RE: RE: RE: RE: RE: Alberta’s tiny Karnalyte takes First out of the block Scotia Review $12.50:
Event
According to the Globe & Mail, KRN has reached an agreement with an Asian partner that will see 19.98% of the company sold at $8.15/sh, or at a 2% premium to yesterday's closing price. Note that KRN was up 9% yesterday, and is 30% higher over the past month, while WPX is flat to down over the same period. Hmmm.
The article suggests that a subsequent equity injection of $15M will occur in the next year or so. Additionally, the partner will buy potash from KRN at market prices over the next 20 years.
KRN has made no press release, and told us today they expected a press release out tomorrow (Thursday).
Implications
We applaud KRN management for attracting a partner to an unconventional project, in a region with a substantial net surplus and a stranglehold by one effective player that will likely have material economies of scale, in a difficult financing environment, and in a potash industry that is clearly becoming a buyer's market. Wow.
Recommendation
We have upgraded KRN to Sector Outperform, and have raised our NAV multiple to 0.5x NAV from 0.3x NAV. Our revised target price is $12.50, up from $7.00 previously.