There are stories, great stories and then there’s the book that is required in conclusion the last 2 yrs at Calgary-based Karnalyte Resources.
And that book is set for any Hollywood ending because of a contract in principle the company signed this week with India’s Gujarat State Fertilizers and Chemicals Ltd. (GSFC.) That agreement will give you for US$700 million of financing C a combination of debt and equity – required to construct the very first stage of Karnalyte’s potash mine in Saskatchewan.
And for a company that was down to its last $30 million, whose stock price some time ago was trading below cash value, securing the financing was an amazing effort.
Put the agreement down to two factors:
The resolution of Robin Phinney, the business’s founder and president C who was ousted from his CEO’s position in May 2014 only to resign from the board one month later, form a concerned shareholders group and go back to the executive suite a year later.The overwhelming desire of GSFC, which in 2013 outlayed $44.7 million and became a 19.9 per cent shareholder, to secure a guaranteed supply of resources from a stable and reliable partner. Compared with the alternative suppliers, Canada looks pretty good. GSFC has signed up to take 56 percent of the mine’s output.
Reached Tuesday, Phinney said “it was vital that you possess the your government in GSFC. We are the next generation of potash producers, that’s high grade and produced at huge discounts with low capital and operating costs.”
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In a statement, GSFC said the ground-breaking deal structure demonstrates its “long term commitment and need to secure supplies of key natural resources through investment structures which are aligned with the values of Canadian shareholders.”
GSFC, whose major shareholder (with a 37.84 percent stake) is Gujarat State Investments argues, the financing “will serve as a template for future investment by Indian companies in Canada.”
Such an outcome, whereby stage among the mine is going to be fully financed, would be a long odds possibility when Phinney was ousted almost 2 yrs back. He was replaced eventually after receiving 98.28 percent support from the shareholders at the annual meeting.
“I never thought in a million years that I would have a go of having it back,” he explained Tuesday.
Ousting Phinney put in place a number of managerial and board changes using the new team being unable within the next nine months to secure “a financing proposal (by having an Indian lender) that might be within the needs of the Corporation.”
Indeed, so un-enamored was the new team using the project that the company took a 94 percent jot down around the mine and began a process to locate a buyer.
But Phinney, working in the backdrop, secured a “proposed framework” with GSFC to boost funds to create the mine. GSFC also indicated it desired to “reconstitute,” the board.
In this kind of environment relations forwards and backwards sides became testy. Karnalyte sued Phinney and the wife – an action that drew a counterclaim from Phinney. All those actions have finally been settled.
So last May, before the rescheduled annual meeting Phinney returned and set about working on a financing package with GFSC. Now everything joined together.
Financial Post
bcritchley@nationalpost.com
