Karnalyte touts 70-year potash mine in Saskatchewan

Karnalyte Resources’ (TSX: KRN) updated feasibility study for its Wynyard project in Saskatchewan positions it as a mid-tier potash player by size and economics, while its mine life and added magnesium co-products set it apart among sites in the province.  

The study estimates Wynyard could produce 142.2 million tonnes of potash and 7 million tonnes of hydromagnesite over a 70-year mine life, according to the study results released on Wednesday. The update outlines an after-tax net present value of about C$2 billion ($1.4 billion) at an 8% discount rate, with a 12.5% internal rate of return and an 8.8-year payback period. Wynyard is about 175 km east of Saskatoon. 

“The updated feasibility study marks a pivotal milestone for Karnalyte Resources, confirming the expected strength and longevity of our Wynyard deposit,” Karnalyte CEO Danielle Favreau said in a release. “As potash is essential to global food security, our competitive cost structure and positive market fundamentals, backed by strong price forecasts, provide a solid platform for long-term value creation.”

The project’s magnesite content could help meet demand for the critical metal magnesium, used in electric vehicles, green technologies and aluminum alloys. China supplies most of the world’s magnesium production.  

Karnalyte shares jumped 28% to 18¢ apiece mid-day Thursday, valuing the company at $9.6 million. The stock has traded in a 52-week range of 8¢ to 28¢. 

High costs

Initial capital costs total C$4.2 billion, including C$4 billion for the three-stage potash processing facilities and C$231 million for the hydromagnesite plant. Sustaining capital over the mine life is forecast at C$7.62 billion. Operating costs are estimated at C$134.01 per tonne of potash and C$318.04 per tonne of hydromagnesite. 

Wynyard hosts about 2.95 billion measured and indicated tonnes grading 47.9% carnallite, 6.1% sylvite (equivalent to 12% potassium oxide and 6.9% magnesium oxide) and 3.9 billion inferred tonnes at 45.2% carnallite and 7.2% sylvite. The resource sits across the Patience Lake, Belle Plaine and Esterhazy members, or geological layers. 

The carnallite-rich deposit allows production of both potash and magnesium products, giving Karnalyte room to pursue additional magnesium commodities such as magnesium chloride brine, magnesium hydroxide and magnesium oxide.

The project could produce 2.2 million tonnes of potash a year at full buildout, along with 104,000 tonnes of hydromagnesite. 

India offtake deal

An offtake agreement would see major shareholder Gujarat State Fertilizers and Chemicals take almost half of Wynyard’s annual production, amounting to 350,000 tonnes a year from the first stage or production and 250,000 tonnes a year from the second stage, with an option for up to 400,000 tonnes a year from the third stage. The deal could secure as much as 1 million tonnes a year once all stages are running.

Wynyard’s first stage gained environmental approval in 2013, and the company plans to file amendments to include the second and third stages.

The feasibility study also highlights opportunities in magnesium chloride brine sales for dust control and de-icing, greater access to the U.S. Corn Belt market and a chance to supply the constrained synthetic hydromagnesite sector. Key risks include hydromagnesite plant performance, competition in the potash market and potential changes to magnesium royalties.

The Wynyard project is construction-ready, with engineering complete and permits secured, but advancement will hinge on financing and stable potash prices, Karnalyte said.

Port controversy

The project update comes amid increasing tension in Canada’s potash landscape. Nutrien (TSX, NYSE: NTR,) the country’s largest potash and fertilizer producer, has decided to bypass the Port of Vancouver in British Columbia in favour of a port near Vancouver, Wash.

B.C. Premier David Eby said the move does not make sense for a Canadian resource industry and warned that exporting through a U.S. port puts a Canadian product at the mercy of the U.S. administration.

“Puts Saskatchewan’s resources in a precarious place, and denies B.C. a port expansion,” Eby told Global News. Nutrien said it evaluated about 30 criteria for its expansion plans and concluded that Longview, Wash., was the best fit.