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Allana Potash Corp.
Management’s Discussion and Analysis
For the three months ended October 31, 2012
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).
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