Allana Potash Corp. continues consolidation in Ethiopia with strategic acquisition of Nova-Ethio Potash Corporation

TORONTO, ONTARIO–(Marketwire – Sept. 4, 2012) – Allana Potash Corp. (TSX:AAA)(OTCQX:ALLRF) ("Allana" or the "Company") is pleased to announce that the Company has entered into 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 strategically located potash license adjacent to the Company's potash project in the Danakhil Depression in Ethiopia (the "Nova Property"). It is proposed that acquisition will be effected through the merger of a wholly-owned subsidiary of Allana and Nova, in accordance with the laws of the British Virgin Islands (the "Transaction").

The Nova exploration license is approximately 154 km2 and is located adjacent to the western and southern boundaries of the Allana license (see Fig. 1). The Nova license also incorporates extensions of the alluvial fans and potential aquifers present on the western portion of the Allana license. Coupled with Allana's land position in its adjacent claims, upon closing of the Transaction, Allana would control approximately 312km2 of the centre of the potash basin in the Dallol area.

Allana believes that the Transaction provides compelling strategic and operational value including:

  • Increasing, through the addition of a large, adjacent potash concession, potential potash resources available for Allana's early stage output described in the November 2011 Preliminary Economic Assessment;
  • Access to potential additional water resources to be utilized as Allana continues to assess long-term commercial operations and complete a feasibility study;

Farhad Abasov, President and CEO of Allana Potash, stated: "Allana's Board of Directors and its management are very excited to have entered into the agreement to acquire Nova and the Nova license. It is expected that this significant adjacent property will give Allana additional strategic ground to augment our current land position and add potential shallow potash resources. Allana will mobilize drilling immediately to evaluate the potential of extensions of the potash deposit identified by Allana on its main license block and to update our potash and water resource estimates. The completion of the acquisition of the Nova Property will complement our ongoing development plans and confirms our commitment to developing the potash resources in the district through both exploration and consolidation."

Drilling on the Nova license area by the Ralph M. Parsons Company ("Parsons") in the 1950s and 1960s included 22 potash holes which targeted the western extension of the Musley Deposit, the main deposit explored by Parsons. Nova has completed 21 drill holes in its western and southern sections and compilation of data from this drilling is in progress. In accordance with the terms of the Merger Agreement, Allana is required to make exploration expenditures up to $5 million over twelve months and drill a minimum of 20 holes with respect to the Nova Property. Allana and Nova have jointly defined a next phase drill program to evaluate and define the resources on the property, and under the terms of the Merger Agreement, will complete a National Instrument 43-101 compliant resource estimate on the Nova Property within twelve months of the closing of the Transaction (the "Nova Resource Estimate").

Pursuant to the terms of the Merger Agreement, Allana shall issue 12,716,667 common shares to the shareholders of Nova in exchange for all of the common shares of Nova (the "Merger Shares"). Further, Allana will issue an additional 35,610,000 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.

In addition, prior to closing, the parties will enter 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, Allana shall pay BEMA an additional fee of $7.5 million, payable at the sole discretion of Allana 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 Allana.

The closing of the Transaction is expected to occur on or before October 17, 2012 and shall be conditional, among other things, upon the approval of the Transaction by Nova shareholders and Nova delivering to Allana a balance sheet indicating no less than $1.3 million in cash and cash equivalents at the time of closing, each Nova shareholder entering into an escrow agreement with Allana in respect of the Allan Escrowed Shares, and the confirmation from Nova to Allana, in writing that the licence underlying the Nova Property has been renewed with the Ethiopian Ministry of Mines.

The Transaction has been approved by the Board of Directors of Allana and the Board of Directors of Nova. Closing of the Transaction remains subject to the receipt of all required regulatory approvals, including the approval of the TSX.

Dundee Securities Ltd. is acting as the exclusive financial advisor to Allana in connection with the Transaction. Salman Partners Inc. and Bellotti Goodman Capital Inc., have been retained by Nova to act as the exclusive financial advisors to Nova with respect to the Transaction.

About Allana Potash Corp.

Allana is a publicly traded corporation with a focus on the acquisition and development of potash assets internationally with its major focus on a previously explored potash property in Ethiopia. Allana has secured financial support from two significant strategic investors: IFC, a member of World Bank Group, and Liberty Metals and Mining, a member of Liberty Mutual Group. Allana has Measured Sylvinite Mineral Resources of 60.8 million tonnes of 30.7% KCl; Indicated Sylvinite Mineral Resources of 110.6 million tonnes of 31.1% KCl, and Inferred Sylvinite Mineral Resources of 46.6 million tonnes grading 30.3% KCl; Measured Kainitite Mineral Resources of 319.4 million tonnes grading 20.2% KCl; Indicated Kainitite Mineral Resources of 382.1 million tonnes of 20.4% KCl and Inferred Kainitite Mineral Resources of 373.7 million tonnes grading 20.4% KCl; Measured Upper Carnallitite Mineral Resources of 49.9 million tonnes grading 17.5% KCl; Indicated Upper Carnallitite Mineral Resources of 105.6 million tonnes of 16.7% KCl, and Inferred Upper Carnallitite Mineral Resources of 89.7 million tonnes grading 13.8% KCl; Measured Lower Carnallitite Mineral Resources of 137.7 million tonnes grading 11.1% KCl; Indicated Lower Carnallitite Mineral Resources of 131.4 million tonnes of 10.6% KCl and Inferred Lower Carnallitite Mineral Resource of 78.2 million tonnes grading 8.5% KCl. The foregoing mineral resource estimates are as at April 27, 2012. For more information with respect to the data verification procedures undertaken and the key assumptions, parameters and risks associated with the foregoing estimates refer to Allana's Technical Report entitled "Updated Resource Report for the Danakhil Potash Deposit, Afar State/Ethiopia" dated June 13, 2012, effective April 30, 2012 filed at www.sedar.com. Allana has approximately 228.5 million shares outstanding and trades on the Toronto Stock Exchange under the symbol "AAA".

Peter J. MacLean, Ph.D., P. Geo., Allana's Senior VP Exploration, is a Qualified Person as defined under National Instrument 43-101 and has reviewed and approved the technical information presented in this release.

Forward-Looking Statements

Except for statements of historical fact relating to the Company, 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 effect, including the issuance of securities, and estimated timeline of the closing of the Transaction;, the estimation of mineral reserves and mineral resources; the timing and amount of estimated future exploration; the anticipated timing with respect to the preparation of the Feasibility Study; costs of exploration; capital expenditures; success of exploration activities; permitting time lines and permitting; government regulation of mining operations; environmental risks; unanticipated reclamation expenses; and title disputes or claims. 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 and they 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 forward-looking statements or forward-looking information. These risks and uncertainties include, but are not limited to, uncertainties with respect to mineral resource estimates, uncertainties with respect to permitting time lines and permitting, government regulation of mining operations, environmental risks; unanticipated reclamation expenses, title disputes or claims, risks inherent with conducting business in an African country such as civil unrest, bribery, security issues and the lack of respect for the rule of law and other risks discussed in Allana's latest annual information and other disclosure documents filed at www.sedar.com. 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 statements or 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 statements and forward-looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except in accordance with applicable securities laws.

To view Fig. 1 Location of the Nova License, Ethiopia, please visit the following link:

http://media3.marketwire.com/docs/816419.pdf