Allana Potash fka AAA

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Robert B. Winslow, CFA [phone]; [e-mail] October 7, 2010 – 1
Agriculture
Allana Potash Corp. (AAA-V, $0.395)
Recommendation: Strong Buy
Robert B. Winslow, CFA [phone]; [e-mail]
Andrew Gilbert [phone]; [e-mail]
October 7, 2010
All values in C$ unless otherwise noted.
Current Price $0.395
Target Price (12-Month) $1.00
Target Return 153%
Changes
Old
New
Recommendation
Buy
Strong Buy
Target
$0.85
$1.00
Company Profile
Allana Potash Corp. (“Allana”) is a mineral exploration company with potash mineral properties in Ethiopia. The Company also has prospective potash properties in Argentina.
Minister Meetings, Ethiopia Site Trip Improve Our Confidence – Upgrading to Strong Buy
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Key gov’t officials supportive – Ethiopia wants to produce potash.
We met with the Minister of Mines, who stated gov’t 5-yr plan is to produce 2M tpy KCl – we believe Allana will be critical to that target.
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Supporting infrastructure is poor, but local government aims to help.
Gov’t officials are also eager to provide road/rail support to develop project; ~$40M earmarked to pave access road earlier than expected.
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Positioned well for low-cost production – solution or open pit mine.
We visited salt evaporate in Danakil depression where temps are +40ºC 12 months/yr; project is amenable to low-cost solar evaporation ponds.
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Raising target to $1.00 from 85¢; upgrading to Strong Buy from Buy.
On higher confidence we trim DCF WACC 0.5% to 13.0%; NAVPS (fd, ff) lifts to $0.99 from $0.86, offsetting higher assumed taxes, royalties.
Company Summary Shares Out (millions) (f.d.)126.052-Week Range$0.60 - $0.19Market Cap (millions)$49.8Avg Daily Volume1,103,884 Cash per FD Share (est)$0.04Est. NAV (mill) $480Fiscal Year EndJul P/NAV0.10xKey Properties:Status:Argentina projectGreenfieldDirectors & OfficersManagement Holdings (est)% FDFarhad AbasovPresident & CEOManagement & Insiders16%Dr. Peter MacLeanSenior VP ExplorationNejib Abba BiyaSenior VP, Bus DevStephen HalaburaAdvisorDeborah BattisonCFODr. Mark StaufferAdvisorPatrick GleesonCorporate SecretaryRichard LacroixAdvisorDrilling, seismic work underway; expecting scoping study in the next 6-12 months; first prod'n could be in 2013; 20% off-take in negotiations with China Mineral United Mining Management Ltd.Danakil Potash Project, Ethiopia
Source:
Company reports, WWCM
Price Chart $0.00$0.10$0.20$0.30$0.40$0.50$0.60$0.7010/1/0912/1/092/1/104/1/106/1/108/1/1010/1/10Price 01,0002,0003,0004,0005,0006,0007,0008,0009,00010,000Volume (
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Source:
Thompson One
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Allana Potash Corp.
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Robert B. Winslow, CFA [phone]; [e-mail] October 7, 2010 – 2
Allana Potash Corp.
Robert B. Winslow, CFA [phone]; [e-mail] October 7, 2010 – 3
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Company Name
Ticker Symbol
Applicable Disclosure
Allana Potash Corp.
AAA-V
1, 2, 3, 11, 12
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