Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
Junior gold miners are common enough and those investors who follow the mining sector closely are probably familiar with other juniors in minerals like copper. Junior potash miners are not nearly so common, though, as potash mining has historically been dominated by the likes ofPotash Corp (POT), Uralkali, and Mosaic (MOS). Canada's Allana Potash (OTCPK:ALLRF) (AAA.TO) is looking to shake that up a bit, though, as the company hopes to move forward with a low-cost asset in northeastern Ethiopia.
I suspect that readers are bombarded with enough warnings about risk that they gradually become immune to them. I have to note, though, that Allana is a great deal riskier than average. This company's market cap is just over $100 million and the company is going to need to raise substantial sums of capital to turn its ambitions into reality. Although Allana's ADR shares carry the dreaded "F", the liquidity is actually pretty good (though still less than 20% of the Canadian shares).
Opening A New Source Of Supply
Potash is a popular fertilizer, the third-most used fertilizer in the world, with global demand in the neighborhood of 30 million tonnes today. Most of the world's potash comes from sylvite deposits in Canada and Russia (were about 80% of the world's known reserves are located), and about 70% of the global trade is controlled by Canpotex (a marketing firm owned by Potash, Mosaic and Agrium (AGU)) and Belarusian Potash Company (owned by Uralkali and Belaruskali). There has been turbulence in the market of late due to Uralkali's threat to exit BPC, but that's a topic for another time.
Allana is not looking to shove aside any of the giants of the potash industry, but the company is looking to bring a new mine in Ethiopia into commercial production, a mine that would not only offer low-cost potash deposits, but also good proximity to growing markets like China and India, as well as other Asian and African agricultural markets.