May 19, 2011 / 8:00 PM / in 6 years

UPDATE 1-Allana Potash says resource estimate at Ethiopia project could rise

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May 19 (Reuters) - Canada’s Allana Potash Corp said drilling results showed that the potential of its Dallol project in Ethiopia could be extended beyond the original resource estimate, helping its shares pare some of their losses.

Shares of the potash explorer, which were down as much as six percent midday before the news, recovered to trade down two percent at C$1.70 on the Toronto Venture Exchange. More than 2.5 million shares were traded by late afternoon.

Results from drill hole 15 at the company’s Dallol property in Ethiopia’s northeastern Danakil Depression showed a mineralization grade as high as 52.4 percent KCl (potassium chloride) over 0.80 metres in a zone rich with sylvinite - an important ore for potash production.

Drilling at the sylvinite zone showed 2.70 metres of mineralized ore with a grade of 39.38 percent KCl starting at a depth of 254.40 metres, Allana Potash said in a statement.

The same hole also showed a strong grade for the kainite ore and the grade for both ores were the highest grade encountered to date on the property, the company said.

The company plans to include data from hole 15 in its upcoming NI 43-101 technical report. The original resource estimate on the property was completed in 2008.

Recent drilling confirmed extension of the Musley deposit about 1200 metres east of previous work as well as the historic resource estimate, and has shown potential to add significantly to the property resource, the company said.

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. (Reporting by Savio D‘Souza in Bangalore; Editing by Roshni Menon)

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