“Agflation” has arrived as America’s expansionist monetary policy kicks into high gear. World food prices hit a new all-time high last month and they are expected to continue much higher this year. An index of 55 food commodities tracked by the Food and Agriculture Organization gained for a sixth month to 214.7 points, above the previous all-time high of 213.5 in June 2008. The cost of food climbed 25 percent from a year earlier in December, based on the FAO figures, after Chinese demand strengthened and Russia’s worst drought in a half-century devastated grain crops.
One way to profit from the rising food prices is by investing in potash producers. 93% of all potash is used in fertilizer products, which are increasing in price and demand in order to keep up with the rising demand for food. Since BHP’s failed bid for PotashCorp in mid-August, junior potash miners have enjoyed a very impressive run, appreciating by greater than 150%. I researched a number of junior potash producers over the past few months and concluded that Allana Potash is the most undervalued and under-appreciated potash stock trading today.
Before I go into the details about the company, let me first say that I have not been compensated in any way to write about this company. There would be an obvious conflict of interest. However, I personally own shares of Allana Potash and I recommended the company to my premium members a few months ago at much lower prices. The stock has since taken off and posted a gain of 23% today alone!
Allana Potash (CVE: AAA or ALLRF)
Allana Potash is a Canadian potash company focusing on the exploration and development of a previously explored Dallol potash property in the Danakil Depression, Ethiopia. The Danakil depression had small-scale potash production in the 20’s and was extensively explored in the 60’s with nearly 300 potash drill holes. The Company has strong management and inferred resource of over 100 million tonnes. Allana has the potential to become one of the lowest-cost potash producers in the world, has extremely encouraging drills results, support from local governments, a strategic financing partner in China Minerals and full funding. They are fast-tracking towards production, expecting a completed feasibility study in 2011 and production in 2012.
Allana recently intersected two significant zones of potash mineralization including the highest grade intersection to date. Potash Hole DK-10-07 intersected 37.8% KCl over 2 metres, and 22.0% KCl over 6.7 metres in two distinct intersections at shallow depths beginning at 136 metres. The upper interval occurs within a thick potash sequence that returned 23.4% KCl over 9.2 metres.
Farhad Abasov, President and CEO, commented: “Allana is very pleased to have identified high grade zones of potash mineralization at very shallow depths and to have extended the Musley deposit an additional 700m to the east. Hole DK-10-07 is situated close to the newly acquired Haro concession and we believe that these positive results indicate significant potential for the Musley Deposit to extend to the Haro concession.”
I believe that Allana will continue to prove its inferred resources and move toward an updated NI 43-101. As the potash industry consolidates and potash prices continue higher within the secular uptrend, I feel confident that Allana’s share price will climb much higher and outperform the gains of its peers. I would not be surprised to see the stock price double by the end of 2011. I also believe the Allana Potash is a likely takeover target by a company such as BHP Billiton, which already has property near Allana.
Make sure to perform your own due diligence. Click here for the latest Allana Potash corporate presentation.
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