Karnalyte Resources Inc.TSX: KRN

Karnalyte Resources Inc. announces second quarter 2011 results

· Issued by Karnalyte Resources Inc. via CNW

CALGARY, Aug. 12, 2011 /CNW/ - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (TSX: KRN) today announced its financial results and operational highlights for the quarter ended June 30, 2011. Karnalyte intends to construct a potash facility near Wynyard, Saskatchewan which is expected to initially produce 500,000 tonnes of potash per year and ultimately increase to 2 million tonnes of potash per year.

"This quarter, we made significant progress on the feasibility study for our proposed potash facility and we remain on track to have that study completed before year end. In addition, we completed drilling of seven new wells for the purpose of identifying additional resources outside of the current development area," said Robin Phinney, President and CEO of Karnalyte Resources Inc. "The data gathered from these cores will be used to generate an updated NI 43-101 resource estimate that we expect to receive before the end of the third quarter."

Karnalyte's Second Quarter 2011 Financial Statements and Management's Discussion and Analysis (MDA) are available at www.sedar.com.

Selected Highlights

  • Completed a seven hole drilling program to further characterize its land holdings and potential potash resources.
  • Subsequent to the end of the quarter, announced that it had selected Lyntek Incorporated to perform a NI 43-101 compliant pre-feasibility study on magnesium chloride compounds that can be produced from the potash feedstock for potential by-products.
  • The Company remains very well funded with current working capital of approximately $40.7 million as at June 30, 2011.

Outlook

  • Over the short term, the Corporation will focus on the following key initiatives:
  • Complete the feasibility study and file the Environmental Impact Statement;
  • Finalize the analysis and interpretation of the recent drilling program to produce an updated NI 43-101 resource estimate;
  • Continue exploration and development of its mineral holdings through additional 3D seismic analysis;
  • Obtain independent assays of product samples recovered from the pilot test facility;
  • Complete a pre-feasibility level study on potential production and marketing of magnesium compounds; and
  • Optimize product quality in cooperation with machinery and equipment suppliers.
KARNALYTE RESOURCES INC.
         
STATEMENTS OF FINANCIAL POSITION
         
(Unaudited)
         
ASSETS        
         
As at   June 30,   December 31,
    2011   2010
         
Current assets        
  Cash   $          44,086,439   $                  59,000,457
  Trade and other receivables                      973,942                               43,276
  Prepaid expenses                       70,710                             312,865
                 45,131,091                        59,356,598
Restricted cash                     125,000                             125,000
Capital assets                   2,997,116                             459,376
Intangible exploration and evaluation and other assets               28,003,608                        10,748,278
         
TOTAL ASSETS   $           76,256,815   $                  70,689,252
         
LIABILITIES        
         
Current liabilities        
  Trade and other payables   $             4,417,080   $                    2,288,123
  Current portion of capital lease liability                           6,904                                 6,904
                     4,423,984                          2,295,027
Capital lease liability                          3,453                                 6,904
Provisions                       151,599                             116,039
Total liabilities                    4,579,036                          2,417,970
         
SHAREHOLDERS' EQUITY        
         
Share capital                 77,311,117                        72,313,190
Warrants and rights                    1,260,227                          1,273,605
Contributed surplus                     3,238,042                          2,359,264
Deficit              (10,131,607)           (7,674,777)
Total shareholders' equity                  71,677,779                        68,271,282
         
LIABILITIES AND SHAREHOLDERS' EQUITY   $            76,256,815   $                  70,689,252
         
KARNALYTE RESOURCES INC.
           
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
           
Three and six months ended June 30, 2011 and 2010
(Unaudited)
           
    Three months ended     Six months ended
    June 30,     June 30,
  2011 2010   2011 2010
           
Expenses          
  General and administrative $        725,489 $        839,387   $       1,535,914 $          1,450,183
  Depreciation and amortization            149,112              12,088                205,768                   22,309
  Share-based payment expense            434,753         1,023,339                892,957             2,397,620
  Other income             (61,429)               (8,530)               (83,909)             (19,458)
          1,247,925         1,866,284             2,550,730              3,850,654
Finance (income) and expense          
     Finance income           (120,762)               (7,252)             (158,950)             (12,188)
     Finance expense              45,066                       -                     65,050                     2,165
Net finance income             (75,696)               (7,252)               (93,900)             (10,023)
           
Net and comprehensive loss        (1,172,229)        (1,859,032)           (2,456,830)             (3,840,631)
           
Loss per share          
     Basic and diluted $             (0.06) $             (0.15)   $               (0.12) $                 (0.30)
             
KARNALYTE RESOURCES INC.
             
STATEMENTS OF CASH FLOWS
             
Three and six months ended June 30, 2011 and 2010
(Unaudited)
             
      Three months ended     Six months ended
      June 30,     June 30,
    2011 2010   2011 2010
Cash Flows from (used in) Operating Activities            
Net loss for the period   $    (1,172,229) $    (1,859,032)   $    (2,456,830) $    (3,840,631)
Add/deduct:            
     Depreciation and amortization                 149,112                   12,088              205,768                   22,309
     Share-based payment expense                 434,753              1,023,339              892,957              2,397,620
     Net finance income               (75,696)               (7,252)               (93,900)             (10,023)
     Interest income received                 120,762                        987              158,950                     1,795
Changes in non-cash working capital:            
     Trade and other receivables             (545,634)                 198,145             (831,840)                 181,157
     Trade and other payables                   74,806                   54,812              126,016             (42,440)
     Prepaid expenses                     4,588                     1,936                17,767                     4,566
           (1,009,538)           (574,977)          (1,981,112)        (1,285,647)
             
Cash Flows from (used in) Investing Activities            
Additions to intangible assets          (9,997,536)           (938,522)        (14,369,955)        (2,029,520)
Additions to capital assets          (1,761,827)             (40,307)          (2,721,563)             (95,743)
Decrease in temporary investments                            -                1,354,019                          -                1,493,560
         (11,759,363)                 375,190        (17,091,518)           (631,703)
             
Cash Flows from (used in) Financing Activities            
Issuance of common shares                 515,000                  40,800           5,008,117                   52,300
Share issue costs                            -                             -               (786,464)                            -  
                  515,000                  40,800           4,221,653                   52,300
             
Effect of foreign exchange on cash               (44,052)                    3,055               (63,041)                        890
Change in cash        (12,297,953)              (155,932)        (14,914,018)        (1,864,160)
Cash, beginning of period            56,384,392               782,595         59,000,457              2,490,823
Cash and cash equivalents, end of period   $      44,086,439 $           626,663   $   44,086,439 $             626,663
             
KARNALYTE RESOURCES INC.
         
STATEMENTS OF CHANGES IN EQUITY
Six months ended June 30,
(Unaudited)
         
  2011 2010
  Number Amount Number Amount
         
Common Shares        
Balance, beginning of period       20,093,740 $ 72,313,190     12,663,800 $ 17,771,007
     Common shares issued              470,000       4,042,000                    -                      -  
     Common shares issued on exercise of share options             135,600          678,000            52,300            52,300
     Common shares issued on exercise of broker warrants               33,502          288,117                    -                     -  
     Transfer on share options exercised                         -            230,125                    -                2,650
     Transfer on broker warrants exercised                         -              85,158                    -                      -  
     Share issue costs                         -          (325,471)                    -                      -  
Balance, end of period        20,732,842     77,311,119     12,716,100     17,825,957
         
Warrants and Rights        
Balance, beginning of period             585,624       1,273,605       2,952,524          293,494
     Broker warrants issued               28,200            71,780                    -                     -  
     Broker warrants exercised          (33,502)          (85,158)                    -                      -  
Balance, end of period             580,322       1,260,227       2,952,524          293,494
         
Contributed Surplus        
Balance, beginning of period         2,359,264                6,161
     Share-based payment expense         1,108,903         2,397,620
     Transfer to share capital on exercise          (230,125)              (2,650)
Balance, end of period         3,238,042         2,401,131
         
Deficit        
Balance, beginning of period       (7,674,777)       (2,352,686)
     Loss for the period       (2,456,830)       (3,840,631)
Balance, end of period     (10,131,607)       (6,193,317)
         
Total Shareholders' Equity        
Balance, end of period       71,677,781       14,327,265

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 impact.  Using a staged approached to potash plant construction, the Corporation plans to operate a solution mining facility that will initially produce 500,000 tonnes of potash per year, increasing to 2 million tonnes of potash per year. Karnalyte owns a 100% interest in Permit KP 360 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. 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.