Financing collapse threatens potash mine

Financing collapse threatens potash mine

A Saskatoon-based mining company’s plan to build a new potash solution mine near Wynyard appears to be in jeopardy after a financing agreement worth about $700 million fell apart.

When Karnalyte Resources Inc. announced its agreement with the Indian company Gujarat State Fertilizers and Chemicals Ltd. (GSFC) in March, its president, Robin Phinney, said he could have “dirt flying” on Oct. 1.

This week, the publicly-traded company said in a news release that GSFC had “ceased negotiations” after the two firms were “unable to reach an agreement on certain fundamental terms” of the deal.

The agreement collapsed over concerns about “governance matters” and how other minerals in the deposit about 170 kilometres east of Saskatoon, such as magnesium, will be developed, Karnalyte said in the release.

“While these negotiations have stalled, we remain hopeful that Karnalyte and GSFC can come to acceptable terms on financing and the development of secondary minerals in the near future,” Phinney said in an email on Thursday afternoon.

“The recent release of an independent, third party Technical Report has confirmed that our Wynyard Project has enormous potential and is construction ready.”

Released last month, the report said the Wynyard Carnallite Project — carnallite is a source mineral for potash — had proven reserves equivalent to 60 million tonnes of 97 per cent pure potash, plus extensive “probable” reserves.

The company said in March that it would build the solution mine in three stages, with the first expected to produce 625,000 tonnes of potash every year. It said all three stages could produce 2.125 million tonnes per year.

Under the terms of the agreement, GSFC would fund construction of phase one and buy 56 per cent of its potash at market price for 20 years in exchange for a 51 per cent voting stake in the Saskatoon company.

“I believe this financing will serve as a template for future investment by Indian companies in Canada and will strengthen relations between our two countries for years to come,” GSFC’s CFO, Vishvesh Nanavaty, said in a statement at the time.

Representatives of GSFC could not immediately be reached for comment Thursday.

Phinney said in the statement that the company remains focused on securing financing to build the mine, which he has previously said could create as many as 300 construction jobs and between 80-90 permanent positions.

“Despite this latest development, we remain optimistic that we’ll be able to achieve financing arrangements in the best interests of all shareholders.”

 

About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on August 11, 2016, in potash. Bookmark the permalink. Leave a comment.

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