Potash is often like Rodney Dangerfield in that it gets no respect, but world demand for potash, a key ingredient in fertilizer for many crops, has been on a solid upward trend again due largely in part to increased demand from emerging countries.
The Food and Agricultural Policy Research Institute (FAPRI) expects world fertilizer use to increase to more than 184 million tonnes in 2024 from 179 million tonnes projected for 2011.
Prices are on the rise as demonstrated in the April 14 Illinois Production Cost Report which reported average fertilizer prices in Illinois as $797 U.S. per ton for anhydrous ammonia (a $20 U.S. increase so far in 2011), $687 U.S. per ton for DAP (a $15 U.S. increase), and $598 U.S. per ton for potash (a $33 U.S. increase in 2011).
A company reaping the benefits of once-again burgeoning potash prices is Toronto-based Allana Potash Corp. (TSX-Venture:AAA); a company that has seen the value of a share rise from under 40 cents in August of 2010 to peak at nearly $2.50 in February 2011 before settling in the area of $1.90 where it currently stands.
Allana is engaged exclusively on acquisition and development of potash projects with its flagship project being the Ethiopia Potash Project in the Danakhil evaporite basin. This project contains an inferred mineral resource of 105,200,000 tonnes with a composite grade of 20.8% KCl (Potassium chloride -- occasionally known as "muriate of potash," primarily when used as a fertilizer).
Allana also has potash claims in Argentina adjacent to Vale's Rio Colorado project, a large potash mine that Vale bought from rival Rio Tinto in 2009. Vale’s project is slated by the industry behemoth to be producing 2.4 million tonnes of potash per year by 2012.
Today, Allana released news announcing significant potash intercepts on its Ethiopian project in a previously unexplored portion of the property. The Company reported that drill hole DK-11-16 intersected significant potash mineralization of 29.80% KCl over four metres starting at a depth of 125.20 metres.
Hole 16 intersected two strong zones of potash mineralization which are interpreted to correlate with the Sylvinite Zone and Kainitite Zone in a previously unexplored part of the basin. The Sylvinite Zone returned 6.50 metres of sylvinite which graded 24.79 % KCl and includes a four-metre interval that returned 29.80% KCl. Further down the hole, five metres of kainitite was intersected which returned 20.29% KCl.
Moreover, this new discovery is not part of the National Instrument 43-101 technical report that was produced in 2008 and is helping delineate what could be a very large area of potash mineralization approximately five kilometres long by four kilometres wide. Samples from Holes 12, 14, 17, 18, and 19 are en route or currently in the lab, which will further define this zone. In addition, similar to Hole 8, Hole 16 intersected potash at relatively shallow depths (125.20 metres) and management plans to evaluate the possibility of open pit mining in its upcoming feasibility study.
Given the magnitude of the mineralization being proven on the Allana property, potash may not get a ton of respect as more glorified mining may come from precious metals, but the dollar value is no laughing matter. With Intrepid Potash recently announcing that potash sales for the first quarter brought an estimated $435 - $445 U.S. per ton as compared to average net realized price for potash for the year-ago quarter of $354 U.S. per short ton, or $390 U.S. per metric tonne, the over 100 million tonnes that Allan is sitting on could garner some serious revenue in the future.
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