Ethiopia's Potash Boom Rolls with $6.5 Billion from Five Companies

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Ethiopia's Ministry of Mines reports that five foreign companies have invested $6.5 billion in the country's potash mining sector: G&B Central Africa Resource (Johannesburg/London), Saynic Potash (India), Nova Potash (Canada), BHP Billiton (NYSE:BHP) (Melbourne, Australia) and Allana Potash (TSX:AAA) (Toronto).

Allana, which has backing from the World Bank, recently announced another high-grade discovery at its 160-square-kilometer property in Dalol, in the Danakil Depression, where the potash industry is centered. The shallow potash deposits in the area allow for the option of open pit mining, in addition to solution mining with recovery through solar evaporation.

Test holes have shown a region of potash mineralization occurring 75 and 200 meters below the surface.

Farhad Abasov, Allana's president and chief executive officer, said that the area continued to yield high-grade potash in the Sylvinite and Kainitite zones. This should allow Allana to upgrade mineral resources from inferred to measured and indicated categories, in addition to the inferred category. The potash zones remain open to the north and east, he said.

For related information, see July 18, 2011, article - Canada's Allana Potash Develops Ethiopian Resources in Hot World Market.

Market reports say that bulk clients are buying potash at $520 a ton, which represents a 27% price increase over the last 18 months, and prices are projected to be $600 a ton by the end of the year. Potash is used primarily as an agricultural fertilizer and as a source of soluble potassium, one of the three primary plant nutrients.

While Ethiopia is on a roll with what the IMF calls a "very ambitious" five-year growth and transformation plan targeting 12% annual growth, inflation has been running at 40%. This inflation should be brought under 10%, which is unrealistic as long as there is a loose monetary policy and the public sector continues to depend heavily bank credit for financing, the IMF said.

The government acknowledges the inflation problem and is working to reduce the rate and at the same time still aims to increase crop production, develop the infrastructure, and expand power generation.

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