Visit the Allana Potash Investor Hub
“For the first time in this junior sector we brought in a real potash producer to become our strategic partner,” says Allana Potash Corp. (TSX: AAA) President and CEO Farhad Abasov, in an interview with Smallcappower.com.
Mr. Abasov discusses a production timeline for his company’s Danakhil potash project in Ethiopia, describes what sets the project apart from others in the sector, and provides his thoughts on the Russian-Belarus cartel as well as his outlook for the price of potash.
Keep up to date with breaking news, commentaries, and interviews by following Allana Potash News.
INTERVIEW TRANSCRIPTION
The SmallCapPower CEO interview with Allana Potash’s Farhad Abasov.
Mark Thorburn: Your company recently announced a partnership with Israel Chemicals. We do describe this agreement as a game changer for Alana.
Farhad Abasov: Allana Potash and ICL signed an agreement on February 12th and it was really a major milestone for the company’s development because for the first time in the junior sector, we brought in a real polished producer to become our strategic partner. The company has structured a strategic partnership with ICL in such a way that it encompasses three major aspects of our business – equity, investment, off-take, solid off-take, take a pay type of an off-take and full technical corporation.
Mark Thorburn: So, does this help the company in raising more equity financing that will be required to take your project to production?
Farhad Abasov: Yes, absolutely. Not only does it help us with equity financing, but it will also help us eventually with debt financing. Because, with ICL becoming a partner for Alana, not only do we get extra investment, as I mentioned earlier, but we also get a very solid off-take, which is very important for, of course, lenders.
And, we also get a technical corporation, which means that ICL, being a products producer that has production profiles similar to what we envision for out Ethiopian project, will be supporting us with solar evaporation ponds, with processing, with trucking, et cetera. That also directs the project technically in the eyes of both investors and potential debt providers.
Mark Thorburn: Is your Danakhil potash project in Ethiopia still on track to be in production by 2016?
Farhad Abasov: We’re still on track to start production in late 2016. The plan for this year is to focus on financing, putting the entire financing package together, but also do some optimization works on the site. But, if everything goes according to the plan, we’d like to start construction, or pre-construction at least, in 2014, so that we can still be on track for 2016 production start.
Mark Thorburn: Some analysts say that Alana’s pot ash project is probably one of the few that has a realistic chance to be in production within two years. What sets this project apart to achieve that type of positive attention?
Farhad Abasov: There’s several factors there. First of all, our CAPEX is one of the lowest in the sector. That’s very important. Secondly, the technologies that we’re going to use to extract our pot ash project are known technologies or proven technologies, including solution mining, use of solar evaporation ponds and very simple flotation processing.
The second thing is, of course, the support that we’ve been getting from our share-holders and investors, and, of course, most recently, a transaction – transformative transaction, with Israel Chemicals, really sets out project apart. That means that with a partner as ICL and, of course, our existing large shareholders, such as International Finance Corporation, Liberty Mines and Metals – we are in the best position to put this project into production.
Mark Thorburn: What is your outlook for pot ash prices? Do you believe that, finally, there has been an uptake in the overall demand, globally?
Farhad Abasov: Our view on pot ash price is not much different, I guess, from many other analysts or major players in the sector. It’s that we believe that the pot ash price will probably be around $300.00 to $350.00 per ton range.
We do not expect any major surge or spike in the pot ash price in the next few years. But, we believe that with our lower cost structure, even with $300.00 to $350.00 price range of pot ash, we can be one of the most successful and profitable companies going forward.
Mark Thorburn: What’s your take on what happened with the Russian Belarus Cartel during the past year? How do you think it will affect potash prices during the next couple of years?
Farhad Abasov: As you know, they’ve had this spat and there are quite a few rumors swirling around this situation between those two countries and companies. And, we believe that eventually, it is in their interest to get together and sell pot ash as one unit. But, even if that does not take place – even if they do operate separately going forward, I think, again, it is in their interest to maintain very solid, healthy pot ash prices going forward.
So, our view on that – no matter what happens there, again, they will still be a price discipline in the sector, going forward.
Mark Thorburn: How do you plan to increase shareholder value over the course of the next 12 months?
Farhad Abasov: In 2014, it works on several work strings – one is financing. And again, this is primarily debt financing followed by equity financing. We already have interest from some large organizations, industrial organizations, who would like to come in and invest in Alana after the deal with ICL was announced.
The second work string is, of course, that further optimization works that we’re trying to accomplish on our project going forward – that will be further [inaudible 00:04:41] and cavern development, et cetera, to optimize the entire operation.
And, the third thing is the selection of the right EPCM contractor, followed by the selection of a construction company.
So, all of these processes and all of these mile stones we believe we can achieve in 2014. And, they will be, again, important milestones that will direct the project even further, bringing it to the point where we can start construction.
Mark Thorburn: Thanks for taking the time to update our viewers, Farhad.
Farhad Abasov:: Thank you very much.
Female: Keep up to date with all your favorite small caps. Subscribe to our free daily newsletter featuring investment ideas, break out stocks, analyst research and more. Smallcappower.com – investing ideas and research.
