TORONTO (miningweekly.com) – Canadian potash project developer Karnalyte Resources has inked a $45-million investment and a 20-year offtake agreement with an Indian fertilizer firm, placing it closer to direct competition with some of the world’s largest potash firms.
India-based Gujarat State Fertilizers & Chemicals (GSFC) has agreed to make a strategic investment of about $45-million in Karnalyte, at a price of $8.15 a common share, which would result in GSFC holding a 19.98% stake in the potash junior.
The two companies had also agreed to an offtake agreement which would see GSFC buy about 350 000 t/y of potash from Phase 1 of Karnalyte's Wynyard carnallite project, increasing to 600 000 t/y when Phase 2 starts production. The offtake agreement would continue for about 20 years.
Although the offtake investment is relatively small, it gives Karnalyte a strategic footing in India, where the marketing arm of potash majors Potash Corporation of Saskatchewan, Mosaic and Agrium – Canpotex – have had a hard time renewing offtake contracts.
"This investment by GSFC is a significant milestone for Karnalyte and establishes Karnalyte as a leader among the new class of potash developers,” Karnalyte CEO Robin Phinney told a teleconference.
"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," GSFC MD Atanu Chakraborty said in a statement.
Based on its current issued and outstanding common share capital, Karnalyte would issue about 5.49-million common shares to GSFC on closing of a private placement. The proceeds from the 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 started late in December 2012 and is expected to conclude on January 28. Following the public consultations, Karnalyte expects to receive final approval for the Wynyard project from the Saskatchewan MOE shortly thereafter.
Karnalyte’s TSX-traded stock rose by 20.69% in value in the last five trading days, and at Thursday noon was up by 8.75% at C$8.70 apiece.