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SASKATOON, SK, Nov. 5, 2020 /CNW/ - Karnalyte Resources Inc.
("Karnalyte" or the "Company") (TSX: KRN) today
announced its financial results and corporate highlights for the
third quarter ended September 30,
2020.
During the third quarter of 2020, the Company completed the
previously announced prefeasibility study for the Proteos Nitrogen
Project, engaged MNP LLP ("MNP") to advise the Company as it
moves through a strategic review process and prepared for a well
workover development project at its Wynyard Potash Project.
As previously announced, the Karnalyte Board of Directors (the
"Board") 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
analyzing potential financing alternatives with a focus on
determining what is in the best interests of Karnalyte and
maximizing value for all of its shareholders. MNP, a leading
Canadian accounting, tax and business consulting firm was appointed
as strategic advisor to support this review. In addition to
assisting with the evaluation of a range of strategic alternatives,
MNP is providing an independent review of the prefeasibility study
Karnalyte recently completed on its Proteos Nitrogen Project. The
Company has been working closely with MNP throughout the quarter
and continues to work with MNP on this engagement. Karnalyte will
provide an update once the review of the prefeasibility study is
completed.
POTASH – WYNYARD POTASH
PROJECT
Market Update - For the most part, market prices for
potash continued to be bearish throughout most of the third quarter
of 2020 with a slight rise in September of 2020. Analysts are
predicting that prices for muriate of potash (MOP) will increase in
the fourth quarter due in part to an increase in demand
expectations and a near-term decrease in supply due to outages from
Nutrien and a reduction in exports from Belarus. For now, analysts are projecting
modest increases in potash prices into 2021 as the global potash
oversupply continues to be depleted and strikes in Belarus and shutdowns at Nutrien decrease the
available supply. Karnalyte continues to monitor the situation.
As previously announced, the Company began preparation for a
well workover development project at the Wynyard project site during the quarter and
this project was completed subsequent to the end of the quarter.
The project consisted of two parts. One was perforation work on the
disposal well tubing throughout the approved injection zones of the
Deadwood and Winnipeg Formations to increase the flow rate of waste
brine that the well will accept. This technique is a standard tool
developed for the oil and gas industry in North America and ultimately may allow for
increased flow through the disposal well thus providing savings to
the operating costs of Phase 1 of the Wynyard project. The second part of this
project was to perform a temperature log test to demonstrate
whether or not there is fluid leakage from the well to the
overlying strata. Regular successful tests are necessary to allow
the continued operation of the potash plant which cannot operate
without functioning disposal wells. The project was a success in
that a significant amount of disposal zone volume was added by the
perforation work. As well, the test, pumping cold water into the
well, recorded a temperature change that met the provincial
government regulations.
NITROGEN – PROTEOS NITROGEN PROJECT
As previously announced, the Company completed the
prefeasibility study of its Proteos Nitrogen Project on
July 21, 2020. Also as previously
announced, the Company has included an independent review of the
prefeasibility study of the Proteos Nitrogen Project in the scope
of work required from MNP as part of their full review of
Karnalyte's strategic options. While Karnalyte was encouraged by
the results of the prefeasibility study, the Company will continue
to take a disciplined and methodical approach to its review and
consideration of the Proteos Nitrogen project. Karnalyte will
provide an update once MNP's independent review of the
prefeasibility study is completed.
SPECIAL SHAREHOLDER MEETING
During the quarter, the Company received a requisition for a
special meeting of shareholders from three shareholders, together
owning not less than 5% of the Company's issued and outstanding
common shares (the "Dissident Shareholders"). The Dissident
Shareholders are asking Karnalyte shareholders to increase the
Board size to six and to appoint four of their nominees and two
nominees of Gujarat State Fertilizers and Chemicals Limited
("GSFC"), Karnalyte's largest investor and strategic partner
that holds approximately 38% of the Company's shares.
The Board has set the date for a special meeting of shareholders
for December 15, 2020. The Board has
fixed November 10, 2020 as the record
date to determine which shareholders will be entitled to vote at
the meeting. The Company will issue a proxy circular that includes
voting instructions and the Board's recommendation to shareholders
ahead of the Special Meeting of Shareholders.
INVESTIGATION
On October 26, 2020 the Company announced the completion of
an investigation into alleged breaches. The investigation was
completed in response to allegations made by the Dissident
Shareholders. A leading law firm completed the extensive review
which included interviews with a number of parties. The
investigation found that the allegations were unfounded and that,
among other things, the Company, its management and its directors
are in compliance with the Company's code of conduct. As such, the
Board has concluded that the Company need not pursue any further
actions or incur any further cost in relation to the Dissident
Shareholders allegations.
OUTLOOK FOR 2020
During the balance of 2020, the Company will continue to work
with MNP to evaluate a broad range of potential strategic
alternatives including the evaluation of existing and future
projects and the analysis of potential financing alternatives. The
Company will also prepare for the special meeting to be held on
December 15, 2020.
2020 THIRD QUARTER RESULTS
At September 30, 2020, the Company
had cash of $5.9 million and positive
net working capital of $5.3 million
and no debt. The Company has adequate cash to fund any existing
commitments in 2020 as well as to meet short term operating and
capital requirements. Karnalyte's Third Quarter 2020 Financial
Statements and Managements' Discussion and Analysis are available
at www.sedar.com and on Karnalyte's website at
www.karnalyte.com.
The following information has been summarised from the Company's
Condensed Interim Unaudited Financial Statements.
|
Sept 30,
2020
|
Sept 30,
2019
|
Total
revenue
|
-
|
-
|
Net and comprehensive
loss
|
(914)
|
(907)
|
Basic and diluted per
share
|
(0.02)
|
(0.02)
|
Total current
assets
|
6,444
|
8,690
|
Total
assets
|
12,198
|
14,517
|
Total
liabilities
|
2,992
|
2,892
|
Total shareholders'
equity
|
9,206
|
11,625
|
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.
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 625,000 TPY
of high grade granular potash, and two subsequent phases of 750,000
TPY each, taking total production up to 2.125 million TPY. All
environmental permits remain valid, preliminary detailed
engineering is complete, and the existing offtake agreement with
Gujarat State Fertilizers & Chemicals Limited remains in
effect. Further development is dependent on improved potash prices
and obtaining financing.
ABOUT THE PROTEOS NITROGEN PROJECT
The Proteos Nitrogen Project is an advanced stage development
project consisting of a proposed small-scale nitrogen fertilizer
plant to be located in Central
Saskatchewan, having a nameplate production capacity of
approximately 700 MTPD of ammonia and approximately 1,200 MTPD of
urea, and designed to produce two products – anhydrous ammonia
(82-0-0) and granular urea (46-0-0). Karnalyte's primary target
market is independent local Saskatchewan fertilizer wholesalers within a
400-kilometer radius of Saskatoon,
Saskatchewan. A secondary target market is the US Midwest
fertilizer wholesalers near to the Canadian – United States border. The proposed plant 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
("GSFC") 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 that was
commissioned in the year 2000, and two urea plants that were
established in 1969, at its fertilizer production complex in
Vadodara, Gujarat State, India.
As the Company's strategic partner and single largest
shareholder, GSFC remains committed to the Company and the Wynyard
Potash Project, and is fully 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.
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.
SOURCE Karnalyte Resources Inc.