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Press release from CNW Group

Karnalyte Resources Inc. Announces Third Quarter 2011 Results

Friday, November 11, 2011

Karnalyte Resources Inc. Announces Third Quarter 2011 Results07:30 EST Friday, November 11, 2011CALGARY, Nov. 11, 2011 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended September 30, 2011. Karnalyte intends to construct a potash facility near Wynyard, Saskatchewan which is expected to initially produce 625,000 tonnes of potash per year and ultimately increase to 2.125 million tonnes of potash per year."The most significant development for Karnalyte this quarter was the receipt of a bankable feasibility study, which confirmed the Project's economic viability, as well as our staged approach to facility construction. In addition, the associated technical report identified considerably greater potash resources than originally estimated, most of which were reclassified as reserves, with approximately 80% of Karnalyte's lease and permit holdings yet to be explored," said Robin Phinney, President and CEO of Karnalyte Resources Inc. "Karnalyte is currently focused on performing detailed engineering activities and obtaining government approval to advance the Project towards the construction phase."Karnalyte's Third Quarter 2011 Financial Statements and Management's Discussion and Analysis (MD&A) will be available at www.sedar.com.Selected HighlightsAnnounced that it will conduct a pre-feasibility study for the production of magnesium compounds in consideration of producing magnesium products as a second product line. The study will delineate magnesium chloride production process flow, determine equipment requirements and provide a capital and operating cost estimate for the production stream. The technical report entitled "Resource Estimate for the Wynyard Carnallite Project, Subsurface Mineral Permit KP 360A and Subsurface Mineral Lease KLSA 010, Saskatchewan, Canada", effective August 30, 2011, included updated resources of net indicated MgCl2 tonnage of 167.9 million metric tonnes.Subsequent to the end of the quarter, received a positive feasibility study and associated technical report for the Wynyard Carnallite Project (the "Project"), which suggested a project life of 68 years at a production rate of 2.125 million tonnes per year. The feasibility study and associated technical report estimated an after-tax internal rate of return of the Project at approximately 22%, and the estimated after-tax net present value of the Project (using a 10% discount rate) of $1,866 million for the 2.125 million tonne per year operation.Subsequent to the end of the quarter, received an updated technical report entitled "Reserve and Resource Estimate for the Wynyard Carnallite Project, Subsurface Mineral Permit KP 360A and Subsurface Mineral Lease KLSA 010, Saskatchewan, Canada", effective October 21, 2011, that quantified the Project's proven and probable KCl reserves at 62.9 and 92.0 million tonnes, respectivelySubsequent to the end of the quarter, submitted an Environmental Impact Statement for the Project to the Saskatchewan Ministry of EnvironmentOutlookOver the short term, the Corporation will focus on the following key initiatives:Continue working with the government to obtain the environmental approvals required for the next phase of the Project;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;Optimize product quality in cooperation with machinery and equipment suppliers; andRaise adequate funding to move the Project forward to the plant and cavern construction phase;KARNALYTE RESOURCES INC.       STATEMENTS OF FINANCIAL POSITION       (Unaudited)       ASSETS             As at September 30, December 31, January 1,  2011 2010 2010       Current assets           Cash $         37,315,587 $            59,000,457 $        2,490,823     Investments                           -                                -              6,147,759     Trade and other receivables                 786,664                      43,276               279,283     Prepaid expenses                   82,348                    312,865               216,949             38,184,599               59,356,598            9,134,814Restricted cash                 375,000                    125,000                         - Capital assets              3,311,049                    459,376               396,938Intangible exploration and evaluation and other assets           33,565,829               10,748,278            6,867,019       TOTAL ASSETS $         75,436,477 $            70,689,252 $      16,398,771       LIABILITIES             Current liabilities           Trade and other payables $           3,434,002 $              2,288,123 $           680,795     Current portion of capital lease liability                     6,904                        6,904                         -                 3,440,906                 2,295,027               680,795Capital lease liability                     1,726                        6,904                         -  Provisions                 176,482                    116,039                         -  Total liabilities              3,619,114               2,417,970               680,795       SHAREHOLDERS' EQUITY             Share capital            77,808,826               72,313,190          17,771,007Warrants and rights              1,146,682                 1,273,605               293,494Contributed surplus               3,543,237                 2,359,264                   6,161Deficit       (10,681,382)         (7,674,777)        (2,352,686)Total shareholders' equity            71,817,363               68,271,282          15,717,976       LIABILITIES AND SHAREHOLDERS' EQUITY $        75,436,477 $            70,689,252 $      16,398,771KARNALYTE RESOURCES INC.      STATEMENTS OF COMPREHENSIVE LOSS      Three and nine months ended September 30, 2011 and 2010(Unaudited)        Three months ended  Nine months ended  September 30,  September 30, 20112010 20112010      Expenses          General and administrative$        795,147$        652,617 $        2,331,061$        2,102,800     Depreciation and amortization           154,719             13,867               360,487                36,176     Share-based payment expense           245,083                    -              1,138,040           2,397,620     Other expense/(income)          (449,959)               1,826           (533,868)            (19,458)            744,990           668,310            3,295,720           4,517,138Finance (income) and expense          Finance income          (196,712)              (7,239)           (355,662)            (19,427)     Finance expense               1,497               2,740                 66,547                  6,731Net finance income          (195,215)              (4,499)           (289,115)            (12,696)      Comprehensive loss          (549,775)          (663,811)        (3,006,605)       (4,504,442)      Loss per share          Basic and diluted$             (0.03)$             (0.05) $             (0.15)$             (0.35)KARNALYTE RESOURCES INC.       STATEMENTS OF CASH FLOWS       Three and nine months ended September 30, 2011 and 2010(Unaudited)          Three months ended  Nine months ended   September 30,  September 30,  20112010 20112010Cash Flows from (used in) Operating Activities      Loss for the period $       (549,775)$       (663,779) $    (3,006,605)$    (4,504,410)Add/deduct:           Depreciation and amortization               154,719              14,516                360,487                36,825     Share-based payment expense               245,083                         -               1,138,040           2,397,620     Net finance income           (195,215)                3,884           (289,115)              (6,139)     Interest income received               123,573                         -                  282,523                  1,795Changes in non-cash working capital:           Trade and other receivables               187,278                        -             (644,562)              181,157     Trade and other payables             (18,930)            (21,648)                107,086            (64,088)     Prepaid expenses                  4,387                3,735                  22,154                  8,301              (48,880)          (663,292)        (2,029,992)       (1,948,939)       Cash Flows from (used in) Investing Activities      Additions to intangible assets        (6,296,377)          (488,361)      (20,666,332)       (2,517,881)Additions to capital assets           (552,553)              (3,420)        (3,274,116)            (99,163)Change in restricted cash           (250,000)                        -             (250,000)                         -  Decrease in temporary investments                         -              738,986                            -             2,232,546         (7,098,930)            247,205      (24,190,448)          (384,498)       Cash Flows from (used in) Financing Activities      Issuance of common shares               384,162            280,000             5,392,279              332,300Share issue costs                          -                         -             (786,464)                          -  Deferred financing costs                           -              (28,118)                          -              (28,118)                384,162            251,882             4,605,815             304,182       Effect of foreign exchange on cash               (7,204)              (2,058)             (70,245)              (1,168)Change in cash        (6,770,852)          (166,263)      (21,684,870)       (2,030,423)Cash, beginning of period        44,086,439            626,663           59,000,457           2,490,823Cash and cash equivalents, end of period $    37,315,587$        460,400 $       37,315,587$          460,400KARNALYTE RESOURCES INC.     STATEMENTS OF CHANGES IN EQUITY     Nine months ended September 30,(Unaudited)      20112010 NumberAmountNumberAmount     Common Shares     Balance, beginning of period20,093,740$      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     132,300             332,300     Common shares issued on exercise of broker warrants       78,172              672,279                   -                           -     Transfer on share options exercised               -              230,125                   -                101,566     Transfer on broker warrants exercised               -              198,703                   -                           -     Share issue costs               -            (325,471)                   -                           -Balance, end of period20,777,512         77,808,82612,796,100         18,204,873     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         (78,172)            (198,703)                -                         -  Balance, end of period    535,652           1,146,682      2,952,524            293,494     Contributed Surplus    Balance, beginning of period            2,359,264                 6,161     Share-based payment expense            1,414,098          2,397,620     Transfer to share capital on exercise             (230,125)             (101,566)Balance, end of period            3,543,237          2,302,215     Deficit    Balance, beginning of period          (7,674,777)          (2,352,686)     Loss for the period          (3,006,605)          (4,504,442)Balance, end of period        (10,681,382)          (6,857,128)     Total Shareholders' Equity    Balance, end of period $      71,817,363 $      13,943,454About 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 625,000 tonnes of potash per year, increasing to 2.125 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.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.  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