GSFC Provides Information to Clarify Certain Incorrect Statements in Respect of the Financing Proposal for the Wynyard Potash Project

VADODARA, INDIA--(Marketwired - Aug. 25, 2016) - Gujarat State Fertilizers and Chemicals Limited ("GSFC") has been made aware of certain incorrect and misleading statements that have been made on certain online blogs in respect of GSFC and the proposed financing transaction involving GSFC and Karnalyte Resources Inc. ("KRN"). GSFC wishes to provide information in order to clarify these incorrect statements.

GSFC's only desire has been to bring the construction and development of the Wynyard Potash project (the "Wynyard Project") to fruition. The financing package that was put forward by GSFC, and to this day remains available should KRN wish to pursue same, is based on a variety of concessions designed to provide value to all shareholders of KRN at the expense of GSFC, including:

• GSFC would receive no economic benefit for guaranteeing the entire project debt (75% of the Phase 1 Wynyard Project cost); the structure was designed such that only voting control was granted to GSFC, and that too only until the project debt is repaid and there will be no economic dilution to the existing shareholders. GSFC would receive this voting control only on closure of financing.
• GSFC was also willing to backstop the entire equity requirement and all cost overruns in respect of the Wynyard Project. The amount of any such backstop would far exceed the amount of money that would be required to simply buy the entire issued and outstanding share capital of KRN. However, GSFC has never had any desire to purchase KRN. It's only goal has been to bring the Wynyard Project forward for the benefit of all shareholders.
• The financing proposal by GSFC to KRN permitted the spin-out of certain undeveloped lands into a new public company to pursue all secondary minerals other than potash. Such new company would initially be held by all public shareholders of KRN, including GSFC, in the same proportions as currently exist in KRN. GSFC has no intention or desire of having any greater interest or control of such company from what every other shareholder of KRN would receive. While GSFC continues to believe that any magnesium project for KRN should only be conducted once the Wynyard Project is completed, as the benefits of any such magnesium project are substantially greater upon construction of the Project and with the cash flow generated by the Wynyard Project, GSFC was nonetheless willing to agree to the request of the finance committee of KRN.

It should be further noted the financing package sourced by GSFC was to be through a syndicate of Indian financial institutions, who have their own requirements for any project financing, including to ensure the financial viability of the Wynyard Project in a variety of commodity price scenarios in order to ensure comfortable repayment of the project debt. GSFC has spent considerable time and effort negotiating an extremely favourable financing package that is not available to KRN from any other financing provider in the current climate, nor was available to KRN even when the market conditions were much more favourable than today. This is largely on the basis of GSFC guaranteeing the entire project debt. Lastly, GSFC has never had any issues disclosing the terms of the proposed financing to any shareholders. GSFC has only complied with the disclosure obligations it has understood that KRN has under applicable securities laws. It is not for GSFC to determine what should or should not be disclosed to shareholders of KRN, this is a matter for the management and finance committee of KRN to determine. GSFC will be pleased to provide details of the proposed financing package at the request of any shareholder, and shareholders may make their own determination as to the fairness of such proposal.

GSFC believes that the Project will create significant value for the region of Saskatchewan and the shareholders of Karnalyte. However, if KRN does not wish to pursue the financing package once the details are known to all shareholders, this is perfectly acceptable to GSFC. GSFC wishes continued success to Karnalyte's management in seeking alternative financing to fund the construction and development of the Wynyard Project and shall continue to extend all reasonable co-operation as may be sought.

About GSFC

GSFC is a professionally managed organization with a net worth of approximately 1 billion 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 more than 50 years and has been credited with several path breaking achievements in implementing large scale industrial projects.