Allana Resources Inc., Toronto, has completed its strategic investment with China Mineral United Management Ltd., a Chinese mining investment group closely associated with one of the largest fertilizer companies in China. The investment is by way of a private placement financing of common shares of the corporation for gross proceeds of $2 million through the issuance of 8 million common shares at a price of $.25 per common share. The net proceeds of the financing will be used to fund exploration and development of Allana’s potash project in Ethiopia and for general corporate and working capital purposes.
Allana has also agreed to negotiate an offtake/financing agreement with China Mineral in which China Mineral would acquire 20 percent of the project’s total potash production at a price discounted to the market price and equal to Allana’s full operating and shipping costs plus a profit margin for Allana. The potash pricing structure would continue until China Mineral completely covers its initial investment of construction costs. As consideration for the offtake/financing agreement, China Mineral would commit to finance 35 percent of the project’s required construction costs, which, based on current estimates, is US$280 million. Allana also believes that its strategic relationship with China Mineral will attract more debt financing as required.
“We are delighted to be forming a strategic relationship with China Mineral as this marks an important milestone in the development of our potash project,” said Allana President and CEO Farhad Abasov. “We believe that this approach will result in near-term value creation for Allana shareholders while at the same time, preserve long-term shareholder value going forward. China Mineral is a strong mining group and we were particularly impressed with the professionalism, enthusiasm and speed with which they pursued and concluded negotiations. We look forward to working with China Mineral in developing this outstanding potash project.”
Allana says its projects involve significant potash assets that are undervalued based on Allana’s current market capitalization, partially due to the financing risk associated with advancing the project to commercial operations.
Allana said in October that it has been receiving multiple unsolicited offers from various strategic counterparties to participate in the project. Financial analysts have also been discovering Allana, with two initiating coverage in November – Lowe, Ondaatje, McCutcheon Inc., and Dundee Capital Markets.
Allana’s project comprises three mineral concessions totaling 150 square kilometers in Ethiopia’s northeastern Danakil Depression. The concessions have an inferred resource estimate of 105.2 million mt of potash mineralization with a composite grade of 20.8 percent KC1 that is open along strike and to depth. Potash deposits there are unique due to their shallow depth and may be amenable to open pit or solution and solar evaporation. The project is some 100 km (approx. 62 miles) from the Red Sea Coast and the sea port of Mersa Fatma, Eritrea, and 600 km (approx. 373 miles) via road from the deep water port of Djibouti.