BMO: Market Perform and $1.75 target for Karnalyte ResourcesAccording to BMO Capital Markets:
Karnalyte Resources
(KRN-TSX)
Stock Rating: Market Perform(S)
Target Price: $1.75
May 21, 2014
Highlights From the BMO Capital Markets Farm to Market Conference
Thomas Drolet, interim CEO, and Ron Love, CFO, presented at the 2014 BMO CM Farm to Market Conference in NewYork.
Presentation Highlights:
• KRN provided an update on the development of its 625kt Wynyard Saskatchewan solution-mining potash greenfield, at which the company continues to perform detailed engineering, with Wynyard already having completed a feasibility study and received environmental approval.
• The company reiterated its 2016 target for initial production of 625kt, ramping to 2.125Mt in 5-6 years (BMO currently assumes a 2018 start-up for modeling/valuation purposes).
• KRN maintains a $626M capex estimate for the initial 625kt mine (including $40M for warehouse capacity), and around $2B for the fully ramped operation, as well as $125-129/t for opex. KRN reminded us of the $45M investment by Gujarat State Fertilizers and Chemicals, and the signing of an engagement letter for an additional US$300M in project debt.
• Karnalyte had $46M ($1.67/share) of cash as of March 31, 2014, many years of cushion at the current burn rate (less than $5M/year).
• KRN has also initiated a search for a permanent CEO after founder Robin Phinney left the role last week.