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Allana Potash Acquires Shares of Nova-Ethio Potash Corporationqrcode

Sep. 7, 2012

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Sep. 7, 2012
Allana Potash Corp.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.

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