Share issue from Nova acquisition bites Allana Potash market cap in recipients’ rush to cash


Every rose has it’s thorns, but most of overhang appears to have been cleared now.


Although the project has progressed significantly since Allana Potash acquired Nova Potash over 1 year ago, the remaining escrowed 28 million shares received by Nova parties November 1, 2013 upon completion of all other requirements have been flooding the market as the recipients disposition, causing short term pressure on the share price as the market tries to absorb what has already amounted to likely over half of the 28 million shares issued to the former proximity play owners in a short 3 week span subsequently.

Although timing is never good for such activity for long term holders of this equity, and while this has caused consternation in some corners, the availability of a large amount of Allana shares at a large discount to NPV has created an outstanding entry price for those looking to take a position in what amounts to the best publicly traded greenfield potash project in the world today. Based on factors outlined in comparison to all others’ completed Feasibility Studies, strategic advantages, target markets and advanced financing and permitting considerations there is little doubt left in any objective analysis that the price deterioration Allana Potash bears is primarily due to the current potash sector disfavour evident in the market, and although Allana’s share price has held up better than almost anyone else’s, price pressure through massive disposition by what can only be Nova shareholders has served to depress the market cap further yet. Ideally a planned AIM listing scheduled for Dec.10 will better serve the liquidity issue and facilitate more Africa friendly investors too.

It bears reflecting that the Nova land acquisition has served to solidify critical strategic, water and potassium resource (including the world’s shallowest SOP resource at no recognised value) that will ultimately be exponentially accretive against the short term pain of the necessary dilution and current one-off dispositions, and it should be kept in mind Nova Potash, by all appearances was simply a proximity play off Allana Potash and Yara’s planned mines from the start. The disposition of their shares upon receipt is a rather common practice among such disinterested players historically speaking, and in no way reflects on the compelling strength of Allana’s Dallol Project or Yara’s neighbouring mine, and all is progressing as planned with near term catalysts expected on the path to ramping up to construction.

With due diligence by mandated financiers and negotiations with multiple strategic partners and off take arrangements currently at advanced stages, along with an increasingly less volatile supply/demand scenario developing in the potash sector, the future, and most notably, the market Allana will be delivering to come 2016, looks far better than the one many investors see today. Those with longer investing time horizons will realize many multiples on their investment over time investing now in this gem while the herd is fearful and grazing elsewhere IMO. Of course, as a shareholder I’m thoroughly biased, but I share reams of due diligence on this blog for the benefit of others who might also support a company that is and intends in future to greatly benefit a nation and region that is desperately pulling it’s people from poverty. I feel good about that and what Allana’s done already on the ground in the community it operates, which compels me to get the word out. I hope occasionally it reaches the ears of someone who can also make a difference through their investments. All the information any interested investor could use to inform themselves of pertinent Allana Potash facts is likely contained in the ” Related articles ” and the links within them below or through a search of Allana Potash on this blog. Anything not answered there is likely not public knowledge but will be in short order I believe through Allana Potash news releases.

In closing, it should be noted that MagIndusries’ Mengo project in ROC has just been financed to the tune of ~$750 million based on metrics quite similar to Allana’s in many respects, but with a 35% higher capex per tonne production of $1000 to Allana’s $642 and payback of 10 years to Allana’s approx. 5 years at a $380/tonne potash price model. Allana also has a ready domestic potash market to sell what it believes will be about 35% of it’s production into that ROC doesn’t, among other proximal and strategic advantages. We can be sure all these factors are currently being duly considered by potential financiers/JV/equity/offtake partners as they conclude their due diligence.

Disclosure: I am a long term holder of Allana Potash and have only increased my position since Sept. 2009 and Allana Potash has not ever compensated me in any way, suggested anything or provided me with any information not available to everyone else. Anything ever published on this blog was/is available to the public and obtained through the internet, and anything else remains my own personal opinion/speculation and not that of Allana Potash. 



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