Allana Potash Corp
(TSXV:AAA)
(OTCQX:ALLRF)
CEO: Farhad Abasov
[display_podcast]
Interview Transcripts:
WSR: Good day from Wall Street. This is Juan Castillo, senior analyst at the Wall Street reporter and joining us today is Farhad Abasov, the CEO for Allana Potash. The company trades on the, now trades on the Toronto Stock Exchange. Ticker symbol is AAA and on the OTCQX ticker symbol is ALLRF. Thanks for joining us today there Farhad.
Farhad: Thank you, Juan.
WSR: Great. Now starting off, talk about the recent, bring us up the speed on your Ethiopian play for Potash.
Farhad: Yeah, sure. We went up two projects in Allana, both Potash projects. One is in Ethiopia, the other one is on Argentina. The Ethiopian project is the one that we’ve been focusing on in the last couple of years and we started about two years ago with the drill program and then we followed up with 2D Seismic Program and Downhole Seismic Program and we finished the drilling of the western part of the property about three months ago and we’ve updated our 43-101 technical report at that time and now we have about almost 673 million tons we have measured that indicated that resource and other almost 600 million tons of inferred resource. They have very good grade and with very good thicknesses and all of these is on the 40% of the project. We continued drilling on the east. In order words, the remaining part of the project. And also we’ve launched recently feasibility study and you might have seen the news recently that we’ve also engaged at one of the largest international banks, BNP Paribas out of Paris to spearhead or debt finance, our project financing efforts.
WSR: Excellent. So, talk about the significance of being the only Ethiopian, the first company with Ethiopian asset to be listed on the TSX.
Farhad: Look Ethiopia is a very unique country. This country I think is one of the few African country that has been independent for many centuries, has incredible history. The country has gone through a very turbulent period in its history but in the last several years has been quite stable and as part of that stability program, quite a few mining companies including Allana Potash has entered the country. It is very important to have very strong relations with the government and I must say that the government has been extremely supportive to other projects. We’ve been educating the market, down at the Ethiopian Potash space in the last two years and I think we’ve made a tremendous progress. A lot of institutional and retail investors are well familiar with the story and they were also well familiar with the advantages that this particular Potash [Indiscernible][ 0:03:17.6] mainly shallow Potash, dry and hot climate that makes them able to [Indiscernible][ 0:03:24.0] operation processes and of course the proximity to largest Potash consuming nation such as India and China.
WSR: Great and so what are some of the other trends in the sector right now and how opposition is the company to capitalize on them.
Farhad: It’s a very interesting sector. I mean, it’s not large by any means compared to let’s say other parts of mining industry or energy but it is unique that 65 to 70 % of supply comes from basically three countries. They are Canada, Russia and Belarus. And Canadian companies have joined an overseas marketing organization for those three companies. And then the two Russian companies and one Belarusian company have their own overseas marketing arm that sells to the rest of the world. So, these two organizations have been controlling basically the supply plus the price. The major buyers are of course the largest countries in the world such as India and China, Brazil and basically everyone else is a Potash buyer. Trying to import a lot of Potash, up to eight million tons a year to have their little Potash production of their own. India, I think, has been importing about six and a half million tons a year and India has no domestic production of Potash.
So, we can see that there’s quite a bit of tension as you can imagine between the suppliers and buyers. Then this is the environment where Allana comes in with hopefully lower cost operation, very close to India and at the same time outside of those traditional products producing regions of Russia and Canada. So, what has happened right now is that we believe we’re in the sweet spot because of shallow nature of the deposits and again as I mentioned earlier, dry and hot climate and of course the lower labor cost, etcetera. We think we’re going have one of the lowest cost operations in the world among junior companies and at the same time approximated to India, we make it very favorable to point with the Indian consumers to purchase our products and it’s not coincidental, they need to last several months with the advancing talks with various Asian organizations. Both government and private organizations are very much interested in cooperating with Allana strategically.
WSR: Great and so perhaps you can walk us through your background and experience far ahead and talk about some of the management team there.
Farhad: Of course, before getting involved with Allana Potash, I was a cofounder of another Potash company called Potash One at a Solution Mining with a project in Saskatchewan and the company was sold late last year to German producer, Potash producer called K+S. Before that, I was involved with the uranium company called Energy Metals. Again, the company had grown from basically about $10 dollars in market capital. It could be about $1.8 billion dollars in market cap within three years and it was sold to another uranium producer called Uranium One which still trade on Toronto Stock Exchange.
I have founded some other companies as well where I played the key role in terms of setting up the companies and sometimes I serve as chairman or consultant or director but obviously right I’m heavily involved with Allana. We have obviously one of the best boards in junior product sector. We have Rick Lacroix with us, the former senior VP of operations of Port Potash Corporation of Saskatchewan and that is the largest Potash producer right now in the world. Rick Lacroix was in charged of all the operations so he’s familiar with the entire spectrum of operations from [Indiscernible][ 0:07:44.9] expansions and mine construction all the way to distribution and logistics.
Our chairman is Mark Stauffer and Mark used to be the president of Potash and Phosphate Institute of Canada. Mark was responsible for putting together the education programs for [Indiscernible][ 0:08:03.9] worldwide about 20 to 25 years ago. Thanks to his efforts. Basically, we have tremendous increase in the use of Potash and Phosphate worldwide. We also have a couple of other people on our adviser boards, an adviser board. One is Steve Halabura, the solution money expert out of Saskatchewan and also Bob [Indiscernible][ 0:08:26.6] who used to be the chairman of [Indiscernible][ 0:08:26.3], the organization I mentioned earlier which is an overseas marketing arm for three Potash producers out of Canada.
In our management, we have a very strong management bulk in terms of exploration and operation. Peter MacLean is our senior VP exploration. Peter was responsible for putting together, devicing on our exploration program as well as obviously carrying it out successfully. Jason Wilkinson is our man in Ethiopia. He actually runs a lower operations in the camp. Nejib Abba Biya as senior VP of business development of Ethiopian descent and Nejib has been instrumental in building a very strong working relationship with the government in Ethiopia at all levels. And we recently added another strong staff to our ranks and it’s Jack Scott. I’ve known Jack for quite a few years. He’s been responsible for putting together large infrastructure project financing packages and we decided that it was the right time for Jack to get involved with Allana as what is needed for the development stage. So, you can see, Juan, that for example with our board, we tried to cover the entire spectrum of operations with Steve Halabura on the exploration side all the way to Mark Stauffer in the fertilized use end and with Rick Lacroix and Bob in the middle with operations and logistics.
Juan: Excellent. So, what are some of the goals and milestones that you and the team there hoping to accomplish for the course of the next year?
Farhad: Juan, within the next 12 months, we’re going to accomplish the following. First, we continue the drill program on the eastern part of the project. So, that will help us to upgrade our existing resource and obviously expand it. On top of it, we’ve started feasibility study. It’s a full feasibility study and we hope to finish it by September, October of next year and the way we’ve structured our feasibility study is such that in the first several months, we are going to do a preliminary economic assessment which should be done by the end of this year and TA will look at determining the mining method at least at the initial stage of production. We have very shallow depth there. A relatively shallow depth compared to many other parts of the world. We are going to consider [Indiscernible][ 0:11:05.6] and Solution Mining methods.
So, by the end of the year, we will have the cost estimate as well as technical feasibility for both mining methods and we’ll have to make a determination then. After that, the rest of the feasibility study will focus on that particular mining method. In addition to that, again, as I mentioned earlier, we engaged at BNP Paribas to do project financing work for us. That’s the critical component of the successful operation as we can imagine with Potash projects, you need a lot of capital to develop these projects to production. Although, we think we’re going to have lower capital expenses than for example Saskatchewan based junior Potash companies. It’s still going to be hundreds of millions of dollars. So, we’ll going to have to look into financing side of it as early as possible plus the BNP Paribas comes in and they’ve been extremely successful and of course they have tremendous in Africa in putting together a large infrastructure project as well as a fertilizer project and specifically in Ethiopia, they’ve done large infrastructure projects recently. So, they have very good network. They have very good network. They have very good understanding on what kind of lenders will come on the debt side into a project like this.
Now, the one key thing that I want to emphasize here that many other companies especially operating Saskatchewan for example do not have is our ability to interact multilateral financial organization such as international finance corporation, African Development Bank and [Indiscernible][ 0:12:42.0] banks so different countries to this project because Ethiopia is a developing nation and many of these multinational financing organizations will look into Ethiopia as a place where the blending will actually meet their requirements or their mandate which is a socio-economic development of these countries and Allana Potash project. So, that’s critical that we work with these organizations to bring in the debt side.
Now, in other thing is of course, the drillers as I said will be coming out in next little while probably every other week or so, we’ll be putting out the drills as they come in and we’ll also advancing talks with strategic companies. Now, when I say strategic, there are two types of strategic, the industrial companies out of the east out of the India and China. We’re interested in doing something strategic. Some type of a cooperation with Allana and there are also large buyers out of India and China who are interested in buying our product. So, we’re talking with both these organizations. These two types of organizations in terms of various strategic financing at the construction space so that they can help us take this to production. So, any deal that may happen with one of these organizations will be announced again within the next 12 months or so.
WSR: Great. And so in terms of investors in financial community, do you believe that the Allana Potash story and your message and ultimately the companies upside are completely understood and appreciated by them. If not, what do you wish investors better understood about the company?
Farhad: I think at this point, the largest investors have been with us is [Indiscernible][] International and Finance Corporation and Liberty Mines and Metals would invest strategically in Allana and collectively hold 20%. They obviously are well-familiar with the project and they love the project and they think it’s going to be probably one of the first Potash producers among juniors not only in Africa but perhaps in the world. Many other institutional investors are quite well familiar with the story and they do understand the tremendous advantages that the project has or the many other junior products or projects. Obviously, it’s not completely 100% understood otherwise, we would not have suffered in this general market route. I know that everybody [Indiscernible][ 0:15:21.8].
Everybody’s stock came down and Allana was not immune to it.
But I think this is an opportunity through the organization, Juan, to convey the message that Allana has been exceptional in the entire sector I would say. We have looked into this project long term without positioning a speculative transaction. But it’s specifically for production. That was the reason I went out and brought an international finance corporation and we’re the only Potash Company in the world with investment forming into finance corporation. As you know, it’s part of World Bank. That was the reason we bought Liberty Metals and Mines. It was primarily not only to get the investment running at this stage but most importantly, at the construction stage.
And many other companies, I would say basically, no other company has done it which tells me that either they’re going to rush towards the tail end of the project to do that or they have other plans and that’s a key differentiator for us. We’re really building a strong project here and I think as we go forward and as I meet various large institutions as we communicate this message through our other meetings again, through channels like yours. More and more people as see through the organization as the organization. They see how methodical we’ve been developing this project by raising money successively higher price, this minimizing over the illusion by bringing strategics into the project by finishing the key exploration target by increasing our resource by almost 13 times and then starting feasibility study and then bringing one of the best banks to deal with the project financing. So, our approach is comprehensive and I think as we go forward, we’ll see more and more institutions and retail investors realizing the major advantage that Allana has.
WSR: Certainly and so once again joining us today is Farhad Abasov, the CEO for Allana Potash Corporation. The company trades on the Toronto Stock Exchange ticker symbol is AAA as well as on the OTCQX, ticker symbol is ALLRF current trading at $1.27 a share and before we conclude, I have to recap some of your key point here why do you believe investors should consider the company as a good investment opportunity today?
Farhad: That’s a great question, Juan. I simply believe that we are at the best position, the Potash Company in this sector right now for two reasons. One is that our costs is down lower which will allow us to actually finance into production and two, we’ve already brought in a strong financial supporters who are positioned or who are basically ready to support us as of construction and that’s a key differentiator. Because if you look at many other companies, they may have a good resource and they have large resource but again, the key will be how much it’s going to cost them to develop it into production and where are they going to get the money. If again, any of the investors listening to this interview can get answers to those questions, I think then they can make a decision as to what Potash Company to invest. And I think if they did that analysis, they will see that Allana Potash definitely stands out.
WSR: Well, we certainly look forward to continue attract the companies growth and report on your upcoming progress and I’d like to thank you for taking the time to join us, Farhad and update our investors on Allana.
Farhad: Thank you so much, Juan.