Not many can say that their projects have the potential to last hundreds of years, but Karnalyte Resources Inc. can. At its site in Wynyard, Saskatchewan, “We have enough there for our great-, great-grandchildren [to mine],” President, Director and Chairman of the Board Robin Phinney says.
Based in Saskatoon, Saskatchewan, the company specializes in the exploration and development of agricultural and industrial potash and magnesium products. Its flagship project is Wynyard Carnallite, which is estimated to contain 156 million tons of recoverable potash resources, Phinney says.
A longtime veteran of the industry, he explains that the company’s history goes back to 2007, when he discovered the mineral deposits. After researching the history of the land, he formed Karnalyte in 2008, and sought funding from friends and family.
After raising $5 million, “I had two historical drill cores that were on the property,” he recalls, adding that he was able to raise $15 million more. “In 2010, we were able to get on the Toronto Stock Exchange and raised an additional $65 million.”
Since then, Karnalyte has completed all of its milestones and attracted a strategic partner in Gujarat State Fertilizers & Chemicals (GSFC) Ltd., an India-based provider of fertilizer, of which potash is an ingredient. “They joined us with an investment of $45 million towards building our first plant,” Phinney says.
A Recovering Market
Karnalyte experienced a setback in 2013 when global potash prices dropped. A major factor was Russia-based potash fertilizer company Uralkali leaving one of the world’s biggest potash cartels. “They killed the potash market for a year,” Phinney recalls.
Vice President of Corporate Development Julius Brinkman agrees. “The strategic partner was coming on and everything was looking great,” he recalls, noting that prices also dropped because of overcapacity, higher oil prices and less fertilizer being used.
However, “Things changed when the oil prices started dropping,” Brinkman says. “Demand is growing especially on the granular potash side, which is our product line. It’s heating up, especially in North America.”
Karnalyte is getting ready to build its first facility, which will initially produce more than 625,000 metric tonnes (689,000 tons) of potash a year, eventually exceeding 2 million tons. “Our strategic partner wants to move this forward as soon as possible,” Phinney adds.
“We’re in constant negotiations with them in terms of how are they going to fund this and what the split’s going to be,” he says. “They want the offtake and they want it yesterday.”
More may join the project, Brinkman adds. “As we grow our capacity, there’s potential for another strategic partner to come in,” he says. “We’re always open to possibilities.”
Karnalyte is taking a route less traveled on the Wynyard Carnallite project by using the solution mining approach, Phinney says. “In the potash industry, they usually go in with the hard rock mining,” he explains.
But solution mining requires lower capital expenditures, Brinkman says. The process involves pumping water into the mineral deposit through a drilled well.
When the mineral dissolves in water, a brine solution is formed, which is brought to the surface. Afterward, the potassium and magnesium are recovered and processed. Thanks to its process technology, “Our cost to process is very competitive,” Phinney says.
A Second Product Line
Phinney has worked in the industrial minerals industry, especially potash, for most of his career. “Potash is a very, very interesting product,” he says, noting that he believes demand for it will only increase as the global population increases.
“We’ve got emerging markets, changing diets and the fact that the soil can only go so long without the addition of fertilizer,” Phinney says. “If you have a large demand, you’ll eventually get some long-term price increases.”
The magnesium product line also has strong potential for Karnalyte. The company conducted a pre-feasibility study for the production of Magnesium Chloride brine and Magnesium Compounds. Both have the potential to be profitable new lines. “It’s like having a goldmine with a copper credit that pays for the operating cost,” he says.
Additionally, with some of the lowest capital expenditures in the industry, “We can build as capacity is required,” Phinney says, noting that he sees a strong future for the company. “We have a premium product and it’s going to go for premium pricing.”
The company also plans to grow its staff. “We have always run a very lean, cost-conscious-type of company,” Brinkman says. “As soon as there’s funding, that will increase dramatically.”