Karnalyte Resources Inc. (
TSX: T.KRN,
Stock Forum) regained some lost ground Tuesday following news that the company has written off its Wynyard Carnallite Project in Saskatchewan.
“The board of directors has determined that in the current price environment for potash, it is not possible to finance and profitably construct and operate a potash production facility at the Wynyard Project,’’
the company said in a press release, Monday.
The company went on to say Monday that it is suspending all activity in relation to the Wynyard Project other than the minimum required to maintain title to the project.
Karnalyte is in the midst of a proxy battle currently being waged by a group of concerned shareholders led by Robin Phinney, who is urging the current board to heed the group’s call for change. Phinney has said he remains willing to engage with the board in constructive dialogue regarding what he deems to be “necessary board changes.’’
“It is clear that shareholders have lost confidence in the current board and that new management is urgently needed to restore shareholder confidence, stabilize the management team and refocus on advancing the Wynyard Carnallite Project,’’
the concerned shareholders have said in a recent press release.
On Tuesday, Karnalyte shares jumped 10.3% to 75 cents, after clawing back the ground that was lost on Monday, following the announcement of the Wynyard write-off. At current levels, the company has a market cap of $20.6 million, based on 27.5 million shares outstanding. The 52-week range is $1.38 and 71 cents.
The company said Monday it had been in talks with an Indian financial institution, but added that talks have not resulted in a proposal that would be in the best interests of the company.
Meanwhile, after completing an impairment review, the company said it has incurred a non-cash impairment expense of $59.1 million related to the Wynyard Project. The company said the project is now carried on its balance sheet at approximately $4 million, an amount that reflects its salvage value, the company said.
Carnallite is an evaporate mineral, a hydrated magnesium chloride. It is used mostly in fertilizers and is an important source of potash.
The Wynyard Carnallite Project is an exploration and early stage pre-development property with a dominant zone of carnallitite and sylvinite (potassium-containing minerals).
Unless there is any improvement in the price of potash, Karnalyte said it will not undertake any further development work at Wynyard, and may seek a buyer for the project.
In addition, the company said it has appointed Thomas Pressello as its new executive vice-president and chief financial officer (effective April 14, 2015) following the resignation of Ron Love.