Karnalyte Resources announced Friday that it has engaged BNP Paribas and Natixis to underwrite a secured US$300-million debt facility for its Wynyard project in eastern Saskatchewan. It took about eight months to put the deal together, and a definitive term sheet and commitments are already being contemplated.
A US$300-million financing would cover nearly half the cost required to get the mine into its first phase of production. But the other half remains a big challenge, and the debt facility is contingent on Karnalyte financing that half on its own.
The company has $60-million in cash, meaning it will have to come up with about $250-million. That is a tall task for any junior company right now, as their share prices have been decimated and equity financing has become extremely dilutive.
“I’d love to have a better share price doing this,” Karnalyte CEO Robin Phinney said in an interview. “We’re at the lower tip end of being able to do this without giving away the company.”
He noted that Karnalyte has a number of financing options besides straight equity, such as selling convertible debentures or an interest in the project. Karnalyte may also be able to get more money from Indian fertilizer firm Gujarat State Fertilizers & Chemicals Ltd., which has already committed $60-million to the company.
Karnalyte will not be spending all the capital right away, so it could kick off construction if it raises around $70-million to $100-million, Mr. Phinney said. The site is prepped for construction and the firm is just awaiting final documentation from the government before it can start digging.
“All my basic risk factors are taken care off. I don’t have any risk issues related to engineering. It’s strictly financing,” he added.
Karnalyte has always had a better shot than its rivals at building a greenfield potash mine because its capital requirements are more manageable. While many Saskatchewan potash mines are expected to cost US$3-billion or more, Karnalyte needs just $626-million to get to first production and about $2-billion to reach full production. The mine is forecast to churn out 625,000 tonnes a year in its first phase, ramping up to 2.125 million tonnes several years later.