Skip to main content

The Globe and Mail

Karnalyte signs potash deal with India's GSFC

The future mine site for Karnalyte near Wynard, Sask., is shown in an Oct. 29, 2012, file photo.

DAVID STOBBE/The Globe and Mail

After three years of scouting for an independent potash supplier, India's Gujarat State Fertilizers & Chemicals Ltd. finally settled on a tiny Alberta company to fill the role.

GSFC, a National Stock Exchange of India-listed firm that manufactures fertilizers and chemicals, signed a deal on Thursday that will see it invest up to $60-million in Okotoks, Alta.-based Karnalyte Resources Inc., and buy potash from the company for at least 20 years.

The deal underscores the growing push by top consumers India and China to distance themselves from Canada's Canpotex Ltd. and Russia's BPC, producer groups that have long controlled most of the world's potash supply amid strong profits.

Story continues below advertisement

"At present, India is fully dependent on imports of potash. This is a significant partnership by an Indian fertilizer manufacturing company with a potash mining company abroad to procure high-quality potash for the Indian market," Atanu Chakraborty, a managing director of GSFC, said in a statement on Thursday.

"Karnalyte is ahead of other junior potash mining companies in Canada in terms of expected commissioning of the project," he added.

Karnalyte owns a potash deposit near Wynyard, Sask., in the heart of the province's rich potash basin. It is one of several potash companies targeting production in coming years and which are not members of the two producer groups.

GSFC first contacted Karnalyte in February, 2012, after engaging the Saskatchewan government three years ago to help it in its search for supply partners, Karnalyte said on a conference call.

The deal will see GSFC initially purchase $45-million worth of Karnalyte stock at $8.15 a share, taking a 19.98-per-cent stake in the company. The Globe and Mail reported Thursday that a deal was in the works for Karnalyte.

The buyer has also committed to a subsequent equity injection of $15-million in upcoming rounds of public equity financing.

Karnalyte shares, which saw trading halted on Wednesday, rose as much as 9 per cent in Toronto after the deal was announced before ending the day with a 6-per-cent gain to $8.49.

Story continues below advertisement

The company expects to start construction on its project late in the first quarter or early in the second, and plans to spend $626-million in a first phase of development that should see it producing 625,000 tonnes of potash annually.

GSFC committed under the deal to purchase 350,000 tonnes of that potash from Karnalyte at market prices during the first phase. In a second phase, it agreed to purchase 600,000 tonnes a year.

"The reason they wanted a 20-years is because they are investing significant money in NPK blending facilities," Ron Love, Karnalyte's executive vice-president and chief financial officer, told analysts on a conference call, referring to a push by GSFC to expand its potash and other fertilizer blending capabilities over coming years.

"They're investing a lot of money and they want to make sure they have sourced product for a long enough period of time that it does not risk their operations," he said.

Report an error Licensing Options
About the Author
Mining Reporter

Pav Jordan is a mining reporter for the Report on Business. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨