(Reuters) - Allana Potash Corp said it discovered a new high-grade potash zone in its property in Ethiopia, sending its shares up as much as 12 percent.
Results from drilling in Hole 19 at the company’s Dallol property in Ethiopia’s northeastern Danakil Depression returned more than 61 percent of potash over 0.90 metres, the company said in a statement.
“This is by far the highest grade KCl (potassium chloride) Allana has encountered,” Dundee Securities said in a note to clients, and rated the company as their “top pick” among small potash explorers.
Allana, which also has assets in Argentina, said Hole 12 in the Ethiopian property returned 22.3 percent potash over 6.8 metres.
About 90 percent of potash produced is used as fertilizer, known as potassium chloride. Demand for fertilizers such as nitrogen, phosphate and potash has increased dramatically.
The company has at least 16 drill holes which will be considered for the resource update in the company’s upcoming technical report.
“Allana will have a large resource upgrade and (will) be able to produce at extremely competitive operating costs,” Dundee said.
The company currently has estimated resources of 105 million tonnes and “will have a significant upwards revision once the updated NI 43-101 technical report is prepared and completed in the next 5-7 days,” the brokerage added.
The potash mineralization in the Danakil Depression is well known, with mining carried out intermittently from the early 1900s. Other mining companies in the basin include BHP Billiton and India’s Sainik Coal Mining, which is planning to initiate mining at the Musley deposit.
Toronto-based company’s shares, which have gained more than a third in value in the last 3-months, were trading up about 9 percent at $2.11 on Monday on the Toronto Stock Exchange. Earlier they had touched a high of C$2.18.