Shares jump in potash miner Karnalyte as site workhttps://www.xe.com/news/2012/09/06/2910261.htm?c=1&t=
By Rod Nickel
WINNIPEG, Manitoba, Sept 6 (Reuters) - Shares of Canadian junior miner Karnalyte Resources Inc soared a surprising 11 percent on Thursday after the company said it has started early site preparation on a potash mine in Western Canada.
It was not yet clear if the share increase was related to the company's announcement on Thursday. Also, the gains were far greater than those of other potash companies
Karnalyte is spending about C$5 million ($5.1 million) to prepare the mine site at Wynyard, Saskatchewan, for later construction, and has hired a firm to produce detailed engineering, it said earlier in the day.
But its project, which would cost C$600 million in the first phase and produce 625,000 tonnes of potash per year, will not proceed unless it finds a crucial investor.
That should happen late this year, said Ron Love, Karnalyte's chief financial officer.
'We've made a lot of progress and are talking to quite a few parties,' Love said, declining to name any.
Karnalyte is looking for an investment of about C$100 million, not necessarily all at once, which Love says is a relatively cheap way to enter the growing potash industry. It would raise the rest of its capital for the first phase from debt and perhaps an additional share issue or investment.
The company is competing for capital with Encanto Potash Corp and Western Potash Corp for funds to launch potash mines. Western Potash said on Wednesday that it is talking with India's Rashtriya Chemicals and Fertilizers Ltd about selling a stake.
The trio of so-called junior miners owns the right to mine potash reserves in the Western Canadian province of Saskatchewan, but lacks the capital at present to build mines.
The investor appeal of potash, a soil nutrient used worldwide to boost crop production, has grown in recent years with population and income growth in developing countries. But in recent months, the world's two biggest miners, BHP Billiton Ltd and Vale SA have delayed decisions on proceeding with their own Saskatchewan potash mines amid difficult economic conditions.
'Now that these guys are delaying, it gives us a little extra window to generate a market position, and hold it,' Love said.
Karnalyte published its feasibility study nearly a year ago, but has not raised capital since, illustrating how challenging equity market conditions have been, said analyst Jaret Anderson of Mackie Research Capital Corporation, who rates the company a 'sell.'
While it offers a relatively low investment and has a finished feasibility study, it also bears risks, such as mining a carnallite deposit for potash, rather than the more traditional sylvinite type of deposit, Anderson said.
Karnalyte's shares were up 11.3 percent at C$7.89 in afternoon trading on the Toronto Stock Exchange.
($1=
.98 Canadian)
(Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Bob Burgdorfer) Keywords: KARNALYTE POTASH/
(rod.nickel@thomsonreuters.com)(1 204 230 6043)(Reuters Messaging: rod.nickel.thomsonreuters.com@reuters.net)
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