Karnalyte Resources Inc. Outlines Updated Strategic Plan and Announces 2018 First Quarter Results
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KARNALYTE RESOURCES INC. OUTLINES UPDATED STRATEGIC PLAN
AND
ANNOUNCES 2018 FIRST QUARTER RESULTS
Not for distribution to U.S. news wire services or dissemination in the United States.
SASKATOON, SK (CNW- May 14, 2018) – Karnalyte Resources Inc. (“Karnalyte” or the “Company”)
(TSX: KRN) today outlined its updated strategic plan, together with its financ ial results and operational
and corporate highlights for the first quarter ended March 31, 2018.
Strategic Plan
Karnalyte announces, after a comprehensive review of its business, operations and strategy during the first
quarter of 2018, that it has updated its strategic plan (the “Strategic Plan”) and intends to diversify its
business into two fertilizer products – potash and nitrogen.
In connection with this updated Strategic Plan, Mr . Frank Wheatley, President of Karnalyte commented
that: “It is time for a fresh start for Karnalyte, and for it to take advantage of opportunities available to it in
Saskatchewan to increase shareholde r value, including diversificati on into the production of a second
fertilizer product - nitrogen fertilizer.”
Mr. Wheatley continued: “Karnalyte’s Wynyard Potash Project remains a construction ready project, and
is poised to be developed once potash prices recover to a point where it becomes economically viable and
can be financed, constructed and profitably operated.”
“Karnalyte is now actively exploring the possibility of developing a small-scale ammonia/urea plant to be
located in Central Saskatchewan. Karnalyte has undertaken preliminary work on this opportunity, and
intends to capitalize on the competitive advantages Saskatchewan provides for nitrogen fertilizer
production. We also believe that the local Saskatchew an market provides an opportunity for a new, small
scale, independent nitrogen fertilizer producer that will provide direct benefits to the local Saskatchewan
farming community,” Mr. Wheatley added.
Overview
After a challenging 2017, Karnalyte started 2018 w ith the appointment of Frank Wheatley as its new
President after a six-month global executive search. Mr. Wheatley undertook a review of Karnalyte’s
business, operations and strategy and with the support of management and the Board of Directors,
determined that Karnalyte required a fresh start. Karnalyte has developed a new strategic plan to diversify
Karnalyte’s business into two fertilizer products – potash and nitrogen. As part of repositioning, refocusing
and rebranding the Company’s business to reflect the updated strategic direction of the Company, the Board
of Directors will ask the shareholders at the upcomi ng annual and special meeting of shareholders to
approve a change of the Company’s name to “Alere Chemicals & Fertilizers Inc.”
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Potash – Wynyard Potash Project
The Wynyard Potash Project remains a construction ready potash project. All environmental permits remain
valid, preliminary detailed engineering is complete, a nd the existing offtake agreement with Gujarat State
Fertilizers & Chemicals Limited (“GSFC”) remains in place. Management believes that if potash prices
continue to improve, then there will come a point where the Company will be able to finance, construct and
profitably operate the Wynyard Potash Project. During 2018, the Company plans to continue the review of
the various throughput scenarios, and to continue to investigate potential cost savings in capital and
operating costs, as part of an ongoing exercise to explore opportunities to improve the economic viability
of the Wynyard Potash Project.
The Company’s strategic partner and single largest shareholder, GSFC, remains committed to both the
Company and the Wynyard Potash Project. GSFC has c onfirmed to the Company that it will continue to
support the structuring of the most cost-effective fi nancing package for the development of the Wynyard
Potash Project, as GSFC has consistently offered to the Company since becoming a shareholder.
Nitrogen – Proteos Nitrogen Project
Proposed Nitrogen Fertilizer Plant: Karnalyte is actively exploring the potential development of a
small-scale ammonia/urea plant to be located in Cent ral Saskatchewan (the “Proteos Nitrogen Project”).
The proposed nitrogen fertilizer plant will have a nameplate production capacity of approximately 700
metric tonnes per day (“mtpd”) ammonia and approxima tely 1,200 mtpd urea, and would be designed to
produce two products – anhydrous ammonia (82-0-0) and granular urea (46-0-0).
Rationale: The Company intends to avail itself of the competitive advantages Saskatchewan provides
for nitrogen fertilizer production, including some of the lowest global natural gas costs, some of the highest
urea prices, together with well-established infrastruct ure, a trained workforce and a politically stable
jurisdiction. Karnalyte is of the view that there is demand for a local, independent producer that provides
an alternate source of supply of nitrogen fertilizer in Saskatchewan. The proposed plant would be the first
greenfields nitrogen fertilizer plant built in Canada in the last 26 years.
Target Market: Karnalyte’s intended primary target market would be independent local Saskatchewan
fertilizer wholesalers within a 400-kilometer radius of Saskatoon, Saskatchewan. A secondary target
market would be the US Midwest fertilizer wholesal ers near to the Canadian – United States border.
Management believes that a Central Saskatchewan location capitalizes on the inherent logistical advantages
presented by situating production in close proximity to local end markets.
Technology Providers: To the extent that Karnalyte proceeds with the Proteos Nitrogen Project, it intends
to use industry leading technology for both the ammoni a and urea plants, and is currently reviewing the
alternate ammonia / urea technologies from the princi pal technology providers to determine the most
appropriate technologies for the Proteos Nitrogen Project.
GSFC Nitrogen Fertilizer Business: Karnalyte’s strategic partner, GSFC, currently operates one ammonia
plant of 445,000 mtpa 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 mtpa 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.
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GSFC is fully supportive of the Company pursuing the development of the Proteos Nitrogen Project and
Karnalyte believes that GSFC’s support, coupled with its five decades of experience in the production of
nitrogen fertilizer, will prove invaluable as Karnalyte pursues this opportunity.
Development Schedule & Milestones:
Initial Work: Initial work undertaken to date by the Co mpany to investigate this opportunity
includes:
Analysis of the Canadian and North American nitrogen fertilizer industry and end markets
Completion of a preliminary fatal flaw analysis, indicating no major impediments or barriers to
entry to the development of the project
Development of a preliminary financial model, with the assistance of GSFC, based on their nitrogen
fertilizer experience
Next Steps: Next steps will include project definition and independent market analysis:
Karnalyte has engaged a recognized fertilizer industry research firm to undertake a formal,
independent market study
The Company is currently in discussions with engineering companies and technology providers to
develop the project definition and the scope of a feasibility study (the “Nitrogen Feasibility Study”)
to confirm the technical and economic viability of the project, initial and sustaining capital costs,
operating costs, together with a detailed project development schedule and budget
Several potentially suitable project sites have been identified and Karnalyte is currently undertaking
due diligence on each of the prospective sites
All necessary environmental baseline work for an environmental impact assessment (the “EIA”)
will commence once a suitable plant site has been secured
Milestones: Near term, indicative project development milestones include:
Project Definition and Initiation of Nitrogen Feasibility Study Second Half 2018
Project site identification and due diligence Second Half 2018
Completion of Independent Market Analysis Second Half 2018
Initiation of Environmental Baseline Studies: Second Half 2018
Completion of Nitrogen Feasibility Study: First Half 2019
Completion of EIA Technical Report / EIA Terms of Reference First Half 2019
Submission of EIA Application: First Half 2019
A more detailed project development schedule and budget will be created as part of the Nitrogen Feasibility
Study. All initial development activities for the first phase of investigation of this opportunity will be
funded from working capital. Additional details on th e Proteos Nitrogen Project will be released as the
project develops.
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Corporate Matters
Annual and Special Meeting of Shareholders
The annual and special meeting (the “Meeting”) of shareholders of the Company will be held on Thursday,
June 7, 2018 in Saskatoon, Saskatchewan. The business to be considered at the Meeting will include the
election of directors, the re-appointment of auditors and the change of the Company’s name to “Alere
Chemicals & Fertilizers Inc.” The notice of meeting and management information circular for the Meeting
provide additional information on the Meeting and are filed concurrently with this press release on SEDAR
at www.sedar.com.
Outlook for 2018
During 2018, the Company will continue to ensure that it is in a position to re-activate the development of
the Wynyard Potash Project if the improving potash price environment results in the Wynyard Potash
Project becoming economically viable and financeable. In addition, the Company intends to continue to
explore the technical and economic viability of devel oping the Proteos Nitrogen Project, with a view to
completing the Nitrogen Feasibility Study during the first half of 2019. A more detailed project
development schedule and budget will be developed as part of the Nitrogen Feasibility Study.
2018 First Quarter Results
At March 31, 2018, the Company had cash of $11.4 million, a positive working capital of $11.5 million
and no debt. The Company has adequate cash to fund any existing commitments in 2018 and the first
quarter of 2019. Furthermore, the Company has su fficient cash to meet short term operating and capital
requirements. Karnalyte’s First Quarter 2018 Financ ial Statements and Managements’ Discussion and
Analysis are available at www.sedar.com.
The information has been summarized from the Company’s Condensed Interim Unaudited Financial
Statements.
Selected Quarterly Results
2018 2017
Mar 31 Mar 31
Total revenue -$ -$
Comprehensive (loss) (745) (7)
Basic and diluted loss per share (0.03) -
Total current assets 12,010 15,724
Total assets 17,839 21,521
Total liabilities 790 388
Total shareholders' equity 17,049 21,133
*Expressed in thousands except loss per share
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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 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 a 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.