By Peter MacLean
Allana Resources Inc. of Toronto, Canada, has acquired three mineral concessions in Ethiopia’s northeastern Danakil depression totalling approximately 150 square kilometres. The project area is approximately 100 kilometres from the Red Sea coast and 600 km via good roads from the deepwater port of Djibouti. The potash mineralization in the Danakil depression is well known with mining having been carried out intermittently from the early 1900s. Mining companies currently working in the basin include BHP Billiton and Sainik Coal Mining, a leading Indian-based coal mining company, the latter of which is planning to initiate mining at the Musley deposit.
Allana and the property vendors have completed National Instrument 43-101-compliant technical reports for the three concessions. These studies were carried out by Ercosplan Ingenieurgesellschaft and North Rim Exploration Ltd., internationally recognized experts in potash exploration. The qualified persons for the reports are Dr. Henry Rauche and Dr. Sebastiaan van der Klauw of Ercosplan, and Stephen P. Halabura, PGeo, of North Rim Exploration. Modern exploration on the property has been limited; however extensive historical exploration by the Ralph M. Parsons Company provides a valuable database to target further drilling and exploration studies. Parsons has completed over 300 exploration drill holes on the project. Drill log data, with analyses, were acquired from the Geological Survey of Ethiopia and have been compiled into a project database. Excellent support and advice were provided by staff from the Geological Survey of Ethiopia through the entire compilation and review process.
Highlights from the technical report outline several significant features of these properties, the following:
* An inferred mineral resource of 105.2 million tons of potash mineralization (sylvite and kainite) with a composite grade of 20.8 per cent KCl;
* Near-surface potash mineralization (within 50 metres of surface for the Musley deposit);
* Potential for solution or open-pit mining;
* Unique environment provides potential to use low-cost geothermal and solar power. Saline brines in a nearby thermal spring returned a superheated temperature of 125 C. Days are often hot and clear to aid use of solar evaporation of brines or to use solar power;
* Downhole radiometric logs from two holes, the closest of which is located approximately five kilometres west of the nearest hole on the Musley deposit, reportedly indicate 45 metres of K mineralization in holes 5 and 7 at a depth 680 metres and another potential zone at 930 metres. These two holes demonstrate significant potential to expand the inferred potash resource on Allana concessions;
* Previous work indicates potential for a deeper horizon of potash mineralization which has only been intersected by the occasional hole;
* MOP (muriate of potash) and SOP production is feasible.
Allana’s concessions cover part of the previously defined Musley potash deposit located on the edge of a 1,000-square-kilometre, salt-filled topographic low that lies along northern Ethiopia’s portion of the East African rift. Previous drilling by Parsons from 1958 to 1967 resulted in the discovery and partial delineation of the Musley deposit which was reported to contain a resource of 171.27 million tons grading 32.48 per cent KCl (Ercosplan). This resource estimate is historical in nature and does not comply with National Instrument 43-101. This estimate should not be relied upon. The smaller Crescent deposit was the initial site of exploration activity by Parsons in the 1950s; however its small size, approximately 10 million tons of secondary carnallite, prompted Parsons to focus on the Musley deposit. The majority of the historical resource at the Musley deposit is located on ground held by Sainik with portions of the resource extending onto the Allana concessions.
Previous work has identified one potash-bearing horizon, designated the Houston formation, which is characterized by three members (sylvinite, intermediate and kainitite members), that extends onto the Allana concessions. The intermediate member lies between the sylvinite and kainitite members, is commonly thick, and contains carnallite mineralization. In the Houston formation, potash mineralization varies from seven to 48 metres in width and has been traced for approximately 10 km along strike and Allana expects that it extends to the southern part of the property. The evaporate basin extends onto the Allana concessions and comprises an area of approximately 150 square kilometres. This portion of the basin has the potential to host all three potash-bearing horizons. This potential is supported by the indicated K mineralization in the two deep holes located approximately five kilometres from the Musley deposit.
Preliminary modelling of 16 historical drill holes on the Allana concessions and 22 nearby drill holes (Ercosplan technical report, July 13, 2008) indicates an inferred mineral resource of 31.3 million tons grading 25.4 per cent KCl from the sylvinite member and 73.9 million tons grading 61.7 per cent kainite from the kainitite member (18.8-per-cent KCl equivalent). In the resource area, the average width of the sylvinite member is 2.78 metres and the kainitite member is typically thicker averaging 5.79 metres. The resource is open in several directions and down dip with much of the Allana ground having seen little to no exploration.
The pertinent parametres used by Ercosplan in its resource calculation are as follows:
* Cut-off grade of 15 per cent KCl and a minimum width of two metres in the sylvinite member;
* Cut-off grade of 30 per cent kainite and a minimum width of three metres in the kainitite member;
* An area of influence surrounding each drill hole of a maximum of 750 metres;
* A specific gravity of 2.2 grams per cubic centimetre;
* Dr. Rauche and Dr. van der Klauw of Ercosplan, and Mr. Halabura, PGeo, of North Rim Exploration, all of whom are independent of Allana, prepared the resource estimate;
* The resource estimate was prepared in accordance with the Canadian Institute of Mining definition standards on mineral resources and mineral reserves adopted by the CIM council.
Allana intends to immediately commence further exploration work on the property. Allana’s evaluation of the property will comprise mapping, initial drill holes to verify the grade of the members of the potash-bearing horizon, downhole seismic to document the geophysical characteristics of the potash-bearing mineralization, and 2-D seismic lines to trace the target horizon, if present, to the south and eastern portions of the concessions. Should this first phase program demonstrate success then additional wide-spaced drilling will be carried out to document the grades and widths of the prospective potash-bearing horizon(s).
Allana has agreed to acquire the properties from three private companies in consideration for a total of $2.5-million in cash payments over three years and the issuance of four million shares. The property will also be subject to a 3-per-cent net smelter return, of which 50 per cent can be purchased for $5-million. The completion of the acquisition is subject to the receipt of all required regulatory approvals, including the approval of the TSX Venture Exchange.
Potash prices have been very strong in the last few years rising from approximately $100 to over $1,000 per ton of KCl this year. There has been strong and steady KCl production growth since the end of World War II. Two economic crises, 1973 and 1981, followed by 1980s recession have restrained production. The global economic growth of the 1990s, a rapidly growing population and significant increases in agricultural requirements, particularly in emerging developing nations, are forcing industrial production to meet the rising potash demand. As a result, prices are forecast to remain very strong.
________________
Peter J. MacLean, PhD, PGeo, Allana’s vice-president of exploration