01/10/2013 05:11 EST | Updated 03/12/2013 05:12 EDT

Karnalyte Resources Potash Project Sells $45-Million Stake To Indian Firm


CALGARY - An Indian company has signed a $45-million deal to buy a 19.98 per cent stake in Karnalyte Resources Inc. (TSX:KRN), which is developing a potash project in Saskatchewan.

Under the deal, Gujarat State Fertilizers and Chemicals Ltd., has agreed to pay $8.15 per share for about 5.5 million shares.

The company has also signed a 20-year off-take agreement for the purchase of approximately 350,000 tonnes per year of potash from Phase 1 of Karnalyte's Wynyard Carnallite Project.

The off-take agreement will increase to 600,000 tonnes per share with the start of Phase 2 of the project.

"GSFC's strategic investment and entering into the off-take agreement will support Karnalyte's growth strategy of constructing its potash production facility and commercializing a superior potash product," Karnalyte president and chief executive Robin Phinney said in a statement.

"This investment by GSFC is a significant milestone for Karnalyte and establishes Karnalyte as a leader among the new class of potash developers."

Karnalyte is developing a potash project near Wynyard, Sask., east of Saskatoon.

The project is planned to initially produce 625,000 tonnes per year of potash, increasing to 2.125 million.

Karnalyte shares closed up 49 cents at $8.49 on the Toronto Stock Exchange on Thursday.

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