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Press release from CNW Group

Karnalyte Announces Significant Increase in Potash and Magnesium Resources

Thursday, September 01, 2011

Karnalyte Announces Significant Increase in Potash and Magnesium Resources07:30 EDT Thursday, September 01, 2011CALGARY, Sept. 1, 2011 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced that it has received an updated resource estimate for its potash property (the "Karnalyte Property") located near Wynyard, Saskatchewan.  The technical report, effective August 30, 2011 and entitled "Resource Estimate for the Wynyard Carnallite Project, Subsurface Mineral Permit KP 360A and Subsurface Mineral Lease KLSA 010, Saskatchewan, Canada" (the "Report"), was prepared by ERCOSPLAN Ingenieurgessellschaft Geotechnik und Bergbau mbH ("ERCOSPLAN") and North Rim Exploration Ltd. ("North Rim"), and is in accordance with National Instrument 43-101 ("NI 43-101").Highlights of the Report include:● Net indicated KCl tonnage of 201.3 million metric tonnes ("MMT"), an increase of 258% from 56.19 MMT reported in previous estimates*.● Net indicated MgCl2 tonnage of 167.9 MMT,an increase of 235% from 50.16 MMT reported in previous estimates*. The Report states "in total the project contains 4,984 MMT of total Indicated Resources (carnallitite and sylvinite) with a weighted average KCl content of 14.4%, which includes 4,046 MMT of carnallitite with a weighted average MgCl2 content of 15.1%.  At a typical solution mining recovery of 27.5% from the carnallitite and 30% from the sylvinite this translates to 201.3 million tonnes of extractable KCl and 167.9 million tonnes of extractable MgCl2.""The updated resource estimate is incredibly encouraging as we have identified additional potash resources far beyond those captured in the 2010 Preliminary Assessment," said Robin Phinney, President and CEO of Karnalyte. "We had previously outlined sufficient resources in the current development area for 30 years of production at the one 2 million tonne-per-year facility that we are currently working towards.  The new resources identified in this updated Report are 3.6 times the number of resources identified in the 2010 Preliminary Assessment. These resources are based on approximately 20% (17,500 acres) of our lease and permit area with 80% yet to be explored."*Previous resource estimates were reported in the Corporation's NI 43-101 compliant technical report entitled "Preliminary Assessment Study, Wynyard Carnallite Project, Subsurface Mineral Permit KP 360, Saskatchewan, Canada" (the "2010 Preliminary Assessment"). The 2010 Preliminary Assessment, effective August 26, 2010, was conducted by ERCOSPLAN, North Rim and Foster Wheeler USA Corporation. The Qualified Persons as defined in NI 43-101 (the "Qualified Persons") for the report were Dr. Henry Rauche, P.Geo., Ph.D., Dr Sebastiaan van der Klauw, P.Geo., Ph.D., Mr. Mo Molavi, M. Eng. P.Eng., Mr. Earl Gebhardt, P. Eng, Mr. Stephen P. Halabura, M.Sc. P.Geo., Ms. Debbie Shewfelt, M.Sc., P. Geo., and Mr. Paul Rogers, P.Eng.  The 2010 Preliminary Assessment is available in Karnalyte's profile on SEDAR at www.sedar.com.A summary of the Mineral Resources of the Karnalyte Property identified in the Report is presented in the following tables:INDICATED RESOURCE SUMMARY Average3KCl Grade (%)Average3MgCl2 Grade (%)In-Place Tonnage (MMT)1,2Total ExtractionTonnage4(MMT)Net KCl Tonnage5,6(MMT)Net2 MgCl2 Tonnage5,6(MMT)Mineable Carnallitite713.80%15.09%4,0461,112153.5167.9Mineable Sylvinite716.98% 93828247.8 Total for KCl714.4% 4,9841,394201.3 INFERRED RESOURCE SUMMARY Average3KCl Grade (%)Average3MgCl2Grade (%)In-Place Tonnage (MMT)1,2Total Extraction Tonnage4(MMT)NetKCl Tonnage5,6(MMT)Net2 MgCl2 Tonnage5,6(MMT)Mineable Carnallitite713.75%14.93%4,6241,271174.8189.9Mineable Sylvinite717.20% 1,56146880.6 Total for KCl714.6% 6,1851,739255.4 Notes:MMT= million metric tonnes.Area exclusions have been applied.  Exclusions include 10% of the area for unknown anomalies inside 3D seismic area, 25% of the area for unknown anomalies outside 3D seismic area.Average KCl Grade" and "Average MgCl2 Grade" refer to weighted averages.Variable Extraction Ratio (27.5% for the Patience Lake and Belle Plaine, 30% for Esterhazy Member)."Net KCl Tonnage" and "Net MgCl2 Tonnage" refer to total amount of extractable KCl and MgCl2 resource in the project area (i.e. Area x Thickness x Density (Sylvite or Carnallite) x Grade x Deductions). Deductions include Variable Extraction Ratio (27.5% for Patience Lake and Belle Plaine, 30% for Esterhazy Member)."Net KCl Tonnage" and "Net MgCl2 Tonnage" were reported as Net KCl Resource and Net MgCl2 Resource in the 2010 Preliminary Assessment.Total values are either averages or sums (as applicable).The Report is based on ten drill holes, including the original three analyzed for the 2010 Preliminary Assessment, and the seven drill holes sunk earlier this year from a location outside of the current development area. In calculating the Mineral Resource tonnages, the following procedures were applied:The area for calculation is determined by measuring the total area of Karnalyte granted Crown mineral lands within the drill hole radii of influence and deducting areas not held by Karnalyte such as freehold mineral title lands, and areas deemed to have been affected by salt dissolution and collapse anomalies;A deduction of 10% of the area is made to account for salt dissolution areas below the scale of seismic resolution in the areas with 3D seismic coverage and of 25% in areas with no 3D seismic coverage as there is a higher risk of encountering large scale collapse features, providing a net area;The volume (mineral interval) for each area and zone is calculated by multiplying the net area by the thickness of the potential solution mining intervals present in the Patience Lake, Belle Plaine and Esterhazy Members;The volume is multiplied by a density factor being calculated from the mineral composition of the canallitite and sylvinitic rock as determined from assays, typically in the range of 1.8 resp. 2.1 t/m³, to provide the in-situ sylvinite and carnallitite tonnage;The resources were transformed to product tonnes using following procedure;a.     The in-situ tonnage is multiplied by the KCl concentration and in case of the carnallitite with the MgCl2 concentration to obtain in-situ KCl tonnage and MgCl2 tonnage;b.     A deduction for overall solution mining recovery is included to provide the amount of mineable KCl and MgCl2, these are not reported as resources;c.     A typical 90% recovery of the process plant (i.e. no refinery runs at 100% recovery) is used, to provide an estimate of the amount of KCl product that can be produced from the resource.  An 85% recovery of the process plant for MgCl2 was used.A copy of the Report will be filed on SEDAR within 45 days. The principal author of the Report is Dr. Henry Rauche EurGeol of ERCOSPLAN. Further authors are Dr. Sebastiaan N.G.C. van der Klauw, EurGeol of ERCOSPLAN, and Ms. Lola Piché P. Geo. of North Rim. The authors are Qualified Persons and have reviewed the contents of this news release.The Corporation is concurrently conducting an environmental impact statement as well as a feasibility study and expects to have the results of the feasibility study by the end of 2011. The feasibility study will examine the economic feasibility of constructing a solution mining facility that will initially produce 500,000 tonnes of potash per year, increasing to 2 million tonnes of potash per year. The study will consider the analysis of the aforementioned ten drill holes, as well as the two drill holes completed earlier this year for dissolution and rock mechanical testing.About 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 Subsurface Permit KP 360A and Subsurface Mineral Lease KLSA-010 located near Wynyard, Saskatchewan, comprising a total of 85,126 acres.Reader AdvisoryThis 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.  Mineral resources that are not mineral reserves do not have demonstrated economic viability. 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: info@karnalyte.com Website: www.karnalyte.com