Karnalyte Gets Major Financing for Saskatchewan Potash Mine

Karnalyte Resources (TSX:KRN) secured what amounts to a hefty down payment in a bid to finance construction of its Wynyard potash project in Saskatchewan and become Canada's next potash producer. Karnalyte announced Tuesday evening it had arranged bought-deal financing led by BMO Capital Markets that would bring in at least CA$115M.

Karnalyte said it would issue 8.65M shares @ CA$13.30 and give BMO and other institutions taking part in the financing a 15% overallotment, which if subscribed to means Karnalyte could reap up to CA$132M.

Combined with $37M in cash on hand that Karnalyte reported as of the end of September, the influx of cash would cover about a quarter of initial capital costs to build Wynyard.

In a recent feasibility study Karnalyte pegged start-up costs for a 625,000 tonne a year solution mine at C$593 million. Karnalyte then plans to scale Wynyard up to over 2 Mt a year for total capital cost of about CA$2B.

Mackie Research analyst Jaret Anderson suggested the funds would go a ways toward getting ground broken at Wynyard.

"This financing removes a major obstacle for any greenfield potash project by providing a sizeable chunk of the capital required for the construction of the initial phase of Wynyard," Anderson said in a research note to clients Wednesday morning. "While additional capital will be required in order to complete construction (scheduled to begin in Q112 with production targeted for early 2014), this initial tranche, combined with the $37M cash on hand and debt financing, likely carries the company through at least 2012."

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