Karnalyte Resources (KRN.TO / KRLTF) was founded in 2007 and listed on the Toronto Stock Exchange in December 2010. The $65-million IPO raised $14 million more than expected.
KRLTF : Price = .15, market cap = 9.86M, enterprise value = 7.47M as of 03/11/24
Based on the 2016 National Instrument 43-101 Technical Report, their Wynyard Project is projected to mine 2.125 million tons of potash annually. Additionally, a nitrogen project exists. Approximately 700 metric tons of ammonia and 1,200 metric tons of urea per day can be produced. Nitrogen’s target customer is independent fertilizer wholesalers in Central Saskatchewan.
Further, Fortune India 500 Gujarat State Fertilizers & Chemicals (GSFC) is Karnalyte’s biggest shareholder. As of 2024, GFSC still supports Wynyard Potash and Proteus Nitrogen projects. Gujarat State Fertilizers & Chemicals has contractually guaranteed a long-term availability to purchase Karnalyte’s potash. Detailed engineering has been completed, and all environmental permits remain valid. Funding and market conditions determine Karnalyte’s progress.
Karnalyte Resources’ investment potential is impressive.
Karnalyte’s largest shareholder is Indian agribusiness giant Gujarat State Fertilizers & Chemicals (GSFC). A placement happened in January 2013 for 8.15 Canadian Dollars per share. Karnalyte’s current enterprise value is 5.74M, and its market cap is 7.51 M. This compares favorably to the 19.80% ownership or a 40 million GFSC 2013 investment. GFSC sits on the Karnalyte board and supports Wynyard Potash and Proteus Nitrogen.
Additional evidence of GSFC’s commitment was the rights offering on August 3, 2022, when GSFC acquired an additional 9,100,000 shares at $0.35 each. GSFC owned 38.73% of Karnalyte before the offering, but their ownership is now 47.73% with this purchase. Karnalyte raised $3.862 million with the rights offering, mostly from GSFC.
This strategic move boosted Karnalyte’s capital by $3.862 million and solidified GSFC’s position as its largest shareholder and board member. The additional investment allowed GFSC to increase its influence within the company.
Potential valuation:
In June 2016, Karnalyte received an updated National Instrument 43-101 Technical Report for its Wynyard Potash Project. The report shows staggering assets.
Potash “NPV (8% ) $3.39 Billion for all 3 phases (after tax)” and Magnesium (NPV (10%) $512 Million (after tax)).
Click here to review the National Instrument 43-101 Technical Report. The 43-101 report details property data verification, metallurgical testing, mineral resource/reserve estimates, recovery methods, market studies/contracts, capital/operating costs, and economic analysis.
Karnalyte’s mineral assets have staggering potential. There is a possibility of $4 billion in potash and $1 billion in magnesium. “There’s enough potash there to sustain the world for I don’t know how many years,” said Dave Van Dam, a prominent Kenora businessman and Karnalyte shareholder. “It’s monstrous.”
A Karnalyte board meeting was scheduled for November 2003 in Saskatoon, Canada. However, it abruptly canceled plans to meet with its Indian board members as the governments of Canada and India disagreed over the killing of a Sikh leader on Canadian soil. KRN has two Indian executives and one Indian banker on its board.
”We were preparing to welcome our board colleagues from India for a visit to Canada this week. However, they canceled their trip due to tensions that arose and escalated last week,” Karnalyte’s Interim Chief Executive Officer Danielle Favreau said in an email. “We hope to reschedule their visit soon.” Karnalyte’s chairman is Vishvesh Nanavaty, Gujarat State Fertilizer’s (GFSC) chief financial officer. Director Dilip Pathakjee works as a senior vice president for GFSC. Another Karnalyte board member, D.C. Anjaria, is from India and has international banking experience. GFSC is financially committed and counting on the future potash supplies despite recent diplomatic disagreement over Sikh Nijjar’s slaying.
As of June 30, 2023, the company had $2.7 million in cash and positive net working capital of $2.7 million, with no debt.
Opportunities:
In March 2016, Karnalyte Resources announced a deal with GSFC to finance the construction of its 625,000 tons per year potash mine in Wynyard, Saskatchewan. Besides that, Karnalyte plans to spin off its secondary mineral assets and unexplored lands into separate companies so shareholders can profit. The GFSC partnership aims to finance Phase 1 of the potash mine while leveraging Karnalyte’s non-potash assets.
Unfortunately, the deal failed to provide the proposed US$700 million financing for the first phase of Karnalyte’s potash mine. The negotiations ended without agreeing on the governance issues and the terms for spinning out Karnalyte’s secondary minerals, including magnesium, into a separate entity.
KRN could not agree with giving up 51% of the voting power to GFSC.
Tiny Insider buys from board member Ritu Malhotra 51,000 shares for .19 on 07/20/23.
As of June 30, 2023, the company had $2.7 million in cash and positive net working capital of $2.7 million, with no debt. No debt eliminates bankruptcy if short-term financing is needed next year.
Karnalyte has a staggering amount of potash and magnesium resources, potentially worth $5 billion before construction costs.
Risk:
GFSC can hold up the project for years. And KRN likely needs cash around +1 years.
Illiquid
Need for financing.
The company has been entangled in lawsuits alleging everything from governance irregularities to improper lobbying of the federal government.
Conclusion:
Karnalyte’s investment thesis is simple. GFSC wants Karnalyte’s Potash and Nitrogen assets. So, GFSC initiated a position in 2013 when it acquired 19.80% of Karnalyte’s outstanding shares at 8.15 per share or 40 million Canadian dollars. GFSC’s average cost exceeds the current market price of 7.50 million USD. GFSC now controls 47.73% after an August 2022 secondary offering.
GFSC’s CFO, Vishvesh D. Nanavaty, is now Karnalyte’s board chairman. Dilip V. Pathakjee (an Indian executive at GFSC) and D.C. Anjaria, an Indian banking executive, are also board members. Canadian business leader Ritu Malhotra is the latest board member. The board construction supports the thesis that GFSC will finance current operations as they attempted with a failed 2016 700M finance proposal.
The 700M USD 2016 financing agreement fell through because GFSC wanted 51% of KRN and access to a spin-off of their nitrogen assets. This disagreement is likely resolved.
The technical report demonstrates billions of dollars worth of assets before construction costs. Detailed engineering has been completed, and all environmental permits remain valid. Funding and market conditions determine Karnalyte’s progress. KRN is not a venture-listed company but instead listed on the Toronto exchange, Big Four auditor (KPMG), and is currently working with UK global consulting and engineering company Wood PLC to evaluate additional cost savings on an ongoing basis to ensure maximum value for investors.
I SPECULATE GFSC didn’t spend ~ $45 million not to give or find project financing as they attempted in 2016. Or spend time on the KRN board traveling from India to attend board meetings. The sleeping giant KRN has a possible billion dollars of assets supported by the National Instrument 43-101 Technical Report. And $100 million had already been invested in getting the project ready.
Karnalyte is SPECULATIVE!!
Although the current attributes compare favorably to KRLTF’s current price = .15, market cap = 9.86M, and enterprise value = 7.47M
Catalyst: Financing
Long KRN.TO KRLTF
Source:
http://shadowstock.blogspot.com/2024/03/illiquid-speculation.html
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