TORONTO (miningweekly.com) – Two Canadian potash juniors had differing fortunes on the Toronto bourse Wednesday morning, with Allana Potash plunging 15% after announcing a $20-million private placement the previous day, while Verde Potash gained 5% after more than doubling the inferred resource at its Brazilian project.

Verde announced after the close yesterday more drilling at the Cerrado Verde deposit had hiked the inferred resource by 150% to 2.68-billion tons of the crop nutrient – which contains enough to sustain Brazil’s current potash use for over 60 years.

The indicated resource at the project remained at 74-million tons, grading 9.2% potassium oxide. While the inferred resource ballooned, the grade slipped slightly to 8.9%.

Still, Verde CEO Cristiano Veloso was pleased with the increased scale of an already big deposit.

“Given the enormity of the Cerrado Verde inferred resource, the project should be able to support large-scale production of multiple potash products,” he said in a statement.

“Brazil's annual potassium oxide consumption is approximately 4-million tons. By comparison, the new resource represents approximately 250-million tons of potassium oxide.”

The problem that has faced Verde is that the type of potash mineralisation that Cerrado Verde contains supports production of what it calls 'thermopotash', which is made from a silicate-based potash resource. The more widely used form of the fertiliser comes from conventional potassium chloride or potassium sulphate deposits.

The company has been working with a University of Cambridge professor on a method that converts potassium oxide into potassium chloride, and successfully produced the conventional crop nutrient at a pilot facility in November.

Next, Verde hopes a preliminary economic assessment will further prove the process works. It aims to produce potassium chloride in the second phase of Cerrado Verde.

CAPITAL RAISING

The reason for Allana's sharp drop was the dilution to its issued share capital following the $20-million private placement it announced after the markets closed on Tuesday. The up-to 28.75-million shares it aims to issue as part of the deal is roughly equal to 15% of its already issued stock.

The fact that the share was down 15% by 11:35 in Toronto at C$0.84 apiece mirrors that.

Added to that, Allana had had a 15% run-up on the TSX before yesterday's close.

The company said it will use the $20-million it raises, or $23-million if the banks arranging it exercise their over-allotment rights, to complete a definitive feasibility study on the Dallol potash project in Ethiopia, as well as for working capital and general corporate purposes.

The study is set for completion in the second half of this year.

CLOSURES

Potash stocks have faired poorly over the past couple of months as worries over the global economy hitting demand for fertilisers have taken root.

Mosaic announced late last year that it was shutting some of its US phosphate production because of dampening demand.

Potash Corp, the biggest fertiliser maker, said this month it is extending the closure of some output of its namesake product "to match supply with demand".

Analysts are at odds over the outlook for the agricultural sector from here. BMO Capital Markets analyst Joel Jackson said in a note this week that fertiliser stocks were oversold.

The prior week, National Bank Financial put out a research note that continued weakness in grain prices would continue to hit fertiliser producers' share prices.

To subscribe to Mining Weekly's print magazine email subscriptions@creamermedia.co.za or buy now.