Karnalyte Resources Inc. announces third quarter 2013 results; appointment of new Director

CALGARY, Nov. 14, 2013 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended September 30, 2013.

"During the third quarter, Karnalyte drilled and successfully tested full-production disposal and source water wells, satisfying two conditions of EIS approval," said Robin Phinney, President and CEO of Karnalyte. "As a result, Karnalyte met a major development milestone by receiving the main Wynyard Carnallite Project development permit, clear of all conditions, from the Saskatchewan MOE."

Karnalyte also announced that it has appointed Martin Hall to serve as Director of the Corporation. Mr. Hall is a Chartered Accountant who first qualified in the U.K in 1975. He spent eight years with PricewaterhouseCoopers in London and then Calgary prior to joining a group of small oil and gas and mineral exploration companies where he held various financial positions latterly as CFO. Between 1994 and 2003, Mr. Hall served as CFO of Tesco Corporation, an oilfield service company. Since his retirement from full time employment in 2003, Mr. Hall has been active as a financial consultant and company director for a number public and private Canadian companies.

As at September 30, 2013, the Company had net working capital of $49,319,380 compared to $28,051,904 at September 30, 2012, including $51,512,033 and $28,853,216, respectively, in cash. Karnalyte's Third Quarter 2013 Financial Statements and Management's Discussion and Analysis (MD&A) are available at www.sedar.com.

Key Project Development Highlights

Since July 1, 2013, Karnalyte has achieved the following key milestones in the development of the Wynyard Carnallite Project (the "Project"):

  • Drilled and successfully tested a full-production capacity disposal well;
  • Drilled and successfully tested a second production-size source water well;
  • Received the main Wynyard Carnallite Project development permit, clear of all conditions, from the Saskatchewan MOE;
  • Continued detailed engineering on the potash plant and underground development; and
  • Continued preparing the plant site for construction upon further financing.

Achievement of these milestones constitutes the majority of capital spending related to preparing for plant construction.  Expenditures related to these activities occurred throughout the third quarter and extended into the first half of the fourth quarter.  As of the date of this press release, the Company does not expect to spend further material amounts on Capital or Intangible Assets until further financing is available.

As at             September 30,         December 31,
              2013         2012
Current assets                        
     Cash           $ 51,512,033       $ 25,114,959
     Trade and other receivables                          150,485                      225,363
     Prepaid expenses                          109,324                      128,927
                      51,771,842         25,469,249
Deferred financing costs                       1,536,168         843,897
Restricted cash                          375,000                      375,000
Capital assets                     16,490,876         6,404,557
Intangible exploration and evaluation and other assets                     43,925,697         43,197,551
ASSETS           $ 114,099,583       $ 76,290,254
Current liabilities                        
     Trade and other payables           $ 2,452,012       $ 3,996,019
                        2,452,012                   3,996,019
Provisions                          169,626                      149,956
Total liabilities                       2,621,638                   4,145,975
SHAREHOLDERS' EQUITY                        
Share capital                   129,774,229                 87,473,052
Contributed surplus                        7,270,158                   4,905,686
Deficit                   (25,566,442)               (20,234,459)
Total shareholders' equity                   111,477,945                 72,144,279
LIABILITIES AND SHAREHOLDERS' EQUITY           $ 114,099,583       $ 76,290,254

For the three and nine months ended September 30,
          Three months
      Nine months
          2013       2012       2013       2012
     General and administrative       $ 1,349,865     $ 1,094,436     $ 3,735,725     $ 2,675,106
     Depreciation and amortization                    226,961                  187,417                  631,019                  603,477
     Share-based payments                    583,759                  751,671               1,692,441               1,446,583
     Transaction costs                              -                            -                            -                  108,984
     Restructuring expenditures                      67,628                  134,398                    67,628                  869,597
     Other income and expenses                     (17,682)                   (50,114)                   (21,314)                 (181,018)
                  2,210,531               2,117,808               6,105,499               5,522,729
     Finance income                   (205,985)                 (130,209)                 (803,575)                 (361,792)
     Finance expense                        1,235                      1,006                    30,059                    15,240
Net finance income                   (204,750)                 (129,203)                 (773,516)                 (346,552)
Comprehensive loss                (2,005,781)              (1,988,605)              (5,331,983)              (5,176,177)
Loss per share                                  
     Basic and diluted       $ (0.07)     $ (0.09)     $ (0.20)     $ (0.24)

For the nine months ended September 30,
                  2013             2012
Cash Flows from (used in) Operating Activities                                
Net loss for the period           $     (5,331,983)     $       (5,176,177)
  Depreciation and amortization                 631,019             603,476
  Share-based payment expense                 1,692,441             1,446,583
  Net finance and other income                 (794,830)             (527,569)
  Interest and other income received                 365,674             542,810
Changes in non-cash working capital:                                
  Trade and other receivables                 117,149             31,804
  Trade and other payables                 (639,832)             (1,019,286)
  Prepaid expenses                 28,803             13,463
Purchase of shares pursuant to compensation plans                 (12,319)             -
                  (3,943,878)             (4,084,896)
Cash Flows from (used in) Investing Activities                                
Additions to intangible assets                 (754,904)             (4,306,408)
Additions to capital assets                 (10,845,469)             (217,138)
                  (11,600,373)             (4,523,546)
Cash Flows from (used in) Financing Activities                                
Issuance of common shares                 44,745,994             -
Exercise of options and warrants                 -             3,613,731
Share issue costs                 (2,432,492)             -
Deferred financing costs                 (796,098)             (403,599)
                  41,517,404             3,210,132
Effect of foreign exchange on cash                 423,921             (3)
Change in cash                 26,397,074             (5,398,313)
Cash, beginning of period                 25,114,959             34,251,529
Cash and cash equivalents, end of period               $     51,512,033     $       28,853,216

For the nine months ended September 30,
        2013       2012
        Number       Amount       Number       Amount
Share Capital                                
Balance, beginning of period             21,988,704     $ 87,473,052             21,418,536     $ 82,105,674
  Common shares issued        5,490,306       44,745,994                       -                            -
  Common shares issued on exercise of share options                    -                  -           141,325                  735,875
  Common shares issued on exercise of broker warrants                   -                       -           309,053               2,657,856
  Treasury shares purchased             (2,049)               (12,319)                       -                            -
  Transfer from contributed surplus on options exercised                      -                        -                   -            262,184
  Transfer from contributed surplus on broker warrants                      -                     -                        -                  785,520
  Share issue costs                       -       (2,432,498)                    -                   -
Balance, end of period       27,476,961       129,774,229       21,868,914       86,547,109
Warrants and Rights                                
Balance, beginning of period       -       -       368,528       934,950
  Broker warrants and rights exercised       -       -       (309,053)                 (785,520)
  Broker warrants and rights expired       -       -         (59,475)                 (149,430)
Balance, end of period       -         -                -                            -
Contributed Surplus                                
Balance, beginning of period                         4,905,686                       3,276,698
  Share-based payment expense                         2,364,472                       2,139,983
  Transfer to share capital on exercise                                     -                         (262,184)
  Option adjustments                                     -                         (132,500)
  Option adjustments                                     -                          149,430
Balance, end of period                         7,270,158                       5,171,427
Balance, beginning of period                     (20,234,459)                    (13,028,610)
  Loss for the period                     (5,331,983)                      (5,176,177)
Balance, end of period                   (25,566,442)                    (18,204,787)
Total Shareholders' Equity                                
Balance, end of period             $ 111,477,945             $ 73,513,749

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 impacts. 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. Readers are cautioned that the foregoing list of factors is not exhaustive.  Additional information on these and other factors that could affect Karnalyte's operations and financial results are included in documents on file with Canadian Securities regulatory authorities and maybe accessed through the SEDAR website (www.sedar.com). 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
E-mail: info@karnalyte.com
Website: www.karnalyte.com


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