What’s next for Ethiopian Potash?

David Wahl, former president and chief executive of Ethiopian Potash (FED-V), in an early March interview said he aimed to keep the drills turning, construction going, and results flowing from the Danakil potash project in northern Ethiopia, rebutting recent concerns that the company’s dwindling cash position and management changeover may slowdown progress.

Almost a week later, on March 7 the company made a surprise announcement that Wahl had stepped down, without providing further details. The company’s chairman George Roach will act as interim CEO, while the company finds a new chief executive.

This is the second shift in Ethiopian Potash’s management this year. Bruce Cumming, the former vice-president of exploration, issued his own press release on Feb. 13 declaring that he quit on Jan. 29, 2012.

Cumming noted that he initially resigned five months prior but his move wasn’t formally accepted by the board. He stated that he remains director of G&B Central African Resources, which granted Ethiopian Potash a 10-year option to acquire the 480-sq.-km potash project.

The next day, Ethiopian Potash, confirmed Cumming’s resignation, explaining that his unauthorized press release was disseminated over Canada NewsWire without the company’s consent, assuring investors that “all claims and licenses continue to be in good standing.”

In the interview with The Northern Miner, then-CEO Wahl said the junior has two drills turning on the project’s southwestern portion and by June aims to release an updated resource estimate and likely finish building an airstrip. A scoping study is slated for the fourth quarter, with completion anticipated by year-end or early 2013.

But getting all that work done is contingent on financing, and the lack of funds on hand led one analyst to downgrade the stock from “under review” to “sell” with a target price of 25¢ per share.

“Should our concerns regarding the balance sheet and property title be addressed, we will consider revisiting our rating and target price,” said Mackie Research analyst Jaret Anderson in a Feb. 27 note.

The company reported having $4.1 million in cash on hand as of Sept. 30, 2011. A figure that Anderson believes is quickly drying up, given it has two drills turning at an estimated cost of at least $500,000 a month.

“We believe this figure is much lower at this point (very likely less than $2 million), thereby putting at risk the company’s ability to continue drilling and other development activities at an appropriate pace.”

He cautions that auditors in the company’s most recent financials highlighted that the low cash balance may affect the junior’s ability to continue ongoing work.

Asked if investors’ should be concerned, Wahl, who chose not to disclose Ethiopian Potash’s current cash position, said the company plans to do a financing in the second quarter.

In the March 7 press release, reporting Wahl’s resignation, Ethiopian Potash said it’s in talks with a strategic investor regarding a proposed private placement, where the investor would acquire 19.9% of company.

If the negotiations are successful, the junior says the option agreement with G&B Central African Resources for its chief asset will be restructured, such that G&B will allow it to exercise into the option earlier in exchange for compensation.

Currently, the company has eight years left in its 10-year option, where it can indirectly acquire 100% of the project after publishing a feasibility study and paying 5% of its outstanding shares to G&B shareholders.

In afternoon trading, the junior was up 13% to 38¢. It has a 52-week trading range of 27¢ (March 1, 2012) to $1.27 (March 30, 2011).