TORONTO (miningweekly.com) – Saskatchewan-focused potash project developer Karnalyte Resources on Thursday announced that the provincial Environment Ministry had given it the green light to proceed with construction permitting for the Wynyard carnallite project, after the company had cleared all conditions set out in its February environmental-impact statement (EIS).
CFO Ron Love explained to Mining Weekly Online that despite the company receiving full approval of the EIS earlier this year, testwork on a brine disposal well, as well as a water supply well had to be completed before the province would consider construction permitting.
“With these tests passed, we are well on our way to secure more project financing and to start construction once the construction permit has been issued,” he said in an interview.
Love explained that most of the work for the required construction and operating permits was already complete and included in the EIS, which made the issuing of the permits less complicated. The company intends to apply for the outstanding permits on an ‘as-required’ basis.
Site preparation activities were already making progress.
The company, which is preparing to start construction of its C$626-million project, is currently on the lookout for another partner, or other investors, to secure more financing to complete the project. Love said the company would probably need to secure another C$75-million to C$100-million to move on with construction.
“We don’t believe it is impossible to raise the money through public markets, but given the soft market, we would prefer to get another partner on board. We have a lot of irons in the fire in our hunt for another partner,” he said.
Scotiabank analyst Ben Isaacson said he believed Karnalyte was relatively well positioned to withstand potash price and junior financing headwinds compared with its peers, and continued to be among the most advanced-stage junior potash projects out there.
Karnalyte in January inked a $45-million investment and a 20-year offtake agreement with Gujarat State Fertilizers and Chemicals (GSFC), resulting in GSFC holding a 19.98% stake in the potash junior.
Under the 20-year take-or-pay offtake agreement, GSFC would buy 350 000 t/y of potash from Karnalyte, which would increase to 600 000 t/y of potash as capacity at the project increased during Phase 2 construction.
The company had also recently engaged financial services providers BNP Paribas and Natixis (New York) as lead arrangers to underwrite project financing to the value of $300-million.
First-phase development would entail construction of a 625 000 t/y potassium chloride plant, estimated to cost $593-million, and the second phase comprises a 2.13-million-tonne-a-year operation, estimated to cost $2-billion.
Karnalyte also plans to construct a 100 000 t/y magnesium-product facility, which is contingent on developing the 625 000 t/y potash facility. The plant would produce magnesium chloride at 32% concentration and 104 000 t/y of hydromagnesite at 99% purity.
Meanwhile, GSFC said the current downtrend in the potash sector was a result of the combined impact of the global recession and economic uncertainty, despite the importance of this commodity in providing food supply to the developing world.
"While short-term variability will always be a reality in the commodity sector, the medium- and long-term fundamentals support strong potash demand and growth in the future,” GSFC GM of finance and Karnalyte director Vishvesh Nanavaty said in a statement.