Management’s Discussion and Analysis – June 30, 2025

TSX: KRN

MANAGEMENT'S

DISCUSSION AND ANALYSIS

General Overview 3

Second Quarter Update 3

Review of Development Strategy 4

Asset Sales 4

Corporate & Governance Matters 4

Outlook for 2025 5

General and Administrative Expenses 6

Other Costs Impacting Comprehensive Loss 7

Exploration and Evaluation and Other Assets 10

Capital Assets 10

Related Party Transactions 12

Restrictions on Disposition of the Potash Project 12

Stage of Development 12

Exploration and Evaluations and Other Assets and Capital Assets 13

Decommissioning Provisions 13

Share-Based Payments 13

Contingent Liabilities 14

Credit Risk 14

Liquidity Risk and Going Concern 14

Market Risk 14

Currency Risk 15

Interest Rate Risk 15

Disclosure Controls and Procedures 15

Internal Controls over Financial Reporting (ICFR) 15

This Management's Discussion and Analysis ("MD&A") is intended to provide a summary of the operational and financial results of Karnalyte Resources Inc. ("Karnalyte" or the "Company") for the six months ended June 30, 2025 and 2024. This MD&A should be read in conjunction with the condensed unaudited interim financial statements of the Company and the related notes thereto for the six months ended June 30, 2025 and 2024. This commentary is dated August 13, 2025. The financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Statements and should be read in conjunction with the restated audited financial statements for the year ended December 31, 2024. These documents, the Annual Information Form dated March 21, 2025, and additional information about the Company are available on SEDAR+ at https://www.sedarplus.ca. Some of the statements made herein contain forward-looking information and accordingly please refer to the "Forward-Looking Information" section at the end of the MD&A.

Karnalyte was incorporated under the Business Corporations Act (Alberta) on November 16, 2007 and is a Saskatchewan-headquartered company focused on the development of potash and magnesium operations in Saskatchewan. The Company's potash project in Wynyard, Saskatchewan (the "Potash Project") is a proposed

2.125 million tonnes per year ("TPY") potash mine utilizing conventional solution mining methods for potash production, with a vision of ultimately becoming the next greenfield, environmentally innovative mine. The Company proposes that the Potash Project, key to Karnalyte's goal of becoming a low-cost, sustainable producer of high-quality product, be developed in three phases using a modular approach, with a first phase ("Phase I") consisting of a production facility capable of producing 625,000 TPY of potash, increasing to 1,375,000 TPY of potash in the second phase, and ultimately to 2,125,000 TPY of potash in the third phase. Also under consideration is the secondary magnesium compounds, on Canada's critical minerals list.

During the quarter, Karnalyte continued to advance its NI 43-101 compliant technical report, which remains a key milestone in demonstrating the value of the Company's assets and advancing toward mine development. While there have been no material changes since the last update, steady progress has continued on the review and refinement of key technical sections. The Company remains actively engaged with its team of qualified professionals to finalize the report's technical inputs, ensuring accuracy and alignment with industry standards.

The review team continues to validate and update core assumptions, including price forecasts and market entry strategies, to reflect current market conditions and strategic business objectives.

The report remains on track for completion in 2025, positioning Karnalyte for future corporate development opportunities. The Company remains committed to advancing its potash project, underpinned by strong global demand and a robust offtake agreement. Potash's role as a vital agricultural input continues to reinforce the Company's long-term value proposition.

Karnalyte's review of its development strategy, initiated in 2024, remains on schedule and is expected to conclude in 2025. This strategic review focuses on assessing the economic potential of expanding magnesium chloride production at the Wynyard Project by developing magnesium resources alongside the Potash Project.

The Company is continuing its evaluation of the co-production of magnesium chloride and potassium chloride through advanced solution mining technologies. The underlying resource, carnallite (hydrated potassium magnesium chloride), is abundant within Karnalyte's mineral deposit. This ongoing analysis is aimed at unlocking additional value through the potential integration of magnesium chloride production into the existing project framework.

Magnesium is recognized as one of Canada's 34 critical minerals and is an essential mineral in the clean technologies and advanced manufacturing value chains.

In April 2025, the Company closed on the sale of three parcels of farmland that are not core to the focus on advancing the Potash Project. These three parcels sold for net proceeds totaling $1,408,000. The proceeds from the sale will be directed towards supporting the company's development activities, advancing its project plans and to fund working capital requirements.

During the quarter, at its most recent annual meeting, Karnalyte shareholders elected Ms. Jennifer Haskey and Mr. Larry Long to the board as independent directors of the Company.

Ms. Haskey brings over 20 years of domestic and international experience in the energy sector, spanning both technical and commercial roles. She has served in advisory capacities with Deloitte LLP and BMO Capital Markets, where she focused on mergers and acquisitions, corporate strategy, value creation, and financial advisory. Her investment and business development expertise includes portfolio management roles at Passport Capital LLC and St Peter Port Capital, as well as corporate development at Repsol Oil & Gas Canada (formerly Talisman Energy Inc.). Earlier in her career, Ms. Haskey worked as a Reservoir Evaluations Engineer at McDaniel & Associates Consultants, primarily evaluating assets in the Western Canadian Sedimentary Basin. Ms. Haskey holds a Bachelor of Science in Mechanical Engineering from the University of Saskatchewan and currently serves on the Board of Kelt Exploration Ltd. (TSX:KEL).

Larry Long is retired following a distinguished career in the mining industry, most recently serving as Senior Vice President of Operations, Potash, at Nutrien - the world's largest provider of crop inputs and services. With over 35 years of industry experience, Mr. Long began his career in 1988 as a field geologist with Noranda in Bathurst, New Brunswick. Mr. Long held several key leadership roles, including Chief Geologist and Production Coordinator for Breakwater Resources in Nunavut and Superintendent of Open Pit Operations at BHP Billiton's Ekati Diamond Mine in the Northwest Territories. He later joined Nutrien (formerly PotashCorp), where he served as General Manager of both the Rocanville and Allan potash mines in Saskatchewan before rising to his senior executive position. In addition to his professional experience, Mr.

Long currently serves on the board of the St. Paul's Hospital Foundation and on the campaign cabinet for

Saskatchewan Polytechnic's Time to Rise campaign. He previously served as a board member and Chair of the Board for the Saskatchewan Mining Association.

Ms. Danielle Favreau, the Company's Chief Executive Officer, commented, "We are pleased to welcome Ms. Haskey and Mr. Long to the Karnalyte board and look forward to benefiting from their many years of experience in finance, engineering, geology and leadership - particularly in the investment banking and potash industries as we continue to pursue the development of the Wynyard Project."

At the Company's annual general meeting, incumbent directors Ritu Malhotra and Derek Hoffman concluded their terms on the board and did not seek re-election.

Ms. Malhotra, who joined the board in 2023 and brought significant experience in engineering and leadership as the President and CEO of March Consulting Associates. Ms. Favreau expressed appreciation, stating: "Ms. Malhotra has been a very valuable member of the Board of Directors and Karnalyte wishes to express its sincere thanks for her significant contributions."

Mr. Hoffman, who joined the board in 2021, contributed deep expertise in the legal and mining sectors, having served as a Partner and leader of the mining group at Miller Thompson LLP, as well as in-house counsel for the global mining company BHP. Ms. Favreau commented "Karnalyte sincerely thanks Mr.

Hoffman for his dedicated service and the meaningful impact he has made as a member of the Board of Directors."

With the election of Ms. Haskey and Mr. Long and the concurrent retirement of incumbent directors Ms. Malhotra and Mr. Hoffman, the board continues to consist of five directors, all of whom are independent for the purpose of National Instrument 58-101 Disclosure of Corporate Governance Practices.

In 2025, Karnalyte Resources Inc. plans to:

• complete the update to its NI 43-101 technical report;

• complete the review of its development strategy; and

• optimize construction and operation plans and enhance project sustainability.

The Company will continue to optimize its asset portfolio, ensuring efficient resource allocation to support project development. Additionally, the Company will intensify its business development activities, seeking strategic partnerships and investment opportunities to advance its projects and move them forward to development. Karnalyte is committed to delivering value to its stakeholders through strategic initiatives, disciplined financial management, and sustainable growth.

General and administrative ("G&A") costs for the six month period ended June 30, 2025 amounted to $671,000 which is a decrease of $119,000 from the comparative 2024 amount.

The key components of the G&A costs are as follows:

(CAD $ thousands)

The following table provides selected financial information of the Company for each of the last eight quarters ended:

Selected Quarterly Results

*Expressed in thousands except loss per share

The 2024 and 2023 comparative figures in the table above are as reported in Management's Discussion and Analysis for the restated year ended December 31, 2024, relating to the calculation error when determining the change in estimate to the decommissioning liability.

The comprehensive income in the second quarter of 2025 was due to the gain on sale of three parcels of land which was partially offset by G&A as well as impairment. The comprehensive loss in the first quarter of 2025 was driven primarily by G&A and impairment relating to efforts on both the NI 43-101 update as well as the magnesium study. Also, since there was no recovery from the change in estimate on the decommissioning liability, that also attributed to a greater comprehensive loss in the first quarter of 2025.

The comprehensive losses in all of the 2024 quarters were driven primarily by both G&A expenses, particularly office and general expenses, salaries and wages, directors fees and accounting and legal expenses, as well as impairment. Additionally, in the third quarter of 2024, the expenditures were partially offset by the gain on disposal of processing and other equipment, mineral properties and computer software as a result of the sale of idle assets in Wynyard. The comprehensive losses in the 2023 quarters were driven primarily by G&A expenses, particularly office and general expenses, salaries and wages, directors fees and accounting and legal expenses.

The third quarter of 2023 was positively impacted due to the change in estimate of the Company's decommissioning liability as a result of the average bond and inflation rates. This third quarter positive impact was reversed in the fourth quarter of 2023 as the change in estimate of the Company's decommissioning liability, resulting in a larger comprehensive loss than the previous third quarter of 2023. The first quarter of

2024's loss increased as travel expenditures were incurred for an in-person strategic planning session and seeking investment and strategic partners. The second quarter of 2024's loss increased due to office and general expenses incurred for the investor relations firm, additional Board meetings and trips to Wynyard for asset sale preparations. In the third quarter of 2024, the comprehensive loss was positively impacted by the Wynyard idle assets sale. In the third and fourth quarters of 2024 and the first quarter of 2025, the comprehensive loss was negatively impacted as the Company reviewed its development of the magnesium assets at the same time as the Potash Project which, in turn, increased the impairment expense. In the second quarter of 2025, the comprehensive income was positively impacted by the three parcels of land sale.

Past performance is not a guarantee of future performance and the information in this MD&A is not necessarily indicative of results for any future period. Factors expected to impact general and administrative expenses in future periods have been described throughout this MD&A.

53.28 million common shares outstanding.

The Company capitalizes costs that are determined to provide future benefits and charges other costs to comprehensive loss including salaries, support and office costs, community relations programs and other administrative related expenditures. Costs directly related to capital assets are capitalized to appropriate categories and depreciated over their useful lives.

Expenditures to date were focused on the completion of the Company's resource reports, including updating the Company's prior technical reports and 2013 environmental impact statement, confirming the resources and reserves through drilling wells on the initial focus area and preparing the Company for construction by advancing detailed engineering and completing initial site preparation.

During the six month period ended June 30, 2025, $406,000 in additions to exploration and evaluation and other assets were impaired. The additions related to the Potash Project and magnesium study. In the second quarter of 2025, the Company sold three parcels of land with a net book value of $420,000, for a net gain on sale of $988,000. The net balances classified as exploration and evaluation and other assets are as follows:

The net balances classified as capital assets are as follows:

The decrease in capital assets is a result of depreciation expenses of $6,000 recognized during the first two quarters of 2025.

The Company's ability to secure adequate financing for the development of the Potash Project on economic terms could result in a material difference from the Company's estimate of the recoverable asset.

At June 30, 2025, the Company had working capital of $0.9 million compared to $1.1 million at June 30, 2024 including $1.1 million and $1.2 million, respectively, in cash and cash equivalents.

As at June 30, 2025 and 2024, the Company also had $0.4 million in restricted cash that was set up as a requirement from the Government of Saskatchewan with respect to reclamation obligations regarding the Potash Project. The Company has updated its reclamation program for the Potash Project in accordance with Government of Saskatchewan regulations. This update may result in the requirement to increase the amount held as restricted cash in order to satisfy the financial assurance requirements of the Government of Saskatchewan in future periods.

The Company maintains cash in bank accounts for day to day operations and invests the excess in overnight financial instruments in high interest saving accounts that are highly liquid.

The Company is in its pre-development phase and therefore there is material uncertainty that the Company will be able to raise additional funds to maintain sufficient financial resources to fund ongoing operating and required exploration expenditures and to move forward to the production stage. The ability of the Company to continue as a going concern is dependent upon obtaining further equity issuances or other forms of financings. Please refer to the Liquidity Risk and Going Concern section under the Financial Risk Factors heading below.

In addition to the minimum regulatory expenditure requirements, the following table summarizes the commitments of the Company as at June 30, 2025:

(CAD $ thousands)

not less than $3,000,000 for work during the first three years of the term of the lease. Expenditures made to date on the property have satisfied this requirement.

There were no material changes to management compensation arrangements and no other related party transactions for the six months ended June 30, 2025.

Pursuant to the terms of the subscription agreement (the "Subscription Agreement") and the offtake agreement (the "Offtake Agreement") between the Company and GSFC, each dated January 10, 2013, the Company must not divest, sell, assign, transfer or otherwise dispose of any part of its interests in the Potash Project without the prior written consent of GSFC until the third anniversary of the date on which the first shipment for delivery of products is dispatched by the Company in accordance with the terms of the Offtake Agreement (the "Project Lock In Period"). After the expiry of the Project Lock In Period, a person may acquire an interest in the Potash Project subject to GSFC's right to terminate the Offtake Agreement at that time. The Subscription Agreement provides that, subject to certain conditions, the above-described restrictions on disposition do not apply to a creation or grant of a security interest to a lender providing financing for the Potash Project (including for an expansion thereof). The Offtake Agreement provides that following the expiry of the Project Lock In Period, the Company may dispose of any part of the Potash Project that is not part of the Company's subsurface mineral lease KLSA 010 or that is not intended or reasonably required for the three phases of the Potash Project.

The preparation of financial statements in accordance with IFRS Accounting Standards ("IFRS") requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amount of assets, liabilities, income and expenses. The Company evaluates judgments and estimates periodically based on historical experience and various assumptions that are considered reasonable in the circumstances. Actual results may differ from those reported. The Company reviews significant areas subject to judgment and estimation with the Audit Committee and independent auditors. Significant areas requiring judgment and estimates include:

The Company is in the pre-development stage of its history and at this stage of the Company's growth, it is subject to the risks associated with early stage companies, including uncertainty of future revenues, developing acceptable markets and growth into established markets, profitability and the need to raise additional financing to continue to progress its Potash Project.

Continued exploration and development of the property is dependent on the Company's ability to obtain necessary financing. As the Company is not currently producing from its property, it will be necessary for the Company to seek additional equity or debt to finance its programs.

The Company's exploration and evaluation expenditures relating to the acquisition of mineral properties, leases, and the exploration and development thereon are recorded at cost and include direct and indirect acquisition and exploration costs associated with specific mineral properties. These costs are capitalized on the basis of the potential realization from the underlying asset and will be amortized over the shorter of estimates of reserves or service life, following the commencement of production, or written off, if the properties are sold or abandoned.

Assets under construction, machinery and equipment, buildings, land improvements, computer hardware and leasehold improvements are recorded at cost. Capital assets are depreciated over their estimated useful lives.

The Company reviews exploration and evaluation assets, capital assets and other non-financial assets for indicators of impairment at each reporting period. Impairment indicators are used to determine whether carrying values of assets should be assessed for impairment or whether a reversal of impairment may be required.

Internal and external indicators of impairment for capital and other non-financial assets are considered, including significant changes in the extent or manner in which an asset is expected to be used. The use of a significant portion of the Company's capital assets is related to exploration and evaluation activity.

Indicators of impairment for exploration and evaluation assets include the period for which the Company has the right to explore, expected renewals of exploration rights, whether substantive exploration and evaluation expenditures on mineral properties are budgeted, and results of exploration and evaluation activities on the exploration and evaluation assets. Management also considers whether sufficient data exists to indicate that the carrying amount of capital assets and exploration and evaluation and other assets is unlikely to be recovered in full from successful development or by sale.

In measuring impairment, estimates of future cash flows require assumptions about future business conditions and other developments. Significant, unanticipated changes to these assumptions could require a provision for impairment in the future.

Amounts are recorded for decommissioning provisions that will be incurred by the Company on or before the end of the operating life of the facilities and properties, and upon retirement of its mining assets. Estimates of these costs are subject to uncertainty associated with the method, timing and extent of future decommissioning activities. The provision and related asset and expense are impacted by estimates with respect to the costs and timing of decommissioning.

The Company has share-based payments expenses for stock option awards to employees, directors, officers and consultants, as explained in the Company's financial statements. IFRS requires that all share-based awards be accounted for using the fair value method. Under this method, the Black-Scholes option pricing model requires estimates of the expected life of the option, forfeiture rates, stock volatility and the risk-free interest rate expected over the life of the option. A change in these assumptions could materially change the amount of share-based payments expenses recorded.

Contingent liabilities are reviewed continuously to assess whether an outflow of cash has become probable. If the recognition criteria are met, then a provision is recorded in the period in which the change in probability occurs. Assessing whether a contingent liability is probable requires the Company to make judgments about the existence of past events and the application of applicable laws, contractual or constructive obligations.

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its commercial obligations. The Company has no significant concentration of credit risk arising from operations. The Company's cash and restricted cash is held with large Canadian financial institutions and management believes the risk of loss to be remote.

The Company manages liquidity risk by maintaining sufficient cash balances to meet liabilities when due. As at June 30, 2025, the Company had cash and cash equivalents totalling $1,053,000 (2024 - $1,164,000) to settle trade and other payables of $682,000 (2024 - $609,000). In the second quarter of 2025, three parcels of land were sold for net proceeds totaling $1,408,000. As at June 30, 2025 and June 30, 2024, the Company's trade and other receivables are subject to normal trade terms.

Management is aware, in making its going concern assessment, of material uncertainties related to events and conditions that may cast significant doubt upon the Company's ability to continue as a going concern. The Company is in its pre-development phase and therefore there is material uncertainty that the Company will be able to raise additional funds to maintain sufficient financial resources to fund ongoing operating and required exploration and to move forward to the production stage. As at June 30, 2025, the Company had working capital (current assets less current liabilities) of $880,000 which is expected to be insufficient to fund operations in the upcoming year. In addition to ongoing operating expenses, the Company is committed to expenditures in 2025 and subsequent years on its regulatory spending requirements and mineral properties to keep the Company in good standing. The Company's cash position may also be impacted by a requirement to fund the decommissioning liability. The ability of the Company to continue as a going concern is dependent upon obtaining further equity issuances or other forms of financings. There is no assurance that the Company will be successful in obtaining required funding at an acceptable cost as and when needed or at all. Failure to obtain additional funding on a timely basis may cause the Company to postpone development plans, forfeit rights in its properties or reduce or terminate its operations.

The financial statements do not include any adjustments to carrying values of asset amounts and liabilities, or reported expenses that may be necessary if the going concern assumption were not appropriate.

Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. The Company's future potash sales are exposed to price risk with respect to North American and international potash prices.

The Company's functional currency is the Canadian dollar with the majority of transactions denominated in Canadian dollars. At this time management believes the foreign exchange risk derived from currency conversions is not significant and therefore does not hedge its foreign exchange risk. At June 30, 2025, the Company held the majority of its cash in Canadian dollars.

The Company's trade and other payables are non-interest bearing and have contractual maturities of less than 45 days. As at June 30, 2025, the Company's only interest bearing asset is cash in high interest saving accounts and a small amount of cash equivalents held in guaranteed investment certificates. Cash and cash equivalents earn interest at prevailing short-term interest rates. During the six month period ended June 30, 2025, the Company earned interest income of $14,000 (2024 - $46,000) from its cash and cash equivalents.

The Company has established disclosure controls and procedures for the timely and accurate preparation of financial and other reports. Such disclosure controls and procedures are designed to provide reasonable assurance that material information required to be disclosed is recorded, processed, summarized and reported within the periods specified by applicable securities regulations. In addition, the disclosure controls ensure that information required to be disclosed is accumulated and communicated to the appropriate members of management and properly reflected in the Company's continuous disclosure filings.

As with most small or developing companies and consistent with the concept of reasonable assurance, the Company recognizes that the relative cost of maintaining these disclosure controls and procedures should not exceed their expected benefits. As a result, the Company's disclosure controls and procedures can only provide reasonable assurance, and not absolute assurance, that the objectives of such controls and procedures are met.

The Chief Executive Officer and Chief Financial Officer are responsible for evaluating the disclosure controls and procedures. They have concluded that the design and operation of these disclosure controls and procedures were not effective due to the existence of material weaknesses in the internal controls over financial reporting noted in the following section.

The Company mitigates these weaknesses by using external consultants as appropriate; however, such mitigating procedures do not constitute compensating controls for the purposes of National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109").

The Chief Executive Officer and Chief Financial Officer of the Company are responsible for designing and ensuring the operating effectiveness of internal controls over financial reporting. They are also responsible for causing the internal controls to be designed and operated effectively under their supervision. They are intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. It is management's belief that any control system, no matter how well conceived or operated, can provide only reasonable, but not absolute,

assurance that the objectives of the control system are met. An internal control system cannot prevent all errors or fraud.

The Company does not have adequate in-house personnel to properly implement segregation of duties with respect to day-to-day accounting, complex accounting and non-routine transactions that may arise and also to prevent and monitor the potential for management override. It is not deemed economically feasible at this time to have such personnel.

These material weaknesses may increase the risk of material misstatements in the financial statements; the Company mitigates these weaknesses by using external consultants as appropriate; however, such mitigating procedures do not constitute compensating controls for the purposes of NI 52-109.

The Company has no off balance sheet arrangements at the time of this MD&A.

As of the date of this MD&A, the Company has 53,283,982 Common Shares and 1,233,000 stock options issued and outstanding.

Certain statements in this MD&A 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 Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "could", "estimate", "expect", "plan", "intend", "forecast", "future", "guidance", "may", "predict", "project", "should", "strategy", "target", "will" or the negative or similar words or phrases suggesting future outcomes or language suggesting an outlook.

Forward-looking statements may include, but are not limited to, management's expectations, intentions, and beliefs concerning: the development and operation of the Potash Project or the Proteos Nitrogen Project; future extraction and exploitation of mineral deposits; capital expenditure requirements; future commodity prices; expectations regarding prices and costs; expectations regarding the Company's ability to obtain additional financing necessary to develop the Potash Project or the Proteos Nitrogen Project; expectations regarding the production capacity of the Potash Project and the Proteos Nitrogen Project; expectations regarding markets for potash in North America and globally; expectations regarding markets for nitrogen fertilizer products; expectations regarding the distinction between standard-grade and high-grade potash; expectations regarding markets for magnesium; the effectiveness of the Company's anticipated solution mining methods; expenditures to be made by the Company to meet certain work commitments; work plans to be conducted by the Company; reclamation and rehabilitation obligation and liabilities; treatment under

governmental regulatory regimes with respect to environmental matters; treatment under governmental taxation regimes; impact of foreign governments and regulation on the Company's operations; future development of infrastructure; government regulation of mining operations; dependence on key personnel; and competitive conditions.

Forward-looking statements in this MD&A include statements regarding: the Company's ability to commence and increase production from 625,000 TPY, to 1.375 million TPY, and thereafter to 2.125 million TPY of potash; the production of potash, nitrogen fertilizer products, or magnesium; the costs related to the operation of the plant and facilities will be consistent with other solution mining operations subject to differences in the Company's mineral body and processing; the implementation and ongoing use of solution mining process; further seismic exploration and drilling; global fertilizer demand and consumption; capital expenditure and operational expenditure estimates; anticipated results of development and extraction activities and estimated future developments; the Company's ability to produce sufficient potash to meet its obligations under the Offtake Agreement; the Company's ability to obtain additional financing on satisfactory terms; the market prices for potash, nitrogen fertilizer products, and magnesium; the Company's ability to pump the waste underground to eliminate surface salt tail piles; the Company's ability to economically extract and process mineralized material into potash; and the improvements that the Company has developed for the solution mining process are as effective as expected by the Company.

Such forward-looking statements are based on a number of material factors and assumptions, including: the stabilization of the global potash industry and market; the Company obtains additional financing in the future; the Company executes its project development plans in a manner consistent with the Company's technical report filed on July 15, 2016 (the "2016 Technical Report"); the Company executes its discounted cash flow model assumptions as described in the 2016 Technical Report; estimates of mineral resources and mineral reserves in the 2016 Technical Report are accurate; full potash production is reached; that the Company continues to have rights to the property subject to subsurface mineral leases KL 246, KL 247A and KLSA 010, and such rights are not challenged or impacted in any material manner; that the Company is able to obtain required approvals, licences and permits, in a timely manner; the Company is able to successfully develop and market nitrogen fertilizer products; the Company is able to successfully develop and market magnesium products; the Company's key senior management continue in their respective roles with the Company; the Company's intellectual property is not challenged; the Company does not become subject to litigation; the Company's ability to meet its obligations under the Offtake Agreement; environmental and other applicable law and other regulations are not amended, repealed or applied in a manner that impacts the development and operation of the Potash Project or the Proteos Nitrogen Project as currently anticipated; there are no adverse changes to the price of potash, nitrogen fertilizer products, or magnesium that would adversely affect the prospects for developing and operating the Potash Project or the Proteos Nitrogen Project, or making it inadvisable or uneconomic to proceed with development; the future mining operations operate as anticipated; the Company's ability to maintain and develop positive relationships with foreign governments and future business partners; the Company is able to develop and maintain the infrastructure required to export, store and transport its potash, nitrogen fertilizers, or magnesium production; there are no comparable mining companies targeting carnallite in North America; and the continued existence and operation of the primary potash production facility.

Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results

will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under "Financial Risk Factors" elsewhere in this MD&A and the following factors, which are discussed in greater detail under the "Risk Factors" section of the Annual Information Form: exploration, development and operation risks related to the Potash Project and the Proteos Nitrogen Project; the ability to secure adequate financing to implement the Company's strategic and development objectives; the ability to maintain adequate capital to meet the Company's financial commitments; the successful execution of the Company's project plans; the uncertainty regarding the estimation of mineral resources and mineral reserves in the 2016 Technical Report; the lack of current revenues and uncertainty about future revenues; the risks associated with the limited operating history of the Company; the lack of developed markets for the Company's magnesium products; the unproven nature of solution mining of carnallite in Saskatchewan; no assurance of titles, leases, or maintenance of existing permits; permit and licensing requirements related to exploration and development activities; the Company's ability to satisfy its material agreements, including the Offtake Agreement; the risks associated with the enforcement of the Company's material agreements, including the Offtake Agreement; the potential loss of key employees, technical experts or key suppliers; the potential for a volatile market for the Common Shares of the Company; the potential dilution of shareholders through future financings; failure to protect the Company's intellectual property rights; litigation and tax matters; adequacy of the Company's insurance coverage; adequacy of the Company's internal controls over financial reporting; environmental and regulatory risks; the volatility of potash and magnesium prices; the cyclical nature of the potash and magnesium industries; availability and cost of labour and materials required for the construction of Phase I; competition; and currency exchange rate fluctuations.

Although the forward-looking statements contained in this MD&A are based upon what management of the Company believes are reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this MD&A and are expressly qualified in their entirety by this cautionary statement. Subject to applicable securities laws, the Company assumes no obligation to update or revise them to reflect new events or circumstances.

Further information about the factors affecting forward-looking statements is available in Karnalyte's Annual Information Form and the restated audited annual financial statements for the year ended December 31, 2024, which have been filed with Canadian provincial securities commissions and are available on SEDAR+ at https://www.sedarplus.ca.