Karnalyte Resources Inc. Announces Third Quarter 2011 Results

CALGARY, 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 Highlights

  • Announced 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, respectively
  • Subsequent to the end of the quarter, submitted an Environmental Impact Statement for the Project to the Saskatchewan Ministry of Environment

Outlook

Over 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; and
  • Raise 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              9,134,814
Restricted cash                   375,000                      125,000                           - 
Capital assets                3,311,049                      459,376                 396,938
Intangible 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                 680,795
Capital 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            17,771,007
Warrants and rights                1,146,682                   1,273,605                 293,494
Contributed surplus                 3,543,237                   2,359,264                     6,161
Deficit         (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   $      16,398,771








KARNALYTE 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,
  2011 2010   2011 2010
           
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            4,517,138
Finance (income) and expense          
     Finance income           (196,712)               (7,239)             (355,662)             (19,427)
     Finance expense                1,497                2,740                   66,547                   6,731
Net 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,
    2011 2010   2011 2010
Cash 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                   1,795
Changes 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               332,300
Share 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            2,490,823
Cash and cash equivalents, end of period   $    37,315,587 $        460,400   $       37,315,587 $          460,400






KARNALYTE RESOURCES INC.
         
STATEMENTS OF CHANGES IN EQUITY
         
Nine months ended September 30,
(Unaudited)
         
  2011 2010
  Number Amount Number Amount
         
Common Shares        
Balance, beginning of period 20,093,740 $      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 period 20,777,512          77,808,826 12,796,100          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   $      13,943,454

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 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 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.  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


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