On August 17, 2010, Ubika Research published a commentary in smallcappower.com titled, “BHP Billiton lights up the potash sector: Will juniors like Allana Potash (TSX VENTURE: AAA) benefit from the trend”. This article had highlighted the strong interest in the potash sector in general and its implications for junior potash exploration companies like Allana Potash.
Since our commentary on August 17th 2010, published in smallcappower.com, Allana (TSX VENTURE: AAA) stock is showing strong momentum. Allana Potash’s stock price has been going up lately on strong volumes. For the last four consecutive trading sessions, AAA shares have been closing at higher levels. So far, in the month of September, the shares have increased by 18% on very high volume.
The stock is showing strength in technical terms as well. The share price is comfortably above both 50 days moving average and 200 days moving average. The average daily share volume during September is also significantly above the 3 months daily average of 780,000. The shares are trading close to its all time 52-week high of $0.60, which it reached during May 3, 2010 and a strong momentum can once again enable the stock to test those highs.
The interest in the potash sector continues to be strong as the battle for the control of Potash Corp. (TSX: POT) still ensues. There is growing indications, both from Potash Corp. itself, and from other sources, that BHP Billiton’s (NYSE: BHP) hostile bid will not go unchallenged. Potash Corp. has indicated that it is receiving interest from some heavyweight players to become the white knight and come with counter proposals to thwart the grossly undervalued bid from BHP.
All this attention to the potash sector, as we had rightly noted in our previous article, has continued to help junior potash exploration companies. We had argued that as the potash industry consolidates further, junior potash exploration companies with high potential asset and an ability to confirm sizable resource base will attract attention in the market as they could be eventual takeover targets as well.
Allana Potash (TSX VENTURE: AAA) continues to benefit from the strong interest in the potash sector. We believe that companies like Allana Potash will further attract attention due to its exploration potential, its current potash resource deposit and its proximity to the land holdings owned by BHP Billiton in the evaporite basin of the Danakhil Depression, Ethiopia.
The company is in the midst of an active drilling session at its Ethiopian property and there could be potential short term catalysts as the drilling program continues.
Disclosure: no positions