TORONTO (miningweekly.com) – Potash hopeful Karnalyte Resources said on Tuesday it hired Lyntek Incorporated to study the potential of producing magnesium chloride at its Wynyard project in Saskatchewan.

The company said it would be extracting the material when mining potash in a solution, and that it could represent a second product line.

The prefeasibility study into producing magnesium chloride would conclude in December, Karnalyte said.

“Karnalyte has recognized this opportunity, and this prefeasibility study is the first step to determining the potential and cost to process this magnesium stream,” CEO Robin Phinney said.

Analysts at Dundee Securities said producing magnesium could provide significant upshot.

"On average, we expect that over the life-of-mine, the magnesium revenue stream will add 10% to earnings before interest and tax generated through potash sales," Richard Kelertas and Joshua Bridges said in a note.

Magnesium chloride is used in the steel and cement industries.

TSX-V-listed Karnalyte plans to produce 500 000 t/y of potash by around 2013, and said earlier this year it could expand this in stages to as much as six-million tons yearly.

Kelertas and Bridges rate Karnalyte a "buy", with a 12-month target price of C$20 a share. The stock rose 1.6% on Tuesday to hit C$12.50 by late afternoon.

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