Allana Potash adopts shareholder rights plan

In an effort to discourage any unsolicited and unfair takeover bids Allana Potash (AAA-T, ALLRF-O) announced yesterday that it is adopting a shareholder rights plan. But the company emphasized that while it is in talks with various strategic parties the plan “is not being proposed in response to or in contemplation of any specific takeover bid for the company.”

Late last week the company reported that it had intersected three zones of “strong” potash mineralization in a single hole in the northern portion of its concession block in Ethiopia. Hole 27 confirmed the extension of potash west of Hole 13 and intersected a strong Sylvinite Zone at a depth of 159.9 metres yielding 37.70% potassium cloride (KCl) over 3.45 metres. The hole also displayed a “prominent” Upper Carnallitite Zone that returned 13 metres grading 17.41% KCl. And a “robust” Kainitite Zone was intersected deeper in the hole at a depth of 259 metres and returned 23.05 % KCl over 7.67 metres.

Allana’s potash project is comprised of four potash concessions known as the Dallol potash project in Ethiopia’s northeastern Danakil Depression. The Dallol project is about 100 km from the Red Sea coast and 600 km via road from the deep water port of Djibouti. Small-scale potash mining has been carried out in this region since the early 1900s. 

Allana’s concessions cover part of the previously defined Musley potash deposit, which lies on the edge of the 1,000-sq.-km evaporite basin along northern Ethiopia’s portion of the East African rift. The regional evaporate basin also extends onto the Allana concessions and makes up an area of 150 sq. km, the company says on its website.

In June the company updated its National Instrument 43-101 compliant resource estimate based on 19 drill holes and results of a 2D seismic survey. Allana reported measured and indicated resources of 673 million tonnes with an average grade of 18.65% KCl for contained KCl of 126 million tonnes and inferred resources of 596 million tonnes averaging 19.96% KCl for 119 million tonnes of contained KCl.

Currently the company is completing an infill drilling program to upgrade elements of its resource estimate in its target initial production zones as part of its work on a feasibility study. The company expects to update its resource estimate before the end of the year and complete the feasibility study in the third quarter of 2012.

Meanwhile, Allana says it is making progress on key infrastructure. The Ethiopian government has rehabilitated the western road toward Mekele and the southern road linking Allana’s project to the port of Djibouti is “substantially” completed.

The company is also continuing discussions with government departments and potential operators on plans and specifications for road, rail, port and power facilities.

Allana expects it will be able to determine the technical and economic parameters of open-pit and solution mining methods by the end of this year in order to evaluate the optimal mining method and product output in the initial stage of production.

On the financing front, Allana has received project finance advisory proposals from several large international banks and has also been advancing talks with large fertilizer and industrial organizations on off-take and strategic investment.

Allana has already secured financial support from two significant strategic investors: International Finance Corporation (IFC), a member of World Bank Group, and Liberty Metals and Mining, a member of Liberty Mutual Group.

Meanwhile, exploration drilling is continuing in the southwestern part of the property as part of the infill drill program.

At presstime in Toronto Allana was trading at 93¢ within a 52-week range of 38¢ (Oct. 7 2010) and $2.43 per share (Feb. 9 2011). The company has about 196.5 million shares outstanding.