Karnalyte Resources Inc. announces first quarter 2012 results

CALGARY, May 14, 2012 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended March 31, 2012.

"Karnalyte's near-term plan is to establish an office in Saskatchewan and assemble an engineering team to commence detailed engineering activities," said Robin Phinney, President and CEO of Karnalyte Resources Inc. "As detailed engineering work advances, we intend on initiating site preparation activities before the end of the year."

As at March 31, 2012, the Company had net working capital of $31,390,734 compared to $55,133,689 at March 31, 2011, including $32,032,143 and $56,384,392, respectively, in cash. Karnalyte's First Quarter 2012 Financial Statements and Management's Discussion and Analysis (MD&A) are available at www.sedar.com.

Outlook

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

• Pursuing a strategic partnership for potential project financing, off-take arrangements and/or marketing assistance;
• Completing its pre-feasibility level study on production and marketing of magnesium compounds;
• Hiring of internal engineering staff for detailed engineering activities and commencement of operations at its Saskatoon office;
• Working with the Government of Saskatchewan to obtain the environmental approvals required for construction;
• Pursuing debt and/or equity financing to obtain the total funding required to bring the project forward to plant and mine construction; and
• Optimizing product quality in cooperation with machinery and equipment suppliers.

KARNALYTE RESOURCES INC.
STATEMENTS OF FINANCIAL POSITION
ASSETS
As at				March 31,			December 31,
				2012			2011
Current assets
	Cash		$	32,032,143		$	34,251,529
	Trade and other receivables			104,106			711,774
	Prepaid expenses			103,087			99,807
	Deferred financing expenses			405,201			102,893
				32,644,537			35,166,003
Restricted cash				375,000			375,000
Capital assets				3,135,400			3,223,921
Intangible exploration and evaluation and other assets				38,307,124			37,082,201
ASSETS			$	74,462,061		$	75,847,125
LIABILITIES
Current liabilities
	Trade and other payables		$	1,248,625		$	2,365,895
	Capital lease liability			5,178			6,904
				1,253,803			2,372,799
Provisions				181,454			185,617
Total liabilities				1,435,257			2,558,416
SHAREHOLDERS' EQUITY
Share capital				83,048,638			82,105,674
Warrants and rights				934,950			934,950
Contributed surplus				3,162,562			3,276,698
Deficit				(14,119,346)			(13,028,613)
Total shareholders' equity				73,026,804			73,288,709
LIABILITIES AND SHAREHOLDERS' EQUITY			$	74,462,061		$	75,847,125
See accompanying notes to the financial statements.

KARNALYTE RESOURCES INC.
STATEMENTS OF COMPREHENSIVE LOSS
For the three months ended March 31,
			2012			2011
Expenses
	General and administrative	$	798,307		$	810,425
	Depreciation and amortization		193,345			56,656
	Share-based payments		130,521			458,204
	Other income		(25,678)			(22,480)
	Transaction costs		108,984			-
			1,205,479			1,302,805
	Finance income		(117,775)			(38,188)
	Finance expense		3,029			19,984
Net finance income			(114,746)			(18,204)
Comprehensive loss			(1,090,733)			(1,284,601)
Loss per share
	Basic and diluted	$	(0.05)		$	(0.06)
See accompanying notes to the financial statements.

KARNALYTE RESOURCES INC.
STATEMENTS OF CASH FLOWS
For the three months ended March 31,
					2012			2011
Cash Flows from (used in) Operating Activities
Loss for the period			$		(1,090,733)		$	(1,284,601)
Add/deduct:
		Depreciation and amortization			193,345			56,656
		Share-based payment expense			130,521			458,204
		Net finance and other income			(140,424)			(40,684)
		Interest and other income received			143,453			60,668
Changes in non-cash working capital:
		Trade and other receivables			231,153			(286,206)
		Trade and other payables			(928,463)			51,210
		Prepaid expenses			13,920			13,179
					(1,447,228)			(971,574)
Cash Flows from (used in) Investing Activities
Additions to intangible assets					(1,284,257)			(4,372,419)
Additions to capital assets					(79,539)			(959,736)
					(1,363,796)			(5,332,155)
Cash Flows from (used in) Financing Activities
Issuance of common shares					-			4,564,897
Exercise of options					886,000			-
Share issue costs					-			(858,244)
Deferred financing costs					(292,234)			-
					593,766			3,706,653
Effect of foreign exchange on cash					(2,128)			(18,989)
Change in cash					(2,219,386)			(2,616,065)
Cash, beginning of period					34,251,529			59,000,457
Cash, end of period			$		32,032,143		$	56,384,392
See accompanying notes to the financial statements.

KARNALYTE RESOURCES INC.
STATEMENTS OF CHANGES IN EQUITY
Three months ended March 31,
		2012					2011
		Number				Amount	Number				Amount
Share Capital
Balance, beginning of period		21,418,536		$		82,105,674	20,093,740		$		72,313,190
	Common shares issued	-				-	470,000				4,042,000
	Common shares issued on exercise of share options	133,200				666,000	32,600				163,000
	Common shares issued on exercise of broker warrants	-				-	33,502				288,117
	Transfer of contributed surplus	-				276,964	-				55,325
	Transfer on broker warrants exercised	-				-	-				85,158
	Share issue costs	-				-	-				(325,473)
Balance, end of period		21,551,736				83,048,638	20,629,842				76,621,317
Warrants and Rights
Balance, beginning of period		368,528				934,950	585,624				1,273,605
	Broker warrants and rights issued	-				-	28,200				71,780
	Broker warrants and rights exercised	-				-	(33,502)				(85,158)
Balance, end of period		368,528				934,950	580,322				1,260,227
Contributed Surplus
Balance, beginning of period						3,276,698					2,359,264
	Share-based payment expense					162,828					568,723
	Transfer to share capital on exercise					(276,964)					(55,325)
Balance, end of period						3,162,562					2,872,662
Deficit
Balance, beginning of period						(13,028,613)					(7,674,777)
	Loss for the period					(1,090,733)					(1,284,601)
Balance, end of period						(14,119,346)					(8,959,378)
Total Shareholders' Equity
Balance, end of period				$		73,026,804			$		71,794,828
See accompanying notes to the financial statements.

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.

Robin Phinney, President & Chief Executive Officer
Ron Love, Chief Financial Officer & Vice-President Finance
Telephone: [phone]
E-mail: [email protected]
Website: www.karnalyte.com