2ub8Xn

Allana Potash Corp. 

Management’s Discussion and Analysis 

For the three months ended October 31, 2012 

ALLANA POTASH CORP. 

Management’s Discussion & Analysis 


The following Management’s Discussion and Analysis (“MD&A”) relates to the financial condition and 

results of operations of Allana Potash Corp. (“we”, “our”, “us”, “Allana”, or the “Company”) for the three 

months ended October 31, 2012 and should be read in conjunction with the unaudited interim consolidated 

financial statements and related notes for the three months ended October 31, 2012. The unaudited interim 

consolidated financial statements and related notes of Allana have been prepared in accordance with 

International Financial Reporting Standards (“IFRS”). Certain non-IFRS measures are discussed in this 

MD&A which are clearly disclosed as such. Additional information, including our press releases, have 

been filed electronically through the System for Electronic Document Analysis and Retrieval (“SEDAR”) 

and are available online under our profile at www.sedar.com. 

This MD&A reports our activities through to December 14, 2012 unless otherwise indicated. 

References to the first quarter of 2013 and the first quarter of 2012 or Q1 2013 and Q1 2012 mean the three 

months ended October 31, 2012 and October 31, 2011 respectively. 

Unless otherwise noted all amounts are reported in Canadian dollars. 

Peter MacLean, Ph.D., P.Geo, Senior Vice President, Exploration of the Company, is a Qualified Person as 

defined under National Instrument 43-101 and has reviewed and approved the technical information 

disclosed in the MD&A. 

CAUTIONARY STATEMENTS 

Except for statements of historical fact relating to Allana, 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 development potential of the Company’s 

properties; the future price of potash and other minerals; the estimation of mineral reserves and mineral 

resources; conclusions of economic evaluation; the realization of mineral reserve estimates; the timing and 

amount of estimated future production; future costs of production; future capital expenditures; success of 

exploration activities; mining or processing issues; currency exchange rates; government regulation of 

mining operations; and environmental risks. 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. Estimates regarding the anticipated timing, amount and expenditures relating to the Ethiopian and 

Argentinean Projects are based on assumptions of underlying mineral reserve and mineral resource 

estimates, the results of feasibility and scoping studies on the properties and the realization of such 

estimates are set out herein. Capital and operating cost estimates are based on extensive research of the 

Company, costs incurred at the projects to date, purchase orders placed by the Company to date, recent 

estimates of construction and mining costs and other factors that are set out herein. Production estimates 

are based on mine plans and production schedules, which have been developed by the Company’s 

personnel and independent consultants. Forward-looking statements 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 forwardlooking 

statements, including but not limited to risks related to: unexpected events and delays during 

construction, expansion and start-up; variations in mineral grade and recovery rates; delay or failure to 

receive government approvals; timing and availability of external financing on acceptable terms; actual 

1




results of current exploration activities; changes in project parameters as plans continue to be refined; 

future prices of potash and other minerals; failure of plant, equipment or processes to operate as 

anticipated; accidents, labour disputes and other risks of the mining industry. 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 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 information. The 

Company does not undertake to update any forward-looking information, except in accordance with 

applicable securities laws. 

The ability of Allana to produce one million tones of potash per year or to increase production beyond one 

million tones per year has not been the subject of a feasibility study and there is no certainty that the 

production rate or proposed expansion will be economically viable. 

The PEA is preliminary in nature and is based on a number of assumptions that may be changed in the 

future as additional information becomes available. Mineral resources that are not mineral reserves do not 

have demonstrated economic viability. The PEA includes inferred mineral resources that are considered 

too speculative geologically to have the economic considerations applied to them that would enable them to 

be categorized as mineral reserves, and there is no certainty that the PEA will be realized. The PEA is not 

based on and has not been amended to reflect the updated resource estimates published by the Corporation 

on April 30, 2012. 

OVERVIEW OF THE COMPANY 

Allana is a potash exploration company listed on the Toronto Stock Exchange (“TSX”) trading under the 

ticker symbol “AAA”. On January 13, 2010, the shareholders of the Company approved a name change 

from Allana Resources Inc. to Allana Potash Corp. to better reflect the nature of the Company. The 

Company is focused on the exploration and development of its previously explored Dallol Potash Project, 

located in the Danakil Depression, Ethiopia, one of the largest evaporite basins in the world. The Company 

also has a grass roots property in Argentina which is located near the Vale’s Rio Colorado potash solution 

mining project. 

The mineral exploration business is risky and most exploration projects will not become mines. The 

Company may offer an opportunity to a mining company to acquire an interest in a property in return for 

funding all or part of the exploration and development of the property. For the funding of property 

acquisitions and exploration that the Company conducts, the Company depends on the issue of shares from 

the treasury to investors. These stock issues depend on numerous factors including a positive mineral 

exploration environment, positive stock market conditions, a company’s track record and the experience of 

management. 

The Company’s unaudited condensed interim consolidated financial statements have been prepared in 

accordance with IFRS applicable to a going concern. Accordingly, they do not give effect to adjustments 

that would be necessary should the Company be unable to continue as a going concern and therefore be 

required to realize its assets and liquidate its liabilities and commitments in other than the normal course of 

business and at amounts different from those in consolidated financial statements. 

2

STRATEGY 




Allana is a junior mining company focused on potash exploration and development in Ethiopia and 

Argentina. 

Management’s objective for the Company is to transform Allana into one of the leading emerging potash 

exploration and development companies outside of the major potash regions in Canada and Russia. 

Allana has investigated open pit mining and solution mining at Dallol in the south-western portion of the 

claim block with processing using solar evaporation and flotation through a Preliminary Economic 

Assessment (“PEA”), of which a summary of such results was released November 22, 2011. The complete 

PEA was posted on SEDAR on January 16, 2012. A Feasibility Study (“FS”) is currently underway 

focusing on solution mining of the Sylvinite Member to produce 1 Million Tonnes per Year of Muriate of 

Potash (“MOP”) and completion of the FS is expected in beginning of 2013. 

Allana has conducted drilling and seismic programs in the last eighteen months. In March 2011, Allana 

engaged Ercosplan Ingenieurgesellschaft Geotechnik und Bergbau mbH (“Ercosplan”) to complete an 

updated mineral resource estimate on its Dallol Potash Project based on the Company’s drilling 

information. This estimate was completed in June 2011 (the ”Technical Report”) and comprised Measured 

and Indicated Mineral Resources totaling 673 Million tonnes grading 18.65% KCl and Inferred Mineral 

Resources totaling 596 Million tonnes grading 19.96% KCl (see News Release dated June 20, 2011 and 

page 10 of the Technical Report). In September 2011, Allana engaged Ercosplan to complete the FS for the 

project based on annual production of 1,000,000 tonnes per year (“TPY”) of MOP production. The initial 

phase of the FS was to determine, via a PEA, the optimal mining and processing methods for the potash 

deposits. In August 2011, the Company retained Environmental Resources Management (“ERM”) to 

complete an Environmental and Social Impact Assessment (“ESIA”) for the project in conjunction with the 

FS. In November 2011, the Company engaged Fugro Consult GmbH (“Fugro”) to perform a Hydrogeological 

investigation on its Danakil property in Ethiopia as a part of the Feasibility Study. 

In April 2012, Allana announced an updated NI 43-101 compliant mineral resource estimate based on over 

40 drillholes completed by Allana and 16 historic drill holes completed by Ralph M. Parsons Company 

(”Parsons”) as well as the seismic data. This mineral resource estimate, completed by Ercosplan, includes 

Measured and Indicated Minerals Resources of 1,297,529,000 tonnes grading 19.32% KCl and an 

additional Inferred Mineral Resource of 588,150,000 tonnes of 18.56% KCl. The foregoing mineral 

resource estimates are effective April 30, 2012. For more information with respect to data verification and 

parameters and risks, please refer to the technical report, supporting this updated mineral resource estimate, 

which was filed on SEDAR on June 13, 2012. 

The Company plans to raise its required project financing through debt and equity. It is intended that the 

equity will come from existing and new strategic investors. The Company also intends to secure supporting 

offtake agreements. 

EXECUTIVE SUMMARY AND OPERATIONAL OVERVIEW: 

Allana continued exploration and development of its Danakil Depression potash project in Ethiopia during 

the period ended October 31, 2012. 

During the three months ended October 31, 2012 and to the date of this MD&A the following significant 

activities occurred: 

� On November 1, 2012, the Company announced that it has closed a definitive agreement (the 

“Merger Agreement”) to acquire all of the issued and outstanding common shares of Nova-Ethio 

Potash Corporation (“Nova”), a private company, which indirectly holds a 100% interest in a potash 

3




license adjacent to the Company’s potash project in the Danakil Depression in Ethiopia (the “Nova 

Property”). 

� Pursuant to the terms of the Normal Course Issuer Bid (“NCIB”), and in accordance with the policies 

of the TSX, during the period ended October 31, 2012, the Company purchased 1,719,400 common 

shares pursuant to the block purchase exception. These shares were cancelled on November 1, 2012 

(see Other and Subsequent events sections). 

� On September 11, 2012, the Company announced that it has signed a Memorandum of Understanding 

(“MOU”) for the development and operation of a potash terminal at the Tadjourah Port to be 

constructed by the Djibouti Port and Free Zones Authority (“DPFZA”). The MOU defines the terms 

and intent of the parties regarding: 

o specific allocation and use of lands within Tadjourah Port for the Company’s potash terminal; 

o integration of designs, construction plans and operating plans for the Company’s potash terminal; 

o services to be provided by DPFZA to the Company at the Tadjourah port; and 

o co-operation in advancing discussions and agreements with governments regarding regulatory, 

import/export and other sovereign terms, and completion of road and rail infrastructure serving 

Tadjourah Port in time to meet the operational needs of DPFZA and the Company. 

� The Company continued talks with a number of potential strategic partners regarding strategic 

investment, a joint venture and/or other potential structures for its Danakil Depression potash project. 

Danakil Depression Properties, Dallol area, Afar Region, Ethiopia 

On October 24, 2008, as subsequently amended, the Company entered into an acquisition agreement to 

purchase a 100% interest in three mineral concessions with the potential to host potash deposits in the 

Danakil Depression Afar region, Ethiopia from SB Management, Forbes & Manhattan Inc. and Ethio-Gibe. 

As consideration for the property, the Company agreed to an aggregate of $2,500,000 in cash payments 

which were completed in 2011. 

The vendors have retained an aggregate of 3.0% net smelter return royalty on the property (the “NSR”). 

The Company has the option, exercisable at any time, to buyout 50% of the NSR (thereby reducing the 

NSR to 1.5%) for $5,000,000. 

At the time of the transaction, both Forbes & Manhattan Inc. and SB Management were non-arms-length 

parties to the transaction as a result of an insider of each, being a 10% shareholder of Allana. This 

shareholding has been subsequently diluted and both Forbes & Manhattan Inc. and SB Management are no 

longer non-arms length to Allana. During 2010, the president of Ethio-Gibe became an officer of the 

Company. 

In July 2011, following the completion of all conditions pursuant to the acquisition agreements and as per 

Company’s policy, licenses were transferred to Allana Potash Afar PLC (“Allana Afar”), a wholly owned 

subsidiary of the Company registered in Ethiopia. The exploration licenses were consolidated into one 

license which is valid until July 18, 2014 and may be extended twice for an additional term of one year 

each, subject to the terms of the licenses. 

On October 12, 2010, subsequently amended on January 19, 2011 and on April 5, 2012, the Company 

entered into an agreement with Haro Petroleum Corporation, a private company operating in Ethiopia, to 

acquire a 100% interest in the Haro concession, a potash mining license within the greater Allana land 

package. The Haro concession is approximately 11 km 2 and is located between the Sainik mining and 

exploration concessions. The Haro concession has no historic drill holes but occupies a strategic location 

between the historic Musley Deposit and the Crescent Carnallite deposit. In addition, the concession is 

4




approximately one kilometre from Allana drill holes DK-10-02 and DK-10-03 which returned 5.5 metres of 

25.8 % KCl and 9.95 metres of 19.5 % KCl respectively (see Press Releases dated June 15, 2010 and July 

7, 2010). 

As consideration for the Haro Property, the Company agreed to an aggregate of $4,000,000 in cash 

payments as set out below: 

� $500,000 as a deposit on or before January 31, 2011 (paid January 28, 2011); and 

� $3,500,000 on or before closing date (paid April 18, 2012); 

This acquisition was completed on April 18, 2012 and the underlying exploration license was transferred to 

Allana Potash Afar PLC. The exploration license is valid until July 22, 2013 and may be extended twice for 

an additional term of one year each, subject to the terms of the licenses. Upon closing, the Company paid 

$200,000 finder’s fee to an arm’s length party. 

The Danakil Depression potash project is located in one of the largest evaporite basins in the world 

comparable to the evaporite basins in Saskatchewan and the Urals, Russia. The entire Danakil Depression 

was extensively explored in the 1950’s and 1960’s. The US-based Ralph Parsons Company (“Parsons”) 

drilled nearly 300 potash holes in the 1960’s. 

The Company’s land position consists of one concession totalling approximately 157 square kilometres 

surrounding the historic Musley Deposit. The Houston Formation, host to the potash-bearing horizons, 

extends on to the Company concessions and sixteen historic drill holes are located on the concessions. 

In June 2011, Ercosplan completed an updated National Instrument 43-101 (“NI 43-101”) compliant 

mineral resource estimate, based primarily on Company exploration efforts but also including some 

Parsons data. The Measured and Indicated Mineral Resources for the project as at June 20, 2011 are 

approximately 673 million tonnes grading 18.65% KCl. The Inferred Mineral Resources for the project as 

at June 20, 2011 are approximately 596 million tonnes grading 19.96% KCl (See News Release dated June 

20, 2011). 

In April 2012, Allana announced an updated resource estimate based on over 40 drillholes completed by 

Allana and 16 historic drill holes completed by Parsons as well as the seismic data. This mineral resource 

estimate includes Measured and Indicated Minerals Resources of 1,297,529,000 tonnes grading 19.32% 

KCl and an additional Inferred Mineral Resource of 588,150,000 tonnes of 18.56% KCl and was completed 

by Ercosplan. The technical report, supporting this updated mineral resource estimate, was filed on 

SEDAR on June 13, 2012. 

The climate of the Danakil Depression may allow Allana to use solar evaporation for the solution mining 

method. As part of the ongoing FS test solution mining caverns and evaporation ponds are being 

constructed to determine the nature of the salt product derived from solar evaporation. The use of solar 

evaporation instead of thermal evaporation using natural gas, coal, etc. will significantly lower operating 

expenses of the potential future potash mine. 

On November 1, 2012 Allana completed its acquisition of the Nova. Nova Property is located west of the 

main Allana exploration license. Exploration on the Nova license has been ongoing since 2011 and 21 drill 

holes totalling 2122 metres of drilling have been completed. Drill hole locations and survey information are 

outlined in Table 1. 

5

Table 1. Nova drill hole locations. 




Hole-ID Easting Northing Elevation (m) Depth (m) Azimuth Dip 

DM-11-01 626572.00 1581111.00 -109.00 134.00 0 -90 

DM-11-02 627128.00 1580866.00 -109.00 110.00 0 -90 

DM-11-03 627229.00 1580402.00 -109.00 132.00 0 -90 

DM-11-04 629956.00 1575672.00 -109.00 84.45 0 -90 

DM-11-05 630944.00 1574293.00 -109.00 81.65 0 -90 

DM-11-06 630416.00 1575172.00 -109.00 87.60 0 -90 

DM-11-07 629413.00 1576755.00 -109.00 90.40 0 -90 

DM-11-08 627882.00 1579930.00 -109.00 96.70 0 -90 

DM-12-09 627499.00 1580459.00 -109.00 105.40 0 -90 

DM-12-10 631305.00 1573139.00 -109.00 90.65 0 -90 

DM-12-11 628938.00 1575259.00 -109.00 108.50 0 -90 

DM-12-12 631632.00 1571965.00 -109.00 71.10 0 -90 

DM-12-13 629937.00 1574983.00 -109.00 102.45 0 -90 

DM-12-14 632176.00 1571176.00 -109.00 64.80 0 -90 

DM-12-15 638407.00 1563782.00 -120.00 127.60 0 -90 

DM-12-16 637402.00 1563518.00 -120.00 86.00 0 -90 

DM-12-17 637837.00 1562531.00 -120.00 82.85 0 -90 

DM-12-18 630929.00 1572984.00 -109.00 99.30 0 -90 

DM-12-19 639068.00 1562585.00 -120.00 163.00 0 -90 

DM-12-20 631776.00 1570900.00 -109.00 81.30 0 -90 

DM-12-21 628402.00 1578946.00 -109.00 121.85 0 -90 

Nova drilling was concentrated on the western portion of its license and the program was designed to 

delineate extensions of the Musley Deposit as well as outline the limits of the evaporite basin. Generally 

Nova intersected similar stratigraphy to drilling on the Allana license and intersected potash in most holes 

(see Table 2). All holes were drilled vertically and true widths of the potash zones are estimated to be very 

similar to drilled widths due to the flat-lying nature of the potash horizons. 

6

Table 2. Nova drill hole results 




HOLE FROM (m) TO (m) DRILLED WIDTH (m) KCl (%) ZONE 

DM-11-01 95.30 

DM-11-02 84.85 

DM-11-03 86.50 

DM-11-04 61.65 

67.75 

DM-11-05 62.89 

DM-11-06 52.04 

67.40 

DM-11-07 76.16 

DM-11-08 61.20 

68.96 

77.45 

81.70 

DM-12-09 76.40 

86.20 

DM-12-10 60.15 

DM-12-11 NSV 

65.65 

73.90 

DM-12-12 54.72 

DM-12-13 NSV 

56.82 

DM-12-14 33.70 

41.20 

DM-12-15 69.25 

104.12 

DM-12-16 57.60 

61.90 

DM-12-17 65.28 

DM-12-18 77.32 

DM-12-19 NSV 

DM-12-20 NSV 

DM-12-21 NSV 

(NSV-No Significant Values) 

Exploration Program 2010-2012 

99.87 

93.90 

89.45 

62.60 

73.95 

69.65 

57.91 

77.10 

78.68 

68.96 

70.89 

81.70 

90.22 

78.60 

98.80 

65.65 

72.25 

80.90 

56.42 

64.82 

35.20 

50.20 

102.95 

108.12 

58.60 

69.40 

66.60 

78.42 

Allana’s exploration program began in April 2010 and has been ongoing. To date 59 drill holes have been 

completed, and the results for 59 holes have been released. The Company has completed approximately 

26,000 metres of drilling and Table 3 provides survey data for the drill holes completed on the project. 

Table 4 outlines selected drill results and Figure 1 shows drill hole locations. 

In addition to completing exploration drill holes, the Company completed approximately 48 kilometres of 

2D seismic work on the southern portion of its property. 

Allana engaged Meridian Drilling to complete 10,000 metres of additional drilling on its Ethiopian potash 

project. This drilling is in addition to the Phase I program (2500 meters - 3000 meters) and has been part of 

the overall program announced by the Company in its presentations and other public communications. The 

drilling is being done in conjunction with 2D seismic and down-hole geophysical surveys and is part of the 

7 

4.57 

9.05 

1.95 

0.95 

6.20 

6.76 

5.87 

9.70 

2.52 

7.76 

1.93 

4.25 

8.52 

2.20 

12.60 

5.50 

6.60 

7.00 

1.68 

8.00 

1.50 

9.00 

33.70 

4.00 

1.00 

7.50 

1.32 

1.10 

- 

13.40 

- 

14.47 

19.40 

18.30 

23.00 

15.50 

14.70 

25.00 

17.90 

13.20 

16.20 

27.00 

15.20 

33.70 

21.00 

17.40 

28.47 

17.38 

21.80 

15.90 

7.60 

18.30 

27.70 

18.30 

9.90 

6.50 

NSV 

KAIN 

NSV 

SYL 

KAIN 

KAIN 

SYL 

KAIN 

SYL 

SYL 

UC 

LC 

KAIN 

SYL 

KAIN 

SYL 

UC 

KAIN 

SYL 

KAIN 

SYL 

KAIN 

UC 

KAIN 

SYL 

KAIN 

KAIN 

KAIN




Phase II drilling program designed to establish sufficient resource to support a feasibility study. A second 

drill rig and equipment capable of drilling to a depth of 800 metres was mobilized out of the UK. The 

exploration drilling program has ended with the completion of Hole DK-12-59. Drill hole location data are 

shown in Table 3 and drill results for holes DK-10-01 to DK-12-59 shown in Table 4. 

Drilling by the Company has confirmed the widespread presence of potash mineralization in the basin. 

Geological interpretations based on core logging and down-hole geophysical testing indicates 4 potash 

horizons are typically present. The most widespread of these is the Kainitite Zone, which is present in 

almost every drill hole, averages approximately 7 metres in thickness and typically yields 20% KCl. The 

Kainitite Zone forms the basal potash horizon and is overlain in some areas by a Lower Carnallitite Zone 

and an Upper Carnallitite Zone. These two zones are locally prominent but are not as widespread as the 

Kainitite Zone. Overlying the Upper Carnallitite Zone is the Sylvinite Zone which averages approximately 

4 metres in thickness and grades about 30% KCl. This unit is fairly widespread and may reach grades of up 

to 52% KCl. 

Below is the terminology being used to describe mineral composition and grades in this MD&A: 

Name Chemical Formula 

Halite NaCl 

Sylvite KCl 

Carnallite KMgCl 3 x 6 H 2O 

Bischofite MgCL 2 x 6 H 2O 

Anhydrite CaSO 4 

Kieserite MgSO 4 x H 2O 

Dolomite CaMg(CO 3) 2 

Kainite 4KMg(SO 4)Cl x 11H 2O 

In June 2011, Ercosplan completed a mineral resource estimate update based on the first 23 drill holes 

completed by the Company and historic drill results (see below). Drilling continued throughout 2011 and 

2012 to expand the potash resources and to increase the confidence level of the mineral resources such that 

Inferred resources can be re-classified as Measured and Indicated. In April 2012 Ercosplan completed an 

updated mineral resource estimate based on 45 drill holes completed by Allana and 16 historic drill holes 

(see below). 

In August 2010, Allana engaged Tesla-IMC International Ltd. to complete approximately 48 kilometres of 

surface 2D seismic surveys on the property. The 2D survey was completed on November 29, 2010 and 

preliminary interpretative data was presented to Allana in March 2011. As drilling continued through the 

spring interpretations were optimized and a final interpretation report was presented to the Company in July 

2011. A follow-up report with updated interpretation based on additional drilling was presented to the 

Company in February 2012. 

Exploration work on the Nova exploration license was initiated in November, 2012. To date 6 holes have 

been completed on the southern portion of the license. Geological logging and sampling of the core are in 

progress and samples will be shipped to the SRC lab in Saskatoon for analysis. 

8

Table 3. Drill hole locations. 





DK-10-01 631596.10 1576205.40 -118.20 194.40 0 -90 

DK-10-02 632523.80 1576812.70 -122.20 190.80 0 -90 

DK-10-03 632547.20 1576199.40 -122.20 207.70 0 -90 

DK-10-04 640242.10 1569994.90 -124.10 842.00 0 -90 

DK-10-05 641131.20 1568050.00 -124.20 680.50 0 -90 

DK-10-06 639136.60 1567358.40 -124.10 585.00 0 -90 

DK-10-07 633090.80 1575846.30 -122.60 236.30 0 -90 

DK-10-08 636773.10 1568999.00 -121.70 200.30 0 -90 

DK-10-09 634888.50 1575114.30 -123.50 242.30 0 -90 

DK-10-10 635961.10 1571869.80 -123.00 368.00 0 -90 

DK-10-11 637884.00 1565527.70 -122.50 164.20 0 -90 

DK-10-12 638460.40 1569703.50 -123.40 587.30 0 -90 

DK-10-13 635538.90 1573066.00 -123.20 378.20 0 -90 

DK-10-14 634438.00 1569211.00 -121.00 173.20 0 -90 

DK-11-15 635271.00 1574122.00 -123.40 393.30 0 -90 

DK-11-16 635887.60 1568619.60 -120.60 201.20 0 -90 

DK-11-17 636601.00 1565006.00 -120.00 118.20 0 -90 

DK-11-18 636336.00 1566263.00 -120.00 116.20 0 -90 

DK-11-19 639400.00 1566098.00 -120.00 663.50 0 -90 

DK-11-20 645997.00 1568863.00 -123.00 497.10 0 -90 

DK-11-21 647691.00 1566602.00 -116.00 509.20 0 -90 

DK-11-22 644258.00 1570781.00 -110.00 501.60 0 -90 

DK-11-23 644871.00 1569639.00 -110.00 533.40 0 -90 

DK-11-24 637466.00 1567150.00 -120.00 215.60 0 -90 

DK-11-25 637122.00 1566072.00 -120.00 188.60 0 -90 

DK-11-26 635975.00 1567340.00 -120.00 194.30 0 -90 

DK-11-27 635025.00 1572995.00 -120.00 281.40 0 -90 

DK-11-28 634398.00 1574069.00 -120.00 290.60 0 -90 

DK-11-29 634056.00 1575166.00 -118.00 254.50 0 -90 

DK-11-30 635273.00 1571704.00 -118.00 240.20 0 -90 

DK-11-31 634863.00 1570169.00 -116.00 117.20 0 -90 

DK-11-32 635293.00 1570819.00 -120.00 231.20 0 -90 

DK-11-33 636731.00 1571010.00 -118.00 507.00 0 -90 

DK-11-34 635959.00 1569851.00 -119.00 243.10 0 -90 

DK-11-35 636912.00 1568028.00 -119.00 197.20 0 -90 

DK-11-36 637661.00 1564383.00 -119.00 116.30 0 -90 

9

Table 3. Drill hole locations (Continued). 





DK-11-37 637034.00 1570046.00 -120.00 380.20 0 -90 

DK-11-38 638180.00 1568039.00 -118.00 536.20 0 -90 

DK-11-39 639070.00 1568504.00 -118.00 632.20 0 -90 

DK-11-40 637568.00 1568048.00 -120.00 245.30 0 -90 

DK-11-41 638470.00 1566630.00 -120.00 386.60 0 -90 

DK-11-42 638900.00 1564794.00 -120.00 443.50 0 -90 

DK-12-43 640135.00 1565078.00 -120.00 608.40 0 -90 

DK-12-44 648248.00 1569411.00 -87.00 311.30 0 -90 

DK-12-45 649056.00 1568354.00 -110.00 299.30 0 -90 

DK-12-46 647917.00 1568002.00 -103.00 368.30 0 -90 

DK-12-47 646780.00 1567584.00 -110.00 530.50 0 -90 

DK-12-48 633638.00 1579043.00 -121.00 443.20 0 -90 

DK-12-49 647050.00 1569160.00 -120.00 416.50 0 -90 

DK-12-50 633989.00 1578023.00 -120.00 428.20 0 -90 

DK-12-51 633993.00 1578026.00 -120.00 116.60 0 -90 

DK-12-52 634716.00 1576436.00 -120.00 362.30 0 -90 

DK-12-53 633001.00 1576947.00 -120.00 251.20 0 -90 

DK-12-54 636138.00 1573117.00 -120.00 422.40 0 -90 

DK-12-55 633839.00 1577260.00 -120.00 284.10 0 -90 

DK-12-56 635459.00 1575154.00 -120.00 350.40 0 -90 

DK-12-57 633275.00 1580035.00 -120.00 461.40 0 -90 

DK-12-58 638460.00 1565067.00 -120.00 197.30 0 -90 

DK-12-59 640680.00 1564240.00 -120.00 602.30 0 -90 

10

Table 4. Selected drill results. 




HOLE FROM (m) TO (m) DRILLED WIDTH (m) KCl (%) 

DK-10-01 110.80 

including 114.15 

DK-10-02 150.10 


DK-10-03 151.25 


DK-10-04 744.00 

DK-10-05 Target not reached 

DK-10-06 495.30 

567.30 


DK-10-07 136.00 


214.14 

DK-10-08 164.30 


172.70 

DK-10-09 210.00 


224.30 

DK-10-10 257.00 


303.40 

350.70 

DK-11-11 115.85 



125.20 


DK-11-12 344.00 


418.42 

DK-11-13 224.40 


342.00 

DK-11-15 254.40 


DK-11-16 125.20 


168.20 

11 

117.35 

116.15 

155.65 

152.10 

161.20 

154.35 

776.40 

498.30 

585.00 

585.00 

145.20 

144.00 

220.80 

168.40 

167.40 

180.20 

217.10 

213.50 

228.30 

269.40 

266.20 

322.80 

357.20 

119.20 

119.20 

118.25 

132.50 

132.50 

359.20 

353.10 

425.25 

227.20 

225.40 

350.70 

257.10 

256.20 

131.70 

129.20 

173.20 

6.55 

2.00 

5.50 

2.00 

9.95 

2.00 

32.40 

3.00 

17.70 

4.20 

9.20 

2.00 

6.66 

4.10 

2.00 

7.50 

7.10 

3.50 

4.00 

12.40 

2.80 

19.40 

6.50 

3.35 

1.95 

1.00 

7.30 

3.80 

15.20 

4.10 

6.83 

2.80 

1.00 

8.70 

2.70 

0.80 

6.50 

4.00 

5.00 

17.65 

19.94 

25.80 

34.80 

19.52 

28.90 

8.00 

30.87 

17.25 

24.51 

23.41 

37.75 

22.04 

24.60 

31.58 

22.08 

22.80 

28.00 

14.60 

23.71 

37.64 

16.90 

21.30 

33.77 

38.85 

44.48 

17.62 

22.00 

26.17 

37.84 

22.30 

45.86 

47.81 

22.91 

39.38 

52.40 

24.79 

29.28 

20.29

Table 4. Selected drill results (Continued). 





DK-11-17 73.20 


77.70 

DK-11-18 64.50 

DK-11-19 263.50 

547.35 

625.47 

DK-11-20 472.34 

DK-11-21 Target not reached 

DK-11-22 261.80 

DK-11-23 491.15 

DK-11-24 135.83 

143.30 

DK-11-25 101.23 

113.31 

DK-11-26 105.00 

117.50 

DK-11-27 159.90 

259.23 

DK-11-28 198.74 

266.43 

DK-11-29 124.50 


227.30 

DK-11-30 193.70 

215.30 

DK-11-31 73.50 


82.30 

DK-11-32 194.89 



203.20 

DK-11-33 56.80 

444.73 

467.50 

471.50 


DK-11-34 174.00 

183.89 

12 

75.20 

75.20 

85.20 

66.50 

270.80 

550.40 

632.70 

478.90 

277.80 

498.20 

138.64 

149.60 

106.65 

119.20 

106.00 

125.50 

163.35 

266.90 

201.30 

274.82 

131.30 

127.00 

233.50 

199.05 

222.20 

79.20 

74.50 

88.40 

200.20 

200.20 

198.40 

206.50 

58.30 

446.23 

469.00 

479.00 

479.00 

177.00 

191.81 

2.00 

1.00 

7.50 

2.00 

7.30 

3.05 

7.23 

6.60 

16.00 

7.05 

2.81 

6.30 

5.42 

5.89 

1.00 

8.00 

3.45 

7.67 

2.56 

8.39 

6.80 

2.50 

6.20 

5.35 

6.90 

5.70 

1.00 

6.10 

5.31 

3.15 

1.35 

3.30 

1.50 

1.50 

1.50 

7.50 

6.00 

3.00 

7.92 

19.38 

31.03 

17.68 

12.80 

37.74 

30.85 

22.09 

23.70 

9.24 

24.02 

35.12 

21.03 

29.33 

19.98 

20.26 

18.54 

37.70 

23.05 

40.27 

21.95 

20.51 

33.84 

23.13 

32.02 

22.54 

15.76 

20.10 

21.41 

18.54 

21.09 

29.60 

15.37 

22.00 

13.90 

30.08 

22.82 

23.85 

38.41 

22.29






DK-11-35 142.50 


153.38 


DK-11-36 82.99 

89.89 


DK-11-37 344.54 

DK-11-38 396.37 


DK-11-39 470.10 


611.00 


DK-11-40 190.87 

193.00 

194.70 

DK-11-41 352.47 


361.22 

13 

148.20 

146.52 

160.92 

159.92 

86.95 

95.02 

95.02 

349.82 

403.33 

397.75 

473.20 

472.20 

619.30 

618.00 

192.00 

206.30 

203.70 

357.91 

357.05 

366.92 

DK-12-42 NSV FAULT ZONE 

DK-12-43 503.40 

586.60 

DK-12-44 281.30 

DK-12-45 215.30 

276.00 

DK-12-46 345.48 

DK-12-47 490.59 

DK-12-48 326.20 

419.20 

DK-12-49 351.97 

400.00 

DK-12-50 385.30 

386.80 

411.70 

DK-12-51 330.30 

333.50 

469.30 

DK-12-52 284.20 

285.20 

506.30 

592.61 

289.00 

225.80 

282.50 

350.58 

494.71 

329.20 

425.20 

384.10 

405.75 

386.80 

392.20 

420.70 

333.50 

345.30 

479.30 

285.20 

302.20 

5.70 

3.02 

7.54 

5.79 

3.96 

5.13 

4.13 

5.28 

6.96 

1.38 

3.10 

2.10 

8.30 

6.00 

1.13 

13.10 

9.00 

5.44 

1.28 

5.70 

2.90 

6.01 

7.70 

10.50 

6.50 

5.10 

4.12 

3.00 

6.00 

32.13 

5.75 

1.50 

5.40 

9.00 

3.20 

11.80 

10.00 

1.00 

15.00 

31.29 

39.10 

20.33 

21.24 

24.63 

20.19 

20.29 

19.73 

9.00 

12.63 

33.85 

41.60 

25.32 

27.92 

16.62 

21.22 

23.16 

33.24 

49.86 

21.79 

36.89 

23.68 

23.13 

16.51 

22.59 

25.99 

22.52 

28.02 

21.01 

19.96 

22.01 

37.20 

19.64 

20.67 

23.87 

20.41 

23.45 

29.60 

13.71






DK-12-53 151.20 

156.40 

225.55 

DK-12-54 289.40 

291.25 

405.80 

DK-12-55 251.53 

255.47 

DK-12-56 233.85 


237.91 

331.52 

DK-12-57 365.70 

455.40 

DK-12-58 174.30 

DK-12-59 501.30 

584.30 

14 

156.40 

162.80 

233.20 

291.25 

294.90 

412.40 

255.47 

260.55 

237.06 

237.91 

243.64 

338.70 

371.40 

461.40 

175.30 

506.30 

590.30 

5.20 

6.40 

7.65 

1.85 

3.65 

6.60 

3.94 

5.08 

4.06 

0.85 

5.73 

7.18 

5.70 

6.00 

1.00 

5.00 

6.00 

18.71 

11.66 

19.29 

39.71 

21.02 

24.85 

39.65 

11.20 

10.88 

35.46 

19.61 

21.90 

16.86 

19.95 

10.70 

9.41 

23.76

Figure 1. Drill hole locations. 




15

Mineral Resource Estimate Update 2012 




As previously discussed, Ercosplan completed a revised NI 43-101 compliant mineral resource estimate 

update in April, 2012. The exploration drilling on the project area confirmed previous geological 

interpretations of the potash horizons and the geology of the deposit. Four potash-bearing horizons are 

confirmed in the basin: Sylvinite Member, Upper Carnallitite Member, Lower Carnallitite Member, and 

Kainitite Member. 

The updated mineral resource estimate includes all four potash bearing beds (sylvinite, upper and lower 

carnallite and kainitite) in the project and is comprised of estimated Measured and Indicated Mineral 

Resources totaling 1,298 million tonnes with an average grade 19.3% KCl (composite of all four potash 

beds) and estimated Inferred Mineral Resources totaling 588 million tonnes with an average grade of 

18.6% KCl (composite of all four potash beds). A summary of the resources is presented in Table 5. 

Table 5. Summary of estimated Measured, Indicated and Inferred Mineral Resources as of April 30, 2012, 

completed by Ercosplan. 

CATEGORY POTASH MEMBER IN-SITU TONNAGE (MT) KCl (%) CONTAINED KCI (MT) 

MEASURED Sylvinite 60.78 30.70 18.66 

Upper Carnallitite 49.94 17.49 8.74 

Lower Carnallitite 137.67 11.12 15.31 

Kainitite 319.43 20.15 64.37 

Total 567.82 18.86 107.08 

INDICATED Sylvinite 110.58 31.05 34.34 



Kainitite 382.12 20.36 77.79 

Total 729.72 19.69 143.65 

TOTAL MEASURED AND INDICATED 

16 

1,297.53 19.32 250.73 

INFERRED Sylvinite 46.62 30.25 14.10 



Kainitite 373.71 20.35 76.05 

Total 588.15 18.56 109.17 

TOTAL INFERRED 

588.15 18.56 109.17 

Notes: 

1. MT=Million Tonnes, tonnage is for in-situ resource with no discount for recovery as mining method is to be determined. 

2. The numbers for tonnage, average KCl per cent are rounded figures. 

3. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty of measured, 

indicated or inferred mineral resources, these mineral resources may never be upgraded to proven and probable mineral reserves. 

4. Average densities used in resource calculations are 2.14, 1.81, 1.91, and 2.10 for the Sylvinite, UC, LC and Kainitite members 

respectively. 

The resource estimate is based on drilling conducted by Allana in 2010-2012 (45 holes) and the 16 historic 

drill holes completed by the Ralph M. Parsons Company (“Parsons”) in the 1950’s and 1960’s. 

Interpretation of the Allana data and drill core at the project by Ercosplan has refined the potash 

stratigraphy originally defined by Parsons. The top of the potash sequence is identified by the Sylvinite 

Member, followed by the Upper Carnallitite Member (“UC”), the Bischofitite Member, the Lower 

Carnallitite Member (“LC”) and the Kainitite Member.




To be included in the resource estimate, drill hole intersections must meet the following criteria: 

� Sylvinite Member > 20% KCl, the combined minimum width of Sylvinite and UC 

Members over 4 metres 

� UC Member > 40% Carnallite, the combined minimum width of Sylvinite and UC 

Members over 4 metres 

� LC Member > 60% Carnallite+Kieserite, minimum width of 5 metres 

� Kainitite Member > 50% Kainite, minimum width of 5 metres 

Allana has drilled 45 holes prior to the resource evaluation all of which provided geological information for 

the report, but several holes did not meet these criteria and consequently were not included in the resource. 

The resource estimates were calculated by extrapolating grades and widths using the radius of influence 

(“ROI”) from each Allana drill hole and historical drill holes based on industry standards for potash 

exploration. This process starts with the interpretation of the Radius of Influence of each exploration hole. 

The following ROIs were used for the calculation of the area of mineralized material in each of the 

resource categories: 

� Sylvinite, Upper Carnallitite Members 

� Measured Resource 350 metres 

� Indicated Resource 750 metres 

� Inferred Resource 1500 metres 

� Lower Carnallitite, Kainitite Members 




For historical drill holes a ROI of 750 metres was used for Inferred Mineral Resources in the different 

members. 

The difference in ROI between the two groups is directly related to the geology of the evaporite 

mineralization. The Sylvinite and UC members are interpreted to be secondary deposits formed from 

carnallite and therefore not as uniform as a primary evaporite deposit. The Kainitite and LC members are 

formed by primary evaporite deposition and are relatively consistent throughout the Allana property. Due 

to this consistency there is a greater degree of confidence in the lateral extent of the mineralization of the 

Kainitite and LC members and the ROI can be increased. 

Analytical results for exploration drill holes DK-12-46 to DK-12-59 have been compiled and are included 

in Table 4. These new results will be combined with previous drill hole information for the calculation of a 

revised mineral resource estimate that will accompany the FS. 

Mineral Resource 2011 

Prior to the 2102 resource estimate, Ercosplan completed a resource estimate in 2011 based on 23 Allana 

drillholes and historic drill results from Parsons. This estimate was released in June 2011 and the results 

are summarized below. 

The updated mineral resource estimate includes all four potash bearing beds (sylvinite, upper and lower 

carnallite and kainitite) in the project and is comprised of Measured and Indicated Mineral Resources 

totaling 673 million tonnes with an average grade 18.65% KCl (composite of all four potash beds) and 

Inferred Mineral Resources totaling 596 Million tonnes with an average grade of 19.96% KCl (composite 

of all four potash beds). A summary of the resources is presented in Table 6. 

17




Table 6. Summary of 2011 Measured, Indicated and Inferred Mineral Resources, effective as of June 13, 

2011. 

CATEGORY POTASH MEMBER IN-SITU TONNAGE (MT) KCl (%) 

MEASURED Sylvinite 16.00 29.09 

Upper Carnallitite 14.93 19.88 

Lower Carnallitite 77.96 12.00 

Kainitite 98.73 19.77 

Total 207.62 17.57 

INDICATED Sylvinite 81.84 30.23 



Kainitite 185.49 19.76 

Total 465.53 19.13 

TOTAL MEASURED AND INDICATED 673.15 18.65 

INFERRED Sylvinite 108.25 31.32 



Kainitite 271.17 20.33 

Total 595.72 19.96 

TOTAL INFERRED 595.72 19.96 

Notes: 

1. MT=Million Tonnes, tonnage is for in-situ resource with no discount for recovery as mining method is to be determined. 

2. The numbers for tonnage, average KCl per cent are rounded figures. 

3. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Due to the uncertainty of measured, 

indicated or inferred mineral resources, these mineral resources may never be upgraded to proven and probable mineral reserves. 

4. Average densities used in resource calculations are 2.14, 1.81, 1.91, and 2.10 for the Sylvinite, UC, LC and Kainitite members 

respectively. 

To be included in the resource estimate, drill hole intersections must meet the following criteria: 

� Sylvinite Member > 20% KCl, minimum width of 2 metres 

� UC Member > 40% Carnallite, minimum width of 2 metres 

� LC Member > 60% Carnallite+Kieserite, minimum width of 5 metres 

� Kainitite Member > 50% Kainite, minimum width of 5 metres 

Allana has drilled 23 holes prior to the resource evaluation all of which provided geological information for 

the report, but several holes (14, 18, 4) did not meet these criteria and consequently were not included in 

the resource. 

The resource estimates were calculated by extrapolating grades and widths using the radius of influence 

(“ROI”) from each Allana drill hole and historical drill holes based on industry standards for potash 

exploration. This process starts with the interpretation of the Radius of Influence of each exploration hole. 

The following ROIs were used for the calculation of the area of mineralized material in each of the 

resource categories: 

� Sylvinite, Upper Carnallitite Members 




18




� Lower Carnallitite, Kainitite Members 




For historical drill holes a ROI of 750 metres was used for Inferred Mineral Resources in the different 

members. 

Preliminary Economic Assessment and Feasibility Study 2011 

In July 2011, the Company engaged Ercosplan to complete a Feasibility Study (“FS”) on its Danakil potash 

project. The initial investigation of the FS was to be a Preliminary Economic Assessment (“PEA”) to 

determine the optimal mining and processing methods for the potash deposits. The PEA is based on 

commercial operations that produce one million tonnes per year (“MTPY”) of a standard Muriate of Potash 

(“MOP”) product 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 therefore the preferred mining method selected for the Project. The PEA yielded, on an unlevered 

basis, an after-tax IRR of 36.8% and an after-tax NPV of US$1.85 Billion based on a 12% discount rate. 

The mineral resource estimate used for the PEA was completed by Ercosplan in June 2011 and includes insitu 

Measured and Indicated Resources of 126 Million tonnes of KCl and Inferred Resources of 119 

Million Tonnes of KCl as set out in the Technical Report (see News Release, June 20, 2011 and “About 

Allana” section at the end of the news release). The current mineral resource estimate completed in April 

2012 was not the base data used for this PEA. Production of more than one million tonnes per year will be 

evaluated during the Feasibility Study as the management intends to start production with one million 

tonnes at the initial stage and then ramp it up to two million tonnes. 

The key economic highlights of the PEA are outlined in the table below (all dollar amounts are stated in 

US$): 

After-tax NPV@12% $1.85 billion 

After-tax IRR (based on 30% income tax rate) 36.8% 

Estimated Total Capital Expenditures (including 

$796 million 

production, port and logistics) 

Estimated Total Operating Expenditures (Production, 

transportation, port, FOB on vessel) 

$90.54/tonne KCl 

Payback period 3.5 years 

For the purpose of the PEA, CAPEX were estimated for three main categories: Production using solution 

mining, solar evaporation and flotation (“Production”); Transportation and handling of product between the 

production site and port; and Port facilities in Djibouti. The Production CAPEX includes costs associated 

with cavern development, the solar evaporation ponds, brine processing, and infrastructure including 

power. Solar evaporation of the saturated brine solution is possible at the Danakil Project due to the yearround 

hot temperatures averaging 40°C and very little rainfall. Salts harvested from the ponds will be 

processed by standard flotation to create an MOP product. Transportation CAPEX costs are based on a 

company owned fleet of trucks and all support such as maintenance. Port CAPEX costs are based on 

Allana constructing its own port terminal in Djibouti including product unloading and storage, shipping 

facilities and supporting infrastructure such as power and minor road construction. The table below outlines 

the estimated capital expenditures in US$ for all categories. 

Estimated Production CAPEX $664 million 

Estimated Transportation/Handling CAPEX $39 million 

Estimated Port CAPEX $93 million 

19




Estimated OPEX were also calculated for Production, Transportation/Handling, and Port. The OPEX costs 

in US$ per tonne are outlined in the table below: 

Estimated Production OPEX $70.24/tonne 

Estimated Transportation/Handling OPEX $8.85/tonne 

Estimated Port OPEX $2.88/tonne 

Estimated general & administrative and contingency costs were also calculated in US$ per tonne and are 

outlined in the table below: 

Estimated G&A $5.70/tonne 

Estimated Contingency $2.87/tonne 

The main assumptions used in the PEA are as follows: 

Production: One million tonnes MOP per year 

Mine life: 30 years 

Mining method: Solution mining 

Processing: Solar evaporation and flotation 

Transport: Trucking to Djibouti 

Power: Diesel generation with fuel shipped to site 

Water: Water on site 

Potash Price: US$500 per tonne in 2013 

Sustaining CAPEX: US$44 million (before cavern or process design optimization) 

Feasibility Study work is ongoing and on schedule for completion in yearly 2013. In the PEA, Ercosplan 

recommends hydro-geological studies to identify large water sources, dissolution testwork, rock 

mechanical testwork, a pilot solution mining operation and solar evaporation ponds tests. Allana initiated 

these studies in November 2011 and the work is proceeding. Five geotechnical drill holes have been 

completed to supply large diameter (PQ) core for rock mechanic testwork which is underway in Germany. 

Pilot solar evaporation ponds are complete and preliminary evaporation tests on synthetic brine indicate 

evaporation rates of approximately 1 cm per day. The crystal crop from this brine serves as preliminary 

test material and 1000 kg were shipped to Germany for flotation studies to prepare the processing flow 

sheets. 

Pilot solution mining is also underway on the project. A trial well has completed sump leaching and 

undercut leaching. Production leaching of the Sylvinite Zone was initiated in December and the resulting 

crystal crop will be utilized to optimize processing. 

In addition, hydrogeological studies are underway throughout the Allana license. To date, 18 holes have 

been drilled and all have encountered water. Pump down tests and recharge tests are ongoing but 

preliminary data indicated flow rates of up to 150 m 3 per hour from some wells. . 

Ercosplan is evaluating the costs and benefits of increasing production of MOP to two MTPY after the third 

year of full production. The potential increase would coincide with the planned completion of rail capacity 

for potash transport in the area. 

The PEA, with a target accuracy of +/- 35%, was completed as an initial scope within Allana’s full 

Feasibility Study program currently being undertaken by Ercosplan, a widely recognized world leader in 

potash exploration techniques and potash mining and processing. 

20




The PEA is preliminary in nature and is based on a number of assumptions that may be changed in the 

future as additional information becomes available. Mineral resources that are not mineral reserves do not 

have demonstrated economic viability. The PEA includes inferred mineral resources that are considered too 

speculative geologically to have the economic considerations applied to them that would enable them to be 

categorized as mineral reserves, and there is no certainty that the PEA will be realized. The PEA is not 

based on and has not been amended to reflect the updated resource estimates published by the Company 

effective April 30, 2012. 

Latin American Potash Corporation, Neuquen Province, Argentina 

On May 28, 2008, the Company announced that it had acquired 100% of Latin American Potash Corp. 

(“LAPC”), a company which holds potash prospective assets in Argentina. The purchase transaction was 

subsequently amended to an acquisition of 100% of the assets of LAPC. The Company acquired mineral 

concessions totaling 154,000 hectares in the potash-rich Neuquen province of Argentina (the concessions 

are under application and have not yet been granted). Some properties adjoin Rio Tinto’s Potasio Rio 

Colorado potash project, which is scheduled for production in 2011. The Company acquired these 

properties for cash consideration of $130,000 and by issuing 3,000,000 common shares of the Company. 

The LAPC properties are located in the same evaporite basin as the Rio Colorado project and display the 

correct stratigraphy to host potash. Potash in the Neuquen basin is found at depths varying from 500 metres 

to 2,500 metres below surface. The potash beds do not outcrop on the properties; however the insoluble 

remnants of Sylvite, the main potash mineral, have been identified in outcrop. 

The Company has engaged Engineer Luis Martin Arce to complete work program recommendations and 

Environmental Impact Assessments reports for the concessions. The concession applications are currently 

under review by the Neuquen government. 

In May 2011, the Company engaged Geomnia Natural Resources SLNE (“Geomnia”) to complete data 

compilation for the Neuquen projects. Geomnia has extensive experience in the Neuquen evaporite basin 

and have worked extensively with Rio Tinto, previous owners of the nearby Rio Colorado potash project. 

Geomnia has an extensive database comprised of geological information, seismic survey data and oil well 

information which it will compile for the project areas and define drill targets. This compilation work has 

been expanded to include reprocessing of selected seismic lines completed by various petroleum 

exploration companies working in the area. 

RESULTS OF OPERATIONS 

The following were key results of operations for the three months ended October 31, 2012. 

The Company recorded a net loss and comprehensive loss for the three months ended October 31, 2012 of 

$1.22 million compared to $0.90 million during the comparative period ended October 31, 2011. 

Allana is an exploration and development stage company and has no revenue at this point in time. 

Expenses for the three months ended October 31, 2012 were $1.43 million. Comparative expenses for the 

three months ended October 31, 2011 were $1.06 million, representing an increase of $0.37 million or 35% 

for three months ended October 31, 2012. 

The primary reasons for the decrease in expenses are described below. 

The Company grants stock options to officers, directors and consultants of the Company and applies the 

Black–Scholes option pricing model to estimate the fair value of the options granted as at the date of grant. 

21




During the three months ended October 31, 2012, 150,000 (October 31, 2011 – 100,000) options were 

granted. The Company uses options as an integral component of its remuneration packages. 

Stock-based compensation expense recorded was $0.04 million for the three months ended October 31, 

2012 (October 31, 2011 – $0.17 million) for the vested portion of the options granted. The decrease in 

stock-based compensation expenses is derived from a lower strike price of options granted during the 

period. The Company uses stock-based compensation to attract and maintain quality personnel. The mining 

industry has been very competitive and this type of compensation is an attractive incentive. The timing of 

grants varies from year to year based on milestones achieved and plan availability. Consequently, the 

quarterly and annual expense can vary widely. When estimating the value of the options using the Black- 

Scholes option pricing model the following assumptions were used: expected dividend yield of 0% 

(October 31, 2011 – 0%); expected life of 5 years (October 31, 2011 – 5 years); expected volatility of 103% 

(October 31, 2011 – 100%); and a risk-free interest rate of 1.28% (October 31, 2011 – 1.35%). 

Expenses excluding stock-based compensation increased by $0.51 million for the three months ended 

October 31, 2012 compared to the three months ended October 31, 2011. 

Consulting and professional fees increased by $0.44 million or by 124% for the three months ended 

October 31, 2012 compared to the three months ended October 31, 2011. The Company recorded increase 

in legal costs related to the now completed Nova transaction that closed on November 1, 2012 (see 

Subsequent events section). Also the Company engaged broader number of consultants this period to carry 

out activities related to the ongoing business and operational expansion. Typically in the more junior stages 

of growth, the Company utilizes part-time consultants. As the Company moves towards the completion of 

the Feasibility Study and towards the development phase more time is utilized related to various 

consultants and consequently the expenses increase. 

As discussed the Company is currently completing its FS and is moving towards the development phase of 

the Danakil project. With this, it is generally experiencing higher overhead expenses including general and 

office, travel and shareholder communications. 

General office expenses increased during the three months ended October 31, 2012 by $0.13 million or by 

136% compared to the same periods in 2011. The expenses have risen primarily due to more promotional 

activities, higher insurance costs and increased office costs. As the Company grows these costs are 

expected to continue to increase. The Company engages in promotional activities in order to raise potential 

and current investors’ awareness regarding its development and exploration activities. 

Travel expenses during the three months ended October 31, 2012 compared to the same periods in 2011 

increased by $0.14 million. As the Company grows its project more travel is required not only to the 

exploration site, but also for meetings with major contractual parties involved in the project, particularly 

during Feasibility Study phase. 

Shareholder communication and filing costs decreased by $0.20 million for the three months ended October 

31, 2012 compared to the three months ended October 31, 2011. The decrease is primarily due to the higher 

fees associated with Company’s graduation to the TSX in September during the prior period. 

Other significant items include an interest income of $0.16 million during the three months ended October 

31, 2012 compared to $0.19 million during the three months ended October 31, 2011 due to higher cash 

and cash equivalent balances in the comparable period. 

22

Summary of Quarterly Results 

Net (loss) for 

the period 

Loss per 

share 

Total 

Assets 

Total 

Liabilities 




31-Oct 31-Jul 30-Apr 31-Jan 31-Oct 31-Jul 30-Apr 31-Jan 

2012 2012 2012 2012 2011 2011 2011 2011 

(1,219,659) 

(0.01) 

104,319,976 

5,354,230 

(853,716) 

(0.01) 

103,893,296 

2,875,798 

(919,937) 

(0.01) 

105,916,978 

4,599,959 

(2,186,282) 

23 

(0.01) 

79,856,576 

1,615,531 

LIQUIDITY, CAPITAL RESOURCES AND CASH FLOWS 

(902,516) 

(0.00) 

80,790,315 

1,717,144 

(1,253,375) 

(0.01) 

(3,261,641) 

(0.02) 

81,513,404 66,148,219 

2,220,461 1,180,285 

(1,608,875) 

(0.01) 

28,877,629 

1,157,496 

As at October 31, 2012, the Company had working capital of $36.38 million compared to working capital 

of $46.68 million at July 31, 2012 (see Non-IFRS Performance Measures). The Company is well funded to 

complete its exploration program and the Feasibility Study which was started in the summer of 2011. 

The viability of the Company through its development phase and into production will be dependent on the 

Company’s ability to secure sufficient funding to finance its operations. 

The Company will be required to raise additional funds either through debt, equity or a joint venture and/or 

other potential structures in order to develop its projects. 

The Company used $0.88 million in operating activities during the three months ended October 31, 2012 

compared to a use of $0.92 million during comparable period in 2011 as generally described in the Results 

of Operations section of this report. Included in the cash used in operating activities is an amount of $0.30 

million provided for the three months ended October 31, 2012 versus $0.19 million used in the same period 

in 2011 due to the changes in non-cash working capital. The net change in non-cash working capital 

reported on the consolidated statements of cash flows identifies the changes in current assets and current 

liabilities that occurred during the period. An increase in a liability (or a decrease in an asset) is a source of 

cash; while a decrease in a liability (or an increase in an asset) is a use of cash. The changes relate 

primarily to the timing with respect to the payment of accounts payable. 

During the three months ended October 31, 2012, the Company used $5.96 million in investing activities 

compared to $5.68 million used during comparable period in 2011. The Company continued to focus on its 

Ethiopian assets as described in the Executive Summary and Operational Overview section of this report 

under the Danakil properties. The funds were used to facilitate Feasibility Study activities, acquisition of 

new property and expansion of the field camp at the site. The Company plans to explore its Argentinean 

assets when it obtains the licenses from the Argentinean government to do so. 

During the three months ended October 31, 2012, the Company used $0.96 million in financing activities 

compared to generating $0.51 million during the comparable period in 2011. During the three months 

ended October 31, 2012, the Company purchased and settled 1,719,400 common shares at an average price 

of $0.515 per share under the NCIB approved by the TSX. These shares were held in treasury as at October 

31, 2012 and were subsequently cancelled. The Company generated $0.51 million in proceeds from the 

exercise of 1,023,000 warrants at an average price of $0.50 during the three months ended October 31, 

2011. The warrants are granted typically as a part of a unit in a private placement and as broker 

compensation. They are exercised by holders as they see fit in relation to their financial goals and 

perceptions. They are contractual and exercised as dictated by the holders. 

OFF-BALANCE SHEET ARRANGEMENTS 

The Company has no off-balance sheet arrangements.

RELATED PARTY TRANSACTIONS 




The Company entered into the following transactions in the ordinary course of business with related 

parties: 

Sales of goods and services for the period ended Purchases of goods and services for the period ended 

October 31, 2012 October 31, 2011 October 31, 2012 October 31, 2011 

2227929 Ontario Inc. $ - $ - $ 101,700 $ 

89,502 

The Company shares office space with other companies who may have officers or directors in common 

with the Company. The costs associated with this space, certain consulting, professional and general and 

administration services are administered by 2227929 Ontario Inc. 

The following balances were outstanding at the end of the reporting period: 

Amounts owed by related parties as at Amounts owed to related parties as at 

October 31, 2012 July 31, 2011 October 31, 2012 July 31, 2011 

2227929 Ontario Inc. $ 85,449 $ 123,013 $ - $ 

- 

These amounts are unsecured, non-interest bearing with no fixed terms of repayment. 

On June 26, 2012, the Company acquired 1,000,000 units of Rodinia Lithium Inc. (“Rodinia”), at a price of 

$1.00 per unit. Each unit consists of one cumulative rate reset non-voting potash stream preferred share and 

one-half of a common share purchase warrant. Each whole warrant entitles the Company to acquire one 

common share of Rodinia at a price of $0.45 until December 26, 2013. The Company’s Director and CEO 

Mr. Farhad Abasov serves as a Director and Senior Officer of Rodinia. 

Compensation of key management personnel 

In accordance with IAS 24, key management personnel are those persons having authority and 

responsibility for planning, directing and controlling the activities of the Company directly or indirectly, 

including any directors (executive and non-executive) of the Company. 

The remuneration of directors and other members of key management personnel (officers) during the 

period were as follows: 

Three months ended 

October 31, 2012 October 31, 2011 

Short-term benefits $ 413,104 $ 880,158 

$ 413,104 $ 880,158 

OTHER 

On April 10, 2012, the Company instituted a NCIB, in respect of its common shares. Pursuant to the terms 

of the NCIB, and in accordance with the policies of the TSX, during the period commencing April 18, 2012 

and ending on April 17, 2013, the Company may purchase up to 19,314,862 common shares during the 

course of the NCIB. Purchases during any 30-day period shall not exceed 2% of the issued and outstanding 

common shares at the time of purchase. All common shares purchased under the NCIB are to be cancelled. 

During the three months ended October 31, 2012, the Company purchased, pursuant to the block purchase 

exception, and settled 1,719,400 common shares at an average price of $0.515 per share under the NCIB 

24




approved by the TSX. These shares were held in treasury as at October 31, 2012 and were subsequently 

cancelled (see Subsequent events section). 

COMMITMENTS AND CONTINGENCIES 

The Company is party to certain management contracts. These contracts require that additional payments of 

up to $7,245,000 be made upon the occurrence of certain events such as change of control. As a triggering 

event has not taken place, the contingent payments have not been reflected in these consolidated financial 

statements. 

In November 2009, the Company entered into a drilling contract with Emerson Moore Drilling Ltd. 

(“EMD”) to drill 2,500 metres at the Danakil Property in Ethiopia. In June, 2010 the Company entered into 

a drilling contract with Meridian Drilling Ltd. (“Meridian”), a sister company of EMD, to drill 10,000 

metres at the Danakil Property in Ethiopia. Simultaneously, in June 2010, the contract with EMD was 

assigned to Meridian. The total commitment under the contract is approximately $213,000 (US$ 200,000) 

for demobilization. As at July 31, 2012, the remaining balance of prepayments under this contract is 

approximately $213,000 (US$200,000) and is included in advances and deposits. 

On November 30, 2010, the Company completed a non-brokered private placement financing with Liberty 

Metals & Mining Holdings, LLC (“LMM”), subsidiary of Liberty Mutual Group. Pursuant to the terms of 

the financing, the Company and LMM entered into an Investor Rights Agreement which gives LMM 

certain rights, including, without limitation, participation and registration rights (in certain circumstances), 

as well as the right to nominate one director to the board of the Company, provided LMM continues to hold 

at least 7.5% of the Company's issued and outstanding shares. In addition, subject to certain conditions, 

LMM has the right to participate in any future equity or equity-linked financings by the Company in order 

to maintain its current ownership level in the Company. 

On May 10, 2011, the Company completed a non-brokered private placement with International Finance 

Corporation, a member of the World Bank Group (“IFC”). Pursuant to the terms of the financing, the 

Company and IFC entered into an Investor Rights Agreement which gives IFC certain rights, including, 

without limitation, participation and registration rights and subject to certain conditions, grants IFC the 

right to participate in future equity based financings in order to maintain its current ownership level in the 

Company. 

In August 2011, the Company engaged Environmental Resources Management ("ERM") to prepare an 

Environmental and Social Impact Assessment Study ("ESIA"). The ESIA is scheduled for completion in 

the last quarter of calendar year 2012 and will form an integral part of the Feasibility Study described 

below. As at July 31, 2012 the total commitment remaining under the contract is approximately $200,000 

(US$ 200,000). 

In September 2011, the Company engaged Ercosplan to prepare a Feasibility Study (“FS”) for its Danakil 

Property in Ethiopia. As at July 31, 2012, the total commitment under the contract is approximately 

$3,393,000 (EUR 2,620,000). 

In October 2011, the Company engaged BNP Paribas, as financial advisor for the arrangement and 

structuring of debt financings for the construction of the Company’s Ethiopian potash project. In 

consideration for providing financial advisory services, the Company pays BNP Paribas a monthly cash 

work fee of US$25,000 and has issued to BNP Paribas 1,400,000 common share purchase warrants of the 

Company (the "Warrants"). Each Warrant is exercisable to acquire one common share of Allana at $0.94 

per warrant for a period of five years from the date of issue; however, the warrants shall only vest and 

become exercisable upon the completion of various milestones. On March 27, 2012, the first milestone was 

achieved and first 500,000 warrants became fully vested and exercisable. Second tranche of 400,000 

warrants became fully vested and exercisable on September 27, 2012. Third tranche will become fully 

25




vested and exercisable within nine months from the first milestone date. In the event of termination of the 

agreement with BNP Paribas, Allana may be subject to a termination fee up to, but not exceeding, 

US$600,000. 

In November 2011, the Company engaged Fugro Consult GmbH (“Fugro”) to perform hydro-geological 

investigation on its Danakil property in Ethiopia. As at July 31, 2012, the total remaining commitment 

under the contract is approximately $520,000 (EUR 400,000). 

The Company’s mining and exploration activities are subject to various federal, provincial and 

international laws and regulations governing the protection of the environment. These laws and regulations 

are continually changing and generally becoming more restrictive. The Company believes its operations 

are materially in compliance with all applicable laws and regulations. The Company has made, and expects 

to make in the future, expenditures to comply with such laws and regulations. 

SUBSEQUENT EVENTS 

On November 1, 2012, the Company acquired all of the issued and outstanding common shares of Nova- 

Ethio Potash Corporation (“Nova”), a private company, which indirectly holds a 100% interest in a potash 

license adjacent to the Company’s potash project in the Danakil Depression in Ethiopia (the “Nova 

Property”). 

Pursuant to the terms of the Merger Agreement, the Company issued 12,716,655 common shares to the 

shareholders of Nova in exchange for all of the common shares of Nova (the “Merger Shares”). Further, the 

Company issued an additional 35,609,972 common shares to be held in escrow (the “Allana Escrowed 

Shares”). The Allana Escrowed Shares shall be released to Nova shareholders in accordance with certain 

escrow release conditions, which shall be based upon the amount of contained potassium chloride within 

the sylvinite zone of the Nova Property as set out in the Nova Resource Estimate. In the event the Nova 

Resource Estimate contains an amount equal to or greater than 29.2 million tonnes of potassium chloride 

within the sylvinite zone, all of the Allana Escrowed Shares shall be released. In the event the Nova 

Resource Estimate contains an amount less than 29.2 million tonnes of potassium chloride, the Allana 

Escrowed Shares shall be released on a pro rata basis to the amount of defined potassium chloride 

supported by the Nova Resource Estimate with all the remaining Allana Escrowed Shares being returned to 

the Company and cancelled. 

In addition, on closing, the parties entered into an agreement with BEMA Investment Holdings Corp. 

(“BEMA”), the largest shareholder of Nova, pursuant to which, in the event the Nova Resource Estimate 

exceeds 45 million tonnes of potassium chloride within the sylvinite zone, the Company shall pay BEMA 

an additional fee of $7.5 million, payable at the sole discretion of the Company, in cash or shares at the 

then current market price (the “Bonus Fee Shares”). In no event, however, shall the Merger Shares, the 

Allana Escrowed Shares or the Bonus Fee Shares exceed 25% of the issued and outstanding common 

shares of the Company. 

On November 1, 2012, 1,719,400 common shares of the Company that were previously purchased though 

the NCIB were cancelled. 

Subsequent to October 31, 2012, 600,000 options with expiration date of December 7, 2012 were exercised 

at a price of $0.14. 

Subsequent to October 31, 2012, the Company granted 180,000 options to consultants. 

26




DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER 

FINANCIAL REPORTING 

Subject to the limitations, if any, described below, the Company’s CEO and CFO, have as at the end of the 

period ended October 31, 2012 designed Disclosure and Control Procedures, (“DC&P”) or caused it to be 

designed under their supervision, to provide reasonable assurance that: 

� material information relating to the issuer is made known to us by others, particularly during the 

period in which the interim filings are being prepared; and 

� information required to be disclosed by the issuer in its annual filings, interim filings or other 

reports filed or submitted by it under securities legislation is recorded, processed, summarized and 

reported within the time periods specified in securities legislation. 

Internal control over financial reporting has been designed, based on the framework established in Internal 

Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway 

Commission (“COSO”), to provide reasonable assurance regarding the reliability of our financial reporting 

and the preparation of financial statements for external purposes in accordance with accounting principles 

generally accepted in Canada. 

There have been no significant changes to the Company’s disclosure controls and procedures and internal 

controls over financial reporting that occurred during the period ended October 31, 2012 that have 

materially affected, or are reasonably likely to materially affect, the Company’s disclosure controls and 

procedures and internal control over financial reporting. 

Because of inherent limitations, internal control over financial reporting and disclosure controls can 

provide only reasonable assurances and may not prevent or detect misstatements. Furthermore, projections 

of any evaluation of effectiveness to future periods are subject to the risk that controls may become 

inadequate because of changes in conditions, or that the degree of compliance with the policies or 

procedures may deteriorate. 

The Audit and Governance Committees of the Company have reviewed this MD&A, and the consolidated 

financial statements for the three months ended October 31, 2012, and the Company’s board of directors 

approved these documents prior to their release. 

RISKS AND UNCERTAINTIES 

The operations of the Company are speculative due to the high-risk nature of its business, which are the 

acquisition, financing, exploration and development of mining properties. These risk factors could 

materially affect the Company’s future operating results and could cause actual events to differ materially 

from those described in forward-looking information relating to the Company. 

Liquidity Concerns and Future Financings 

The Company will require significant capital and operating expenditures in connection with the 

development of its properties. There can be no assurance that the Company will be successful in obtaining 

required financing as and when needed. Volatile markets may make it difficult for the Company to obtain 

debt financing or equity financing on favorable terms, if at all. Failure to obtain additional financing on a 

timely basis may cause the Company to postpone or slow down its development plans, forfeit rights in 

some or all of its properties or reduce or terminate some or all of its activities. 

27




Nature of Mining, Mineral Exploration and Development Projects 

Mining operations generally involve a high degree of risk. The Company’s operations are subject to the 

hazards and risks normally encountered in the mineral exploration, development and production, including 

environmental hazards, explosions, unusual or unexpected geological formations or pressures and periodic 

interruptions in both production and transportation due to inclement or hazardous weather conditions. Such 

risks could result in damage to, or destruction of, mineral properties or producing facilities, personal injury, 

environmental damage, delays in mining, monetary losses and possible legal liability. Mineral exploration 

is highly speculative in nature. There is no assurance that exploration efforts will be successful. Even when 

mineralization is discovered, it may take several years until production is possible, during which time the 

economic feasibility of production may change. Substantial expenditures are required to establish proven 

and probable mineral reserves through drilling. Because of these uncertainties, no assurance can be given 

that exploration programs will result in the establishment or expansion of mineral resources or mineral 

reserves. There is no certainty that the expenditures made by the Company towards the search and 

evaluation of mineral deposits will result in discoveries or development of commercial quantities of ore. 

Development projects have no operating history upon which to base estimates of future cash operating 

costs. For development projects, reserve and resource estimates and estimates of cash operating costs are, 

to a large extent, based upon the interpretation of geologic data obtained from drill holes and other 

sampling techniques, and feasibility studies, which derive estimates of cash operating costs based upon 

anticipated tonnage and grades of ore to be mined and processed, ground conditions, the configuration of 

the ore body, expected recovery rates of minerals from the ore, estimated operating costs, anticipated 

climatic conditions and other factors. As a result, actual production, cash operating costs and economic 

returns could differ significantly from those estimated. Current market conditions are forcing many mining 

operations to increase capital and operating cost estimates. Indeed, there have been a number of mining 

operations that have ceased or been suspended or delayed because operation costs are estimated to be 

greater than projected prices of product. It is not unusual for new mining operations to experience 

problems during the start-up phase, and delays in the commencement of production often can occur. 

No Revenues 

To date the Company has recorded no revenue from exploration operations and the Company has not 

commenced commercial production or development on any property. There can be no assurance that 

significant losses will not occur in the near future or that the Company will be profitable in the future. The 

Company’s operating expenses and capital expenditures may increase in subsequent years in relation to the 

engagement of consultants, personnel and equipment associated with advancing exploration, development 

and commercial production of the Company’s properties. The Company expects to continue incurring 

losses for the foreseeable future. The development of the Company’s properties will require the 

commitment of substantial resources to conduct time-consuming exploration. There can be no assurance 

that the Company will generate any revenues or achieve profitability. 

Foreign Exchange 

The Company is subject to foreign exchange risks relating to the relative value of the Canadian dollar as 

compared to the US dollar. The Company supports its operations by raising financing in Canadian dollars 

and mineral commodities are sold in US dollars. A decline in the US dollar would result in a decrease in 

the real value of Allana’s future revenues, if any, and adversely affect its financial performance. 

The Company is subject to limited foreign exchange risks relating to the relative value of the Ethiopian Birr 

as compared to the US dollar and Canadian dollar. The Company supports its project operations by 

financing in US dollars and Canadian dollars. A decline in the Ethiopian Birr would result in a decrease in 

the monetary asset values recorded on Allana Afar’s stand alone statement of financial position. The 

28




exposure is limited to an amount of cash that is being loaned through the intercompany accounts and being 

sent to an account in Ethiopian bank. 

Mineral Resource and Mineral Reserve Estimates May be Inaccurate 

There are numerous uncertainties inherent in estimating mineral resources and mineral reserves, including 

many factors beyond the control of the Company. Such estimates are subjective. The accuracy of any 

mineral resource or mineral reserve estimate is a function of the quantity and quality of available data and 

of the assumptions made and judgments used in engineering and geological interpretation. These amounts 

are estimates only and the actual level of mineral recovery from such deposits may be different. 

Differences between management’s assumptions, including economic assumptions such as commodity 

prices and market conditions, could have a material adverse effect on the Company’s financial position and 

results of operations. 

Differences between management’s assumptions, including economic assumptions such as commodity 

prices and market conditions, and actual events could have a material adverse effect on the Company’s 

mineral reserve estimates. 

Licenses and Permits, Laws and Regulations 

The Company’s exploration and development activities, including mine, mill, road, rail and other 

transportation facilities, require permits and approvals from various government authorities and are subject 

to extensive federal, provincial, state and local laws and regulations governing prospecting, development, 

production, exports, taxes, labour standards, occupational health and safety, mine safety and other matters. 

Such laws and regulations are subject to change, can become more stringent and compliance can therefore 

become more costly. In addition, the Company may be required to compensate those suffering loss or 

damage by reason of its activities. There can be no guarantee that Allana will be able to maintain or obtain 

all necessary licenses, permits and approvals that may be required to explore and develop its properties, 

commence construction or operation of mining facilities. 

Mineral Commodity Prices 

The profitability of the Company’s operations will be dependent upon the market price of mineral 

commodities. Mineral prices fluctuate widely and are affected by numerous factors beyond the control of 

the Company. The level of interest rates, the rate of inflation, the world supply of mineral commodities and 

the stability of exchange rates can all cause significant fluctuations in prices. Such external economic 

factors are in turn influenced by changes in international investment patterns, monetary systems and 

political developments. The price of mineral commodities has fluctuated widely in recent years, and future 

price declines could cause commercial production to be impracticable, thereby having a material adverse 

effect on the Company’s business, financial condition and result of operations. 

Environmental 

The Company’s activities are subject to extensive federal, provincial state and local laws and regulations 

governing environmental protection and employee health and safety. Environmental legislation is evolving 

in a manner that is creating stricter standards, while enforcement, fines and penalties for non-compliance 

are also increasingly stringent. The cost of compliance with changes in governmental regulations has the 

potential to reduce the profitability of operations. Further, any failure by the Company to comply fully 

with all applicable laws and regulations could have significant adverse effects on the Company, including 

the suspension or cessation of operations. 

29

Title to Properties 




The acquisition of title to resource properties is a very detailed and time-consuming process. The Company 

holds its interest in certain of its properties through mining claims. Title to, and the area of, the mining 

claims may be disputed. There is no guarantee that such title will not be challenged or impaired. There may 

be challenges to the title of the properties in which the Company may have an interest, which, if successful, 

could result in the loss or reduction of the Company’s interest in the properties. 

Foreign Operations 

At present, substantially all of the operations of Allana are in Ethiopia and, as a result, the operations of the 

Company are exposed to various levels of political, economic and other risks and uncertainties associated 

with operating in foreign jurisdictions. These risks and uncertainties include, but are not limited to: 

currency exchange rates; high rates of inflation; labour unrest; war, terrorism, crime, famine, drought, 

illegal mining, corruption and uncertainty of the rule of law; renegotiation or nullification of existing 

concessions, licenses, permits and contracts; changes in taxation policies; restrictions on foreign exchange; 

changing political conditions; currency controls; and governmental regulations that may require the 

awarding of contracts to local contractors or require foreign contractors to employ citizens of, or purchase 

supplies from, a particular jurisdiction. Changes, if any, in mining or investment policies or shifts in 

political attitudes in Ethiopia may adversely affect the operations or profitability of the Company. 

Operations may be affected in varying degrees by government regulations including with respect to, but not 

limited to, restrictions on production, price controls, import or export controls, currency remittance, income 

taxes, foreign investment, maintenance of claims, environmental legislation, land use, land claims of local 

people, water use and mine safety. Failure to comply strictly with applicable laws, regulations and local 

practices relating to mineral right applications and tenure, could result in loss, reduction or expropriation of 

entitlements. The occurrence of these various factors and uncertainties cannot be accurately predicted and 

could have an adverse effect on the operations and profitability of Allana. 

The legal system in Ethiopia is not yet as developed as legal systems in Canada, which leads to a higher 

level of uncertainty in the application and determination of Ethiopian legal issues than would be expected 

in Canada, which can lead to regulatory delays, ill motivated use of courts or regulatory bodies and 

inconsistency in interpretation and enforcement of applicable Ethiopian laws. Such risks are part of overall 

risks of doing business in Ethiopia and should be taken into account by any investor in Ethiopian 

mineral projects. 

Uninsured Risks 

The Company maintains insurance to cover normal business risks. In the course of exploration and 

development of mineral properties, certain risks, and in particular, unexpected or unusual geological 

operating conditions including explosions, rock bursts, cave ins, fire and earthquakes may occur. It is not 

always possible to fully insure against such risks as a result of high premiums or other reasons. Should 

such liabilities arise, they could result in significant liabilities to the company and increase costs of 

projects. 

Competition 

Allana competes with many other mining companies that have substantially greater resources than the 

Company. Such competition may result in the Company being unable to acquire desired properties, recruit 

or retain qualified employees or acquire the capital necessary to fund its operations and develop its 

properties. The Company’s inability to compete with other mining companies for these resources would 

have a material adverse effect on the Company’s results of operation and business. 

30

Dependence on Outside Parties 




Allana has relied upon consultants, engineers and others and intends to rely on these parties for 

development, construction and operating expertise. Substantial expenditures are required to establish 

mineral reserves through drilling, to carry out environmental and social impact assessments, to develop 

processes to extract the commodity from the ore. If such parties’ work is deficient or negligent or is not 

completed in a timely manner, it could have a material adverse effect on Allana. 

Qualified Personnel 

Recruiting and retaining qualified personnel in the future is critical to the Company’s success. As the 

Company explores its Danakil Potash Project, the need for skilled labour will increase. The number of 

people skilled in the exploration and development of mining properties is limited, particularly in Ethiopia, 

and competition for this workforce is intense. The development of the Danakil Potash Project and other 

initiatives of the Company may be significantly delayed or otherwise adversely affected if the Company 

cannot recruit and retain qualified personnel as and when required. 

Current Global Financial Conditions 

Financial markets globally have been subject to increased volatility and numerous financial institutions 

have either gone into bankruptcy or have had to be rescued by governmental authorities. Access to 

financing has been negatively impacted by liquidity crises throughout the world. These factors may impact 

the ability of the Company to obtain loans and other credit facilities in the future and, if obtained, receive 

terms attractive to the Company. If these increased levels of volatility and market turmoil continue, the 

Company may not be able to secure appropriate debt or equity financing, any of which could affect the 

trading price of the Company’s securities in an adverse manner. 

Share Price Fluctuations 

The market price of securities of many companies, particularly exploration stage companies, experience 

wide fluctuations in price that are not necessarily related to the operating performance, underlying asset 

values or prospects of such companies. There can be no assurance that fluctuations in the Company’s share 

price will not occur. 

Conflicts of Interest 

Certain of the Company’s directors and officers serve or may agree to serve as directors or officers of other 

companies and, to the extent that such other companies may participate in ventures in which the Company 

may participate, the directors and officers of Allana may have a conflict of interest in negotiating and 

concluding terms respecting such participation. 

Litigation 

Allana has entered into legally binding agreements with various third parties on a consulting and 

partnership basis. The interpretation of the rights and obligations that arise from such agreements is open 

to interpretation and Allana may disagree with the position taken by the various other parties resulting in a 

dispute that could potentially initiate litigation and cause Allana to incur legal costs in the future. Given the 

speculative and unpredictable nature of litigation, the outcome of any such disputes could have a material 

adverse effect on Allana. 

Internal Controls 

Allana has invested resources to document and analyze its system of internal control over financial 

reporting. Internal control over financial reporting is a process designed to provide reasonable assurance 

31




regarding the reliability of financial reporting and the preparation of financial statements for external 

purposes in accordance with generally accepted accounting principles. A control system, no matter how 

well designed and operated, can provide only reasonable, not absolute, assurance with respect to the 

reliability of financial reporting and the financial statement preparation. 

PEA 

This document includes a discussion on the Company’s PEA with respect to the Danakil Potash Project. As 

disclosed herein, the Company has, since the date of the PEA, disclosed a new updated mineral resource 

estimate for the project. Although the PEA represents useful, accurate and reliable information based on the 

information available at the time of its publication, and provides an important indicator as to the economic 

potential of the Danakil Potash Project, the PEA is based on mineral resources estimates published in June 

2011, which do not reflect exploration conducted since their effective date, and the PEA does not reflect the 

latest mineral resource estimate published by Allana on April 30, 2012. Certain assumptions used in the 

PEA, some of which relate to the June 2011 mineral resource estimate, may have changed from those used 

for the new resource estimate, causing a variation of parameters. Moreover, the updated mineral resource 

estimate may have an impact on Allana’s plans on how it intends to develop the deposit. 

The PEA is partly based on inferred mineral resources that are considered too speculative geologically to 

have the economic considerations applied to them that would enable them to be categorized as mineral 

reserves, and there is no certainty that the PEA based on these mineral resources will be realized. The 

results depend on inputs that are subject to a number of known and unknown risks, uncertainties and other 

factors that may cause actual results to differ materially from those presented here. The reader should 

review carefully the technical report, relating to the PEA which can be found on SEDAR at 

www.sedar.com. 

SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS 

The preparation of these consolidated financial statements in conformity with IFRS requires the Company’s 

management to make judgments, estimates and assumptions about future events that affect the amounts 

reported in the consolidated financial statements and related notes to the consolidated financial statements. 

Although these estimates are based on management’s best knowledge of the amount, event or actions, 

actual results may differ from those estimates and these differences could be material. 

The areas which require management to make significant judgments, estimates and assumptions in 

determining carrying values include, but are not limited to: 

� Assets’ carrying values and impairment charges 

In the determination of carrying values and impairment charges, management looks at the higher of 

recoverable amount or fair value less costs to sell in the case of assets and at objective evidence, significant 

or prolonged decline of fair value on financial assets indicating impairment. These determinations and their 

individual assumptions require that management make a decision based on the best available information at 

each reporting period. 

� Capitalization of exploration and evaluation costs 

Management has determined that exploration and evaluation costs incurred during the year have future 

economic benefits and are economically recoverable. In making this judgment, management has assessed 

various sources of information including but not limited to the geologic and metallurgic information, 

history of conversion of mineral deposits to proven and probable mineral reserves, scoping and feasibility 

studies, proximity of operating facilities, operating management expertise and existing permits. See Note 

10 of the consolidated financial statements for details of capitalized exploration and evaluation costs. 

32




� Mineral reserve estimates 

The figures for mineral reserves and mineral resources are determined in accordance with National 

Instrument 43-101, “Standards of Disclosure for Mineral Projects”, issued by the Canadian Securities 

Administrators. There are numerous uncertainties inherent in estimating mineral reserves and mineral 

resources, including many factors beyond the Company’s control. Such estimation is a subjective process, 

and the accuracy of any mineral reserve or mineral resource estimate is a function of the quantity and 

quality of available data and of the assumptions made and judgments used in engineering and geological 

interpretation. Differences between management’s assumptions including economic assumptions such as 

mineral prices and market conditions could have a material effect in the future on the Company’s financial 

position and results of operation. 

� Impairment of exploration and evaluation assets 

While assessing whether any indications of impairment exist for exploration and evaluation assets, 

consideration is given to both external and internal sources of information. Information the Company 

considers includes changes in the market, economic and legal environment in which the Company operates 

that are not within its control that could affect the recoverable amount of exploration and evaluation assets. 

Internal sources of information include the manner in which exploration and evaluation assets are being 

used or are expected to be used and indications of expected economic performance of the assets. Estimates 

include but are not limited to estimates of the discounted future after-tax cash flows expected to be derived 

from the Company’s mining properties, costs to sell the properties and the appropriate discount rate. 

Reductions in metal price forecasts, increases in estimated future costs of production, increases in estimated 

future capital costs, reductions in the amount of recoverable mineral reserves and mineral resources and/or 

adverse current economics can result in a write-down of the carrying amounts of the Company’s 

exploration and evaluation assets. 

� Estimation of decommissioning and restoration costs and the timing of expenditure 

The cost estimates are updated annually during the life of a mine to reflect known developments, (e.g. 

revisions to cost estimates and to the estimated lives of operations), and are subject to review at regular 

intervals. Decommissioning, restoration and similar liabilities are estimated based on the Company’s 

interpretation of current regulatory requirements, constructive obligations and are measured at fair value. 

Fair value is determined based on the net present value of estimated future cash expenditures for the 

settlement of decommissioning, restoration or similar liabilities that may occur upon decommissioning of 

the mine. Such estimates are subject to change based on changes in laws and regulations and negotiations 

with regulatory authorities. 

� Income taxes and recoverability of potential deferred tax assets 

In assessing the probability of realizing income tax assets recognized, management makes estimates related 

to expectations of future taxable income, applicable tax planning opportunities, expected timing of 

reversals of existing temporary differences and the likelihood that tax positions taken will be sustained 

upon examination by applicable tax authorities. In making its assessments, management gives additional 

weight to positive and negative evidence that can be objectively verified. Estimates of future taxable 

income are based on forecasted cash flows from operations and the application of existing tax laws in each 

jurisdiction. The Company considers whether relevant tax planning opportunities are within the Company’s 

control, are feasible and are within management’s ability to implement. Examination by applicable tax 

authorities is supported based on individual facts and circumstances of the relevant tax position examined 

in light of all available evidence. Where applicable tax laws and regulations are either unclear or subject to 

ongoing varying interpretations, it is reasonably possible that changes in these estimates can occur that 

materially affect the amounts of income tax assets recognized. Also, future changes in tax laws could limit 

the Company from realizing the tax benefits from the deferred tax assets. The Company reassesses 

unrecognized income tax assets at each reporting period. 

33




� Share-based payments 

Management determines costs for share-based payments using market-based valuation techniques. The fair 

value of the market-based and performance-based non-vested share awards are determined at the date of 

grant using generally accepted valuation techniques. Assumptions are made and judgment used in applying 

valuation techniques. These assumptions and judgments include estimating the future volatility of the stock 

price, expected dividend yield, future employee turnover rates and future employee stock option exercise 

behaviors and corporate performance. Such judgments and assumptions are inherently uncertain. Changes 

in these assumptions affect the fair value estimates. 

� Contingencies 

Refer to Commitments and Contingencies section of this MD&A. 

CAPITAL MANAGEMENT 

The capital of the Company consists of common shares, treasury shares, warrants and options. 

The Company manages and adjusts its capital structure based on available funds in order to support the 

acquisition, exploration and development of mining properties. The Company manages its capital structure 

and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the 

underlying assets. In order to maintain or adjust its capital structure, the Company may issue new shares, 

seek debt financing, or acquire or dispose of assets. The Board of Directors does not establish quantitative 

return on capital criteria for management, but rather relies on the expertise of the Company's management 

to sustain future development of the business. 

The Company is not subject to any externally imposed capital requirements. 

Management reviews its capital management approach on an on-going basis and believes that this 

approach, given the relative size of the Company, is reasonable. There have been no changes in the risks, 

objectives, policies and procedures in 2012 or 2013. 

FINANCIAL INSTRUMENTS 

Details of the significant accounting policies and methods adopted (including the criteria for recognition, 

the bases of measurement, and the bases for recognition of income and expenses) for each class of financial 

asset and financial liability are disclosed in Note 6 of the audited consolidated financial statements for the 

year ended July 31, 2012. 

34




The Company's financial assets and financial liabilities as at July 31, 2012 and October 31, 2012 were as 

follows: 

July 31, 2012 

Loans and 

receivables 

35 

Assets / 

(liabilities) at fair 

value through 

profit or loss 

Other financial 

assets/ 

(liabilities) 

Cash and cash equivalents $ 8,656,411 $ 40,475,962 $ - $ 49,132,373 

Restricted cash 50,000 

- 

- 

50,000 

Amounts and other receivables 106,656 

- 

- 

106,656 

Other financial assets - 

1,000,000 

- 

1,000,000 

Accounts payable and accrued liabilities $ - $ - $ (2,875,798) $ (2,875,798) 

October 31, 2012 

Cash and cash equivalents $ 718,036 $ 40,615,911 $ - $ 41,333,947 

Restricted cash 50,000 

- 

- 

50,000 

Amounts and other receivables 118,276 

- 

- 

118,276 

Other financial assets - 

1,000,000 

- 

1,000,000 

Accounts payable and accrued liabilities $ - $ - $ (5,354,230) $ (5,354,230) 

At October 31, 2012, there are no significant concentrations of credit risk for loans and receivables 

designated at fair value through profit and loss. The carrying amount reflected above represents the 

Company’s maximum exposure to credit risk for such loans and receivables. 

FINANCIAL RISK FACTORS 

The Company's risk exposures and the impact on the Company's financial instruments are 

summarized below: 

Credit risk 

The Company's credit risk is primarily attributable to amounts receivable. The Company has no significant 

concentration of credit risk arising from operations. Financial instruments included in amounts receivable 

consist of harmonized sales tax due from the Federal Government of Canada. Management believes that the 

credit risk concentration with respect to these financial instruments is remote. 

Liquidity risk 

The Company's approach to managing liquidity risk is to ensure that it will have sufficient liquidity to 

meet liabilities when due. As at October 31, 2012, the Company had cash and cash equivalents balance of 

$41,333,397 (July 31, 2012 – $49,132,373) to settle current liabilities of $5,354,230 (July 31, 2012 – 

$2,875,798). Substantially all of the Company's financial liabilities have contractual maturities of less 

than 30 days and are subject to normal trade terms. 

Market risk 

(a) Interest rate risk 

The Company has cash balances subject to fluctuations in the prime rate. The Company's current 

policy is to invest excess cash in investment-grade short-term deposit certificates issued by its 

banking institutions. The Company periodically monitors the investments it makes and is satisfied 

Total




with the credit ratings of its banks. Management believes that interest rate risk is remote as 

investments are short-term, and the Company currently does not carry interest bearing debt at 

floating rates. 

(b) Foreign currency risk 

The Company's functional currency is the Canadian dollar. The Company also funds certain 

operations, exploration and administrative expenses in Ethiopia and Argentina on a cash call basis 

using the Argentine Peso, the Euro, the US dollar, the UK pound sterling, the Swiss franc and the 

Ethiopian Birr currencies converted from its Canadian dollar bank accounts held in Canada. The 

Company does not hedge its foreign exchange risk. 

The following assets and liabilities listed in Canadian dollars are subject to foreign currency rate 

fluctuations as at July 31, 2012 and October 31, 2012: 

ETB EUR 

Denominated in 

GBP CHF USD 

Cash and cash equivalents $ 371,582 $ - $ - $ - $ 3,463 

Advances and deposits 123,424 

- 

- 

- 

- 

Accounts payable and accrued liabilities (58,463) (273,960) (224,680) 

- (1,082,556) 

Net exposure as at July 31, 2012 $ 436,543 $ (273,960) $ (224,680) $ - $ (1,079,093) 

Cash and cash equivalents $ 378,162 $ - $ - $ - $ 11,060 

Advances and deposits 71,098 

- 

- 

- 

- 

Accounts payable and accrued liabilities (190,789) (2,654,384) (101,299) (12,882) (2,127,316) 

Net exposure as at October 31, 2012 $ 258,471 $ (2,654,384) $ (101,299) $ (12,882) $ (2,116,256) 

(c) Price risk 

The Company will be exposed to price risk with respect to commodity prices, specifically potash. 

The Company closely monitors commodity prices to determine the appropriate course of action to 

be taken by the Company. The Company’s future operations will be significantly affected by 

changes in the market price of this commodity. Prices fluctuate on a daily basis and are affected by 

numerous factors beyond the Company’s control. The supply and demand for potash, the level of 

interest rates, the rate of inflation, investment decisions by large holders of potash and stability of 

exchange rates can all cause significant fluctuations in prices. Such external economic factors may 

in turn be influenced by changes in international investment patterns and monetary systems and 

political developments. 

(d) Financial instrument classification as fair value 

The Company has designated its cash equivalents to be measured at fair value. 

The three levels of the fair value hierarchy are as follows: 

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities; 

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or 

liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and 

Level 3 - Inputs for the asset or liability that are not based on observable market data 

(unobservable inputs). 

36




As at October 31, 2012 and July 31, 2012 the Company had the following financial instruments at 

fair value: 


Level 1 Level 2 Level 3 

Cash equivalents $ - $40,615,911 $ - 

Other financial assets $ - $11,535 $988,465 

July 31, 2012 

Level 1 Level 2 Level 3 

Cash equivalents $ - $40,475,962 $ - 

Other financial assets $ - $11,535 $988,465 

(e) Sensitivity analysis 

The Company carries no interest bearing debt to give rise to exposure to interest rate risk. A 1% 

increase in interest rates would have a corresponding monthly impact on net loss of approximately 

$34,000 based on the cash and cash equivalents balance at October 31, 2012. 

A 10% increase in the value of each of the Argentine Peso, the Euro, the US dollar, the UK pound 

sterling, the Swiss franc and the Ethiopian Birr against the Canadian dollar would not have any 

significant impact on the net loss of the Company as a result of substantially all of the Company’s 

monetary assets and liabilities being held in Canadian dollars. 

Price risk is remote since the Company is not a producing entity. 

NON-IFRS PERFORMANCE MEASURES 

The Company has included the non-IFRS performance measure below in this document. This non-IFRS 

performance measure does not have any standardized meaning prescribed by IFRS and, therefore, may not 

be comparable to similar measures presented by other companies. The Company believes that, in addition 

to conventional measures prepared in accordance with IFRS, certain investors use this information to 

evaluate the Company’s performance. Accordingly, they are intended to provide additional information 

and should not be considered in isolation or as a substitute for measures of performance prepared with 

IFRS. The definition for this performance measure and reconciliation of the non-IFRS measure to reported 

IFRS measures is as follows: 

Working Capital 

Current assets 

Cash and cash equivalents $ 41,333,947 $ 49,132,373 

Restricted cash 50,000 50,000 

Amounts receivable 118,276 106,656 

Prepaid expenses 229,339 267,756 

41,731,562 49,556,785 

Current liabilities 

Accounts payable and accrued liabilities 5,354,230 2,875,798 

Working capital $ 36,377,332 $ 46,680,987 

37 


July 31, 2012

OUTLOOK 




The Company will continue to focus on its potash exploration and development projects in Ethiopia and 

Argentina and will continue to look for projects that complement its properties in Ethiopia and Argentina in 

order to accomplish its objective to become a leading emerging potash exploration company outside of the 

major potash regions in Canada and Russia. 

OTHER MD&A REQUIREMENTS 

Additional information relating to the Company is available under the Company’s profile on SEDAR at 

www.sedar.com. 

SUMMARY OF SECURITIES AS AT DECEMBER 14, 2012 

As at December 14, 2012 the following common shares, common shares purchase options, share purchase 

warrants and special performance shares were issued and outstanding: 

� 240,133,279 common shares; 

� 35,609,972 common shares placed in escrow under terms of Nova Merger Agreement; 

� 15,070,000 common share purchase options with exercise prices ranging from $0.15-$2.00 expiring 

between June 19, 2013 and December 4, 2017; 

� 6,368,910 share purchase warrants with exercise prices ranging from $0.88-$2.08 expiring between 

August 2, 2013 and October 18, 2016. 

LIST OF DIRECTORS AND OFFICERS 

Mark Stauffer Chairman of the Board 

Farhad Abasov Director, President and Chief Executive Officer 

Lewis MacKenzie Director 

Rick Lacroix Director 

Diana Walters Director 

Deborah Battiston Chief Financial Officer 

Peter MacLean Senior Vice President, Exploration 

Nejib Abba Biya Senior Vice President, Business Development 

Jack Scott Senior Vice President, Strategic Projects 

Richard Kelertas Senior Vice President, Corporate Development 

Jason Wilkinson Vice President, Danakil Operations 

Brianna Davies Corporate Secretary 

December 14, 2012 

38

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