Karnalyte Resources Inc. Files Management Information Circular and Issues Letter to Shareholders
KARNALYTE.COM
TSX: KRN
KARNALYTE RESOURCES INC. FILES MANAGEMENT
INFORMATION CIRCULAR AND ISSUES LETTER TO
SHAREHOLDERS
Urges shareholders to vote the BLUE MANAGEMENT PROXY FORM for professional leadership and
stability
Warns that self-interested dissident shareholder interests diverge from those of other
shareholders
/NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES./
SASKATOON, SK, November 23, 2020 – Karnalyte Resources Inc. (“Karnalyte” or the “Company”)
(TSX:KRN) announces that it has filed a Management Information Circular ahead of the Special Meeting
of Karnalyte Resources Shareholders (the “Meeting”), scheduled to be held on December 15, 2020. The
Meeting has been scheduled following a requisition from Peter Matson, Greg Szabo and Mark
Zachanowich, (the “Dissidents”), former Karnalyte Directors who resigned from the Board of Directors
of Karnalyte (the “Board”) in January of 2019, following their breach of the Company’s Code of
Conduct and their fiduciary obligations.
The Management Information Circular is in the process of being mailed to shareholders and can be
downloaded from Karnalyte’s website. Shareholders are urged to review the Management Information
Circular and then vote the BLUE MANAGEMENT PROXY FORM:
1. AGAINST the Directors Removal Resolution, and
2. WITHHOLD from the Dissident Director Election (as described in the Management Information
Circular).
LETTER TO SHAREHOLDERS
Karnalyte has also issued a letter to shareholders, which details the need for professional leadership
and stability and highlights that the Dissident claims and accusations should be disregarded, as the
Dissident interests are not the same as those of other shareholders. In fact, if the Dissidents were
successful in taking control of the Board the future value of shareholders’ investments in Karnalyte
would be threatened. The letter to shareholders is as follows:
Dear Karnalyte Shareholders,
Karnalyte Resources Inc. (“Karnalyte” or the “Company”) faces an unnecessary and expensive
proxy contest, following a requisition from Peter Matson, Greg Szabo and Mark Zachanowich,
(the “Dissidents”). The Dissidents are former Karnalyte Directors who resigned from the Board
of Directors of Karnalyte (the “Board”) in January of 2019, following their breach of the
Company’s Code of Conduct and their fiduciary obligations. To make matters worse, the
Dissidents submitted their requisition very shortly after the current Directors were elected,
with over 80% support of the votes cast. Now, shareholders are faced with an attempt to take
control of the Board by a group of self-interested Dissidents. The good news is that you can
protect your interests in Karnalyte by following the voting recommendations included in the
BLUE MANAGEMENT PROXY FORM.
VOTE THE BLUE MANAGEMENT PROXY FORM FOR PROFESSIONAL LEADERSHIP AND STABILITY
There is considered decision making and positive momentum at Karnalyte. Your existing Board
has initiated a review process to determine the optimal strategic direction to maximize value
for all shareholders, and has engaged a leading business consulting firm to assist in that
strategic review process and to provide an independent review of the pre-feasibility study on
the Nitrogen Project. This independent review is nearing completion and the results will be
shared with shareholders when available. Always acting with an eye towards preserving
shareholder value while also moving the ball forward with discipline, your current Board has
conserved shareholder funds and reduced risk by working with Gujarat State Fertilizers and
Chemicals Ltd. (“GSFC”), the Company’s largest shareholder, on the pre-feasibility study for
the Nitrogen Project.
At the same time, your Board has demonstrated its commitment to good governance and
stewardship by acting quickly and decisively to engage external counsel to investigate dubious
but concerning allegations made by the Dissidents, ultimately finding those claims to be
without merit. Your Board and management team have also refrained from using Company
resources to address relentless attacks, even when the Board and management had every
justification to do so. The Board has instead directed the Company’s depleted cash resources
towards determining the best strategic direction for Karnalyte, an exercise aimed at
maximizing value for all shareholders. At all times, the Board and the management team have
demonstrated their discipline and commitment to acting in the best interests of all
shareholders.
Perhaps most importantly, Karnalyte’s Board has deep and diversified industry expertise, meets
all independence requirements, and is well qualified to oversee the execution of the
Company’s value creation plan. These qualifications stand in stark contrast to the lack of
qualifications on the part of the Dissidents and their handpicked Director nominees.
WITHHOLD FROM SUPPORTING SELF-INTERESTED DISSIDENTS WHO THREATEN THE FUTURE
VALUE OF YOUR INVESTMENT IN KARNALYTE
The Dissidents and their Board nominees are the wrong people, in the wrong place, at the
wrong time. The self-anointed “Concerned Shareholders” have a history of unethical behavior
and putting their own interests ahead of other shareholders. As mentioned above, the
Dissidents were previously Directors of Karnalyte but resigned from the Board after being found
to be in breach of their fiduciary duties and Karnalyte’s Code of Conduct. Regardless, the
Dissidents – who hold just over 5% of the Company’s outstanding shares – are now demanding to
appoint their handpicked Director nominees to two thirds of the seats on Karnalyte’s Board.
It is important to keep in mind that the Dissidents are the same individuals who as Directors,
spent millions of dollars without any real results. To make matters worse, the Dissidents are
continuing to unnecessarily cost Karnalyte shareholders thousands of dollars and would
continue to do so, should they be allowed to pursue their proxy contest misadventure.
Thoroughly and fairly investigating what turned out to be unfounded and unjustified allegations
cost shareholders $103,000. Holding an unnecessary special meeting between two Annual
Meetings and in the middle of a global pandemic is likely to cost shareholders a minimum of
$350,000. Shareholders should question why the Dissidents chose to make their requisition a
short time after the annual meeting instead of making a proposal to be considered at that
annual meeting and avoiding the significant additional costs. If the Dissidents are successful,
they will double the size of the Board resulting in additional costs to shareholders. Adding
insult to injury, the Dissidents may even expect shareholders to pay for the Dissidents’ own
costs if the Dissidents are successful in taking control of Karnalyte. Expect the Dissident costs
to be in the tens to hundreds of thousands of dollars.
According to the information provided to the Company by the Dissidents themselves, the
Dissident director nominees have very limited or no experience serving as directors of a public
company, NO experience in the financing or construction of major capital projects, nor any
experience in the potash or mining sectors. Given the lack of critical skills and industry
expertise within the Dissident Director Nominees and a lack of any vision or clarity regarding
the Dissident’s potash plan, it is fair for shareholders to wonder if the Dissidents’ plan is
actually to abandon the Company’s potash project all together to focus exclusively on the
nitrogen strategy. While the Dissidents have not come out and said this, their choices for their
Director nominees – and corresponding lack of applicable experience or expertise – do beg this
question.
After carefully reviewing what Karnalyte and the Dissidents have to offer – more detail is
included in the Management Information Circular – the choice for shareholders is simple.
Accordingly, your Board unanimously recommends that shareholders vote as follows using only
the BLUE MANAGMENT PROXY FORM:
1. AGAINST the Directors Removal Resolution;
2. WITHHOLD from the Dissident Director Nominees (as described in the Management
Information Circular).
VOTE YOUR BLUE MANAGEMENT PROXY FORM TODAY
The Special Meeting of Shareholders is scheduled for Tuesday, December 15, 2020 but given the
COVID-19 pandemic, shareholders are strongly encouraged not to attend the Meeting in
person. Instead, in order to ensure that their vote is counted at the Meeting, shareholders
are urged to vote in advance and ensure that their vote is received prior to the proxy
voting deadline of Friday, December 11, 2020 at 9:30 a.m. (Saskatoon Time). Shareholders
will be able to listen to the meeting. For more information, please see the Meeting details in
the Management Information Circular.
On behalf of the Board of Directors, we appreciate your investment in Karnalyte, along with
your continued engagement and support. We urge you to vote using the BLUE MANAGEMENT
PROXY FORM for professional management and stability, as we believe the best is yet to come!
Sincerely,
The Board of Directors of Karnalyte Resources Inc.
VOTING INSTRUCTIONS
There are two resolutions for shareholders to vote on. Karnalyte recommends that shareholders vote:
1. AGAINST the Directors Removal Resolution, and
2. WITHHOLD from the Dissident Director Election (as described in the Management
Information Circular).
To ensure that your vote is counted at the Special Meeting of Karnalyte Shareholders, please ensure it
is received well in advance of the proxy voting deadline of Friday, December 11, at 9:30 a.m.
(Saskatoon time). If you require assistance voting your BLUE MANAGEMENT PROXY FORM, contact
[email protected] or call 306-986-1486.
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.
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.