Karnalyte Resources Inc. Announces 2018 Year End Results and Provides Corporate Update
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KARNALYTE RESOURCES INC. ANNOUNCES 2018 YEAR END RESULTS
AND PROVIDES CORPORATE UPDATE
Not for distribution to U.S. news wire services or dissemination in the United States.
SASKATOON, SK (CNW- March 22, 2019) – Karnalyte Resources Inc. (" Karnalyte " or the
"Company ") (TSX: KRN) today announced its financial results and corporate highlights for the financial
year ended December 31, 2018.
Highlights
Wynyard Potash Project (“ Wynyard Potash ”)
• Potash price environment continues to improve, movi ng Wynyard Potash closer to economic
viability
• Phase 1 initial capital cost estimate to be updated during 2019
Proteos Nitrogen Project (“ Proteos Nitrogen ”)
• Project site land assembly continuing
• Preliminary environmental permitting work identified
• Technology provider selection process continuing
• Agricultural industry partner and offtake arrangements discussions continue
Corporate
• Actively executing strategic plan to diversify into two fertilizer product lines – potash and nitrogen
• Rights offering provided additional working capital to fund project development
• Gujarat State Fertilizer and Chemicals Limited’s (“ GSFC ”) additional investment in Karnalyte,
through a backstop of the rights offering, demonstr ates GSFC’s ongoing commitment to and
support of Karnalyte, Wynyard Potash and Proteos Nitrogen
2018 – The Year in Review
2018 was a year of transition for Karnalyte as it t ook a series of steps to position itself to execute on its
strategy to build an independent Saskatchewan based fertilizer company producing potash and
manufacturing nitrogen fertilizer. Changes in management and the Board continued to position Karnalyte
to advance the development of both Wynyard Potash and Proteos Nitrogen.
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Wynyard Potash
Wynyard Potash is a well advanced conventional solution mining potash project. We have completed a NI
43-101 final feasibility study, basic engineering, obtained all necessary environmental approvals, and
entered into an offtake agreement with GSFC for app roximately 50% of Phase 1 production. The only
ingredient lacking is a potash price that makes Wynyard Potash economically viable.
Future development of Wynyard Potash remains dependent on an improvement in potash prices.
While 2018 witnessed some encouraging signs regardi ng potash prices, and in particular by the contract s
entered into by China and India in the fourth quart er of 2018, potash prices have not yet reached the level
where Wynyard Potash is an economically viable and financeable mining project. Global economic
uncertainty continues to negatively impact internat ional financial markets and equity and debt markets
remain tight, restrictive and increasingly expensive as interest rates rose during 2018.
The Company and the Board of Directors are committe d to taking a prudent and disciplined approach to
the development of Wynyard Potash, and the Company will continue to closely monitor potash prices and
market dynamics in deciding when to re-activate dev elopment of Wynyard Potash. The Company has
decided that the timing is right to update the init ial capital cost estimate for Phase 1, as the last estimate
was completed in 2016, and expects to undertake this update during 2019.
The Company's strategic partner and single largest shareholder, GSFC, originally invested in Karnalyte in
2013 with the intention of developing Wynyard Potas h into an operating potash mine and an independent
source of potash for export to India. GSFC remains committed to developing Wynyard Potash and
continues to work with the Company to update Phase 1 capital costs, determine when to re-activate
development, and assist in structuring the most cost-effective financing package for the development of the
Wynyard Potash.
Proteos Nitrogen
Proteos Nitrogen is a compelling part of Karnalyte’s future and diversifies our business by adding a second
fertilizer product line. Proteos Nitrogen is a proposed regional-scale nitrogen fertilizer plant to be located
in central Saskatchewan, with a nameplate capacity of 700 mtpd (metric tonnes per day) ammonia and
1,200 mtpd urea. Our primary target market is loca l, independent wholesalers within a ~400-kilometre
radius of Saskatoon, with a secondary target market of Midwest USA wholesalers near the Canadian border.
Saskatchewan has a number of competitive advantages for nitrogen fertilizer production, including:
• Plentiful natural gas
• Some of the lowest global natural gas prices
• Higher urea usage rates
• Premium pricing in local markets
• Proximity to local markets
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The Company believes its regional scale design will provide farmers with local supply, while at the sa me
time allowing them to reduce transportation costs and associated risks. As with any industrial material, the
ultimate consumers are always looking for local, alternate and independent sources of supply.
During 2018, progress on investigating the project’ s technical and economic viability included an
independent market study conducted by Argus Media, with positive results, a strong response to an
invitation for expressions of interest from technology providers and EPC contractors, as well as project site
identification and continuing discussions with a number of agriculture industry participants.
Corporate Matters
2018 also witnessed a number of changes in senior m anagement and the Board of Directors designed to
position Karnalyte to advance the development of both Wynyard Potash and Proteos Nitrogen. Karnalyte
is strongly committed to the implementation and mai ntenance of best governance practices and is
undertaking a detailed internal review of its gover nance practices in order update and upgrade its
governance policies and practices during the first half of 2019. In addition, in furtherance of best corporate
governance standards, and having regard to Karnalyt e’s strategic plan transition to a multi-product
independent fertilizer company, the Company has dev eloped a skills matrix outlining the required
competencies, skills and experience of potential di rectors of Karnalyte, including experience in the
agriculture industry, public companies, development of major capital projects, raising equity and proj ect
debt financing, corporate governance expertise, fin ancial literacy, and meeting all legal and regulato ry
requirements applicable to Canadian public companies.
During the fourth quarter of 2018, Karnalyte undertook a fully subscribed rights offering, raising a total of
approximately $2.3 million in working capital to fu rther the development of Wynyard Potash and Proteos
Nitrogen. GSFC backstopped the rights offering and now holds approximately 38.7% of the Company.
GSFC’s additional investment in the Company demonstrates GSFC’s ongoing commitment to and support
of Karnalyte, Wynyard Potash and Proteos Nitrogen.
Outlook
2019 will be a pivotal year for Karnalyte as it moves the development of both Wynyard Potash and Proteos
Nitrogen towards critical milestones. For Wynyard Potash, the completion of the Phase 1 capital cost
update will set the stage for a potential investmen t decision if, when combined with an improving pota sh
price environment, Wynyard Potash becomes an economic and financeable project.
Completing the site acquisition, initiating permitting, solidifying offtake arrangements, as well as securing
potential equity investors will also move Proteos Nitrogen towards confirming the technical and economic
viability of Proteos Nitrogen, and facilitate an in vestment decision prior to the end of 2019. We continue
to have productive discussions with local agricultu ral industry partners regarding their potential
participation in Proteos Nitrogen.
While Karnalyte has sufficient working capital to a dvance the development of both Wynyard Potash and
Proteos Nitrogen, it will require additional funding to complete the development activities necessary to take
both projects to the stage where an investment decision can be made by the Board of Directors.
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2018 Year End Results and Selected Annual Information
The Company continued to exercise fiscal restraint during 2018 as it waits for the potash price environment
to improve before proceeding with further developme nt of Wynyard Potash. The costs incurred by the
Company during 2018 were primarily associated with the technical and economic evaluation of Proteos
Nitrogen. As a result, at December 31, 2018, the C ompany had cash of $10.5 million, a positive workin g
capital of $10.3 million, and no debt. The Company has adequate cash to fund all existing commitments in
2019.
Furthermore, the Company has sufficient cash to mee t short term operating and capital requirements.
Karnalyte's 2018 Year End Financial Statements, Man agement's Discussion and Analysis and Annual
Information Form are available at www.sedar.com or on the Company’s website at www.karnalyte.com .
The following information has been summarised from the Company's audited financial statements.
Selected annual results
(CAD $ thousands)
Year ended December 31
2018 2017 2016
Total revenue - - -
Interest and other income 122 114 296
Net and comprehensive loss (6,018) (3,395) (8,852)
Basic and diluted per share (0.21) (0.12) (0.32)
Total current assets 11,136 12,757 17,156
Total assets 16,921 18,602 23,024
Total current liabilities 901 691 1,750
Total liabilities 2,608 846 1,886
Total shareholders’ equity 14,313 17,756 21,138
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About Karnalyte Resources Inc.
Karnalyte Resources Inc. is an advanced development 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 f ertilizer plant with a nameplate production capacit y 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 62 5,000 tpy of high grade granular 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 remai ns in effect. Further development is dependent on
improved potash prices.
About the Proteos Nitrogen Project
The Proteos Nitrogen Project is an advanced stage d evelopment 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 a pproximately 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 fer tilizer wholesalers within a 400-kilometer radius o f
Saskatoon, Saskatchewan. A secondary target market is the US Midwest fertilizer wholesalers near to the
Canadian – United States border. The proposed plan t 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 (“GSF C”) 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 establ ished 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 Va dodara, Gujarat State, India. GSFC’s urea plants h ave
consistently operated at optimum capacity over the past five decades.
As t he Company’s strategic partner and single largest s hareholder, GSFC remains committed to the
Company and the Wynyard Potash Project, and is full y 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.
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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 applicabl e
Canadian securities laws. Forward-looking informati on is often, but not always, identified by the use of
words such as “anticipate”, “believe”, “could”, “es timate”, “expect”, “plan”, “intend”, “forecast”, “f uture”,
“guidance”, “may”, “predict”, “project”, “should”, “strategy”, “target”, “will” or similar words or ph rases
suggesting future outcomes or language suggesting an outlook.
The forward-looking statements contained in this pr ess release are based on certain key expectations a nd
assumptions made by Karnalyte, including, without limitation, assumptions as to: projected economics for
the Company’s planned potash production facility, t he confirmation in an independent feasibility study of
Karnalyte’s assumptions regarding the technical and economic viability of the Proteos Nitrogen project, the
ability of Karnalyte to obtain financing on terms f avourable to the Company, and the ability of Karnal yte
to receive, in a timely manner, the necessary appro vals 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 u ndue reliance on the forward-looking statements and
information contained in this press release. Withou t limiting the generality of the foregoing, readers are
cautioned that the Company has not received a feasi bility study prepared by a third party with respect to
the Proteos Nitrogen project.
Actual results may vary from the forward-looking in formation presented in this press release, and such
variations could be material. Risk factors and unce rtainties could cause actual results to vary from t he
forward-looking information in this press release. Additional information on forward-looking statement s
and other factors that could affect Karnalyte’s ope rations and financial results are included in docum ents
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 applicable securities laws, the Company assumes no obligation to
update or revise them to reflect new events or circumstances.