Karnalyte Resources Inc. Announces Third Quarter 2012 Results

CALGARY, Nov. 13, 2012 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended September 30, 2012.

"This quarter, Karnalyte entered into an engineering, procurement and construction management agreement with Foster Wheeler, and has since launched detailed engineering for the equipment component of our proposed potash plant," said Robin Phinney, President and CEO of Karnalyte Resources Inc. "Our Saskatoon office had its grand opening last month and the engineering team has started preparing the site for construction. We expect to initiate site construction upon securing additional financing."

As at September 30, 2012, the Company had net working capital of $28.1 million compared to $34.7 million at September 30, 2011, including $28.9 million and $37.3 million, respectively, in cash. Karnalyte's Third 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 as required 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 forward to 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		Sept 30,		December 31,
		2012		2011
Current assets
Cash		$     28,853,216		$       34,251,529
Trade and other receivables		301,910		711,774
Prepaid expenses		103,295		99,807
Deferred financing costs		444,710		102,893
		29,703,131		35,166,003
Restricted cash		375,000		375,000
Capital assets		2,900,634		3,223,921
Intangible exploration and evaluation and other assets		42,379,809		37,082,201
ASSETS		$     75,358,574		$      75,847,125
LIABILITIES
Current liabilities
Trade and other payables		$      1,649,501		$        2,365,895
Capital lease liability		1,726		6,904
		1,651,227		2,372,799
Provisions		193,598		185,617
Total liabilities		1,844,825		2,558,416
SHAREHOLDERS' EQUITY
Share capital		86,547,109		82,105,674
Warrants and rights		-		934,950
Contributed surplus		5,171,427		3,276,698
Deficit		(18,204,787)		(13,028,613)
Total shareholders' equity		73,513,749		73,288,709
LIABILITIES AND SHAREHOLDERS' EQUITY		$     75,358,574		$      75,847,125

KARNALYTE RESOURCES INC.
STATEMENTS OF COMPREHENSIVE LOSS
Three and nine months ended Sept 30,
	Three months ended			Nine months ended
	2012	2011		2012	2011
Expenses
General and administrative	$     1,094,436	$        795,147		$     2,675,106	$     2,331,061
Depreciation and amortization	187,417	154,719		603,477	360,487
Share-based payments	751,671	245,083		1,446,583	1,138,040
Transaction costs	-	-		108,984	-
Restructuring expenditures	134,398	-		869,597	-
Other income and expenses	(50,114)	(449,959)		(181,018)	(533,868)
	2,117,808	744,990		5,522,729	3,295,720
Finance income	(130,209)	(196,712)		(361,792)	(355,662)
Finance expense	1,006	1,497		15,240	66,547
Net finance income	(129,203)	(195,215)		(346,552)	(289,115)
Comprehensive loss	(1,988,605)	(549,775)		(5,176,177)	(3,006,605)
Loss per share
Basic and diluted	$             (0.09)	$             (0.03)		$             (0.24)	$             (0.15)

KARNALYTE RESOURCES INC.
STATEMENTS OF CASH FLOWS
Nine months ended Sept 30,
		2012		2011
Cash Flows from (used in) Operating Activities
Net loss for the period		$    (5,176,177)		$    (3,006,605)
Add/deduct:
Depreciation and amortization		603,476		360,487
Share-based payment expense		1,446,583		1,138,040
Net finance and other income		(527,569)		(289,115)
Interest and other income received		542,810		282,523
Changes in non-cash working capital:
Trade and other receivables		31,804		(644,562)
Trade and other payables		(1,019,286)		107,086
Prepaid expenses		13,463		22,154
		(4,084,896)		(2,029,992)
Cash Flows from (used in) Investing Activities
Additions to intangible assets		(4,306,408)		(20,916,332)
Additions to capital assets		(217,138)		(3,274,116)
		(4,523,546)		(24,190,448)
Cash Flows from (used in) Financing Activities
Issuance of common shares		-		5,392,279
Exercise of options and warrants		3,613,731		-
Share issue costs		-		(786,464)
Deferred financing costs		(403,599)		-
		3,210,132		4,605,815
Effect of foreign exchange on cash		(3)		(70,245)
Change in cash		(5,398,313)		(21,684,870)
Cash, beginning of period		34,251,529		59,000,457
Cash and cash equivalents, end of period		$   28,853,216		$       37,315,587

KARNALYTE RESOURCES INC.
STATEMENTS OF CHANGES IN EQUITY
Nine months ended Sept 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	78,172	672,279
Transfer from contributed surplus on options exercised		-	262,184	-	230,125
Transfer from warrants on broker warrants exercised		-	785,520	-	198,703
Share issue costs		-	-	-	(325,471)
Balance, end of period		21,868,914	86,547,109	20,777,512	77,808,826
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)	(78,172)	(198,703)
Broker warrants and rights expired		(59,475)	(149,430)	-	-
Balance, end of period		-	-	535,652	1,146,682
Contributed Surplus
Balance, beginning of period			3,276,698		2,359,264
Share-based payment expense (note 10)			2,139,983		1,414,098
Transfer to share capital on exercise			(262,184)		(230,125)
Option adjustments			(132,500)		-
Broker warrants expired			149,430		-
Balance, end of period			5,171,427		3,543,237
Deficit
Balance, beginning of period			(13,028,610)		(7,674,777)
Loss for the period			(5,176,177)		(3,006,605)
Balance, end of period			(18,204,787)		(10,681,382)
Total Shareholders' Equity
Balance, end of period			$ 73,513,749		$    71,817,363

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.

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