Investor Presentation - Allana Potash


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Investor Presentation - Allana Potash
Speaker: Farhad Abasov - CEO, Allana Potash

Mining On Top: Africa - London Summit
24-26 June 2014 | London

Published in: Business, Economy & Finance
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  • Investor Presentation - Allana Potash

    2. 2. | TSX: AAA OTCQX: ALLRF CAUTIONARY NOTES  Except for statements of historical fact relating to the Company, certain information contained herein constitutes “forward-looking information” under Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved”. Statements with respect to estimated production, the estimation of mineral reserves and mineral resources; the realization of mineral reserve estimates; the timing and amount of estimated future production; costs of production; capital expenditures; success of exploration activities; permitting time lines and permitting, mining or processing issues; government regulation of mining operations; environmental risks; unanticipated reclamation expenses; title disputes or claims; litigation liabilities; and limitations on insurance coverage, as well as statement with respect to the ICL strategic alliance including with respect to the anticipated use of proceeds of the Offering, the timing of closing of the Offering and the expected benefits of the strategic alliance with ICL are forward-looking statements. Forward-looking statements are based on the opinions, assumptions estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements or forward- looking information. Such risks include the uncertainty with respect to the shareholder approval of the Second Tranche not being obtained, the fact that the expected benefits of the strategic alliance may not materialize, the inherent capital markets consequences of an equity controlling position, regulatory risks and such other risks as discussed in the risk factors sections of our latest annual information form, our technical reports and other continuous disclosure documents filed from time to time at Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except in accordance with applicable securities laws  The Units described herein with respect to the ICL strategic alliance have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws, and accordingly, may not be offered or sold within the United States except in compliance with the registration requirements of the U.S. Securities Act and applicable state securities requirements or pursuant to exemptions there from. This press release does not constitute an offer to sell or a solicitation of an offer to buy any of the Company's securities in the United States.  Investors are advised that National Instrument 43-101 of the Canadian Securities Administrators requires that each category of mineral reserves and mineral resources be reported separately. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty of measured, indicated or inferred mineral resources, these mineral resources may never be upgraded to proven and probable mineral reserves  The information presented uses the terms “measured”, “indicated” and “inferred” mineral resources. United States investors are advised that while such terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize these terms. “Inferred mineral resources” have a great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of measured or indicated mineral resources will ever be converted into mineral reserves. United States investors are also cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.  The measured, indicated and inferred mineral resource and reserve estimates were reviewed and optimized by EuroGeol. Dr. Henry Rauche and EuroGeol. Dr. Sebastiaan van der Klauw, who are “qualified persons” as such term is defined in National Instrument 43-101 .For information regarding the mineral resource and reserve estimates, including parameters used to generate the estimates, please see the Company’s press release dated February 4, 2013 and the technical report titled “TECHNICAL REPORT Summarizing the Feasibility Study for a Sylvinite Solution Mine for the ALLANA Potash Project (The ALLANA and NOVA properties), Afar State, Ethiopia" filed on SEDAR on March 19, 2013 as well as the press release dated June 26, 2013 and the supporting NI 43-101 technical report titled “TECHNICAL REPORT Resource Estimate for the Danakhil Potash Project, Danakhil Depression, Afar State, Ethiopia” filed on SEDAR on August 6, 2013.  Peter J. MacLean, Ph.D., P. Geo., Allana’s Senior VP Exploration, is a Qualified Person as defined under National Instrument 43-101 and has reviewed and approved the technical information presented in in this presentation
    4. 4. | TSX: AAA OTCQX: ALLRF WHAT DOES ICL’S ALLIANCE WITH ALLANA POTASH MEAN FOR THE COMPANY: VALIDATION OF THE PROJECT BY A MAJOR POTASH PRODUCER FINANCIAL SUPPORT  Strong equity investment allowing AAA to conduct optimization and preconstruction work and contribute to construction start-up  Paving the way for the rest of equity and debt financing to follow  Lenders want to see substantial investment from a strategic player – completed  ICL’s involvement increases the potential for future production expansion (MOP + SOP) SOLID OFFTAKE  80% of production is take-or-pay and the rest marketed, guaranteed placement of the product with a strong established global potash player  Offtake – major requirement from lenders, will contribute to accelerated debt financing process  Critical transportation and logistics/sales expertise provided by ICL, thus reducing costs for AAA TECHNICAL COOPERATION  Technical support and expertise during construction and operation from a established potash producer – also important for lenders and shareholders  Significant mitigation of construction, start-up, ramp-up and full operational risks
    5. 5. | TSX: AAA OTCQX: ALLRF WORLD CLASS POTASH RESOURCE  Significant high grade deposit  Estimated mineral reserves and resources delineated ROBUST ECONOMICS & LOW COST PROVEN MINING METHOD  Low- cost, proven Solution Mining technology; shallow potash beds  Low capex (US$642m) and opex (US$125/tonne including transportation and sustaining capex) due to solution mining and solar evaporation processes  Water resources available on the project site STRATEGICALLY LOCATED  Geopolitically stable / environmentally benign  Proximity to growing African, and key Asia/Pacific markets SOLID MANAGEMENT & BOARD AND SUPPORTIVE GOVERNMENT  Experienced in potash and large development projects, with a track record of delivering enhanced shareholder value CLEAR PATH TO FULL DEBT PLUS EQUITY FINANCING  Debt mandate letters signed with development financing banks (debt financing)  Comprehensive strategic alliance with ICL (one of the largest potash producers in the world) completed  ICL (16.4%), Liberty Metals & Mining (11.9%) and IFC (2.3%) as strong strategic partners1 FAST TRACK TO PRODUCTION  Mining license secured  Infrastructure – build well underway, project production expected to commence late 2016 INVESTMENT HIGHLIGHTS (1) Shareholding numbers are approximate and to the best of the company’s knowledge only (as of March 1, 2013)
    7. 7. | TSX: AAA OTCQX: ALLRF AFRICAN POTASH CONSUMPTION1 IS ABOUT TO RISE DRAMATICALLY  Dramatic structural changes in the agricultural sectors in African nations including Ethiopia: • Significant FDI into the agribusiness sector, better funding, export orientation, need for more fertilizers (potash demands to grow by 5-6% CAGR through to 2025)  Governments along with NGOs and private companies building rural infrastructure and educating farmers on the use of fertilizers including potash • (Ethiopia – 15% of public spending goes to agribusiness sector; length of rural roads quadrupled, rail network under construction, extreme poverty reduced by 49% 1995-2011)  African nations including Ethiopia announced plans to build NPK blending facilities which will increase the amount of potash used  Ethiopia and other countries are becoming significant exporters of various agricultural products Source: IFIA + Argus Consulting Inc. – 2013, New African Magazine, March 2014
    8. 8. | TSX: AAA OTCQX: ALLRF AFRICA A POTENTIALLY VAST MARKET FOR POTASH  African population projected to reach 2.2 billion by 2050+  African demand for fertilizers is expected to increase significantly over next decade  Current KCI usage <750,000 tpy AFRICA: CLIMATE MAP Source: IFA The term “Africa” includes North African countries, sub-Saharan Africa and South Africa. NUTRIENT CONSUMPTION BY REGION Sources: Wendt, J., 2012. Potash Fertilizers in Africa: Background, Assessment and Prospects. Electronic International Fertilizer Correspondence (e-ifc) No. 32, 11/2012. International Potash Institute (IPI), Horgen, Switzerland. + World Bank forecast – current population of approximately 900 million in 2010 Source: IFDC, derived from FAOSTAT FERTILIZER USE FOR VARIOUS REGIONS & MARKETS (2012)
    9. 9. | TSX: AAA OTCQX: ALLRF STRATEGY EXECUTION GEOLOGY AND RESOURCE DELINEATION SYLVINITE RESERVES (1) In Situ Resource (MT) KCl (%) Contained KCl (MT) Proven 32.97 28.0 8.2 Probable 60.81 28.8 15.5 Total reserves 23.7 RESOURCE SYLVINITE In Situ Resource (MT) KCl(%) Contained KCl (MT) Measured 115.31 27.8 32.0 Indicated 212.11 28.6 60.7 Inferred 90.76 27.8 25.2 KAINITITE Measured 552.3 19.2 105.9 Indicated 598.2 19.5 116.8 Inferred 481.8 19.8 95.3 UPPER CARNALLITITE Measured 121.5 17.5 21.3 Indicated 289.8 17.2 49.9 Inferred 175.5 16.5 29.0 DELINEATION OF SIGNIFICANT RESOURCERESOURCE ESTIMATE SUMMARY (FEASIBILITY STUDY) Source: ERCOSPLAN Feasibility Study Feb.2013 & Resource Estimate Jun.2013 – Please refer to page 2 for full source of FS and resource estimate
    10. 10. | TSX: AAA OTCQX: ALLRF STRATEGY EXECUTION PROVEN MINING METHOD & PROCESSING THE SOLUTION MINING PROCESS INVOLVES: 1. Drilling boreholes (0.5m wide and up to 450m deep). 2. Pumping water down the holes to dissolve potash bearing material. 3. Brine is pumped to the surface. 4. Brine is transported to the evaporation ponds. 5. Brine is evaporated in the evaporation ponds to produce potash bearing crystals. 6. Crystals from the evaporation ponds are crushed. 7. The crushed crystal material is processed in the processing plant.Source: ERM & the Company PROVEN MINING AND PROCESSING TECHNOLOGIES  Proven extraction and production process: Solution Mining • Used in some large Saskatchewan potash mining operations as well as in the USA (Utah)  Low opex and capex due to efficient eco-friendly solar evaporation and no need to preheat the brine  Minimal impact on the environment  Allana has conducted solution mining and solar evaporation tests on its project with evaporation rates of 7.0-7.5mm/day
    11. 11. | TSX: AAA OTCQX: ALLRF STRATEGY EXECUTION FEASIBILITY STUDY COMPLETED PROJECT COSTS FINANCIALS 10% After-tax NPV US$1.32 billion IRR (after tax) 33% Payback Period 3.1 years from COD CAPEX(US$M) Brine Field $ 85 Evaporation Pond 93 Plant & Storage 148 Utilities 102 Truck Loading 5 Transportation Capex 18 Port Capex 24 Total Direct* 475 EPCM 47 Owners Cost, Contingency & Other 120 Total Capex $642 OPEX(US$/tonne) Production Opex $ 65 Transportation & Port Opex 28 G&A, Contingency 6 Total Opex (loaded on ship) 99 Total Opex (includes sustaining Capex) $125 KEY ASSUMPTIONS Potash Price (US$2013) US$430 / tonne Proven and Probable Reserves (Sylvinite) 24 million tonnes MOP Annual Production 1 million tonnes MOP Mine Life 25 years Accuracy of Study +/-15% * NOTE: In 2013 US$ terms. MOP denotes muriate of potash. The Feasibility Study was prepared by ERCOSPLAN IngenieurgesellschaftGeotechnik und Bergau (“ERCOSPLAN”) under the supervision of EuroGeol. Dr. Henry Rauche and EuroGeol. Dr. Sebastiaan van derKlauw, who are “qualified persons” as such term is defined in National Instrument 43-101. Dr. Peter MacLean, , Ph.D., P. Geo. Senior, Vice President, Exploration is the Company’s designated Qualified Person for the purposes of the Feasibility Study. For more information regarding the Feasibility Study, including parameters used to generate the estimates, please see Company’s press release dated February 4, 2013, and supporting technical report filed on SEDAR on March 19, 2013.
    12. 12. | TSX: AAA OTCQX: ALLRF STRATEGY EXECUTION PRE-CONSTRUCTION ADVANCEMENT  Secured a strategic alliance with large experienced industry player (ICL) with technical knowhow  Technical cooperation agreement signed and will de-risk the project  ICL operational expertise are a perfect match for our site  Work with Ethiopian and Djibouti government to complete infrastructure build up MITIGATE CONSTRUCTION AND OPERATIONAL RISKS AND BUILD A COMPETENT OPERATING TEAM DE-RISK THE REVENUE MODEL FOR INVESTORS AND LENDERS MITIGATE FINANCING RISK 1 2 3  Secured a strategic equity investment (ICL), and more interest from new equity investors (ICL invested C$25 million for 16.5% of AAA – can invest up to C$84 million through exercise of warrant)  Working to secure debt financing (debt mandate letters signed and process is well underway  More interest from new large lender  Visibility on debt financing for the competition in the junior potash sector is problematic at best  Secured take-or-pay offtake for 80% of production and marketing offtake for the remaining 20% (1 million TPY)  ICL is a major fertilizer producer/marketer with global sales and logistics operations
    13. 13. | TSX: AAA OTCQX: ALLRF  Entered option agreements for three Danakhil licenses in 2008  Commenced drilling  Acquired adjacent Haro license  Initial investment by Liberty Metals & Mining  Strategic investment by IFC  Completed acquisition of three Danakhil options  Mineral resource estimate increase to M&I 673Mt @ 19% KCl& 596Mt Inferred @ 20% KCl  PEA completed; ESIA & feasibility study initiated  Mineral resource estimate increase to M&I of 1.3Bt @ 19.3% KCl& 588Mt Inferred @ 18.6% KCl  Acquired adjacent Nova license  Feb 2013: Major hydrogeological study completed  Feb 2013: Feasibility Study completed  May 2013: Environmental & Social Impact Assessment approved  June 2013: Resource estimate increase announced, with measured & indicated resources bolstered by 85% to 2.4Bt @ 17.9% KCI; Debt LOIs received for over 65% of total capex  July 2013: Debt due diligence process underway  August 2013: Discussions continuing with off-take and strategic partners; Debt mandate letters signed  October 2013: Mining License issued consolidating all licenses and acquisitions into single property ALLANA’S TRACK RECORD DELIVERING ON SIGNIFICANT MILESTONES 2009 & PRIOR 2010 2011 2012 2013 2014 – AAA & ICL FORM MAJOR STRATEGIC ALLIANCE (FEBRUARY 12)
    14. 14. | TSX: AAA OTCQX: ALLRF 2014 STRATEGIC PLAN TARGETS AND OBJECTIVES PERFORMANCE Off-Take and Strategic Partnership Negotiations /Agreement COMPLETED EPCM Selection Q1-Q2/14 Debt Financing Completion 2Q-4Q/14 Infrastructure Build Completion 1Q/14→2016 Mine Construction and Start-up 2H/14 → 2H/16 Ramp up to full production 2H/17 PLEASE NOTE: The timeline above is indicative only, subject to change by the Company at any time. Each stage of the exploration is conditional on prior stages being completed satisfactorily and the program may change
    15. 15. | TSX: AAA OTCQX: ALLRF CONTACT US Allana Potash Corp. Richard A. Kelertas Senior Vice President – Corporate Development