Allana Resources Inc.

Allana Resources Inc.

November 04, 2009 13:27 ET

Allana Resources Announces $2 Million Private Placement and a Strategic Off-Take/ Financing Deal With a Chinese Mining Group

TORONTO, ONTARIO--(Marketwire - Nov. 4, 2009) - Allana Resources Inc. (TSX VENTURE:AAA) ("Allana" or the "Company"), is pleased to announce that following the review of several proposals to participate in Allana's potash project in Ethiopia (the "Project") (See News Release dated October 28, 2009), Allana has decided to enter into a strategic offtake/financing agreement (the "Offtake/Financing Agreement") with China Mineral United Management Ltd ("China Mineral") and announces an initial $2 million private placement financing with China Mineral (the "Strategic Investment").

The Strategic Investment will be by way of a non-brokered private placement for gross proceeds of $2,000,000 based on the issuance of 8,000,000 common shares at a price of $0.25 per common share.

Closing of the initial $2 million Strategic Investment is anticipated to occur on or about November 5, 2009 or as soon thereafter as practicable (the "Closing Date") and is subject to the receipt of applicable regulatory approvals including approval of the TSX Venture Exchange. The common shares issuable will be subject to resale restrictions for a period of four months plus one day from the Closing Date.

In addition, based upon management's review and recommendation, Allana has agreed to negotiate the Offtake/Financing Agreement with China Mineral, a Chinese mining investment group closely associated with one of the largest fertilizer companies in China. Pursuant to the proposed Off-take/Financing Agreement, China Mineral would acquire 20% of the Project's total potash production at a price discounted to the market price and equal to Allana's full operating and shipping costs plus a profit margin for Allana. This potash pricing structure will continue until China Mineral completely recovers its initial investment of the Construction Costs described below. Once China Mineral recovers its initial investment, it is proposed that the pricing will then be negotiated in good faith, based on international potash market price benchmarks.

As consideration for the Offtake/Financing Agreement, it is proposed that China Mineral will commit to finance 35% of the Project's required construction costs, which, based on current estimates are expected to be approximately US$280,000,000 (the "Construction Costs"). Allana also believes that its strategic relationship with China Mineral positions the Company well to attract debt financing in the future as required, which will further enhance the Project's return on equity.

Allana management believes that the Project is a significant potash asset that is undervalued based on Allana's current market capitalization, partially due to the financing risk associated with advancing the Project to commercial operations. Allana management also believes that any potential transaction whereby direct or indirect economic control of the Project changes hands at this early stage of the Project's development, is not in the best interests of Allana's shareholders. As such, management's primary objectives in negotiating a transaction structure were: (i) to significantly reduce the financing risks associated with the Project; and (ii) to allow Allana to retain full economic control of the Project in order to maximize value for Allana shareholders in the future, including being paid a change of control premium for the Project. The Offtake/Financing Agreement and Strategic Investment, in Allana's view, fulfill both of these objectives. Furthermore, Allana remains strategically positioned to freely continue discussions with any strategic counterparty, including ChinaCo. (see News Releases dated July 20, 2009 & September 15, 2009), and can pursue other mutually beneficial transactions.

Farhad Abasov, Allana's President and CEO, stated "We are delighted to be forming a strategic relationship with China Mineral as this marks an important milestone in the development of our potash project. We believe that this approach will result in near-term value creation for Allana shareholders while at the same time, preserve long-term shareholder value going forward. China Mineral is a strong mining group and we were particularly impressed with the professionalism, enthusiasm and speed with which they pursued and concluded negotiations. We look forward to working with China Mineral in developing this outstanding potash project."

The net proceeds of the Strategic Investment will be used to fund exploration and development of the Project and for general corporate and working capital purposes.

Allana has agreed to pay a commission in the amount 6% cash in connection with the Strategic Investment.

About Allana Resources Inc.

Allana is a publicly traded corporation with a focus on the acquisition and development of potash assets internationally with its major focus on a previously explored potash property in Ethiopia with 43-101-compliant Inferred Mineral Resource of over 100 million tonnes of potash mineralization (Sylvite and Kainite) with a composite grade of 20.8 % KCl (see Allana News Release Sept. 17, 2008). Allana has approximately 80.8 million shares outstanding and trades on the TSX-Venture Exchange under the symbol "AAA".

Forward-Looking Statement

Except for statements of historical fact relating to the Company, certain information contained herein constitutes ''forward-looking information'' under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to the terms and use of proceeds of the Strategic Investment, the impact of the Strategic Investment on the Company, the likelihood of reaching a definitive Offtake/Financing Agreement on schedule or at all, the impact of the proposed Offtake/Financing Agreement, the 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; limitations on insurance coverage and the effect of terminating the investor relations contract. 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''. Forward-looking statements are based on the opinions and 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. 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.


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