Allana Potash Announces Positive Preliminary Economic Assessment on SOP Production at Its Danakhil Potash Project

TORONTO, ONTARIO--(Marketwired - March 2, 2015) - Allana Potash Corp. (TSX:AAA)(OTCQX:ALLRF) ("Allana" or the "Company") is pleased to announce positive results of an independent Preliminary Economic Assessment ("PEA") prepared by Ercosplan Ingenieurgesellschaft Geotechnik und Bergau ("ERCOSPLAN") on the production of Sulfate of Potash ("SOP") at its Danakhil Potash Project in Ethiopia (the "Project").

The PEA is based on commercial operations that produce one million tonnes per year ("MTPY") of a standard SOP product over an estimated operating life of 77 years. The PEA evaluated the potential for SOP production as a separate mining operation from the MOP operation that is the focus of Company's Feasibility Study (see news release dated Feb. 4, 2013 and technical report prepared in accordance with NI 43-101 available on SEDAR). The PEA examined solution mining of brine with solar evaporation of the brine to a crystal product and reverse flotation of this product for cleaning, followed by transformation of remaining sulfates to a SOP product as the proposed SOP mining and processing method for the project. The PEA for the SOP operation yielded, on a real, unlevered basis, an after-tax Internal Rate of Return ("IRR") of 39% and an after-tax Net Present Value ("NPV") of US $1.6 Billion based on a 10% discount rate. SOP is a premium potash product widely used on chloride sensitive crops such as tobacco, fruits and vegetables as well as nuts, with China as the largest consumer.

Farhad Abasov, President and CEO of Allana commented: "Allana is very excited with the positive preliminary economic assessment of an independent SOP operation at its Danakhil Potash Project. The potential for SOP operations, coupled with the Feasibility Study Allana previously completed on MOP operations, demonstrates the uniqueness of Allana's Project which through its sylvinite and kainitite resources has the potential to produce MOP and SOP with industry-leading CAPEX and OPEX profiles. The PEA's extremely positive results give Allana great confidence in the SOP potential at the Project and management will evaluate undertaking a full Feasibility Study for the production of SOP. The PEA also allows Allana to move forward confidently with its project finance plans and ongoing talks with potential strategic partners. Allana has retained a financial advisor to assist the Company in its evaluation of various options to maximize the value of the SOP potential for Allana shareholders."

The mineral resource estimate used for the PEA was completed by ERCOSPLAN in April of 2013 and includes in-situ measured Kainitite mineral resources of 552.3 million tonnes at 19.4% KCl, indicated Kainitite mineral resources of 598.2 million tonnes of 19.5% KCl and an estimated inferred Kainitite mineral resource of 481.8 million tonnes of 19.8% KCl in the Kainitite Member (see news release dated June 26, 2013 and "About Allana" section at the end of this news release). Factoring in mining, pond and processing losses, these resources translate to approximately 77,000,000 tonnes of recoverable SOP product. The Kainitite Member is comprised mostly of kainite, a potassium sulfate mineral that can be processed to SOP, and halite (NaCl, or common salt).

The key economic highlights of the PEA are outlined below (all dollar amounts are stated in US$):

The PEA is preliminary in nature, it includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the estimates of the PEA will be realized.

For the purpose of the PEA, capital expenditures (CAPEX) were estimated for three main categories: Production using solution mining, solar evaporation and processing of the crystal product to SOP (Production); Transportation and handling of product between the production site and port (Transportation); and terminal facilities at the port in Djibouti (Port). The Production CAPEX includes costs associated with cavern development, the solar evaporation ponds, brine processing, and infrastructure including water and power supply. Solar evaporation of the saturated brine solution is possible at the Danakhil Project due to the year-round hot temperatures, averaging 40°C, and very little rainfall. Salts harvested from the ponds will be cleaned from Halite by reverse flotation and the product will be reacted with potassium rich brine to create a SOP product. Transportation CAPEX costs are based on a company owned fleet of trucks and all support such as maintenance. Port CAPEX costs are based on Allana constructing its own terminal at Tadjoura Port in Djibouti including product unloading and storage, shipping facilities and supporting infrastructure such as power and minor road construction. The table below outlines the estimated capital expenditures in US $ for all categories.

Estimated operating expenditures (OPEX) were also calculated for Production, Transportation, and Port. The OPEX costs in US$ per tonne are outlined in the table below:

Estimated general & administrative and contingency costs as well as the long-term sustaining CAPEX for ongoing buildout of the solution well field plus equipment, vehicle and infrastructure replacements were also calculated in $US per tonne and are outlined in the table below:

The main assumptions used in the PEA are as follows:

In the PEA, ERCOSPLAN recommends additional flotation testwork and an additional solution cavern to produce brine for further evaporation testwork, to facilitate a Feasibility Study evaluating the potential to concurrently extract both MOP and SOP from the same brine field. Additional studies currently in progress including an Aquifer Stress Test (AST) and Solution Well #3 (SW3) will provide valuable information for this evaluation. The AST is intended to confirm the viability of Allana's long-term water supply by pumping water at greater than planned production rates from one of the projected water supply fields for an extended period, now complete. SW3 is a production-scale solution well currently in operation to supplement experience from the pilot-scale solution well work from the Feasibility Study, and to produce brines from the Kainitite horizon through to the Sylvinite horizon to optimize solution mining configurations for the Project.

The PEA, with a target accuracy of +/- 35%, was completed as an initial scoping assessment to determine the viability of an independent SOP operation within the Allana mining license in the Danakhil Depression. The PEA on SOP production is independent of the MOP production that has been detailed in the Feasibility Study (see news release Feb. 4, 2013 and the associated technical report prepared in accordance with NI 43-101 available on SEDAR) which remains current and unaffected by the results of the PEA. The SOP operation provides an option, if a second feasibility study incorporating SOP proves positive, to complement or expand upon the MOP operation and various production scenarios will be under evaluation. A technical report in support of the PEA will be available under the Company's profile on SEDAR and Allana's website within 45 days of this news release.