Karnalyte Resources Inc. Provides Operational and Corporate Update and Announces 2017 Year End Results
KARNALYTE RESOURCES INC. PROVIDES OPERATIONAL AND CORPORATE UPDATE
AND ANNOUNCES 2017 YEAR END RESULTS
Not for distribution to U.S. news wire services or dissemination in the United States.
SASKATOON, SK (CNW - March 27, 201 8) – Karnalyte Resources Inc. ( "Karnalyte" or the
"Company") (TSX: KRN) today announced its financial results and operational and corporate highlights
for the year ended December 31, 2017.
2017 – The Year in Review
2017 was a challenging year for the Company, both from a potash industry perspective, as well as from a
corporate perspective. Potash markets in 2017 witnessed strong global demand, with major potash
producers reporting record shipments, together with an increase in potash prices in all major marke ts.
Notwithstanding the strong demand for potash, and an improving potash price environment, potash prices
have not yet recovered to a level where the Company's potash project in Wynyard, Saskatchewan (the
"Wynyard Project ") is economically viable. As a result, it is still not possible for the Company to
finance and profitably construct and operate a potash mine and production facility at the Wynyard Project
site at the present time.
The Wynyard Project remains a construction ready potash project. All permi ts remain in place,
preliminary detailed engineering is complete, and 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 wil l come a point where the Wynyard Project becomes economically
viable and financeable, and the Company will then be in a position to pursue the construction and
operation of the Wynyard Project.
The Company' s strategic partner, GSFC, remains committed to both the Company and the Wynyard
Project. GSFC has 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 Project, similar to the support
GSFC offered to the C ompany in 2016. See the Company' s material change report filed on March 18,
2016 and MD&A dated March 14, 2017, both available on SEDAR at www.sedar.com.
Wynyard Project
During 2017, the Company continued to undertake additional test -work flowing from the optimization
and de -risking program completed during 2016 (the " Optimization Program "). The Optimization
Program was designed to confirm the design parameters in the National Instrument 43-101 T echnical
Report dated June 23, 2016 (the "Technical Report"). For more information about the Technical Report,
including a more detailed analysis and the assumptions and qualifications on which the Technical Report
authors rely, see the Technical Report av ailable on SEDAR at www.sedar.com. The Optimization
Program included the following:
1. Cavern Testing – The Company measured the brine concentration, temperature, and blanket oil
level in the Belle Plaine zone pilot test cavern to further match actual operati ng conditions to the
ERCOSPLAN laboratory work and verify their modeling of the test cavern. This verification work was
successful and confirmed brine design concentration and temperature set out in the Technical Report. In
addition, the Company prepared a new sonar map of the test cavern for comparison with the initial sonar
mapping done before the test cavern was created. Management believes that these two sonar maps will
assist in analyzing the test results, improving the future detailed engineering desi gn and optimizing the
project economics. Further testing of the Patience Lake Member and the development of a dual well
cavern was determined not to be necessary and will not be undertaken.
2. Decommissioning 2016 Test Cavern Site – Karnalyte largely decommissioned the test cavern site in
accordance with the operating permit from the Government of Saskatchewan. All rental equipment was
returned and most of the Company- owned equipment and material was moved to the permanent storage
yard. These activities also p repared the site for the first phase of the Wynyard Project ( "Phase I")
construction.
3. Disposal Well Temperature Log – To fulfill a condition of the licence for the disposal well requiring a
well temperature log every 5 years, the Company contracted North Rim Exploration Ltd. to carry out a
routine temperature log in November, 2017 to ensure that the continued integrity of the disposal well is
being maintained. In addition, this work included opening up the two disposal zones, thereby increasing
the well' s disposal capacity . The test work was interrupted by very early cold winter conditions on
November 1, 2017 that interfered with the logistics of the water-based testing, and the decision was made
to complete the temperature log in the spring of 2018.
4. Magnesium Testing – The Company extracted samples of the production brine containing MgCl 2
from the Belle Plaine zone pilot test cavern and provided those samples to the Saskatchewan Research
Council ("SRC") for further lab scale testing . The purpose of the test work was to further verify
Karnalyte's process to produce high purity 99% plus Basic Magnesium Carbonate ("BMC") in a specified
variety of formulations to meet various industrial specifications for varying uses . SRC also completed
testing to convert the BMC to high grade Magnesium Oxide ( "MgO") under various calcination
conditions. The Company also undertook an evaluation of the potential markets for MgCl2 brine, BMC
and MgO, which evaluation management believes confirmed the existence of viable mark ets for such
products.
5. EIS Compliance - To comply with terms of the approved Environmental Impact Statement ("EIS")
for the Wynyard Project , the Company engaged Dillon Consulting Limited , who had originally prepared
the EIS, to prepare an updated decommiss ioning, reclamation and financial assurance plan for the
Government of Saskatchewan . This is a standard requirement of the Government of Saskatchewan
performed every 5 years. This plan defines the work and calculates costs that would be required to
decommission and reclaim all existing site work undertaken, and facilities constructed, to date for the
Wynyard Project, in the event that the project does not proceed. A draft plan has been pr ovided to the
Saskatchewan Environment Ministry for review, and the updated plan is expected to be complete d and
accepted during 2018.
6. Review of Project Economics – The Company undertook a review of the economics of the Wynyard
Project, which included a review of: a) alternate throughput levels; b) capital expenditure ( "capex") and
operating expenses ("opex") for the various throughput levels; and c) a review of the capex and opex for
the Wynyard Project as presently designed, with a view towards identifying any potential cost savings.
a) The Company reviewed a variety of throughput levels for the Wynyard Project, ranging from
200,000 TPY potash production, through 250,000 TPY, 312,500 TPY up to the current
Phase I design basis of 625,000 TPY potash production. Management believes that the results
of this exercise confirmed tha t the current Phase I design basis of 625,000 TPY of potash
production provides superior economics, as well as superior per tonne capex and per tonne
opex, to any of the other throughput scenarios investigated.
b) During 2018, the Company plans to continue the review of the various throughput scenarios
as part of an ongoing exercise to explore opportunities to improve the capex and opex for the
Wynyard Project.
c) The Company also investigated the potential to find significant savings on capex and opex for
the current Phase I design basis of 625,000 TPY of potash production thr ough a review of all
front-end engineering and solution mining design. While this investigation did reveal some
potential savings in both capex and opex, management believes that they were n ot of such a
magnitude as to materially affect either the current economics, or the ability to finance, the
Wynyard Project in the current potash price environment.
7. Review of Alternate Technologies – The Company is aware of a number of conceptual ideas for novel
solution mining and processing techniques and technology . The Company has spent considerable time
investigating these ideas, and at present, management understands that none of these ideas have been
progressed beyond the conceptual stage. Given none of these ideas has been the subject of any
comprehensive program of test work whether bench scale, pilot scale, or industrial scale test work, these
ideas remain untested and unproven for potash production. In designing the potash operations for the
Wynyard Project, the Company has relied on conventional, industry standard, proven and workable
technology. The Company plans to continue to monitor research and development programs regarding
novel potash mining techniques and technologies.
Corporate Matters
2017 was also a challenging year for the Company from a corporate perspective . A number of senior
executives resigned or were terminated, and the Company continues to face legal proceedings related
thereto.
The Company engaged an executive search firm to undertake a global executive search for a new Chief
Executive Officer. After a comprehensive six-month process, in February 2018 the Company announced
the appointment of Frank Wheatley as President of the Company. The Company intends for Mr. Wheatley
to become the permanent Chief Executive Officer, replacing I nterim Chief Executive Officer , W. Todd
Rowan, upon the Company arranging successful financing for the Wynyard Project.
Outlook
During 2018, the Company will continue to ensure that it is in a position to make a final investment
decision on the Wynyard Project if the improving potash price environment results in the Wynyard
Project becoming economically viable and financeable.
With new senior management in place, the Company is undertaking a comprehensive review of its
business, operations and strategy, and plans to have completed that review concurrently with the release
of the 2018 first quarter financial results.
2017 Year End Results and Selected Annual Information
The Company has been exercising fiscal restraint while continuing to seek and analyze financing
alternatives for the Wynyard Project. As a result, at December 31, 2017, the Company had cash of $12.3
million, a positive working capital of $12.1 million and no debt. The Company has adequate cash to fund
any existing commitments in 2018. Furthermore, the Company has sufficient cash to meet short term
operating and capital requirements. Karnalyte's 2017 Year End Financial Statements, Management 's
Discussion and Analysis and Annual Information Form are available at www.sedar.com.
The information has been summarised from the Company's audited financial statements.
For further information, please contact:
Danielle Favreau, Chief Financial Officer
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 facili ty, 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.
Selected Annual Results
(CAD $ thousands)
Year ended December 31
2017 2016 2015
Total revenue -$ -$ -$
Interest and other income 114 296 160
Net and comprehensive loss (3,395) (8,852) (14,536)
Basic and diluted per share (0.12) (0.32) (0.53)
Total current assets 12,757 17,156 28,067
Total assets 18,602 23,024 31,962
Total current liabilities 691 1,750 1,883
Total liabilities 846 1,886 2,064
Total shareholders' equity 17,756 21,138 29,898
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 qu alified in their
entirety by this cautionary statement. Subject to applicable securities laws, the Co mpany assumes no
obligation to update or revise them to reflect new events or circumstances.