Karnalyte Resources Inc. Engages Strategic Advisor, Appoints Interim CFO, and Sets Date FOR Special Meeting of Shareholders
KARNALYTE.COM
TSX: KRN
KARNALYTE RESOURCES INC. ENGAGES STRATEGIC ADVISOR,
APPOINTS INTERIM CFO, AND SETS DATE FOR SPECIAL
MEETING OF SHAREHOLDERS
Not for distribution to U.S. news wire services or dissemination in the United States.
SASKATOON, SK (CNW- July 27, 2020) – Karnalyte Resources Inc. (“Karnalyte” or the “Company”)
(TSX: KRN) announces that it has engaged MNP LLP (“ MNP”) as an independent strategic consultant to
advise the Board of Directors as it determines the long-term strategic direction of the Company. The
Company also announces that it has appointed Christie Gradin, CPA, CA, as Interim Chief Financial
Officer (“CFO”). In addition, Karnalyte announces that pursuant to a requisition received from a
dissident shareholder group, it will hold a special meeting of shareholders (the “ Meeting”) on
December 15, 2020.
STRATEGIC ADVISOR ENGAGEMENT
As previously announced, Karnalyte’s Board of Directors (the “ Board”) has initiated a strategic review
process to evaluate a broad range of potential strategic alternatives available to it including the
evaluation of its existing and future projects, and the analysis of potential financing alternatives, with
a focus on determining what is in the best interests of Karnalyte and maximizing value for all of its
shareholders. To assist in this process, and after thoroughly considering proposals from national and
global firms over the past few months, the Company has engaged MNP, a leading Canadian accounting,
tax and business consulting firm, as its strategic advisor. MNP has extensive experience in the potash
and nitrogen industries, including in-depth knowledge of the Saskatchewan area. In addition to
assisting with the evaluation of a range of strategic alternatives, MNP will provide an independent
review of the pre-feasibility study Karnalyte recently completed on its Proteos Nitrogen project. The
Company has established a project steering committee consisting of the two independent directors
currently on its Board who will consider, evaluate, and make recommendations on the various strategic
alternatives. Karnalyte does not intend to disclose developments with respect to the process unless and
until the Board has made a determination or otherwise determines that disclosure is necessary or
appropriate.
APPOINTMENT OF INTERIM CFO
Karnalyte is pleased to announce that Christie Gradin, CPA, CA has been appointed as Interim CFO,
effective July 27, 2020. Ms. Gradin brings extensive expertise, business acumen and senior financial
management experience and will provide important support as the Company navigates its strategic
review process. Karnalyte’s current CFO & Interim CEO, Danielle Favreau, will continue in the role as
Interim CEO and Christie Gradin will assume the CFO responsibilities. The Board determined that
maintaining an Interim CEO position and an Interim CFO position was appropriate at this time until the
strategic review process is completed and permanent appointments can be made based on the future
needs of the Company.
Christie Gradin, CPA, CA has held numerous senior financial and management positions in both private
and publicly traded Companies. Most recently she served as the Director of Finance and Administration
at SED Systems, a division of Calian Inc. She also has experience in the insurance and financial services
industries. Ms. Gradin is currently the CEO of Christie Gradin, CPA P.C. Inc., providing CFO services to
multiple organizations and industries. Ms. Gradin has a Bachelor of Commerce degree from the
University of Saskatchewan and a Masters of Professional Accounting, and is a Chartered Professional
Accountant, Chartered Accountant.
SPECIAL SHAREHOLDER MEETING DATE SET
Karnalyte held its most recent annual meeting of shareholders on June 26, 2020 (the “ 2020 AGM”), at
which each director received over 80% support of the votes cast. Less than two weeks following the
2020 AGM, the Company received a requisition for a special meeting of shareholders from the following
three shareholders: Peter Mason, Greg Szabo, and Mark Zachanowich (the “ Dissident Shareholders”).
The Dissident Shareholders together own not less than 5% of the Company’s issued and outstanding
common shares, are all prior members of Karnalyte’s Board, and per the Dissident Shareholders’ July 7,
2020 press release, “In early 2019, the [Dissident Shareholders] found themselves offside Karnalyte’s
Code of Business Conduct, took responsibility for their actions, and resigned from the Board as the
appropriate and ethical course of action.” The Dissident Shareholders are asking Karnalyte shareholders
to increase the Board size to six and appoint four of their nominees and two nominees from Karnalyte’s
largest investor and strategic partner that holds approximately 38% of the Company’s shares, Gujarat
State Fertilizers and Chemicals Limited.
Subsequent to submitting their requisition, the Dissident Shareholders have made a number of
statements regarding the Company, its Board, and its management. Karnalyte believes many of these
statements to be misleading or demonstrably false, and will respond to some of them before the
Meeting. Certain allegations the Dissident Shareholders publicly released on July 22, 2020, despite
being unproven at this time, require a careful and fair review, which Karnalyte has initiated. The
Company intends to report on the results of the review when it is completed and does not intend to
comment on the status of the review until that time. Shareholders should expect that there will be
financial costs associated with the conduct of the review and the engagement of professional advisors
to ensure that an impartial process is followed.
The Board has set the date for the Meeting for December 15, 2020. Karnalyte respects the rights of all
its shareholders. The Board chose that date in the best interest of Karnalyte and all of its shareholders,
having taken into consideration several factors, including that the 2020 AGM was held a mere month
ago, that to make an informed decision at the Meeting shareholders would benefit from the
information gained following the strategic review and the internal review of allegations made by the
Dissident Shareholders, and the costs of holding an additional meeting. At this time, the Company
estimates that the Meeting will result in a minimum additional unexpected cost to the Company of
$50,000. Shareholders should also expect an increase in legal and other costs as the Company addresses
the Dissident Shareholders’ allegations.
The Board has fixed November 10, 2020 as the record date to determine which shareholders will be
entitled to vote at the Meeting. In advance of the Meeting, shareholders will receive a management
information circular that will include more information about the matters to be presented, and how to
vote, at the Meeting. Shareholders should read that information carefully before deciding how to vote.
There is no need for shareholders to take any action at this time.
ABOUT KARNALYTE RESOURCES INC.
Karnalyte Resources Inc. is a 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 TPY. Karnalyte is also exploring the development of the Proteos Nitrogen Project,
which is a proposed small-scale nitrogen fertilizer 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.
For further information, please contact:
Danielle Favreau
CFO & Interim CEO
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 and 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 approvals 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 feasibility 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 uncertainties could cause actual results to vary from the
forward-looking information in this press release. Additional information on forward-looking statements
and other factors that could affect Karnalyte’s operations 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 applicable securities laws, the Company assumes no
obligation to update or revise them to reflect new events or circumstances.