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Press release from CNW Group

Karnalyte announces retention of project finance advisor

Monday, December 19, 2011

Karnalyte announces retention of project finance advisor07:00 EST Monday, December 19, 2011This news release is intended for distribution in Canada only and is not authorized for distribution to United States newswire services or for dissemination in the United States(all dollar figures expressed in Canadian Dollars)CALGARY, Dec. 19, 2011 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced it has engaged the Bank of Montreal to act as its exclusive financial advisor in assisting the Corporation to structure project debt financing to fund a portion of the anticipated development, construction and start-up capital costs for its Wynyard Carnallite Project (the "Project"). A resources and reserve estimate for the Project, dated effective October 21, 2011 (the "Technical Report,") provides for an initial facility with annual capacity of 625,000 tonnes per year ("tpy") of potash product, increasing to 2.125 million tpy, in two additional phases over a five to six year period. The Corporation remains committed to developing its reserves and resources."Debt financing has always been a part of the financing strategy for the Project, and given the current economic environment we feel it is prudent to drive forward with this initiative," said Robin Phinney, President and CEO of Karnalyte. "Having worked since 2008 on the planning and mining plan phase of the Project using leading global engineers and carnallite experts, we are moving forward with our staged approach to construction, which we anticipate will reduce project risk by shortening the timeline to production and lowering the upfront capital commitment."The proceeds of the project financing will be an important part of the total financing package that will enable Karnalyte to begin construction of the initial phase of the Project in 2012 that, based on the Corporation's most recent Technical Report, has an expected development capital expenditure of $593 million. The Corporation expects to fund the development capital expenditure for the initial phase of the Project through a combination of equity and project debt financing.Key Highlights of Karnalyte's Wynyard Carnallite Project:The Subsurface Mineral Permit KP 360A and Subsurface Mineral Lease KLSA 010 which comprise the Wynyard Carnallite Project are 100% owned by Karnalyte Resources Inc.;Located in an attractive jurisdiction with existing infrastructure;Existing, internationally established solution mining method to be employed;Potash solution mining has significantly lower capital costs than traditional shaft mining; andSolution mining provides for rapid start-up, with no requirement for shaft construction and no waiting time sourcing traditional processing equipment.The Corporation engaged Germany-based ERCOSPLAN Ingenieurgesellschaft Geotechnik und Bergbau mbH ( and Saskatchewan-based North Rim Exploration Ltd. ( to prepare a technical report which contributed to the feasibility study for the Project. Foster Wheeler Canada Ltd. ( conducted the feasibility study for the Project. These three firms bring world class industry expertise in carnallite solution mining, potash, and mining projects.Key highlights of the Feasibility Study and Technical Report included:Development capital expenditure ("CAPEX") for the initial 625,000 tpy plant is estimated at $593 million with annual operating expenses ("OPEX") of $133 per tonne KCl.Development CAPEX for the full 2.125 million tpy operation is estimated at $1,973 million (inclusive of the initial $593 million), with OPEX of $129 per tonne KCl.Annual sustaining CAPEX is forecast to begin in the fifth year of production and to ramp up to approximately $22.8 million annually in the ninthyear of production.Estimated after-tax Internal Rate of Return ("IRR") of approximately 22%.Estimated after-tax Net Present Value ("NPV") using a 10% discount rate of $1,866 million for the 2.125 million tpy operation.KCl that can be mined from the Proven Reserves is 62.9 million tonnesKCl that can be mined from the Probable Reserves is 92.0 million tonnesAbout 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.Reader AdvisoryThis press release contains forward-looking statements. More particularly, this press release contains statements concerning the Corporation's debt and equity financing activities, the timeline to production and its 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 ability to secure the debt financing, ability to complete construction in a short term timeframe and its 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: Website: