1.0billion tons measured and indicated at 20%KCL with a 60% solution extraction
ratio (combined open pit and solution mining) = 120 m tons KCL sellable / 2.0 m tons per year = 60 year mine life.
Estimated $800 m for mine capex / 200 m shares = ($4.00) capex cost per share
$55 million cash on hand
Karnalyte appears to be a solid company with a huge resource. Planning to do a deep solution mine and be in production by 2013. Two things come to mind after reading the articles below. 1) It appears that Potash Corp. plans to double production to 17 million tons by 2015…and BHP plans on developing the Janzen Mine and Karnalyte will be selling into the same MOP market as the Canadian Cartel? My point is if the market turns down and if Canada produces million more tons of MOP then, what could happen to the share price of Karnalyte?
2) having a share price of over $16 per share…and not likely to sign an Off-Take Agreement, then one must assume a combination of Debt Financing and a Share Offering. For arguments sake, lets assume 50% of each. That would be $410m /50% Debt Financing and 50% Share Offer. $205 million / $16 per share = 12 million new shares.
Proposed total shares outstanding: 21 million current + 12 million new shares = 33 million shares at time of production….very positive as the number of shares outstanding will be very low. Production is likely as the proposed Capex is very low at just over $400 million dollars.
717 m tons KCL x 35% extraction rate = 250 million tons sellable. Planned 2 m tons per year production per year. Long life mine.
Estimated $400 m for mine capex / 33 m shares = ($12.00) capex cost per share
$35 million cash on hand
October 17, 2011 (Source: agrimoney.com) -- Uralkali, targeting leadership in world potash, revealed its output of the nutrient had edged 4% higher – even as China defied common market thinking by revealing that sector may be about to produce too much for its own good.The Russian group said its potash production had risen by 4% to 8.06m tonnes in the first nine months of 2011, a figure including output from peer Silivinit, which Uralkali took over in June. The increase reflected further efforts by Uralkali, which claims by buying Silvinit to have overtaken Canada's PotashCorp to top rank in potash production, to cash in on higher prices of the nutrient, a spokesman told Agrimoney.com.Uralkali, which is bringing new mining operations onstream and is interested in taking control of regional rival Belaruskali, has ambitions to overtake PotashCorp in production capacity too.PotashCorp, which sold 8.6m tonnes of potash last year, has capacity of 13.3m tonnes, but has plans to reach 17.1m tonnes by 2015, given a revival in demand which has returned most miners to full production
September 29, 2011 (Source: Financial Post) -- When market turmoil increases, it can be almost impossible for junior mining companies to raise any money (see 2008, for example). Given the uncertainty in the air today, Mackie Research analyst Jaret Anderson decided that this is a good opportunity to review the cash positions of junior potash companies and see who is best equipped to get through a bear market. He found that Allana Potash Corp., Karnalyte Resources Inc. and Western Potash Corp. are in very solid shape, with cash balances of $55-million, $35-million and $25-million respectively.
Allana can maintain its current spending pattern for more than three years without needing an equity offering, Mr. Anderson wrote. Karnalyte has 11 months of liquidity at recent burn rates, and while Western Potash has only eight months of liquidity, its spending could decrease as it is close to publishing a pre-feasibility study
Allana Potash (AAA.to) $200m Market Cap: 160 km2 land package located in Ethiopia which surprisingly has a great infrastructure and close proximity to developing growth regions in Africa, India, Asia, and the Middle East. The resource itself is of ample size and only 100m from the surface which will make this a low cost operation. Allana has Measured and Indicated Sylvinite Resources of 97.8 Million Tonnes grading 30.04 % KCl, Measured and Indicated Kainitite Resources of 284.2 Million Tonnes grading 19.8% KCl, Measured and Indicated Upper Carnallitite Resources of 78.3 Million Tonnes grading 18.4% KCl, and Measured and Indicated Lower Carnallitite Resources of 212.6 Million Tonnes grading 12.0 % KCl. In addition to these resources, the project contains additional Inferred Mineral Resources of 596 Million tonnes grading 20 % KCl from all four potash horizons. Allana has a very strong management team, strong strategic investors, but not that great of a share structure (196m OS). Projected CapEx is expected to be low in comparison to many but estimate is unknown. Expected Production: 2014+.
Karnalyte Resources (KRN.to) $300m Market Cap: The Karnalyte Property is located 0.5m km to the south of highway 16 near the town of Wynyard. The 43-101 complaint report states that ”in total the project contains 4,984 MMT of total Indicated Resources (carnallitite and sylvinite) with a weighted average KCl content of 14.4%, which includes 4,046 MMT of carnallitite with a weighted average MgCl2 content of 15.1%.. KRN is conducting an environmental impact statement as well as a feasibility study and expects to have the results of the feasibility study by the end of 2011. The feasibility study will examine the economic feasibility of constructing a solution mining facility that will initially produce 500,000 tonnes of potash per year, increasing to 2.0 MTPY. In summary, KRN has a large resource, Lower than typical CapEx ($350m+), and a great share structure (20.1m OS). Expected Production: Mid 2013. [Karnalyte Resources Presentation]