Karnalyte Resources Inc. Announces Second Quarter 2013 Results; Meets Condition of Environmental Impact Statement Approval
FOR IMMEDIATE RELEASE
KARNALYTE RESOURCES INC. ANNOUNCES SECOND QUARTER 2013 RESULTS; MEETS CONDITION OF ENVIRONMENTAL IMPACT STATEMENT APPROVAL
Calgary, Alberta (August 9, 2013) - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended June 30, 2013. The Corporation also announced that the Saskatchewan Ministry of Environment (“MOE”) has indicated that it is satisfied with one of the conditions of the Wynyard Carnallite Project’s Environmental Impact Statement (“EIS”) approval dated February 7, 2013.
“During the second quarter, Karnalyte made progress towards securing funds for the construction and commissioning of the Wynyard Carnallite Project by engaging BNP Paribas and Natixis as lead arrangers for up to US$300 million in project debt,” said Robin Phinney, President and CEO of Karnalyte. “Subsequent to the end of the quarter, we received notice that the Saskatchewan MOE is satisfied with the results of the brine disposal injectivity test mentioned in the EIS approval we received earlier this year.”
“Uralkali’s recent announcement to withdraw from its sales partnership with Belarusian Potash may change global potash markets, however, based on global potash demand fundamentals and the barriers to entry into the North American market faced by international potash companies, we don’t believe this development will have as extreme of an impact on price as predicted,” added Phinney. “As such, Karnalyte will look at various strategies and alternatives while continuing to assess the implications of this development.”
Karnalyte also confirms that it is not aware of any material undisclosed information that may be contributing to the recent decrease in market price and level of trading activity of its shares.
As at June 30, 2013, the Company had net working capital of $55,654,143 compared to $30,504,468 at June 30, 2012, including $56,224,956 and $31,472,099, respectively, in cash. Karnalyte's Second Quarter 2013 Financial Statements and Management's Discussion and Analysis (MD&A) are available at www.sedar.com
Key Project Development Highlights
Since April 1, 2013, Karnalyte has achieved the following key milestones in the development of the Wynyard Carnallite Project (the “Project”):
- Engaged BNP Paribas and Natixis, New York Branch, on an exclusive basis, to act as lead arrangers (the "Lead Arrangers") for a senior secured project finance facility of up to US$300 million;
- Selected Whiting Equipment Canada Inc. (“Whiting”) as its major equipment supplier and worked with Whiting to advance detailed engineering activities related to major equipment component specifications;
- Continued detailed engineering to advance the underground cavern design and planning;
- Continued site preparation activities at the future production facility site;
Received notice that the Saskatchewan MOE is satisfied with a condition of EIS approval, as the • results of the recently completed injection test, have confirmed there is sufficient capacity for brine disposal; and
- Prepared to drill another groundwater source well, which will be tested to support water yield results from the existing groundwater well.
STATEMENTS OF FINANCIAL POSITION
ASSETS
| As at Current assets Cash Trade and other receivables Prepaid expenses Deferred financing costs | June 30, | December 31, 2012 $ 25,114,959 225,363 128,927 843,897 |
|---|---|---|
| 2013 | ||
| $ 56,224,956 | ||
| 176,493 | ||
| 105,828 | ||
| 1,164,536 | ||
| Restricted cash Capital assets Intangible exploration and evaluation and other assets | 57,671,813 | 26,313,146 375,000 6,404,557 43,197,551 |
| 375,000 | ||
| 13,107,994 | ||
| 43,710,479 | ||
| ASSETS | $ 76,290,254 | |
| $ 114,865,286 | ||
| LIABILITIES Current liabilities Trade and other payables | $ 3,996,019 | |
| $ 2,017,673 | ||
| Provisions | 2,017,673 | 3,996,019 149,956 |
| 165,181 | ||
| Total liabilities | 2,182,854 | 4,145,975 |
| SHAREHOLDERS' EQUITY Share capital Contributed surplus Deficit | 87,473,052 4,905,686 (20,234,459) | |
| 129,780,607 | ||
| 6,462,486 | ||
| (23,560,661) | ||
| Total shareholders' equity | 112,682,432 | 72,144,279 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | $ 76,290,254 | |
| $ 114,865,286 |
STATEMENTS OF COMPREHENSIVE LOSS
For the three and six months ended June 30,
| Expenses General and administrative Depreciation and amortization Share-based payments Transaction costs Restructuring expenditures Other income and expenses | Three months | Six months ended 2013 2012 | |
|---|---|---|---|
| ended | |||
| 2013 | 2012 | ||
| $ 2,385,860 $ 1,580,670 404,058 416,059 1,108,682 694,912 - 108,984 - 735,199 (3,632) (130,904) | |||
| $ 1,304,189 | $ 782,363 | ||
| 197,442 | 222,714 | ||
| 684,396 | 564,391 | ||
| - | - | ||
| - | 735,199 | ||
| 8,563 | (105,226) | ||
| Finance income Finance expense | 2,194,590 | 2,199,441 | 3,894,968 3,404,920 (597,590) (231,583) 28,824 14,235 |
| (520,587) | (113,808) | ||
| 1,960 | 11,206 | ||
| Net finance income | (518,627) | (102,602) | (568,766) (217,348) |
| Comprehensive loss | (1,675,963) | (2,096,839) | (3,326,202) (3,187,572) |
| Loss per share Basic and diluted | $ (0.13) $ (0.15) | ||
| $ (0.06) | $ (0.10) |
STATEMENTS OF CASH FLOWS
| Cash Flows from (used in) Operating Activities Net loss for the period Add/deduct: Depreciation and amortization Share-based payment expense Net finance and other income Interest and other income received Changes in non-cash working capital: Trade and other receivables Trade and other payables Prepaid expenses Purchase of shares pursuant to compensation plans | 2013 | 2012 $ (3,187,572) 416,059 694,912 (348,252) 362,487 146,934 (889,874) (11,104) - |
| $ (3,326,202) | ||
| 404,058 | ||
| 1,108,682 | ||
| (572,400) | ||
| 219,417 | ||
| 48,871 | ||
| (409,492) | ||
| 7,269 | ||
| (5,947) | ||
| (2,525,744) | (2,816,410) | |
| Cash Flows from (used in) Investing Activities Additions to intangible assets Additions to capital assets | (2,931,604) (124,738) | |
| (521,332) | ||
| (8,061,886) | ||
| (8,583,218) | (3,056,342) | |
| Cash Flows from (used in) Financing Activities Issuance of common shares Exercise of options and warrants Share issue costs Deferred financing costs | - 3,613,731 - (508,646) | |
| 44,745,994 | ||
| - | ||
| (2,432,492) | ||
| (443,479) | ||
| 41,870,023 | 3,105,085 | |
| Effect of foreign exchange on cash Change in cash Cash, beginning of period | (11,763) (2,779,430) 34,251,529 | |
| 348,936 | ||
| 31,109,997 | ||
| 25,114,959 | ||
| Cash and cash equivalents, end of period | $ 56,224,956 | $ 31,472,099 |
STATEMENTS OF CHANGES IN EQUITY
2013 2012 Number Amount Number Amount
Share Capital
| Balance, beginning of period | 21,988,704 | $ 87,473,052 21,418,536 | $ 82,105,674 | |
| Common shares issued | 5,490,306 44,745,994 | - | - | |
| Common shares issued on exercise of share options | - | - | 141,325 | 735,875 |
| Common shares issued on exercise of broker warrants | - | - | 309,053 | 2,657,856 |
| Treasury shares purchased | (928) (5,941) | - | - | |
| Transfer from contributed surplus on options exercised | - | - | - | 262,184 |
| Transfer from contributed surplus on broker warrants | - | - | - | 785,520 |
| Share issue costs | - | (2,432,498) | - | - |
| Balance, end of period | 27,478,082 | 129,780,607 | 21,868,914 | 86,547,109 |
Warrants and Rights
| Balance, beginning of period | - | - | 368,528 934,950 |
| Broker warrants and rights exercised | - | - | (309,053) (785,520) |
| Balance, end of period | - | - | 59,475 149,430 |
Contributed Surplus
| Balance, beginning of period | 4,905,686 | 3,276,698 |
| Share-based payment expense | 1,556,800 | 1,082,847 |
| Transfer to share capital on exercise | - | (262,184) |
| Option adjustments | - | (127,691) |
| Balance, end of period | 6,462,486 | 3,969,670 |
Deficit
| Balance, beginning of period | (20,234,459) | (13,028,610) |
| Loss for the period | (3,326,202) | (3,187,572) |
| Balance, end of period | (23,560,661) | (16,216,182) |
Total Shareholders' Equity
Balance, end of period $ 112,682,432 $ 74,450,027
Director Resignation
Karnalyte also announces that Paul Sharpe has tendered his resignation as a director of the Corporation effective today. The board of directors thanks Mr. Sharpe for his contributions to the Corporation and wishes him well in his future endeavours.
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 impacts. 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. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Karnalyte’s operations and financial results are included in documents on file with Canadian Securities regulatory authorities and maybe accessed through the SEDAR website (www.sedar.com). 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 forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.
For further information, please contact:
Robin Phinney, President & Chief Executive Officer Ron Love, Executive Vice-President &Chief Financial Officer Telephone: (403) 995-6560 E-mail: [email protected] Website: www.karnalyte.com
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