Allana Potash one of the world’s most advanced stage potash plays discusses mandate letter signing
September 16, 2013 – Tracy Weslosky, Publisher of InvestorIntel interviews Farhad Abasov, President and CEO of Allana Potash Corp. (TSX: AAA | OTCQX: ALLRF) and discusses the current state of the potash market and explains why Allana Potash has not only held its own, but has flourished, despite the recent potash market upheaval. With major milestones accomplished and more on the way, Allana is advancing to become the first potash producer on the African continent.
Tracy starts: I was just looking at our news this morning and we’re weighted heavily towards the Uralkali story. I wanted InvestorIntel viewers to know what your thoughts were overall on how the BPC breakup is impacting the general potash market and for you personally.
FA: Thank you, Tracy. Yes, that was big news a few weeks ago (July 30th) and still continues to impact the entire potash sector. If you look at the history of those two companies, you will see that they have been together previously and then they fell apart and then they came back again under the BPC umbrella, which was the marketing organization through which they were selling potash. And now Uralkali has decided — again — to depart, which has caused all of the consequences that we have seen. Now the main impact of this is expected and is now already happening — potash prices declining — because Uralkali made it very public that they wanted to abandon the price-over-volume strategy. Long term, I think frankly it’s not a sustainable strategy and Uralkali will probably return to the way they have been producing for a long time, just like Canadian companies. But in the short term, we’re seeing some impact, some negative impact, on the potash prices and consequently on the entire sector. As you know, since the day of Uralkali announcement, most of the potash companies actually have fallen in value.
TW: In spite of the Urakali news, I’ve noticed that Allana Potash really hasn’t been affected. Can you tell us why?
FA: Allana has a unique proposition, as you know, with our potash project in Dallol, Ethiopia is concerned. We have unique advantages. Despite this quite negative consequence of the Urakali news, we’ve done quite well because people (investors) started looking deeper into actual fundamentals of the projects throughout the entire potash sector. Before there was a lot of speculative sentiment in the sector, depending on the location, depending on the potential size of the project and so forth. But after the Uralkali news, people realized — ok — the margins will most likely be squeezed (at least in the short term), so you have to look at the projects that have strong fundamentals, strong economics. As you know, we can actually compete with our project, not only with almost all the greenfield potash operations, but also with some high-cost producers today.
TW: Recently you put out some very exciting news about project financing. Please tell us all about it. You’ve got debt and equity financing lined up, correct?
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FA: Tracy, you’re right. We’ve put out very positive news on the lender process — on project financing with debt process. For the past several months we’ve been working very closely with an elite group of multilateral finance organizations – they’re also known as export/development and financing institutions. Because we’re in Ethiopia and because we’re in agricultural business, the potash business, we’ve decided that we’re going to target a specific group of lenders to provide project financing to our project. The work that we’ve done in the last several months has culminated in these mandate letters that we’ve signed with arguably the most prestigious organizations out of Western Europe, North America and Africa. And they’ve agreed to continue the process, to the point where they’re committed to providing up to 65% of the project financing (or debt) to Allana. Now obviously the process is still on, they still need to complete further due diligence and presently we’re working on all of those aspects with this group of sophisticated lenders. But we are extremely pleased with the support that they have provided to us — especially considering that the support came after the Urakali news.
TW: To date, you’ve raised $90 million?
FA: Actually a little over $90 million.
TW: It’s my understanding that Allana will be the first potash producer in Africa.
FA: Yes, that’s what we’re aiming for, Tracy. We are one of the most advanced projects in Africa, not only in East Africa. Right now there’s no potash production on the entire continent. We’re hoping that if everything is on track, including our financing plans and of course construction after that, we will be able to become the first potash producer on the African continent.
TW: One of the hottest buzz terms online right now is food security. Can you tell me what other benchmarks we should look forward to seeing Allana achieve in this upcoming year?
FA: In the coming weeks and months, we will have achieved very important and significant milestones. We are presently working on a mining permit and we’ve been working very closely with the ministry of mines in Ethiopia, as well as with other ministries in the country. Allana is hoping to, within the next few weeks, be able to secure mining permit, which is obviously a very important milestone for us. In addition, in parallel to all these processes, we’ve been working on financing — not only the debt process, but also on equity. And we’ve been working very closely with our existing strategic shareholders, as well as potentially new strategic shareholders and investors. That process is going forward extremely well. We’re very pleased with the pace and the progress. Again, despite all the turbulence in the potash sector, we’re moving forward with the entire process. Also, I want to say that on the technical side, we’ve been working equally as hard. As we approach the preconstruction period, we have to make sure that we have the right people and select the right EPCM (Engineering, Procurement, Construction and Management) contractor. Basically, we have to have the right people to build this project and we have to have the right people to manage the project. So we’ve been working also on selecting the right person, the right candidate for the Chief Operating Officer position, and we’ve actually advanced our EPCM selection process. Very large, very well known engineering companies have already applied for that and we’re going through the selection process. We are hoping that by the end of October we’ll make the decision on what firm will be Allana’s EPCM contractor.
Disclaimer: Allana Potash Corp. is an advertorial member of InvestorIntel.
An accomplished entrepreneur and corporate finance professional, Tracy Weslosky is the CEO for InvestorIntel Corp. and the VP of Business Development for Bellotti Capital Partners ... <Read more about Tracy Weslosky>