Slide 1: The Leading Developer of Premium Quality Potash
THE LEADING DEVELOPER OF PREMIUM QUALITY POTASH KARNALYTE RESOURCES INC. 2013 KARNALYTE.COM | KRN: TSX 1
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS Certain statements in this presentation may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation, or industry results, to be materia
Slide 3: Potash Is Critical to Meet Growing Food Demand
POTASH IS CRITICAL TO MEET GROWING FOOD DEMAND • The Food and Agriculture Organization of the United Nations Growing World Population(1) estimates that the global population will reach 9.1 billion by 2050 10 Billion People 8 • There are ~75 million more people that need to be fed 6 each year, with m
Slide 4: Investment Highlights
INVESTMENT HIGHLIGHTS SIGNIFICANT • Bankable feasibility study complete PROJECT • Environmental approved to initiate construction DE-RISKING • Strategic investment made by one of India’s largest fertilizer companies (GSFC) SCALABLE PROJECT • Modular approach: initial 625Ktpa with 2 expansions of 750
Slide 5: Attractive Project Economics
ATTRACTIVE PROJECT ECONOMICS* Bankable Feasibility Study1 (BFS) • Production targeted in 2016 • Initial production of 625Ktpa with ramp-up to 2.125Mtpa in 5 to 6 years BFS Summary (Results below are dependent on price assumption used) • BFS used potash price of $480/tonne based on a medium to long t
Slide 6: Attractive Project Economics: Tax Structure
ATTRACTIVE PROJECT ECONOMICS* Attractive tax structure Primary royalty regime (Potash Profit Tax – “PPT”) • 10 year holiday for new production on base component • 120% CAPEX recovery on initial and expansion capital for profit component allowed prior to profit tax being applied • Company estimated i
Slide 7: Phase I 625,000 tpa
PHASE I 625,000 tpa Company’s internal projections assuming $400 potash price At Full Production $ per installed Annual Cash Brine Field Tonnes of KCl Operation NPV % KCl Tonne of Flow Temperature °C Produced (t) Cost (millions IRR Capacity (millions CAD) CAD) 30 9.3 625,000 1000 130 $131 $860 16.4%
Slide 8: Senior Project Debt
SENIOR PROJECT DEBT • Lead arrangers highly reputable financial institutions out of New York BNP Paribas Natixis • Each lead arranger to underwrite 50% of the US$300M facility Underwritten structure • Syndicate to banks, financial institutions and other institutional lenders Subject to credit approv
Slide 9: Strategic Investor with Off-Take Agreement
STRATEGIC INVESTOR WITH OFF-TAKE AGREEMENT • Phase I plant will produce 625,000 tonnes of high-grade potash annually • Gujarat State Fertilizers & Chemicals (GSFC) and Karnalyte entered into a strategic partnership in January 2013 19.98% interest in Karnalyte obtained for $45 million including a tak
Slide 10: Global Marketing Strategy
GLOBAL MARKETING STRATEGY Overseas North America • GSFC off-take agreement • Remaining production into N.A. market Central North American distribution location • Potential for another strategic partner Among highest global pricing environments Port locations Premium product appeals to sophisticated
Slide 11: The World's Largest Potash-Producing Region
THE WORLD’S LARGEST POTASH-PRODUCING REGION Property comprises a total of ~86,126 acres • Located 0.5 km south of Highway 16 near Wynyard, SK Existing infrastructure • Rail and roadways • Natural gas, power and water in close proximity Access to skilled labour Opportunity for resource expansion 11
Slide 12: Karnalyte's Competitive Advantage
KARNALYTE’S COMPETITIVE ADVANTAGE Mineral Resource Characteristics Dissolves faster than other salts Lower solution mining OPEX than other potassium salts Amenable to solution mining Lower CAPEX, shorter construction timeline than conventional mining Contains magnesium Opportunity for product expans
Slide 13: KRN's High Quality Potash Product
KRN’S HIGH QUALITY POTASH PRODUCT • Minimum Grade 97% • Minimum Grade 95% • Less than 1% sodium • Sodium content 3.5% - 4% key for increasing crop yields • Irregular shape – compactor process • Spherical shape – granulated process • Rough, unsmooth • Superior flowing characteristics • Higher caking
Slide 14: Process Video
Ka rnalyte RESOURCES PROCESS VIDEO Saskatchewan
Slide 15: KRN's Premium Potash Product
KRN’S PREMIUM POTASH PRODUCT • Fertilizer blends of Nitrogen, Phosphate and Potassium (“NPK”) provide unparalled advantages over standard applications Granulated or compacted product is required for inclusion in NPK blends North America is now entirely blended market, Brazil vast majority and the re
Slide 16: Management Team Experienced in Building Potash Mines
MANAGEMENT TEAM EXPERIENCED IN BUILDING POTASH MINES Robin L. Phinney, P.Eng., President, CEO and Ronald Love, B.Comm., CA, Executive VP, CFO and Director Director • Held engineering positions with Potash Corp of • More than 18 years of experience in progressively senior Saskatchewan (“PCS”) for 15
Slide 17: Board of Directors
BOARD OF DIRECTORS Bruce Townsend, Director and Chairman of the Raymond Floyd, B. Sc., Chemical Engineering, J.D., Board* MBA, Director* • Director, Financial Analysis Nitrogen Operations with • Recently retired SVP at Suncor Energy PCS from 2001 to 2009 • Inductee of the IW Manufacturing Hall of Fa
Slide 18: Key Milestones and Near-Term Catalysts
KEY MILESTONES AND NEAR-TERM CATALYSTS • Engineering progress has been substantial with Karnalyte entirely prepared for full construction Site prepared and ready for construction Environmental approval in place Proceed to construction permitting Unloading area on rail line secured and prepared to ac
Slide 19: Near-Term, De-Risked Development of High Quality Potash
NEAR-TERM, DE-RISKED DEVELOPMENT OF HIGH QUALITY POTASH • Highest grade agriculture product • Minimal environmental impact • De-risked project • Experienced management team and board: industry-specific expertise • Production expected in 2 years from financing • Attractive After-tax Net Present Value
Slide 20: Key Metrics
TSX:KRN Key Metrics* Recent share price (10/16/2013) $1.92 Shares O/S 27.4MM Fully diluted shares O/S 29.6MM Cash (30/09/2013) $49.3MM Ownership (% of basic shares O/S) Top Institutions 10% Management & Directors 17% GSFC 19.98% Analyst Coverage BMO Capital Markets Canaccord Genuity Clarus Securitie
Slide 21: Appendix
APPENDIX 21
Slide 22: Mineral Resource: Carnallite
MINERAL RESOURCE: CARNALLITE What is Carnallite? (KCl + MgCl2 + 6H2O) • A potassium salt-bearing mineral • Dissolves faster than Sylvinite, making a solution mining process more efficient • The first mineral that was mined to produce potash (mid 1800’s in Germany) • Contains magnesium Used as a trac
Slide 23: Transportation & Distribution Strategy
TRANSPORTATION & DISTRIBUTION STRATEGY Port Rail Significant progress made with various Canadian Pacific (CP) main rail line ~3 miles port options: from plant site • Vancouver • Evaluating car supply, movement and rail options • Thunder Bay • Churchill Evaluating Canadian National (CN) ~30 miles • N
Slide 24: Solution Mining Overview
SOLUTION MINING OVERVIEW Surface Facility Brinefield Brine Processing Ground Surface Cavern Patience Lake Member (Predominantly Carnallitite) Cavern Belle Plaine Member (Predominantly Carnallitite) Esterhazy Member (Sylvinite) Cavern Source: Bankable Feasibility Study 24
Slide 25: Brine Processing Overview
BRINE PROCESSING OVERVIEW Brine Processing Overview Simplified Flow Diagram Brine processing removes impurities from Cooling Brinefield Process Heat the extracted mineral in order to obtain Water Water Source saleable potassium chloride (KCl) Brine Storage • Evaporators remove water from production
Slide 26: BFS Capital Cost Specifics
BFS CAPITAL COST SPECIFICS 625Ktpa Operation (Phase I) C$626mm (C$1,002/tonne) US$mm US$ per tonne % of Total 5% Process Equipment and Facility $234 $374 36% 9% Process Equipment and Facility Solution Mining Facilities $118 $189 18% Solution Mining Facilities Other Direct Costs $94 $150 14% 36% Indi
Slide 27: BFS Operating Cost Specifics
BFS OPERATING COST SPECIFICS 625Ktpa Operation (Phase I) C$81mm (C$129/tonne) C$mm C$ per tonne % of Total 6% 8% Personnel $7 $11 8% 5% Personnel Natural Gas $27 $43 34% 10% Natural Gas Electricity $10 $16 12% Electricity Brine Field Expansion $21 $33 26% Maintenance & Spare Parts $8 $13 10% 34% Bri
Slide 28: Bankable Feasibility Study Economics
BANKABLE FEASIBILITY STUDY ECONOMICS Economic Model Assumptions BFS Reserves & Resources BFS Assumptions Mineralized Average KCl Net KCl Reserves & Resources 2.125Mtpa Operation Tonnage (Mt) Grade (%) Tonnage (Mt) Production Start Up (year) 2015 Total Average Carnallitite 677.6 18.6% 126.0 Mine Prod
Slide 29: Magnesium Upside Potential
MAGNESIUM UPSIDE POTENTIAL • Positive Pre-Feasibility Study completed for Magnesium Pre-Feasibility Study Assumptions Production Facility in 2012 Magnesium PFS • 147Mt of probable MgCl2 reserves with a mine life 70 years 191Ktpa Operation Reserve can increase when additional plant capacity and Pro
Slide 30: For More Information
FOR MORE INFORMATION 403 – 235 MILLIGAN DRIVE OKOTOKS, AB T1S 0B8 TEL 403.995.6560 | FAX 403.995.1678 WWW.KARNALYTE.COM info@karnalyte.com 30