Allana Potash hits 44% KCI over 2.5 metres in Ethiopia

Allana Potash Corp. (TSE:AAA) (OTCQX:ALLRF) said Tuesday it has intersected two zones of strong potash mineralization in a hole at its potash property in Ethiopia.
The company said that hole DK-11-30, located in the western portion of the concession block, intersected a strong Sylvinite Zone at a depth of 193.7 metres, yielding 32.02% KCI over 5.35 metres, including a high grade section from 195.2 to 197.7 metres of 43.85% KCI.
KCI is the composite grade of all four potash-bearing beds including sylvinite, upper and lower carnallite and kainitite.
A robust Kainitite Zone was also encountered deeper in the hole, at a depth of 215.3 metres, returning 22.5% KCI over 6.9 metres, the company said.
"Allana continues to be encouraged by the continuity and strength of potash mineralization in the western portion of the property as exhibited by the results of Hole 30," said president and CEO, Farhad Abasov.
"This area continues to yield high grade potash in the Sylvinite and Kainitite zones which management believes will allow Allana to upgrade mineral resources from Inferred to Measured and Indicated categories as well as add to the Inferred category.
"The relatively shallow and high grade nature of the Sylvinite Zone make this area ideal for solution mining with recovery through solar evaporation."
Hole 30 was targeted to test potash mineralization west of Hole 10, and is part of a drilling program in the west designed to test the extension of the potash mineralization associated with the historic Musley Deposit. The aim of the western campaign is to allow for more material to be included in the measured and indicated resource categories.
Hole 30 is located west of Hole 10 and east of the historic Musley Deposit, suggesting that potash mineralization at Musley continues and is consistent at least to Hole 10, the company said in a statement.
As of June, total measured and indicated resources stood at 673 million tonnes, with an average grade of 18.65% KCI, with totak inferred mineral resources of 596 million tonnes at a grade of 19.96% KCI.
In late November, Allana announced the "extremely positive" results of a preliminary economic assessment (PEA) for its Danakhil potash project in Ethiopia, with the potential to expand production at the site to two million tonnes of muriate of potash (MOP) product per year.
The economic study, conducted by Ercosplan, yielded, on an after-tax basis, an internal rate of return (IRR) of 36.8 percent and a net present value (NPV) of US$1.85 billion based on a 12 percent discount rate.
The results exceeded management's expectations, said Abasov at the time, with the project having "one of the lowest capex and opex in the world" in the potash industry.
Indeed, estimated total capital expenditures, which include production, transportation and handling and port facilities in Djibouti are $796 million, including $128 million in contingency. Total operating expenses are estimated at $90.54 per tonne of KCI, with a projected payback period of three and a half years.
Abasov said that most of the initial MOP product will be coming from sylvinite layers, with the mine life expected to increase once other potash-bearing beds are used. The company is planning to start production with one million tonnes at the initial stage, intended by year 2017, and then ramp up to two million tonnes after year three. Start of construction at the project is anticipated for the end of 2012-early 2013, with minimal output expected by the end of 2014.
A feasibility study is due out in the third quarter of 2012, with a focus on geotechnical drilling, rock mechanical testwork, pilot studies on solution mining cavern development and solar evaporation ponds.
Separately, Allana announced today that its has promoted Jason Wilkinson to VP of its Danakhil operations, reflecting the shift in activity at the project to the development stage.
Allana has financial support from two strategic investors, IFC, a member of the World Bank Group, and Liberty Metals and Mining, and is in ongoing talks with new potential strategic partners.