located in Ethiopia and once complete, will be the closest source of key potash supply for India, one of the largest importers of potash and is a country that is clearly looking to secure stable sources of potash. Once it moves closer to production, a company like Allana will be well positioned to attract attention from prospective buyers from countries like India and China.