CALGARY, Jan. 10, 2013 /CNW/ - Karnalyte Resources Inc. ("Karnalyte") (TSX:KRN) and Gujarat State Fertilizers & Chemicals Limited ("GSFC") (BSE:500690, NSE:GSFC, CSE:GSFC), a publicly-traded Indian agribusiness company focused on the production and sale of fertilizers and industrial products.
"GSFC's strategic investment and entering into the off-take agreement will support Karnalyte's growth strategy of constructing its potash production facility and commercializing a superior potash product," said Robin Phinney, President and CEO of Karnalyte. "This investment by GSFC is a significant milestone for Karnalyte and establishes Karnalyte as a leader among the new class of potash developers. We are confident that GSFC's strategic investment and committed off-take agreement will be instrumental in the future success of the Project."
Atanu Chakraborty, IAS, Managing Director of GSFC commented, "At present, India is fully dependent on imports of potash. This is a significant partnership by an Indian fertilizer manufacturing company with a potash mining company abroad to procure high quality potash for the Indian market. Karnalyte is ahead of other junior potash mining companies in Canada in terms of expected commissioning of the Project. For GSFC, an assured supply will help in expanding its portfolio of fertilizers."
GSFC will subscribe for 19.98% of the issued and outstanding Common Shares after giving effect to this transaction at a price of $8.15 per Common Share in a non-brokered private placement (the "Private Placement") for total gross proceeds of approximately $45 million. Based on its current issued and outstanding common share capital, Karnalyte will issue approximately 5,490,000 Common Shares to GSFC upon closing of the Private Placement. The proceeds from the Private Placement may be subject to escrow pending Karnalyte receiving final approval of its environmental impact statement ("EIS") from the Saskatchewan Ministry of the Environment ("MOE") under the Saskatchewan Environmental Assessment Act. Karnalyte's public consultation for the EIS commenced on December 29, 2012 and is expected to conclude on January 28, 2013.
Following the public consultations, Karnalyte expects to receive final approval from the Saskatchewan MOE shortly thereafter.
Subject to the terms of the off-take agreement, upon commencement of commercial production, GSFC will be committed to buy 350,000 TPY of potash from Karnalyte, increasing to 600,000 TPY of potash as capacity at the Project increases during Phase 2, for a period of approximately 20 years on a take or pay basis.
SOURCE Karnalyte Resources Inc.