Overview

Allana Potash Inc. (TSX-V: AAA) ("Allana"), has acquired the option to earn a 100 % interest in three potash concessions (Dallol Potash Project) in Ethiopia's northeastern Danakil Depression totaling approximately 150 square kilometers. Allana has acquired the option from three private vendors and has received regulatory approval for the transaction. The Dallol Potash Project area is approximately 100 km from the Red Sea coast and 600 km via road from the deep water port of Djibouti (Fig. 1). The potash mineralization in the Danakil Depression is well known with mining carried out intermittently from the early 1900s. Additional mining companies currently working in the basin include BHP Billiton and Sainik Coal Mining (Sainik), a leading Indian-based coal mining company (Fig. 2), the latter of which is planning to initiate mining at the Musley deposit.

Allana's concessions cover part of the previously defined Musley potash deposit located on the edge of a 1,000 square kilometer evaporite basin that lies along northern Ethiopia's portion of the East African Rift. Previous drilling by the Ralph M. Parsons Company (Parsons) from 1958-1967 resulted in the discovery and partial delineation of the Musley Deposit which was reported to contain a resource of 171.27 million tonnes grading 32.48 % KCl. This resource estimate is historical in nature and does not comply with National Instrument 43-101. The smaller Crescent Deposit was the initial site of Parsons' exploration activity in the 1950s however its small size, approximately 10,000,000 tonnes of secondary carnallite, prompted Parsons to focus on the Musley Deposit. The majority of the historic resource at the Musley Deposit is located on ground held by Sainik with portions of the resource extending onto the Allana concessions including an inferred potash resource of 105,200,000 tonnes with a composite grade of 20.8 % K₂O.

Previous work has identified at least one potash-bearing horizon in the basin, designated the Houston Formation, which is characterized by three members (Sylvinite, Intermediate and Kainitite), that extends onto the Allana concessions. The Sylvinite member is comprised of sylvite and halite and can be up to 11 metres thick. The Kainitite Member is comprised of kainite, halite and minor sylvite and averages 9 metres in thickness. The Intermediate Member lies between the Sylvinite and Kainitite members, is commonly thick and contains carnallite mineralization. In the Houston Formation potash mineralization varies from 7 to 48 metres in width in total thickness and has been traced for approximately 10 km along strike onto the northern and southern portions of the Allana property.

The regional evaporate basin also extends onto the Allana concessions and comprises an area of approximately 150 square kilometres. This portion of the basin has the potential to host all three potash-bearing horizons as well as a deeper horizon intersected by deep Parsons drill holes. The resource potential of this area is significant and constitutes a potential target of a billion tonnes. This potential is supported by the indicated K mineralization in the two deep holes, as mentioned above, located approximately 5 km from the Musley Deposit which yielded 45 m of potash mineralization at a depth of 680 m (Fig. 3).

Allana has completed a NI 43-101 compliant technical report for the three concessions. These studies were carried out by ERCOSPLAN Ingenieurgesellschaft (ERCOSPLAN) and North Rim Exploration Ltd, internationally recognized experts in potash exploration. Modern exploration on the property has been limited; however as indicated above, extensive historic exploration by Parsons includes over 300 exploration drill holes, metallurgical studies and economic analyses on the project. Drill log data, with K analyses, were acquired from the Geological Survey of Ethiopia and have been compiled into a project database. Excellent support and advice has been provided by staff from the Geological Survey of Ethiopia through the entire compilation and review process.

Highlights from the technical report outline several unique features of this acquisition including the following:

An inferred mineral resource of 105,200,000 tonnes of potash mineralization (Sylvite and Kainite) with a composite grade of 20.8% KCl. Near-surface potash mineralization (within 50 metres of surface for the Musley Deposit). Down-hole radiometric logs from two holes, the closest of which is located approximately 5 km west of the nearest hole on the Musley Deposit, reportedly indicates 45 metres of K mineralization in holes 5 and 7 at a depth 680 metres and another potential zone at 930 metres. These two holes demonstrate significant potential to expand the inferred potash resource on Allana concessions. Previous work indicates potential for a deeper horizon of potash mineralization which has only been intersected by the occasional hole. Potential for solution or open-pit mining. Unique environment provides potential to use low-cost geothermal and solar power. Saline brines in a nearby thermal spring returned a super-heated temperature of 125 °C. Days are often hot and clear to aid use of solar evaporation of brines or to use solar power. MOP (muriate of potash) and SOP production is feasible.

Preliminary modelling of 16 historic drill holes on the Allana concessions and 22 nearby drill holes (ERCOSPLAN Technical Report, July 13, 2008) indicates an inferred mineral resource of 31,300,000 tonnes grading 25.4 % KCl from the Sylvinite Member and 73,900,000 tonnes grading 61.7 % kainite (KMg(SO4)Cl*2.75H₂O) from the Kainitite Member (18.8% KCl equivalent). In the resource area, the average width of the Sylvinite Member is 2.78 metres and the Kainitite Member is typically thicker averaging 5.79 metres. The resource is open in several directions and down dip with much of the Allana ground having seen little to no exploration. Significant results from past drilling on, and adjacent to, Allana's land package are shown in Fig. 3. Note that widths reported are drilled widths; however given the shallow dip of the potash horizons these are estimated to be close to true widths.

The pertinent parameters utilized by ERCOSPLAN in their resource calculation are as follows: Cut-off grade of 15 % KCl and a minimum width of 2 metres in the Sylvinite Member Cut-off grade of 30 % Kainite and a minimum width of 3 metres in the Kainitite Member An Area of Influence surrounding each drill hole of a maximum of 750 metres A specific gravity of 2.2 grams/cm³ Dr. Henry Rauche and Dr. Sebastiaan van der Klauw of ERCOSPLAN, and Stephen P. Halabura, P.Geo, of North Rim Exploration Ltd., all of whom are independent of Allana, prepared the resource estimate. The resource estimate was prepared in accordance with the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by the CIM Council.

Allana has commenced its Phase I drilling programme during the second quarter of 2010. The Phase 1 programme currently consists of 7 holes and is designed to confirm historic drilling results, to confirm the accuracy of the previous resource and to potentially increase the resource. It is expected that drill holes will vary in depth from 200 metres to 800 metres and will test potash horizons near the current resource as well as in the centre of the evaporate basin. It is planned that the drill programme will be followed by down-hole seismic studies (vertical seismic profiling) and a programme of surface 2D seismic over the southern part of the basin. The Phase 1 programme is comprised of between 2,500 and 3,000 metres of drilling and is expected to be completed by the third quarter of 2010.

In addition to the start of drilling, camp construction is approaching completion near the village of Hamadela and plans to expand the camp to accommodate additional personnel have been initiated. The camp will accommodate approximately 35 people and provide a safe and efficient base of operations for Allana's activities.

In addition to the strong and promising technical aspects of the project, the Ethiopian government is strongly supporting mining initiatives in the country. Allana has had advanced discussions with the Minister of Transportation, Minister of Mines and the Minister of Defense regarding infrastructure improvements in the Danakil region which would greatly enhance the economics of the projects. Allana's relationship with the Ethiopian government is very strong and will greatly assist rapid advancement of the project.