Karnalyte Resources Inc. announces second quarter 2012 results

CALGARY, Aug. 14, 2012 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended June 30, 2012.

"This quarter, Karnalyte began preparation for the detailed engineering and construction phase of the Wynyard Carnallite Project by securing office space in Saskatoon and hiring key personnel," said Robin Phinney, President and CEO of Karnalyte Resources Inc. "We plan to launch detailed engineering upon the office's opening, which we expect in the third quarter of this year, with commencement of site preparation activities expected before year end. In addition to the progress made towards potash product development, we received a positive Preliminary Feasibility Study for magnesium products subsequent to quarter end that supports the opportunity to produce and market magnesium products as a second product line."

As at June 30, 2012, the Company had net working capital of $30.5 million compared to $40.7 million at June 30, 2011, including $31.5 million and $44.1 million, respectively, in cash. Karnalyte's Second 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:

• Hiring personnel to fill positions at its Saskatoon office;
• Working with the government to obtain the environmental approvals required for construction;
• Pursuing debt and/or equity financing to obtain the total funding required to bring the Project toward plant and mine construction;
• Pursuing a strategic partnership for potential project financing, off-take arrangements and/or marketing assistance;
• Determining the next steps required to pursue the magnesium compound production and marketing opportunity; and
• Optimizing product quality in cooperation with machinery and equipment suppliers.

KARNALYTE RESOURCES INC.
STATEMENTS OF FINANCIAL POSITION
ASSETS
As at			June 30,			December 31,
			2012			2011
Current assets
	Cash	$	31,472,099		$	34,251,529
	Trade and other receivables		188,325			711,774
	Prepaid expenses		111,162			99,807
	Deferred financing costs		500,152			102,893
			32,271,738			35,166,003
Restricted cash			375,000			375,000
Capital assets			2,967,854			3,223,921
Intangible exploration and evaluation and other assets			40,797,335			37,082,201
ASSETS		$	76,411,927		$	75,847,125
LIABILITIES
Current liabilities
	Trade and other payables	$	1,763,818		$	2,365,895
	Capital lease liability		3,452			6,904
			1,767,270			2,372,799
Provisions			194,630			185,617
Total liabilities			1,961,900			2,558,416
SHAREHOLDERS' EQUITY
Share capital			86,547,109			82,105,674
Warrants and rights			149,430			934,950
Contributed surplus			3,969,670			3,276,698
Deficit			(16,216,182)			(13,028,613)
Total shareholders' equity			74,450,027			73,288,709
LIABILITIES AND SHAREHOLDERS' EQUITY		$	76,411,927		$	75,847,125

See accompanying notes to the interim financial statements.

KARNALYTE RESOURCES INC.
STATEMENTS OF COMPREHENSIVE LOSS
Three and six months ended June 30,
						Three months ended					Six months ended
				2012		2011		2012			2011
Expenses
	General and administrative	$		782,363	$	725,489	$	1,580,670		$	1,535,914
	Depreciation and amortization			222,714		149,112		416,059			205,768
	Share-based payments			564,391		434,753		694,912			892,957
	Transaction costs			-		-		108,984			-
	Restructuring expenditures			735,199		-		735,199			-
	Other income and expenses			(105,226)		(61,429)		(130,904)			(83,909)
				2,199,441		1,247,925		3,404,920			2,550,730
	Finance income			(113,808)		(120,762)		(231,583)			(158,950)
	Finance expense			11,206		45,066		14,235			65,050
Net finance income				(102,602)		(75,696)		(217,348)			(93,900)
Comprehensive loss				(2,096,839)		(1,172,229)		(3,187,572)			(2,456,830)
Loss per share
	Basic and diluted	$		(0.10)	$	(0.06)	$	(0.15)		$	(0.12)

See accompanying notes to the interim financial statements.

KARNALYTE RESOURCES INC.
STATEMENTS OF CASH FLOWS
Six months ended June 30,
			2012			2011
Cash Flows from (used in) Operating Activities
Net loss for the period		$	(3,187,572)		$	(2,456,830)
Add/deduct:
	Depreciation and amortization		416,059			205,768
	Share-based payment expense		694,912			892,957
	Net finance and other income		(348,252)			(93,900)
	Interest and other income received		362,487			158,950
Changes in non-cash working capital:
	Trade and other receivables		146,934			(831,840)
	Trade and other payables		(889,874)			126,016
	Prepaid expenses		(11,104)			17,767
			(2,816,410)			(1,981,112)
Cash Flows from (used in) Investing Activities
Additions to intangible assets			(2,931,604)			(14,369,955)
Additions to capital assets			(124,738)			(2,721,563)
			(3,056,342)			(17,091,518)
Cash Flows from (used in) Financing Activities
Issuance of common shares			-			5,008,117
Exercise of options and warrants			3,613,731			-
Share issue costs			-			(786,464)
Deferred financing costs			(508,646)			-
			3,105,085			4,221,653
Effect of foreign exchange on cash			(11,763)			(63,041)
Change in cash			(2,779,430)			(14,914,018)
Cash, beginning of period			34,251,529			59,000,457
Cash and cash equivalents, end of period		$	31,472,099		$	44,086,439

See accompanying notes to the interim financial statements.

KARNALYTE RESOURCES INC.
STATEMENTS OF CHANGES IN EQUITY
Six months ended June 30,
		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	141,325		735,875			135,600		678,000
	Common shares issued on exercise of broker warrants	309,053		2,657,856			33,502		288,117
	Transfer from contributed surplus on options exercised	-		262,184			-		230,125
	Transfer from warrants on broker warrants exercised	-		785,520			-		85,158
	Share issue costs	-		-			-		(325,471)
Balance, end of period		21,868,914		86,547,109			20,732,842		77,311,119
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	(309,053)		(785,520)			(33,502)		(85,158)
Balance, end of period		59,475		149,430			580,322		1,260,227
Contributed Surplus
Balance, beginning of period				3,276,698					2,359,264
	Share-based payment expense			1,082,847					1,108,903
	Transfer to share capital on exercise			(262,184)					(230,125)
	Option adjustments			(127,691)
Balance, end of period				3,969,670					3,238,042
Deficit
Balance, beginning of period				(13,028,610)					(7,674,777)
	Loss for the period			(3,187,572)					(2,456,830)
Balance, end of period				(16,216,182)					(10,131,607)
Total Shareholders' Equity
Balance, end of period				$ 74,450,027					$ 71,677,781

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.

 

SOURCE: Karnalyte Resources Inc.

For further information:

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