Karnalyte Resources Inc. and Gujarat State Fertilizers & Chemicals announce strategic investment and off-take agreement

Karnalyte Resources Inc. and Gujarat State Fertilizers & Chemicals announce 
strategic investment and off-take agreement 
(all dollar figures expressed in Canadian dollars) 
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, announced today that: 


    --  GSFC will make a strategic investment of approximately $45
        million in Karnalyte at a price of $8.15 per common share of
        Karnalyte ("Common Shares"), which will result in GSFC holding
        a 19.98% ownership stake in Karnalyte; and
    --  Karnalyte and GSFC have agreed to a committed off-take
        agreement for the purchase of approximately 350,000 tonnes per
        year ("TPY") of potash from Phase 1 of Karnalyte's Wynyard
        Carnallite Project (the "Project"), increasing to 600,000 TPY
        with the commencement of Phase 2.  The off-take agreement will
        continue for approximately 20 years from the commencement of
        commercial production of Phase 1.

"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."

Strategic Investment

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.

The Common Share issue price of $8.15 is based on a 20% premium to the volume 
weighted average price of Karnalyte's Common Shares traded on the Toronto 
Stock Exchange ("TSX") for the 20 trading days ended December 20, 2012. The 
issue price is subject to an adjustment if commercial production has not 
commenced on or before October 1, 2016, which may be satisfied by the issuance 
of an additional 555,555 Common Shares by Karnalyte to GSFC at that time.

Pursuant to the terms of the Subscription Agreement, GSFC shall have the right 
to appoint one nominee to the board of directors of Karnalyte. In addition, 
GSFC retains the right to maintain its equity position in future equity 
offerings and has agreed to commit approximately $15 million in the next 
rounds of public equity financing by Karnalyte to finance the construction of 
Phase 1 of the Project.

Off-take Agreement

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.

Closing

Closing of the Private Placement (and the coming into effect of the off-take 
agreement) is subject to customary closing conditions including the receipt of 
all regulatory approval, including the approval of the TSX. It is 
anticipated that the closing will take place on or about February 25, 2013. 
If MOE approval of the EIS is not received by May 31, 2013, then either party 
can terminate the strategic investment and off-take agreement. All Common 
Shares distributed pursuant to the Private Placement will be subject to a hold 
period of four months following closing in accordance with applicable Canadian 
securities laws.

Advisors

Karnalyte was advised by BMO Capital Markets on this transaction. Burstall 
Winger LLP and Goodmans LLP act as legal counsel to Karnalyte.

GSCF was advised on financial matters by PricewaterhouseCoopers Private 
Limited, and by Amarchand & Mangaldas & Suresh A. Shroff & Co. and Torys LLP 
on legal matters.

Conference Call

Karnalyte will host a conference call on Thursday, January 10, 2013 at 10:00 
a.m. Eastern time to discuss the strategic investment and off-take agreement 
with GSFC and then take questions from securities analysts and institutional 
investors. Interested parties may access the conference call by dialing 1 
(647) 427-7450 or 1 (888) 231-8191. Please connect approximately 10 minutes 
prior to the beginning of the call. The conference call will be archived for 
replay until Thursday, January 17, 2013 at midnight. To access the archived 
conference call, dial 1 (416) 849-0833 or 1 (855) 859-2056 and enter the 
reservation number 86582242 followed by the number sign.

About Gujarat State Fertilizers & Chemicals

GSFC, founded in 1962, is a publicly traded agribusiness company focusing on 
the production and sale of fertilizers and industrial products in India. In 
addition to marketing fertilizers and agri-inputs to nine states throughout 
India, GSFC also operates a research and development centre and develops new 
fertilizer products as well as a variety of other chemicals and materials, as 
well as applications for its various industrial products at its Applications 
Development Centre.

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, Karnalyte plans to operate a solution mining facility that will 
initially produce 625,000 TPY of potash, increasing to 2.125 million TPY of 
potash. Karnalyte owns a 100% interest in Subsurface Permit KP 360A 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 Karnalyte's off-take 
agreement with GSFC and GSFC's strategic investment. The forward-looking 
statements contained in this document are based on certain key expectations 
and assumptions made by Karnalyte, including with respect to the ability of 
Karnalyte to obtain the approval of the MOE, the closing of the transactions 
described herein, the ability of Karnalyte to raise additional financing to 
complete construction of the Project, and the ability to produce potash from 
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 (including the approval of the MOE), the 
failure to raise additional financing, 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), potash prices 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.

Robin Phinney, President & Chief Executive Officer Ron Love, Executive 
Vice-President & Chief Financial Officer Telephone: (403) 995-6560 
E-mail:info@karnalyte.com Website:www.karnalyte.com

SOURCE: Karnalyte Resources Inc.

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CO: Karnalyte Resources Inc.
ST: Alberta
NI: MNG ORDER CONF 

-0- Jan/10/2013 07:25 GMT


 
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