(all dollar figures expressed in Canadian dollars)
CALGARY, Jan. 10, 2013 /CNW/ - Karnalyte Resources Inc. ("Karnalyte")
(TSX:KRN) and Gujarat State Fertilizers & Chemicals Limited ("GSFC")
(BSE:500690, NSE:GSFC, CSE:GSFC), a publicly-traded Indian agribusiness
company focused on the production and sale of fertilizers and
industrial products, announced today that:
GSFC will make a strategic investment of approximately $45 million in
Karnalyte at a price of $8.15 per common share of Karnalyte ("Common
Shares"), which will result in GSFC holding a 19.98% ownership stake in
Karnalyte and GSFC have agreed to a committed off-take agreement for the
purchase of approximately 350,000 tonnes per year ("TPY") of potash
from Phase 1 of Karnalyte's Wynyard Carnallite Project (the "Project"),
increasing to 600,000 TPY with the commencement of Phase 2. The
off-take agreement will continue for approximately 20 years from the
commencement of commercial production of Phase 1.
"GSFC's strategic investment and entering into the off-take agreement
will support Karnalyte's growth strategy of constructing its potash
production facility and commercializing a superior potash product,"
said Robin Phinney, President and CEO of Karnalyte. "This investment by
GSFC is a significant milestone for Karnalyte and establishes Karnalyte
as a leader among the new class of potash developers. We are confident
that GSFC's strategic investment and committed off-take agreement will
be instrumental in the future success of the Project."
Atanu Chakraborty, IAS, Managing Director of GSFC commented, "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. Karnalyte is ahead of other junior potash mining
companies in Canada in terms of expected commissioning of the Project.
For GSFC, an assured supply will help in expanding its portfolio of
GSFC will subscribe for 19.98% of the issued and outstanding Common
Shares after giving effect to this transaction at a price of $8.15 per
Common Share in a non-brokered private placement (the "Private
Placement") for total gross proceeds of approximately $45 million.
Based on its current issued and outstanding common share capital,
Karnalyte will issue approximately 5,490,000 Common Shares to GSFC upon
closing of the Private Placement. The proceeds from the Private
Placement may be subject to escrow pending Karnalyte receiving final
approval of its environmental impact statement ("EIS") from the
Saskatchewan Ministry of the Environment ("MOE") under the Saskatchewan
Environmental Assessment Act. Karnalyte's public consultation for the
EIS commenced on December 29, 2012 and is expected to conclude on
January 28, 2013. Following the public consultations, Karnalyte
expects to receive final approval from the Saskatchewan MOE shortly
The Common Share issue price of $8.15 is based on a 20% premium to the
volume weighted average price of Karnalyte's Common Shares traded on
the Toronto Stock Exchange ("TSX") for the 20 trading days ended
December 20, 2012. The issue price is subject to an adjustment if
commercial production has not commenced on or before October 1, 2016,
which may be satisfied by the issuance of an additional 555,555 Common
Shares by Karnalyte to GSFC at that time.
Pursuant to the terms of the Subscription Agreement, GSFC shall have the
right to appoint one nominee to the board of directors of Karnalyte.
In addition, GSFC retains the right to maintain its equity position in
future equity offerings and has agreed to commit approximately $15
million in the next rounds of public equity financing by Karnalyte to
finance the construction of Phase 1 of the Project.
Subject to the terms of the off-take agreement, upon commencement of
commercial production, GSFC will be committed to buy 350,000 TPY of
potash from Karnalyte, increasing to 600,000 TPY of potash as capacity
at the Project increases during Phase 2, for a period of approximately
20 years on a take or pay basis.
Closing of the Private Placement (and the coming into effect of the
off-take agreement) is subject to customary closing conditions
including the receipt of all regulatory approval, including the
approval of the TSX. It is anticipated that the closing will take
place on or about February 25, 2013. If MOE approval of the EIS is not
received by May 31, 2013, then either party can terminate the strategic
investment and off-take agreement. All Common Shares distributed
pursuant to the Private Placement will be subject to a hold period of
four months following closing in accordance with applicable Canadian
Karnalyte was advised by BMO Capital Markets on this transaction.
Burstall Winger LLP and Goodmans LLP act as legal counsel to Karnalyte.
GSCF was advised on financial matters by PricewaterhouseCoopers Private
Limited, and by Amarchand & Mangaldas & Suresh A. Shroff & Co. and
Torys LLP on legal matters.
Karnalyte will host a conference call on Thursday, January 10, 2013 at
10:00 a.m. Eastern time to discuss the strategic investment and
off-take agreement with GSFC and then take questions from securities
analysts and institutional investors. Interested parties may access
the conference call by dialing 1 (647) 427-7450 or 1 (888) 231-8191.
Please connect approximately 10 minutes prior to the beginning of the
call. The conference call will be archived for replay until Thursday,
January 17, 2013 at midnight. To access the archived conference call,
dial 1 (416) 849-0833 or 1 (855) 859-2056 and enter the reservation
number 86582242 followed by the number sign.
About Gujarat State Fertilizers & Chemicals
GSFC, founded in 1962, is a publicly traded agribusiness company
focusing on the production and sale of fertilizers and industrial
products in India. In addition to marketing fertilizers and agri-inputs
to nine states throughout India, GSFC also operates a research and
development centre and develops new fertilizer products as well as a
variety of other chemicals and materials, as well as applications for
its various industrial products at its Applications Development Centre.
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, Karnalyte plans
to operate a solution mining facility that will initially produce
625,000 TPY of potash, increasing to 2.125 million TPY of potash.
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.
This press release contains forward-looking statements. More
particularly, this press release contains statements concerning
Karnalyte's off-take agreement with GSFC and GSFC's strategic
investment. The forward-looking statements contained in this document
are based on certain key expectations and assumptions made by
Karnalyte, including with respect to the ability of Karnalyte to obtain
the approval of the MOE, the closing of the transactions described
herein, the ability of Karnalyte to raise additional financing to
complete construction of the Project, and the ability to produce potash
from 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 (including the approval of the MOE), the
failure to raise additional financing, 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), potash
prices 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.
SOURCE: Karnalyte Resources Inc.
For further information:
Robin Phinney, President & Chief Executive Officer
Ron Love, Executive Vice-President & Chief Financial Officer
Telephone: (403) 995-6560