Capital markets firm Raymond James recently initiatied coverage on Allana Potash (TSE:AAA) at "market perform" with a $1 target price.
is a junior mineral exploration company focused on developing potash
mineral properties in Ethiopia and Argentina. It has a 100 percent
interest in the "very well advanced" Danakhil Potash Deposit, located in
the Danakhil Depression in northern Ethiopia.
A definitive feasibility study for the deposit is due by the end of the year.
addition to Danakhil, the company is also engaged in early stage potash
exploration in Argentina, with its property concession adjacent to Vale’s construction-stage Rio Colorado project.
"On paper, Allana's Danakhil potash project boasts a series of positive attributes that position it well versus other greenfield
assets around the globe," Raymond James analyst Steve Hansen said in a note.
James' Hansen said Allana's balance sheet was "very healthy" with $45.2
million in cash as at January 31 and the potash explorer recently
closed a bought deal financing for an additional $25 million, all of
which is expected to be sufficient for further de-risking initiatives at
the Danakhil Potash Deposit.
Hansen added that the recent move
to hire global bank BNP Paribas to find financing partners provides a
"strong indication" that project financing will ultimately be realized.
solution mining process carries a $796 million capex price-tag which is
"one of the lowest" for a pure-play greenfield potash project amongst
its junior developer peer group and considerably lower than
Saskatchewan-based projects, the Raymond James analyst said, making this
"an attractive feature" for potential acquirers or strategic partners.
the Danakhil project's close proximity to the Asian markets, Raymond
James' Hansen reckons Allana could "successfully engage" an offtake
agreement with parties from Asia.
"We note that Chinese and
Indian parties have been rumored to be interested in the project as well
as this sort of arrangement...the acquisition of Allana by a Chinese
entity is a distinct possibility, in our view."
He added that
Allana’s location in Ethiopia will continue to serve as a
"counterintuitive advantage" giving it access to financing
from non-traditional sources of funding such as international development organizations such as the World Bank's IFC.
Such organizations are not typically available to developers working in developed markets such as Saskatchewan.
longer-term at the industry as a whole, Hansen believes the outlook for
global agri-products, including fertilizers, "was robust".