KARNALYTE RESOURCES INC. ANNOUNCES FIRST QUARTER 2011 RESULTS

CALGARY, May 12 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended March 31, 2011.

"This quarter, Karnalyte accomplished several key goals that are essential to the progression of the Wynyard Carnalite Project," said Robin Phinney, President and CEO of Karnalyte Resources Inc. "The Subsurface Mineral Lease we obtained encompasses the area for the Environmental Impact Statement and feasibility study that Foster Wheeler, GeoEngineers and ERCOSPLAN will complete this year. The drilling licenses we received enable us to continue the exploration and development of our lease and permit holdings so that we may prepare for the construction of a commercial potash facility and pursue additional potash resources."

Karnalyte's First Quarter 2011 Financial Statements and Management's Discussion and Analysis (MD&A) are available at www.sedar.com.

Selected Highlights

  • Closed the over-allotment option granted in connection with its December 2010 initial public offering in January 2011, raising an additional $4,042,000 for total gross proceeds of more than $64 million;
  • Selected engineering firm, Foster Wheeler, in January 2011, to lead the feasibility study, in conjunction with GeoEngineers Inc. and ERCOSPLAN Ingenieurgesellschaft Geotechnik und Bergbau mbH;
  • Completed two drill holes required for the feasibility study, which are currently undergoing caprock analysis;
  • Received approval from the Government of Saskatchewan's Ministry of Energy and Resources in February 2011 to convert 16,825 acres of Karnalyte's Permit KP 360 area to a Subsurface Mineral Lease (KLSA-010); and
  • Received seven additional drilling licenses from the Province of Saskatchewan, permitting drilling and exploration of the Corporation's potash resources. To date, three of the seven drill holes have been completed.

Outlook

Over the short term, the Corporation will continue to focus on the following key initiatives:

  • Pursuing completion of a third party feasibility study and filing the Environmental Impact Assessment;
  • Finalizing the current drilling program and obtaining full analysis of drill cores;
  • Continue exploration and development of its mineral holdings through additional 3D seismic analysis;
  • Obtaining independent assays of product samples recovered from the pilot test facility; and
  • Optimizing product quality in cooperation with machinery and equipment suppliers.
 
KARNALYTE RESOURCES INC.

BALANCE SHEET

(Unaudited)
ASSETS            
             
As at
 
 
 
March 31,
2011
 
 
December 31,
2010
 
 
January 1,
2010
             
Current assets            
  Cash   $    56,384,392   $    59,000,457   $      2,490,823
  Investments                           -                             -              6,147,759
  Trade and other receivables               328,786                 43,276              279,283
  Prepaid expenses              814,275               312,865               216,949
          57,527,453          59,356,598            9,134,814
Restricted cash               125,000               125,000                           -  
Capital assets            1,371,939               459,376              396,938
Intangible exploration and evaluation and other assets       15,286,412          10,748,278            6,867,019
             
TOTAL ASSETS   $    74,310,804   $    70,689,252   $    16,398,771
             
LIABILITIES            
             
Current liabilities            
  Trade and other payables   $      2,386,860   $      2,288,123   $        680,795
  Current portion of capital lease liability                   6,904                   6,904                           -  
             2,393,764            2,295,027              680,795
Capital lease liability                   5,178                   6,904                           -  
Provisions              117,034               116,039                           -  
Total liabilities           2,515,976            2,417,970               680,795
             
SHAREHOLDERS' EQUITY            
             
Share capital          76,621,317          72,313,190         17,771,007
Warrants and rights            1,260,227            1,273,605              293,494
Contributed surplus             2,872,662           2,359,264                   6,161
Deficit           (8,959,378)           (7,674,777)           (2,352,686)
Total shareholders' equity          71,794,828          68,271,282          15,717,976
             
LIABILITIES AND SHAREHOLDERS' EQUITY   $   74,310,804   $   70,689,252   $    16,398,771
             

KARNALYTE RESOURCES INC.
       
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
       
Three months ended March 31,
(Unaudited)
       
  2011   2010
       
Expenses      
  General and administrative $         810,425   $          610,796
  Depreciation and amortization               56,656                  10,221
  Share-based payment expense              458,204             1,374,281
           1,325,285             1,995,298
Other (income) and expense      
  Other income               (60,668)                 (15,864)
  Other expense                 19,984                    2,165
Net other income               (40,684)                 (13,699)
       
Net and comprehensive loss          (1,284,601)            (1,981,599)
       
Loss per share      
  Basic and diluted $             (0.06)   $            (0.16)
       

KARNALYTE RESOURCES INC.
         
STATEMENTS OF CASH FLOWS
         
Three months ended March 31,
(Unaudited)
         
                     2011                    2010
Cash Flows from (used in) Operating Activities        
Net loss for the period   $    (1,284,601)   $    (1,981,599)
Items not involving cash:        
  Depreciation and amortization                 56,656                10,221
  Share-based payment expense               458,204          1,374,281
  Net other income               (40,684)               (13,699)
  Interest and other income received                 60,668                11,736
Changes in non-cash working capital:        
  Trade and other receivables             (286,206)               (16,988)
  Trade and other payables                 51,210               (97,252)
  Prepaid expenses                 13,179                  2,630
              (971,574)             (710,670)
         
Cash Flows from (used in) Investing Activities        
Additions to intangible assets          (4,372,419)          (1,090,998)
Additions to capital assets             (959,736)               (55,436)
Decrease in temporary investments                          -               139,541
           (5,332,155)          (1,006,893)
         
Cash Flows from (used in) Financing Activities        
Issuance of common shares            4,564,897                11,500
Share issue costs             (858,244)                            -  
             3,706,653                11,500
         
Effect of foreign exchange on cash               (18,989)                 (2,165)
Change in cash          (2,616,065)          (1,708,228)
Cash, beginning of period          59,000,457           2,490,823
Cash and cash equivalents, end of period   $    56,384,392     $        782,595

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 Permit KP 360 and Subsurface Mineral Lease KLSA-010 located near Wynyard, Saskatchewan, comprising a total of 85,126 acres.

Forward-Looking Statements

This 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: info@karnalyte.com
Website: www.karnalyte.com


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