Karnalyte Resources Inc. Announces 2018 Third Quarter Results, Provides Update ON Potash and Nitrogen Projects and Launches Rights Offering
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KARNALYTE RESOURCES INC. ANNOUNCES 2018 THIRD QUARTER RESULTS,
PROVIDES UPDATE ON POTASH AND NITROGEN PROJECTS
AND
LAUNCHES RIGHTS OFFERING
Not for distribution to U.S. news wire services or dissemination in the United States.
SASKATOON, SK (CNW- November 14, 2018) – Karnalyte Resources Inc. (“ Karnalyte” or the
“Company”) (TSX: KRN) today announced its financial results and operational and corporate highlights
for the third quarter ended September 30, 2018, provide d an update on the status of its Wynyard Potash
Project (“Wynyard Potash”) and Proteos Nitrogen Project (“Proteos Nitrogen”), and announced a rights
offering to its shareholders.
Highlights
Actively executing strategic plan to diversify into two fertilizer product lines – potash and nitrogen
Potash price environment continues to improve, moving Wynyard Potash closer to economic
viability
Proteos Nitrogen continues to systematically advance through development
Rights offering provides existing shareholders equal opportunity to invest in Karnalyte at an
attractive entry price and provides additional working capital to fund its business
Gujarat State Fertilizer and Chemicals Limited’s (“GSFC”) additional investment in Karnalyte, by
way of a backstop of the rights offering, de monstrates GSFC’s ongoing commitment and support
of Karnalyte, Wynyard Potash and Proteos Nitrogen
Overview
Mr. Frank Wheatley, President of Karnalyte, commented: “During the third quarter of 2018, we continued
to execute on our strategic plan to diversify our business into two fertilizer product lines – potash and
nitrogen. We are encouraged by the improving pot ash price environment, which brings our flagship
Wynyard Potash closer to being an economically viable project.”
“We are also extremely pleased with the response to our request for expressions of interest for the
development of Proteos Nitrogen” Mr. Wheatley continued, “as well as for GSFC’s vote of confidence in
Karnalyte through its additional investment through the rights offering.”
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Potash
There have been some encouraging signs regarding the potash price environment as some contracts in key
markets reported price increases between 20% and 30% from prices reported in the third quarter of 2017.
We believe that the price outlook is firm as strong global demand continues to increase while new capacity
is slow to ramp up.
Despite these positive signs, prices have not yet r ecovered to the point where Wynyard Potash is
economically viable and financeable. Karnalyte continues to monitor potash prices and continues to discuss
with its strategic partner GSFC the appropriate timing to re-activate development of Wynyard Potash.
Nitrogen
Proteos Nitrogen achieved a number of project development milestones during the third quarter, including
receipt of the first phase independent marketing study prepared by Integer Research Inc., which confirmed
our market thesis of a viable, local market for nitrogen fertilizer in Central Saskatchewan. Karnalyte also
received numerous responses to our request for expressi ons of interest for the development of Proteos
Nitrogen on an EPC basis.
Proteos Nitrogen
Expressions of Interest
As previously reported on July 30, 2018 and Octobe r 22, 2018, Karnalyte issued, through its strategic
partner GSFC, an invitation for expressions of interest (“ EOI”) from a select group of international
technology providers and engineering, procurement a nd construction contractors, for developing Proteos
Nitrogen on a lump sum turn-key basis.
Karnalyte has received a total of 8 EOIs and togeth er with GSFC is currently classifying these EOIs in
order to short list the technology providers / EPC cont ractors to receive a formal Request for Proposal for
development of the Project on an EPC basis.
Independent Market Analysis
Karnalyte has received a draft of the final version of the first phase independent market study, prepared by
Integer Research Ltd., which was re cently acquired by Argus Media (“ Argus”), of the nitrogen fertilizer
industry in North America, with particular focus on Central Canada. The study confirms and validates
Karnalyte’s internal market analysis, and Karnalyt e intends to retain Argus to undertake a second phase
study at the appropriate time in order to support discussions regarding project financing for the Project.
About Argus Media
Argus is a leading energy and commodity price reporti ng agency providing data, news and insight as well
as conference and consulting services. Companies in more than 140 countries around the world use Argus
prices to index physical trade and as benchmarks in financial derivative markets as well as for analysis and
planning purposes. Prior to its acquisition by Argus, Integer Research was an internationally recognized
independent consultant to the fer tilizers and chemicals industry that provided market studies, including
supply/demand, trade and cost analysis and price fo recasts. With respect to nitrogen, they offered
capabilities across the nitrogen value chain, including analysis of ammonia, urea, UAN, and other nitrogen
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products. They produced market documentation for lende rs and banks in support of project financing for
greenfield and brownfield fertilizer projects. Through their offices in London, Beijing and Tokyo, Integer
Research offered consultancy servi ces and industry intelligence to fertilizer and chemicals markets
worldwide.
Project Site
Karnalyte continues to narrow its list of potential project sites located in Central Saskatchewan that match
Karnalyte’s project site selection criteria, which include adequate space for the initial development, as well
as for potential future expansion, together with proxim ity to all requisite infrastructure, including natural
gas, power, water, rail and highway.
Interest from the Agricultural Industry
Karnalyte continues to receive interest in Prot eos Nitrogen from a number of agriculture industry
participants and Karnalyte is curre ntly engaged in discussions with su ch industry participants. Those
discussions confirm Karnalyte’s market thesis that there is both a desire and a demand for an independent,
alternate source of supply of nitrogen fertilizer in central Saskatchewan, however, such discussions remain
preliminary in nature and no agreements or arrangements have yet been concluded.
Milestones: Indicative project development milestones include:
Receipt of EOIs Complete
Receipt of Phase 1 independent market analysis Complete
Project Site – selection of preferred site Fourth Quarter 2018
Issuance of Request for Proposal: Fourth Quarter 2018
Third Quarter Shareholders Letter
We have today issued a letter to shareholders that we intend on regularly sending in connection with our
quarterly financial reporting. Our aim is simple: to k eep our shareholders apprised of developments that
are relevant to Karnalyte, to provide insight into our business and broader fertilizer industry and outline the
steps we are taking to execute on our strategic plan. A copy of our third quarter letter to shareholders in
available on our website at www.karnalyte.com.
Rights Offering
The Board of Directors of Karnalyte has approved a rights offering (the “ Rights Offering”) to be made
only to holders of common shares of record at the close of business on November 21, 2018 (the “ Record
Date”). Karnalyte will issue rights (“Rights”) to subscribe for up to an aggregate of 14,058,282 common
shares at a subscription price of C$0.17 per common share, raising approximately $2.4 million. The
Company intends to use the proceeds of the Rights Offering to advance the development of Proteos
Nitrogen and Wynyard Potash.
Karnalyte will issue one (1) right for each common share held. Each two (2) rights will entitle the holder
to subscribe for one common share of Karnalyte up on payment of the subscription price of C$0.17 per
common share. GSFC, the Company’s largest sharehol der and strategic partner, has advised Karnalyte
that it intends to exercise, subject to relevant restri ctions, all of its basic subscription privileges. The
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Company has also entered into a standby commitme nt agreement with GSFC, pursuant to which GSFC
has agreed to purchase all common shares issuable under the Rights Offering which remain unsubscribed
under the basic subscription privilege and the additional subscription privilege.
It is expected that the Rights will trade on the Toronto Stock Exchange under the symbol “ KRN.RT”
commencing on November 20, 2018 and will trade until 12:00 p.m. (Toronto time) on December 20, 2018
(the “Expiry Time”), after which time unexercised rights will be void and of no value. Shareholders who
fully exercise their rights under the basic subscription privilege will be entitled to subscribe for additional
common shares, if available as a result of unexercised rights prior to the Expiry Time, subject to certain
limitations as set out in the Company’s Rights O ffering circular, which will be filed on SEDAR under
Karnalyte’s profile at www.sedar.com. The Company e xpects to close the Rights Offering on or before
December 31, 2018.
A Rights Offering notice and a rights certificate will be mailed to each registered shareholder of the
Company resident in Canada as at the Record Date. Registered shareholders who wish to exercise their
rights must forward the completed rights certificate, together with the applicable funds, to the rights agent,
AST Trust Company (Canada), on or before the Expiry Time. Shareholders who own their common shares
through an intermediary, such as a bank, trust company, securities dealer or broker, will receive materials
and instructions from their intermediary.
The Rights Offering will be conducted in all provinces of Canada. However, certain holders of common
shares in jurisdictions outside of Canada, other than the United States, may be able to participate in the
Rights Offering where they can establish that the transaction is exempt under applicable legislation. If you
are a holder of common shares and reside outside of Canada please see the Rights Offering notice and
Rights Offering circular to determine your eligibilit y and the process and timing requirements to receive
and, or, exercise your Rights. The Company requests an y ineligible holder interested in exercising their
Rights, other than ineligible holders in the Unite d States, to contact the Company at their earliest
convenience. A copy of the Rights Offering notice and the Rights Offering Circular are available on
Karnalyte’s website at www.karnalyte.com.
2018 Third Quarter Results
At September 30, 2018, the Company had cash of $9.4 million, a positive working capital of $9 million and
no debt. The Company has adequate cash to fund any existing commitments in 2018 and through the third
quarter of 2019. Furthermore, the Company has su fficient cash to meet short term operating and capital
requirements. Karnalyte’s Third Quarter 2018 Fina ncial Statements and Managements’ Discussion and
Analysis are available at www.sedar.com.
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The information has been summarized from the Company’s Condensed Interim Unaudited Financial
Statements.
Outlook for 2018
During the fourth quarter of 2018, the Company will continue to ensure that it is in a position to re-activate
the development of Wynyard Potash, if the improving potash price environment results in Wynyard Potash
becoming economically viable and financeable. In a ddition, the Company will continue to explore the
technical and economic viability of developing Pr oteos Nitrogen, with a view towards making an
investment decision during the first half of 2019.
Mailing List
In order to receive the latest updates, we encourage a ll shareholders to subscribe to our 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 remains in effect. Further development is dependent on
improved potash prices.
Selected Quarterly Results
2018 2017
Sept 30 Sept 30
Total revenue -$ -$
Comprehensive (loss) (1,339) (1,266)
Basic and diluted loss per share (0.05) (0.10)
Total current assets 10,089 8,552
Total assets 15,885 19,235
Total liabilities 1,217 946
Total shareholders' equity 14,668 18,289
*Expressed in thousands except loss per share
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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
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
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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.