Karnalyte Resources Inc. Announces Third Quarter 2011 Results
FOR IMMEDIATE RELEASE
KARNALYTE RESOURCES INC. ANNOUNCES THIRD QUARTER 2011 RESULTS
Calgary, Alberta (November 11, 2011) - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended September 30, 2011. Karnalyte intends to construct a potash facility near Wynyard, Saskatchewan which is expected to initially produce 625,000 tonnes of potash per year and ultimately increase to 2.125 million tonnes of potash per year.
“The most significant development for Karnalyte this quarter was the receipt of a bankable feasibility study, which confirmed the Project’s economic viability, as well as our staged approach to facility construction. In addition, the associated technical report identified considerably greater potash resources than originally estimated, most of which were reclassified as reserves, with approximately 80% of Karnalyte’s lease and permit holdings yet to be explored,” said Robin Phinney, President and CEO of Karnalyte Resources Inc. “Karnalyte is currently focused on performing detailed engineering activities and obtaining government approval to advance the Project towards the construction phase.”
Karnalyte’s Third Quarter 2011 Financial Statements and Management’s Discussion and Analysis (MD&A) will be available at www.sedar.com.
Selected Highlights
- Announced that it will conduct a pre-feasibility study for the production of magnesium compounds in consideration of producing magnesium products as a second product line. The study will delineate magnesium chloride production process flow, determine equipment requirements and provide a capital and operating cost estimate for the production stream. The technical report entitled "Resource Estimate for the Wynyard Carnallite Project, Subsurface Mineral Permit KP 360A and Subsurface Mineral Lease KLSA 010, Saskatchewan, Canada", effective August 30, 2011, included updated resources of net indicated MgCl2 tonnage of 167.9 million metric tonnes.
- Subsequent to the end of the quarter, received a positive feasibility study and associated technical report for the Wynyard Carnallite Project (the “Project”), which suggested a project life of 68 years at a production rate of 2.125 million tonnes per year. The feasibility study and associated technical report estimated an after-tax internal rate of return of the Project at approximately 22%, and the estimated after-tax net present value of the Project (using a 10% discount rate) of $1,866 million for the 2.125 million tonne per year operation.
- Subsequent to the end of the quarter, received an updated technical report entitled "Reserve and Resource Estimate for the Wynyard Carnallite Project, Subsurface Mineral Permit KP 360A and Subsurface Mineral Lease KLSA 010, Saskatchewan, Canada", effective October 21, 2011, that quantified the Project’s proven and probable KCl reserves at 62.9 and 92.0 million tonnes, respectively
- Subsequent to the end of the quarter, submitted an Environmental Impact Statement for the Project to the Saskatchewan Ministry of Environment
Outlook
Over the short term, the Corporation will focus on the following key initiatives:
Continue working with the government to obtain the environmental approvals required for the next phase of the Project;
- Continue exploration and development of its mineral holdings through additional 3D seismic analysis;
- Obtain independent assays of product samples recovered from the pilot test facility;
- Complete a pre-feasibility level study on potential production and marketing of magnesium compounds;
- Optimize product quality in cooperation with machinery and equipment suppliers; and
- Raise adequate funding to move the Project forward to the plant and cavern construction phase;
KARNALYTE RESOURCES INC.
STATEMENTS OF FINANCIAL POSITION
(Unaudited)
ASSETS
| As at Current assets Cash Investments Trade and other receivables Prepaid expenses | September 30, | December 31, January 1, 2010 2010 $ 59,000,457 $ 2,490,823 - 6,147,759 43,276 279,283 312,865 216,949 |
|---|---|---|
| 2011 | ||
| $ 37,315,587 | ||
| - | ||
| 786,664 | ||
| 82,348 | ||
| Restricted cash Capital assets Intangible exploration and evaluation and other assets | 38,184,599 | 59,356,598 9,134,814 125,000 - 459,376 396,938 10,748,278 6,867,019 |
| 375,000 | ||
| 3,311,049 | ||
| 33,565,829 | ||
| TOTAL ASSETS | $ 70,689,252 $ 16,398,771 | |
| $ 75,436,477 | ||
| LIABILITIES Current liabilities Trade and other payables Current portion of capital lease liability | $ 2,288,123 $ 680,795 6,904 - | |
| $ 3,434,002 | ||
| 6,904 | ||
| Capital lease liability Provisions | 3,440,906 | 2,295,027 680,795 6,904 - 116,039 - |
| 1,726 | ||
| 176,482 | ||
| Total liabilities | 3,619,114 | 2,417,970 680,795 |
| SHAREHOLDERS' EQUITY Share capital Warrants and rights Contributed surplus Deficit | 72,313,190 17,771,007 1,273,605 293,494 2,359,264 6,161 (7,674,777) (2,352,686) | |
| 77,808,826 | ||
| 1,146,682 | ||
| 3,543,237 | ||
| (10,681,382) | ||
| Total shareholders' equity | 71,817,363 | 68,271,282 15,717,976 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | $ 70,689,252 $ 16,398,771 | |
| $ 75,436,477 |
KARNALYTE RESOURCES INC.
STATEMENTS OF COMPREHENSIVE LOSS
Three and nine months ended September 30, 2011 and 2010 (Unaudited)
| Expenses General and administrative Depreciation and amortization Share-based payment expense Other expense/(income) | Three months | Nine months ended September 30, 2011 2010 $ 2,331,061 $ 2,102,800 360,487 36,176 1,138,040 2,397,620 (533,868) (19,458) | |
|---|---|---|---|
| ended | |||
| September 30, | |||
| 2011 | 2010 | ||
| $ 795,147 | $ 652,617 | ||
| 154,719 | 13,867 | ||
| 245,083 | - | ||
| (449,959) | 1,826 | ||
| Finance (income) and expense Finance income Finance expense | 744,990 | 668,310 | 3,295,720 4,517,138 (355,662) (19,427) 66,547 6,731 |
| (196,712) | (7,239) | ||
| 1,497 | 2,740 | ||
| Net finance income | (195,215) | (4,499) | (289,115) (12,696) |
| Comprehensive loss | (549,775) | (663,811) | (3,006,605) (4,504,442) |
| Loss per share Basic and diluted | $ (0.15) $ (0.35) | ||
| $ (0.03) | $ (0.05) |
STATEMENTS OF CASH FLOWS
Three and nine months ended September 30, 2011 and 2010
| Cash Flows from (used in) Operating Activities Loss for the period Add/deduct: Depreciation and amortization Share-based payment expense Net finance income Interest income received Changes in non-cash working capital: Trade and other receivables Trade and other payables Prepaid expenses | Three months | Nine months ended September 30, 2011 2010 $ (3,006,605) $ (4,504,410) 360,487 36,825 1,138,040 2,397,620 (289,115) (6,139) 282,523 1,795 (644,562) 181,157 107,086 (64,088) 22,154 8,301 | |
|---|---|---|---|
| ended | |||
| September 30, | |||
| 2011 | 2010 | ||
| $ (549,775) | $ (663,779) | ||
| 154,719 | 14,516 | ||
| 245,083 | - | ||
| (195,215) | 3,884 | ||
| 123,573 | - | ||
| 187,278 | - | ||
| (18,930) | (21,648) | ||
| 4,387 | 3,735 | ||
| (48,880) | (663,292) | (2,029,992) (1,948,939) | |
| Cash Flows from (used in) Investing Activities Additions to intangible assets Additions to capital assets Change in restricted cash Decrease in temporary investments | (20,666,332) (2,517,881) (3,274,116) (99,163) (250,000) - - 2,232,546 | ||
| (6,296,377) | (488,361) | ||
| (552,553) | (3,420) | ||
| (250,000) | - | ||
| - | 738,986 | ||
| (7,098,930) | 247,205 | (24,190,448) (384,498) | |
| Cash Flows from (used in) Financing Activities Issuance of common shares Share issue costs Deferred financing costs | 5,392,279 332,300 (786,464) - - (28,118) | ||
| 384,162 | 280,000 | ||
| - | - | ||
| - | (28,118) | ||
| 384,162 | 251,882 | 4,605,815 304,182 | |
| Effect of foreign exchange on cash Change in cash Cash, beginning of period | (70,245) (1,168) (21,684,870) (2,030,423) 59,000,457 2,490,823 | ||
| (7,204) | (2,058) | ||
| (6,770,852) | (166,263) | ||
| 44,086,439 | 626,663 | ||
| Cash and cash equivalents, end of period | $ 37,315,587 $ 460,400 | ||
| $ 37,315,587 | $ 460,400 |
STATEMENTS OF CHANGES IN EQUITY
Nine months ended September 30,
| Common Shares Balance, beginning of period Common shares issued Common shares issued on exercise of share options Common shares issued on exercise of broker warrants Transfer on share options exercised Transfer on broker warrants exercised Share issue costs | 2011 | 2010 Number Amount 12,663,800 $ 17,771,007 - - 132,300 332,300 - - - 101,566 - - - - | |
| Number | Amount | ||
| 20,093,740 | $ 72,313,190 | ||
| 470,000 | 4,042,000 | ||
| 135,600 | 678,000 | ||
| 78,172 | 672,279 | ||
| - | 230,125 | ||
| - | 198,703 | ||
| - | (325,471) | ||
| Balance, end of period | 20,777,512 | 77,808,826 | 12,796,100 18,204,873 |
| Warrants and Rights Balance, beginning of period Broker warrants issued Broker warrants exercised | 2,952,524 293,494 - - - - | ||
| 585,624 | 1,273,605 | ||
| 28,200 | 71,780 | ||
| (78,172) | (198,703) | ||
| Balance, end of period | 2,952,524 293,494 | ||
| 535,652 | 1,146,682 | ||
| Contributed Surplus Balance, beginning of period Share-based payment expense Transfer to share capital on exercise | 6,161 2,397,620 (101,566) | ||
| 2,359,264 | |||
| 1,414,098 | |||
| (230,125) | |||
| Balance, end of period | 3,543,237 | 2,302,215 | |
| Deficit Balance, beginning of period Loss for the period | (2,352,686) (4,504,442) | ||
| (7,674,777) | |||
| (3,006,605) | |||
| Balance, end of period | (10,681,382) | (6,857,128) | |
| Total Shareholders' Equity | |||
| Balance, end of period | $ 71,817,363 | $ 13,943,454 |
About Karnalyte Resources Inc.
Karnalyte is engaged in the business of exploration and development of high quality agricultural and industrial potash and magnesium products. Karnalyte intends to develop and extract a carnallite - sylvite mineral deposit through a known solution mining process at competitive costs and with minimal environmental impact. Using a staged approached to potash plant construction, the Corporation plans to operate a solution mining facility that will initially produce 625,000 tonnes of potash per year, increasing to 2.125 million tonnes of potash per year. Karnalyte owns a 100% interest in Subsurface Permit KP 360A and Subsurface Mineral Lease KLSA-010 located near Wynyard, Saskatchewan, comprising a total of 85,126 acres.
Forward-Looking Statements
This press release contains forward-looking statements. More particularly, this press release contains statements concerning the Corporation's future operations. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Karnalyte, including with respect to the Corporation's future operations. Although Karnalyte believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Karnalyte can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals, risks associated with the mining industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations. The forward-looking statements contained in this document are made as of the date hereof and Karnalyte undertakes no obligation to update publicly or revise any forwardlooking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
For further information, please contact:
Robin Phinney, President & Chief Executive Officer Ron Love, Chief Financial Officer & Vice-President Finance Julius Brinkman, Vice-President Corporate Development Telephone: (403) 995-6560 E-mail: [email protected] Website: www.karnalyte.com
- 30 -