Analyst Actions: Canaccord Optimistic on Karnalyte Resources; Lifts Target to $12
Canaccord Genuity remains optimistic on Karnalyte Resources. It has released an analyst report, lifting the target price but maintaining the rating. It said:
Investment recommendation: "We have previously stated and continue to believe that KRN is the best positioned junior potash company (and most advanced, as they are construction-ready). With their phased construction approach and
relatively low initial capex of $650 million, we always believed they would be
able to attract strategic investors to move the project forward (versus the
higher risk/speculative nature of awaiting a takeout partner for some of
their peers that have a $3B capex project). We believe this morning's
announcement of a $60M commitment by a strategic partner is the first
of several financing-related announcements that will move this project
Investment highlights: "Karnalyte and India's Gujarat State Fertilizers & Chemicals Limited (GSFC) announced a strategic investment and off-take agreement in KRN's Wynyard potash project in Saskatchewan. The agreement is for a C$45 million strategic investment at C$8.15 per common share. The investment will give GSFC approximately 5.49 million shares or a 19.98% ownership stake in Karnalyte. GSFC retains the right to maintain its equity position in future equity offerings and has agreed to commit approximately C$15 million in the next
round(s) of public equity financing by Karnalyte to finance the construction of Phase 1 of the Project. The companies have agreed to a 20-year, take-or-pay off-take agreement (upon commencement of commercial production), whereby GSFC has committed to purchase approximately 350kt of potash annually from Phase 1, increasing to 600kt annually with the commencement of Phase 2."
Valuation: "We continue to rate the KRN shares Speculative Buy but have increased our target price to C$12.00 (from C$11.75 previously) based upon a 1x
NAVPS of C$11.92."