Canada's Allana Potash Develops Ethiopian Resources in Hot World Market

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--India is the world's largest importer of potash, with 6 million tons incoming annually. The country's Department of Fertilizers has raised concerns with the Foreign Affairs minister concerning the prices set this year by Canpotex (Singapore/Vancouver), the company that markets and distributes potash globally for producers in Canada's Saskatchewan province, including Potash Corporation of Saskatchewan (NYSE:POT) (Saskatoon, Saskatchewan), which is the world's largest producer.

With pressure on food production to provide for a fast-growing world population, potash is becoming a scarce resource, with accompanying tensions along the supply chain.

The farming co-ops in India have halted imports, as they say they are paying higher prices than those negotiated by the Chinese and are waiting for the government to grant import subsidies. China reportedly has been obtaining potash supplies at $400 per ton, whereas Canpotex has pressed India to pay $500 per ton.

ICL Fertilizers (Israel) will now sell China potash at $470 per ton, which is a $70 increase on the price for the first half of the year. At the end of June, the chief executive of Russian producer Uralkali told an investment conference in Moscow that potash could reach $600 per ton by the end of 2011.

Against this market background of price and supply security pressure, the major global producers are pursuing mergers and focusing on exploration and new potash resource discoveries.

One company with promising prospects in the field is Allana Potash Corporation (TSX:AAA) (Toronto, Ontario), which has announced that its East Africa project in Ethiopia has intersected potash mineralization on the eastern portion of its holding. Although no resource quantity has been calculated in the area, which has not been drilled before, the presence of strong potash mineralization suggests a strong continuity for the resource, and the deposit remains open in all directions, the company reports.

"The area is approximately 18 square kilometers, and management believes that there is good potential to add potash resources to the project," said Farhad Abasov, the Allana president and chief executive officer. "Additional drilling will closely follow road building to determine if a large, shallow potash resource may be amenable to open-pit mining. The company's development efforts continue with plans for a feasibility study under way, and work is expected to begin in a few weeks. In addition, management continues negotiations with potential off-takers."

The $3 billion East Africa potash mining and processing plant project has the backing of the World Bank. Most of its assets are still being qualified. The value of the company has doubled in 2011. In June, a compliant report was issued, reporting 673 million tons of indicated mineral reserves.

With food security at crisis levels in East Africa, an Ethiopia potash resource would be a major development for the country, which is already making strides in energy, mining and infrastructure.

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