As some of you will remember, I bought stock in a little potash company back in late 2010. Today Allana Potash released its NI 43 101 report which is official resource estimate of the company's Danakhil Potash Project. The news was below expectations to say the least and the stock acted accordingly.
The company reported:
•NEW MEASURED AND INDICATED MINERAL RESOURCES OF 673 MILLION TONNES WITH CONTAINED KCl OF 126 MILLION TONNES
•INCREASE IN INFERRED MINERAL RESOURCES TO 596 MILLION TONNES WITH CONTAINED KCl OF 119 MILLION TONNES
This is, of course a major increase for Allana's resource estimate, but a far cry from the rumored 1 billion tons. Another major disappointment was the KCI (the potash) grade of only 18.65% in the measured and indicated classification. Again--this was much lower than the expectations of around 25% and even a tad lower than past historical drilling on the site indicated.
The major analyst covering the stock (Dundee research) seems to be quite optimistic regarding the company. They think the report means the company could increase potash production from an estimated 1 million tons per year. This is hard to see happening, considering the CEO of the company mentioned that production would be capped at 1 million tons per year because of poor infrastructure in Ethiopia. Granted, if infrastructure improved, then the company could increase production, but this is a long way out (2016+).
Overall, this was a slightly underwhelming report. I am selling my position for the short-term and will reevaluate matters latter. I picked up this stock back at .41 and sold today at 2.04. This resulted in a 400% return in just over 9 months. Still I was hoping for more.
I will keep an eye on Allana Potash. At some point it may fall back to a bargain level.
Black Swan Insights
Great stock trade.
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