Karnalyte Resources Inc. Announces 2018 Second Quarter Results and Provides Update ON Potash and Nitrogen Projects
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KARNALYTE RESOURCES INC. ANNOUNCES 2018 SECOND QUARTER RESULTS
AND
PROVIDES UPDATE ON POTASH AND NITROGEN PROJECTS
Not for distribution to U.S. news wire services or dissemination in the United States.
SASKATOON, SK (CNW- August 9, 2018) – Karnalyte Resources Inc. (“Karnalyte” or the “Company”)
(TSX: KRN) today announced its financial results and operational and corporate highlights for the second
quarter ended June 30, 2018, and provided an update on the status of its Wynyard Potash Project and Proteos
Nitrogen Project.
Overview
Karnalyte has made significant progress in investigating the economic and technical viability of the Proteos
Nitrogen Project during the second quarter of 2018. In addition to issuing an invitation for expressions of
interest for the technical and economic aspects of the project, and initiating an independent market analysis,
Karnalyte has undertaken due diligence on a number of potential project sites.
Mr. Frank Wheatley, President of Karnalyte, comme nted that: “The technical assistance provided by
Karnaltye’s strategic partner Gujarat State Fertili zers & Chemicals Limited (GSFC) from their five (5)
decades experience in nitrogen fertilizer production has allowed Karnalyte to streamline some of the early
phases of development, and we are grateful for their technical and commercial assistance as we continue to
explore the Proteos Nitrogen Project.”
With respect to the Wynyard Potash Project, while there have been some encouraging signs regarding the
potash price environment, prices have not yet recovere d to the point where the Wynyard Potash Project is
economically viable and financeable. During the second half of 2018, Karnalyte and GSFC intend to revisit
the timing and sequence of the steps required to re-activate development of the project.
Proteos Nitrogen Project
Pre-Feasibility Study
Karnalyte has initiated several component parts of the pre-feasibility study on the Proteos Nitrogen Project,
designed to explore the technical and economic viability of the proposed project, including an invitation
for expressions of interest on the technical and eco nomic aspects of the project, an independent market
analysis, and due diligence on a number of potential project sites.
Expression of Interest
As previously reported on July 30, 2018, Karnalyt e has issued, through its strategic partner GSFC, an
invitation for expressions of interest (“EOI”) from a select group of international technology providers and
engineering, procurement and cons truction contractors, for developing the Proteos Nitrogen Project on a
lump sum turn-key basis.
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The scope of work covered by the EOI includes all phases of development, from basic engineering, through
detailed engineering, procuremen t, construction, commissioning a nd satisfaction of all relevant
performance and completion tests, including all ancillary facilities and infrastructure, together with an
estimate of total capital costs for the project. Karnalyt e / GSFC have requested that all EOIs be provided
on or before the end of August, 2018. After receipt, Karnalyte / GSFC will review the EOIs with a view to
developing a short list of technology providers / contractors to receive a formal request for proposal, for
EPC arrangements, for development of the Proteos Nitrogen Project.
Independent Market Analysis
Karnalyte has retained Integer Research Ltd. (“Inte ger Research”) to undertake a first phase independent
market study of the nitrogen fertilizer industry in North America, with particular focus on Central Canada.
The purpose of the study is to validate Karnalyte’s internal market analysis, and Karnalyte anticipates
receiving the first phase report in September 2018. Subject to a positive outcome for the Project in the first
phase study, Karnalyte intends to retain Integer Rese arch to undertake a second phase study in order to
support discussions regarding project financing for the Proteos Nitrogen Project.
About Integer Research
Integer Research is an internationally recognized inde pendent consultant to the fertilizers and chemicals
industry that provides market studies, including supply/demand, trade and cost analysis and price forecasts.
With respect to nitrogen, they o ffer capabilities across the nitrogen valu e chain, including analysis of
ammonia, urea, UAN, and other nitrogen products. They produce market documentation for lenders and
banks in support of project financing for greenfield and brownfield fertilizer projects. Through their offices
in London, Beijing, and Tokyo, In teger Research offers consultancy series and industry intelligence to
fertilizer and chemicals markets worldwide.
Feedback from Potential Customers
As part of Karnalyte’s internal market analysis, it has spoken with a number of potential customers based
in Saskatchewan for the two nitrogen fertilizer produc ts it is considering producing, anhydrous ammonia
and urea. Those discussions confirm Karnalyte’s mark et thesis that there is, as with most industrial
materials, both a desire and a demand for an independe nt, alternate source of supply of nitrogen fertilizer
in central Saskatchewan.
Project Site
Karnalyte is currently undertaking due diligence on a number of potential project sites located in Central
Saskatchewan that match Karnalyte’s project site sel ection criteria, which include adequate space for the
initial development, as well as for potential future expa nsion, together with proximity to all requisite
infrastructure, including natural gas, power, water, rail and highway.
Milestones: Indicative project development milestones include:
Receipt of EOIs August 2018
Receipt of Phase 1 independent market analysis September 2018
Project Site – selection of preferred site Second Half 2018
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Completion of Pre-Feasibility Study: Second Half 2018
As initial milestones are achieved, management will be in a better position to prepare a more detailed project
development schedule and budget. All initial development activities for the first phase of investigation of
this opportunity will be funded from working capital.
Wynyard Potash Project
While there have been some encouraging signs regarding the potash price environment, potash prices have
not yet recovered to the point where the Wynyard Pot ash Project is economically viable and financeable.
However, given the lead times necessary to prepare a major mining project for construction, and in order
to ensure that it is developed in a timely fashion to take advantage of any future increase in potash prices,
during the second half of 2018, Karnalyte and GSFC intend to revisit the timing and sequence of the steps
required to re-activate development of the project.
Outlook for 2018
During the second half of 2018, the Company will continue to ensure that it is in a position to re-activate
the development of the Wynyard Potash Project, if th e improving potash price environment results in the
Wynyard Potash Project becoming economically viable and financeable. In addition, the Company will
continue to explore the technical and economic viabil ity of developing the Proteos Nitrogen Project, with
a view towards making an investment decision during the first half of 2019.
2018 Second Quarter Results
At June 30, 2018, the Company had cash of $10.2 million, a positive working capital of $10.3 million and
no debt. The Company has adequate cash to fund any existing commitments in 2018 and through the second
quarter of 2019. Furthermore, the Company has su fficient cash to meet short term operating and capital
requirements. Karnalyte’s Second Quarter 2018 Financial Statements and Managements’ Discussion and
Analysis are available at www.sedar.com.
The information has been summarized from the Company’s Condensed Interim Unaudited Financial
Statements.
Selected Quarterly Results
2018 2017
June 30 June 30
Total revenue -$ -$
Comprehensive (loss) (1,215) (1,581)
Basic and diluted loss per share (0.04) (0.06)
Total current assets 10,880 9,685
Total assets 16,692 20,557
Total liabilities 788 1,003
Total shareholders' equity 15,904 19,554
*Expressed in thousands except loss per share
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New Mailing List
In order to receive the latest updates, we encourage a ll shareholders to subscribe to our mailing list. Due
to some technical issues with the old list, the Company has established a new mailing list. In order to sign
up to the new list, please use the following link: http://karnalyte.com/mailing-list-signup/
About Karnalyte Resources Inc.
Karnalyte Resources Inc. is an advanced developm ent stage company focused on two fertilizer products,
potash and nitrogen, to be produced and manufactured in Saskatchewan. Karnalyte owns the construction
ready Wynyard Potash Project, with planned phase 1 production of 625,000 tonnes per year (tpy) of high
grade granular potash, and two subsequent phases of 750,000 tpy each, taking total production up to 2.125
million tonnes per year (Mtpy). Karnalyte is also exploring the development of the Proteos Nitrogen
Project, which is a proposed small-scale nitrogen fer tilizer plant with a nameplate production capacity of
approximately 700 metric tonnes per day (mtpd) of ammonia and approximately 1,200 mtpd of urea, and a
target customer market of independent fertilizer wholesalers in Central Saskatchewan.
About the Wynyard Potash Project
The Wynyard Potash Project is a construction ready solution mining potash project located in Wynyard,
Saskatchewan, with planned phase 1 production of 625,000 tpy of high grade gr anular potash, and two
subsequent phases of 750,000 tpy each , taking total production up to 2. 125 Mtpy. All environmental
permits remain valid, preliminary detailed engineering is complete, and the existing offtake agreement with
Gujarat State Fertilizers & Chemicals Limited remain s in effect. Further development is dependent on
improved potash prices.
About the Proteos Nitrogen Project
The Proteos Nitrogen Project is an advanced stage development project consisting of a proposed small-
scale nitrogen fertilizer plant to be located in Ce ntral Saskatchewan, having a nameplate production
capacity of approximately 700 mtpd of ammonia and approximately 1,200 mtpd of urea, and designed to
produce two products – anhydrous ammonia (82-0-0) a nd granular urea (46-0-0). Karnalyte’s primary
target market is independent local Saskatchewan fertilizer wholesaler s within a 400-kilometer radius of
Saskatoon, Saskatchewan. A secondary target market is the US Midwest fertilizer wholesalers near to the
Canadian – United States border. The proposed plant would be the first greenfield nitrogen fertilizer plant
built in Canada in the last 26 years.
About Gujarat State Fertilizers & Chemicals Limited
Gujarat State Fertilizers & Chemicals Limited (“GSFC”) is a leading Indian Fortune 500 chemicals and
fertilizer company that has been in business for more than 50 years. GSFC currently operates one ammonia
plant of 445,000 Mtpy nameplate capacity, which was commissioned in the year 2000 based on Linde’s
technology (after the two old ammonia plants estab lished in 1969 were retired due to higher energy
consumption), and two urea plants, with a total of 370,590 Mtpy nameplate capacity which were established
in 1969, at its fertilizer production complex in Vadodara , Gujarat State, India. GSFC’s urea plants have
consistently operated at optimum capacity over the past five decades.
As t he Company’s strategic partner and single largest shareholder, GSFC remains committed to the
Company and the Wynyard Potash Project, and is fully supportive of the Company pursuing the
development of the Proteos Nitrogen Project. GSFC has also confirmed to the Company that it will continue
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to support the structuring of the most cost-effective financing package for the development of the Wynyard
Potash Project, as GSFC has consistently offered to the Company since becoming a shareholder in 2013.
For further information, please contact:
Frank D. Wheatley
President
Karnalyte Resources Inc.
1(306) 986-1486
www.karnalyte.com
FORWARD-LOOKING STATEMENTS
Certain information included in this press release is forward-looking, within the meaning of applicable
Canadian securities laws. Forward-looking information is often, but not always, identified by the use of
words such as “anticipate”, “believe”, “could”, “estimate”, “expect”, “plan”, “intend”, “forecast”, “future”,
“guidance”, “may”, “predict”, “project”, “should”, “strategy”, “target”, “will” or similar words or phrases
suggesting future outcomes or language suggesting an outlook.
The forward-looking statements contained in this press release are based on certain key expectations and
assumptions made by Karnalyte, including, without limitation, assumptions as to: projected economics for
the Company’s planned potash production facility, the confirmation in an independent feasibility study of
Karnalyte’s assumptions regarding the technical a nd economic viability of the Proteos Nitrogen Project,
the ability of Karnalyte to obtain financing on terms favourable to the Company, and the ability of Karnalyte
to receive, in a timely manner, the necessary appr ovals from the Company’s board of directors,
shareholders, regulatory authorities, and other third parties.
Karnalyte believes the expectations and assumptions upon which the forward-looking information is based
are reasonable. However, no assurance can be given that these assumptions and expectations will prove to
be correct. Accordingly, readers should not place undue reliance on the forward-looking statements and
information contained in this press release. Without limiting the generality of the foregoing, readers are
cautioned that the Company has not received a feasibilit y study prepared by a third party with respect to
the Proteos Nitrogen Project.
Actual results may vary from the forward-looking information presented in this press release, and such
variations could be material. Risk factors and uncer tainties could cause actual results to vary from the
forward-looking information in this press release. A dditional information on forward-looking statements
and other factors that could affect Karnalyte’s opera tions and financial results are included in documents
on file with Canadian securities regulatory authorities and may be accessed through the Company’s profile
on the SEDAR website (www.sedar.com).
These forward-looking statements are made as of the date hereof and are expressly qualified in their entirety
by this cautionary statement. Subject to applicab le securities laws, the Company assumes no obligation to
update or revise them to reflect new events or circumstances.