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Press release from CNW Group

Karnalyte Resources Inc. announces second quarter 2011 results

Friday, August 12, 2011

Karnalyte Resources Inc. announces second quarter 2011 results07:00 EDT Friday, August 12, 2011CALGARY, Aug. 12, 2011 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended June 30, 2011. Karnalyte intends to construct a potash facility near Wynyard, Saskatchewan which is expected to initially produce 500,000 tonnes of potash per year and ultimately increase to 2 million tonnes of potash per year."This quarter, we made significant progress on the feasibility study for our proposed potash facility and we remain on track to have that study completed before year end. In addition, we completed drilling of seven new wells for the purpose of identifying additional resources outside of the current development area," said Robin Phinney, President and CEO of Karnalyte Resources Inc. "The data gathered from these cores will be used to generate an updated NI 43-101 resource estimate that we expect to receive before the end of the third quarter."Karnalyte's Second Quarter 2011 Financial Statements and Management's Discussion and Analysis (MD&A) are available at HighlightsCompleted a seven hole drilling program to further characterize its land holdings and potential potash resources.Subsequent to the end of the quarter, announced that it had selected Lyntek Incorporated to perform a NI 43-101 compliant pre-feasibility study on magnesium chloride compounds that can be produced from the potash feedstock for potential by-products.The Company remains very well funded with current working capital of approximately $40.7 million as at June 30, 2011.OutlookOver the short term, the Corporation will focus on the following key initiatives:Complete the feasibility study and file the Environmental Impact Statement;Finalize the analysis and interpretation of the recent drilling program to produce an updated NI 43-101 resource estimate;Continue exploration and development of its mineral holdings through additional 3D seismic analysis;Obtain independent assays of product samples recovered from the pilot test facility;Complete a pre-feasibility level study on potential production and marketing of magnesium compounds; andOptimize product quality in cooperation with machinery and equipment suppliers.KARNALYTE RESOURCES INC.     STATEMENTS OF FINANCIAL POSITION     (Unaudited)     ASSETS         As at June 30, December 31,  2011 2010     Current assets     Cash $          44,086,439 $                  59,000,457 Trade and other receivables                    973,942                             43,276 Prepaid expenses                     70,710                           312,865               45,131,091                      59,356,598Restricted cash                   125,000                           125,000Capital assets                 2,997,116                           459,376Intangible exploration and evaluation and other assets              28,003,608                      10,748,278     TOTAL ASSETS $           76,256,815 $                  70,689,252     LIABILITIES         Current liabilities     Trade and other payables $             4,417,080 $                    2,288,123 Current portion of capital lease liability                         6,904                               6,904                   4,423,984                        2,295,027Capital lease liability                        3,453                               6,904Provisions                     151,599                           116,039Total liabilities                  4,579,036                        2,417,970     SHAREHOLDERS' EQUITY         Share capital               77,311,117                      72,313,190Warrants and rights                  1,260,227                        1,273,605Contributed surplus                   3,238,042                        2,359,264Deficit            (10,131,607)         (7,674,777)Total shareholders' equity                71,677,779                      68,271,282     LIABILITIES AND SHAREHOLDERS' EQUITY $            76,256,815 $                  70,689,252     KARNALYTE RESOURCES INC.      STATEMENTS OF LOSS AND COMPREHENSIVE LOSS      Three and six months ended June 30, 2011 and 2010(Unaudited)        Three months ended  Six months ended  June 30,  June 30, 20112010 20112010      Expenses      General and administrative$        725,489$        839,387 $       1,535,914$          1,450,183 Depreciation and amortization           149,112             12,088              205,768                  22,309 Share-based payment expense           434,753        1,023,339              892,957            2,397,620 Other income            (61,429)              (8,530)             (83,909)            (19,458)         1,247,925        1,866,284           2,550,730             3,850,654Finance (income) and expense         Finance income          (120,762)              (7,252)           (158,950)            (12,188)    Finance expense             45,066                      -                   65,050                    2,165Net finance income            (75,696)              (7,252)             (93,900)            (10,023)      Net and comprehensive loss       (1,172,229)       (1,859,032)         (2,456,830)            (3,840,631)      Loss per share         Basic and diluted$             (0.06)$             (0.15) $               (0.12)$                 (0.30)       KARNALYTE RESOURCES INC.       STATEMENTS OF CASH FLOWS       Three and six months ended June 30, 2011 and 2010(Unaudited)          Three months ended  Six months ended   June 30,  June 30,  20112010 20112010Cash Flows from (used in) Operating Activities      Net loss for the period $    (1,172,229)$    (1,859,032) $    (2,456,830)$    (3,840,631)Add/deduct:          Depreciation and amortization               149,112                  12,088            205,768                  22,309    Share-based payment expense               434,753             1,023,339            892,957             2,397,620    Net finance income             (75,696)              (7,252)             (93,900)            (10,023)    Interest income received               120,762                       987            158,950                    1,795Changes in non-cash working capital:          Trade and other receivables           (545,634)                198,145           (831,840)                181,157    Trade and other payables                 74,806                  54,812            126,016            (42,440)    Prepaid expenses                   4,588                    1,936              17,767                    4,566         (1,009,538)          (574,977)        (1,981,112)       (1,285,647)       Cash Flows from (used in) Investing Activities      Additions to intangible assets        (9,997,536)          (938,522)      (14,369,955)       (2,029,520)Additions to capital assets        (1,761,827)            (40,307)        (2,721,563)            (95,743)Decrease in temporary investments                          -               1,354,019                        -               1,493,560       (11,759,363)                375,190      (17,091,518)          (631,703)       Cash Flows from (used in) Financing Activities      Issuance of common shares               515,000                 40,800         5,008,117                  52,300Share issue costs                          -                            -             (786,464)                           -                  515,000                 40,800         4,221,653                  52,300       Effect of foreign exchange on cash             (44,052)                   3,055             (63,041)                       890Change in cash      (12,297,953)             (155,932)      (14,914,018)       (1,864,160)Cash, beginning of period          56,384,392              782,595       59,000,457             2,490,823Cash and cash equivalents, end of period $      44,086,439$           626,663 $   44,086,439$             626,663       KARNALYTE RESOURCES INC.     STATEMENTS OF CHANGES IN EQUITYSix months ended June 30,(Unaudited)      20112010 NumberAmountNumberAmount     Common Shares     Balance, beginning of period      20,093,740$ 72,313,190    12,663,800$ 17,771,007    Common shares issued             470,000      4,042,000                   -                     -      Common shares issued on exercise of share options            135,600         678,000           52,300           52,300    Common shares issued on exercise of broker warrants              33,502         288,117                   -                    -      Transfer on share options exercised                        -           230,125                   -               2,650    Transfer on broker warrants exercised                        -             85,158                   -                     -      Share issue costs                        -         (325,471)                   -                     -  Balance, end of period       20,732,842    77,311,119    12,716,100    17,825,957     Warrants and Rights     Balance, beginning of period            585,624      1,273,605      2,952,524         293,494    Broker warrants issued              28,200           71,780                   -                    -      Broker warrants exercised         (33,502)         (85,158)                   -                     -  Balance, end of period            580,322      1,260,227      2,952,524         293,494     Contributed Surplus    Balance, beginning of period       2,359,264              6,161    Share-based payment expense       1,108,903       2,397,620    Transfer to share capital on exercise        (230,125)            (2,650)Balance, end of period       3,238,042       2,401,131     Deficit    Balance, beginning of period     (7,674,777)     (2,352,686)    Loss for the period     (2,456,830)     (3,840,631)Balance, end of period   (10,131,607)     (6,193,317)     Total Shareholders' Equity    Balance, end of period     71,677,781     14,327,265About Karnalyte Resources Inc.Karnalyte is engaged in the business of exploration and development of high quality agricultural and industrial potash and magnesium products.  Karnalyte intends to develop and extract a carnallite - sylvite mineral deposit through a known solution mining process at competitive costs and with minimal environmental impact.  Using a staged approached to potash plant construction, the Corporation plans to operate a solution mining facility that will initially produce 500,000 tonnes of potash per year, increasing to 2 million tonnes of potash per year. Karnalyte owns a 100% interest in Permit KP 360 and Subsurface Mineral Lease KLSA-010 located near Wynyard, Saskatchewan, comprising a total of 85,126 acres.Forward-Looking StatementsThis press release contains forward-looking statements. More particularly, this press release contains statements concerning the Corporation's future operations. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Karnalyte, including with respect to the Corporation's future operations. Although Karnalyte believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Karnalyte can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals, risks associated with the mining industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), commodity price and exchange rate fluctuations. The forward-looking statements contained in this document are made as of the date hereof and Karnalyte undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.  For further information: Robin Phinney, President & Chief Executive Officer Ron Love, Chief Financial Officer & Vice-President Finance Julius Brinkman, Vice-President Corporate Development Telephone: (403) 995-6560 E-mail: Website: