Allana Potash, a Canadian company headquartered in Toronto, has reported the results of an independent preliminary economic assessment (PEA) for its Danakhil potash project in northeastern Ethiopia. The PEA is based on commercial operations that would produce 1 million mt/y of standard muriate of potash over an initial estimated operating life of 30 years.

The PEA examined open-pit and solution mining methods. Following a review of the costs and other operating considerations, solution mining with processing using solar evaporation and standard flotation yielded significant advantages and was selected as the preferred mining method for the project.

Total capital expenditure to develop the Danakhil project is estimated at $796 million. Production capital expenditure includes costs associated with cavern development, solar evaporation ponds, brine processing and infrastructure, including power. Solar evaporation of the saturated brine solution is possible at the Danakhil project due to the year-around temperatures averaging 40°C and very little rainfall. Salts harvested from the ponds will be processed by standard flotation to create muriate of potash product.

Transportation capital expenditure costs are based on a company-owned fleet of trucks. Port capital expenditures are based on Allana constructing its own port terminal in Djibouti.

Feasibility study work on the Danakhil project is in progress and scheduled for completion in the third quarter of 2012. The study includes hydrogeological studies to identify large water sources, dissolution testwork, rock mechanical testwork, a pilot solution mining operation, and solar evaporation pond tests. The study is also evaluating the costs and benefits of increasing production of muriate of potash to 2 million mt/y after the third year of full production.