Gujarat State Fertilizers and Chemicals Limited

Gujarat State Fertilizers and Chemicals Limited

August 04, 2016 09:02 ET

GSFC Confirms Cessation of Negotiations in Respect of Financing for Phase-I Potash Mine

VADODARA, INDIA--(Marketwired - Aug. 4, 2016) - Gujarat State Fertilizers and Chemicals Limited ("GSFC") confirms a cessation of negotiations with Karnalyte Resources Inc. ("Karnalyte" or the "Company") (TSX:KRN) in respect of the proposed USD 700 million financing (the "Transaction") for Phase I of the Company's potash mine at Wynyard, Saskatchewan (the "Wynyard Project"), as disclosed in the news release of the Company dated August 2, 2016.

GSFC, based on discussions with the proposed project lenders, believes that the Transaction should be undertaken only upon completion of a thorough project development review, including a critical analysis of the overall project costs. Such a review is required to mitigate all implementation risks and ensure that the Wynyard Project can be completed in a timely and cost efficient manner. Further, GSFC has always been advised by technical experts of Karnalyte that development of Karnalyte's secondary minerals (including magnesium), being by-products of potash, by the Company or a separate entity, will be most efficient upon successful development of the Wynyard Project. It is in this context that GSFC proposed certain changes in governance to prioritize the completion of the project development review. This led to the cessation of negotiations.

Based on the commitments made by the company that the balance funding would be arranged to ensure supply of potash to GSFC by April, 2015, GSFC invested 45 Mn USD, in the first quarter of 2013, for a minority stake in the Company to part finance the development of the Wynyard Project. The current Transaction was proposed when KRN was unable to secure financing for the Wynyard project. GSFC continues to remain optimistic and is willing to expend required efforts and resources to efficiently develop the Wynyard Project. GSFC believes that such a project will create significant value for the region of Saskatchewan and the shareholders of Karnalyte. GSFC looks forward to the co-operation of Mr. Robin Phinney and other stakeholders of the Company in order to be able to proceed with the development of the Wynyard Project. In the meanwhile, GSFC will monitor its investment, and take all necessary actions to protect its investment by ensuring that its investment is utilized for the purpose for which it is made, being the development of the Wynyard Project.

About GSFC

GSFC is a professionally managed organization with a net worth of approx 725 Mn USD. The Government of Gujarat is its largest single shareholder and Mr. A. K. Tiwari, an experienced bureaucrat from the Indian Administrative Services, with remarkable credentials is at its helm. It has been in existence and operations for almost 60 years and has been commended for several path breaking achievements in implementing large scale industrial projects.

For further information regarding this news release, please contact GSFC at krnshareholder@gsfcltd.com.

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