Karnalyte Resources Inc. Announces Thomas Drolet as Permanent CEO; Second Quarter 2014 Results

CALGARY, Aug. 14, 2014 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN), has previously announced on 13 May 2014 Mr. Thomas Drolet's appointment as acting  President and Chief Executive Officer ("CEO") for an initial period of six months to a year.

The Board of Directors are pleased to announce today the appointment of Mr. Thomas Drolet as the permanent President and CEO of Karnalyte Resources Inc.

"Mr. Drolet has made significant advances with the Corporation's strategic plan and positioning the company to begin construction," stated Bruce Townsend, Chairman of the Board.  "Mr. Drolet has the responsibility of aggressively pursuing financing to build the 625,000 tonnes per year ("tpy") Wynyard Carnallite Project potash facility (the "Project")."  

Highlights of the Strategic Plan include:

• Aggressively pursue additional strategic partners and finance components
• Continuing to advance the detailed engineering for full construction
• Developing, progressing and pursuing markets and product development for magnesium co-products

Karnalyte Resources Inc. is poised to be the next junior potash company to build a Project with our strategic partner, Gujarat State Fertilizers & Chemicals ("GSFC").  Competitive advantages for the Project include:

• Receiving a positive bankable feasibility study confirming economic viability of the Project, with:
  • Development capital expenditure ("CAPEX") for the initial 625,000 tpy plant estimated at $593 million with annual operating expenses ("OPEX") of $133 per tonne KCl
  • Development CAPEX for the full 2.125 million tonne per year  operation estimated at $2,002 million (inclusive of the initial $593 million), with OPEX of $125.45 per tonne KCl
• Receiving Environmental Impact Statement ("EIS") approval from the Saskatchewan Ministry of Environment ("MOE") to initiate construction of the Project
• Entering into a strategic investment and off-take agreement with GSFC, where GSFC has agreed to purchase approximately 350,000 tpy of potash from Phase 1 of the Project, increasing to 600,000 tpy with the commencement of Phase 2, at prevailing market prices
• Engaging BNP Paribas and Natixis, New York Branch, on an exclusive basis, to act as lead arrangers for a senior secured project finance facility of up to US$300 million
• Selecting Whiting Equipment Canada Inc. as its major equipment supplier
• Receiving notice that the Saskatchewan MOE is satisfied with the injection testing
• Received water right licence and approval to operate ground water works

As at June 30, 2014, the Company had net working capital of $44.2 million compared to $44.4 million at June 30, 2013, including $44.4 million and $56.2 million, respectively, in cash. Karnalyte's Second Quarter 2014 Financial Statements and Management's Discussion and Analysis (MD&A) are available at www.sedar.com .

KARNALYTE RESOURCES INC.
STATEMENTS OF FINANCIAL POSITION
ASSETS
		June 30, 2014			December 31, 2013
(CAD thousands, unaudited)
Current assets
Cash		$	44,409		$	46,161
Trade and other receivables		329			1,480
Prepaid expenses		89			139
		44,827			47,780
Restricted cash		375			375
Deferred financing costs		1,672			1,606
Capital assets (note 4)		19,226			18,745
Intangible exploration and evaluation and other assets (note 5)		43,009			42,951
ASSETS		$	109,109		$	111,457
LIABILITIES
Current liabilities
Trade and other payables		$	615		$	746
		615			746
Provisions		148			135
Total liabilities		763			881
SHAREHOLDERS' EQUITY
Share capital (note 6(a))		129,780			129,774
Contributed surplus		8,143			7,778
Deficit		(29,577)			(26,976)
Total shareholders' equity		108,346			110,576
LIABILITIES AND SHAREHOLDERS' EQUITY		$	109,109		$	111,457

                                                                                                                 

KARNALYTE RESOURCES INC.
STATEMENTS OF COMPREHENSIVE LOSS
For the three and six months ended June 30,
	Three months ended					Six months ended
(CAD thousands except per share amounts, unaudited)	2014		2013			2014		2013
Expenses
General and administrative	$	1,459	$	1,304		$	2,403	$	2,386
Depreciation and amortization	192		197			409		404
Share-based compensation expense (note 7)	(128)		684			184		1,109
Other (income) and expenses	(14)		9			(45)		(4)
	1,509		2,194			2,951		3,895
Finance income	(168)		(521)			(360)		(598)
Finance expense	6		2			10		29
Net finance income	(162)		(519)			(350)		(569)
Comprehensive loss	(1,347)		(1,675)			(2,601)		(3,326)
Loss per share (note 6(b))
Basic and diluted	$	(0.05)	$	(0.06)		$	(0.09)	$	(0.13)

KARNALYTE RESOURCES INC.
STATEMENTS OF CASH FLOWS
For the six months ended June 30,
(CAD thousands, unaudited)		2014		2013
Cash Flows from (used in) Operating Activities
Net loss for the period		$	(2,601)	$	(3,326)
Add/deduct:
Depreciation and amortization		409		404
Stock-based compensation expense		184		1,109
Net finance income		(350)		(572)
Interest income received		360		219
Changes in non-cash working capital:
Trade and other receivables		(163)		49
Trade and other payables		501		(409)
Prepaid expenses		43		7
Purchase of shares pursuant to compensation plans		-		(6)
		(1,617)		(2,525)
Cash Flows from (used in) Investing Activities
Additions to intangible assets		(145)		(521)
Proceeds on sale of intangible assets		1,244		-
Additions to capital assets		(1,199)		(8,062)
Proceeds on disposition of capital assets		25		-
		(75)		(8,583)
Cash Flows from (used in) Financing Activities
Issuance of common shares		-		44,745
Share issue costs		-		(2,432)
Deferred financing costs		(66)		(443)
		(66)		41,870
Effect of foreign exchange on cash		6		348
Change in cash		(1,752)		31,110
Cash, beginning of period		46,161		25,115
Cash and cash equivalents, end of period		$	44,409	$	56,225

KARNALYTE RESOURCES INC.
STATEMENTS OF CHANGES IN EQUITY
For the six months ended June 30,
(Expressed in CAD thousands, unaudited)
	2014			2013
	Number	Amount		Number	Amount
Share Capital
Balance, beginning of period	27,477	$	129,774	21,989	$	87,473
Common shares issued  (note 6(b))	-	-		5,490	44,746
Treasury shares purchased	-	-		(1)	(6)
Vesting of employee share ownership plan	1	6		-	-
Share issue costs	-	-		-	(2,432)
Balance, end of period	27,478	129,780		27,478	129,781
Contributed Surplus
Balance, beginning of period		7,778			4,906
Share-based payment expense (note 7)		371			1,557
Vesting of employee share ownership plan		(6)			-
Balance, end of period		8,143			6,463
Deficit
Balance, beginning of period		(26,976)			(20,234)
Loss for the period		(2,601)			(3,326)
Balance, end of period		(29,577)			(23,560)
Total Shareholders' Equity
Balance, end of period		$	108,346		$	112,684

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. Once financing is obtained 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 and Cautionary Statements

Some of the statements in this announcement may be forward-looking including statements relating to future business plans of Karnalyte. When used in this announcement, the words, "estimate", "approximate", potential and similar expressions are intended to identify forward-looking statements. Forward-looking statements include statements regarding the intent, belief and current expectations of Karnalyte Resources Inc. Such statements are not promises or guarantees, and are subject to risks and uncertainties that could cause actual outcome to differ materially from those suggested by any such statements. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. All such forward looking statements involve substantial known and unknown risks and uncertainties, certain of which are beyond Karnalyte's control. Please refer to Karnalyte's Annual Information Form for the year ended December 31, 2013 and dated March 26, 2014 and available for viewing at www.sedar.com, for a list of risk factors. Karnalyte's actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Karnalyte will derive therefrom. All subsequent forward-looking statements, whether written or oral, attributable to Karnalyte or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements.

Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release.

SOURCE: Karnalyte Resources Inc.

For further information: Thomas Drolet, President & Chief Executive Officer; Ron Love, Executive Vice-President Finance & Chief Financial Officer, Telephone: [phone], E-mail: [email protected], Website: www.karnalyte.com