CALGARY, April 29, 2015 /CNW/ - Gujarat State Fertilizers & Chemicals Ltd. ("GSFC"), a significant shareholder of Karnalyte Resources Inc. (TSX: KRN) ("Karnalyte" or the "Company"), wishes to correct misleading statements made by the Company in respect of GSFC and its representatives in its press release dated April 24, 2015.
GSFC made a significant investment in Karnalyte in January 2013 for the development of the Wynyard Project. Since then it has been the largest shareholder of the Company. Karnalyte and its board of directors (the "KRN Board") have been unable to secure the remaining financing required for the completion of the Wynyard Project and requested assistance from GSFC in sourcing the remaining financing required for the Wynyard Project. Recently, GSFC provided a financing proposal (the "Financing Proposal"), which contained indicative terms to be negotiated and finalised amongst the potential financiers and the KRN Board, after significant time and effort was spent by GSFC sourcing such Financing Proposal. The Financing Proposal was offered by highly reputed Indian financial institutions and required significant guarantees by GSFC in respect of the financing in order to ensure the most favourable terms could be made available to the Company. The fact that such a Financing Proposal (albeit indicative) could be negotiated shows that the Wynyard Project is not uneconomic as incorrectly stated by Karnalyte. The assertion that the Financing Proposal "would have rendered the Corporation insolvent and would have completely wiped out shareholder value" is both erroneous and grossly misleading. In this regard, it is also important to note that GSFC has always maintained that any financing proposal which involves raising equity financing (including the Financing Proposal) that is to be approved in respect of the Company, should be put to shareholders (whether legally required or not) and would be supportive of the future KRN Board putting such financing proposal forward to shareholders of KRN for their approval (whether legally required or not).
GSFC rejects any suggestion by the KRN Board that GSFC refused to provide details of the Financing Proposal or that the KRN Board offered a viable alternative for its consideration. All the details requested by the independent committee set up by the KRN Board were provided by GSFC; the members simply refused to review those details or engage in discussing the proposal and instead threatened that if GSFC did not support the finalization of such unviable financing structure and provide unconditional support to the KRN Board in the current proxy contest with Mr. Robin Phinney, they would recommend that the development of the Wynyard Project be shelved. As is evident from the recent press releases issued by Karnalyte, the KRN Board has not just carried out such threats which may destroy the business potential of Karnalyte (thereby prejudicing shareholders) but sought to defend their wrongful actions by publicising misleading statements about GSFC, a highly reputed organisation and a key shareholder of Karnalyte who has, in good faith, and for the benefit of all the stakeholders of the Company made considerable efforts to assist the Company in negotiating a viable financing proposal.
The above actions are evidence of an entrenched board that is ignoring the wishes of an overwhelming number of shareholders representing approximately 59% of Karnalyte shareholders and is not acting in the best interests of shareholders. GSFC is disappointed and dismayed by the actions of the KRN Board, has lost faith in their ability to act in the best interests of the Company and believes an immediate reconstitution of the KRN Board is the only solution to advance Karnalyte and create value for all stakeholders of the Company.
Moving Karnalyte Forward
The proposed financing framework that GSFC has agreed with Mr. Phinney is indicative only, however Mr. Phinney and GSFC are intent on working together for the benefit of all shareholders. Given that the current board's mandate and relevance to the ongoing business of the Company has long since been exhausted, GSFC looks forward to exploring this exciting opportunity further with the reconstituted board and the Company's shareholders in due course.
Except where otherwise stated herein, the statements contained in this press release are not made by or on behalf of the management of Karnalyte but are made by or on behalf of GSFC. For further information regarding this news release, please contact Mr. Sanjeev Varma at +91-265-309-3484 or [email protected].
The registered address of Karnalyte is located at 1600, 333 – 7th Avenue S.W., Calgary, Alberta, T2P 2Z1. A copy of this press release may be obtained on the Company's SEDAR profile at www.sedar.com.
SOURCE Gujarat State Fertilizers & Chemicals Ltd.
For further information: For further information regarding this news release, please contact Mr. Sanjeev Varma at +91-265-309-3484 or [email protected]