Allana Potash says Djibouti government starts new port project

Allana Potash Corp. (TSX:AAA)(OTCQX:ALLRF) said Wednesday that the Republic of Djibtouti's government has started the pre-qualification process to select contractors for the construction of the new port at Tadjoura, Djibouti.

With financing from the Arab Fund for Economic and Social Development and the Saudi Fund for Development, the Djibouti government-owned Port Authority will build and operate marine civil facilities and common services - to be constructed with an initial 30-hectare yeard and a 435 metre quay, the company said.

Allana said it will continue to work with the Djibouti authorities to integrate the required potash storage and handling facilities into the new port plans.

With a recently-completed, positive preliminary economic assessment (PEA) under its belt for its Dallol potash project in Ethiopia, Allana Potash is expecting a host of developments in 2012, including a feasibility study later this year.

Based on the PEA plan, transportation of the product to Djibouti would be completed through a company-owned fleet of trucks, with port costs based on Allana constructing its own port terminal in Djibouti, including product unloading and storage, shipping facilities and supporting infrastructure.

With regards to infrastructure developments for the project, Allana said again today that highway construction by Ethiopian government contractors was "actively proceeding" to connect the project area with paved roads both to the company's project development staging facilities in Mekele, and to the southern highway access to ports in Djibouti.

The company also said that discussions were progressing with government departments and private sector operators regarding regarding rail facilities linking road and port infrastructure. Allana continues to expect that the infrastructure required for the company's Dallol potash project to reach full operation will be in place at the same time as, or in advance of its projected construction period, it said.

The company is planning to start production at Dallol with one million tonnes at the initial stage by 2015, to reach peak production by year 2017. Start of construction at the project is anticipated as early as late 2012, with minimal output expected by the end of 2014.

President and CEO of Allana, Farhad Abasov, said in a statement Wednesday: "Allana is encouraged by the admirable progress made by the Djibouti Government in the ongoing development of the country's transportation infrastructure.

"Allana understands that both the Djibouti and Ethiopian Governments are looking to the strategic Danakhil potash resource as one of the catalysts for the development of road, port and rail facilities critical to the continued economic growth within the region and we are pleased to have the opportunity to participate in supporting these developments."

Last November, the company announced the results of the PEA for its Dallol potash project for production of one million tonnes, with the potential to expand output at the site to two million tonnes of muriate of potash (MOP) product per year at a later stage.

The economic study, conducted by Ercosplan and based on solution mining with a solar evaporation method, 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, with the project having "one of the lowest capex and opex in the world" in the potash industry, especially when compared to Saskatchewan players in Canada.

Solar evaporation of the saturated brine solution is possible at the Dallol project due to the year-round hot temperatures and very little rainfall, in contrast to Saskatchewan. Salts harvested from the ponds at Dallol will be processed by standard flotation to create an MOP product.

The Ethiopia project also hosts shallower deposits, which means the company is not required to drill that deep, allowing for cost savings, Abasov told Proactiveinvestors in December.

The ongoing feasibility study, which will consider additional MOP and sulphate of potash (SOP) output, is due out in the third quarter of 2012.

Meanwhile, pilot evaporation pond testwork, hydrogeological studies and solution mining testwork are underway as the company's feasibility study advances. Heavy machinery to construct the ponds is on site, and engineering work and earthworks are in progress, Allana added.

An update to the NI 43-101 compliant technical report is also expected by the end of the first quarter of 2012, with Abasov expecting substantial additions to resources on the eastern side, and an upgrade to the measured and indicated category on the western side.

Exploration drilling has now shifted to the far eastern part of the property as part of the program designed to add mineral resources.

Allana Potash already has financial support from two strategic investors, IFC, a member of the World Bank Group, and Liberty Metals and Mining, and recently announced the closing of a $20 million private placement financing.

Total measured and indicated resources now stand at 673 million tonnes, with an average grade of 18.65% KCI, with total inferred mineral resources of 596 million tonnes at a grade of 19.96% KCI.