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Analyst Actions: BMO Capital Keeps Outperform on Karnalyte Resources

Event: "Updating our model after a period of restriction from the $45 million (5.49 million shares at $8.15/share) investment by Gujarat State Fertilizer &

Chemicals (GSFC)."

Forecasts: "We still assume a 2016 start for Wynyard Phase 1 (625k tonnes) and a ramped 2.1M tonne mine (Phase 2) by 2022, but assume a more back-end loaded ramp. We model Phase I capex of $650 million (versus $593 million from feasibility and our prior $675 million estimate), but lower Phase 1+2 capex to $2.1 billion from $2.2 billion. Our assumed average potash price is $436â€"443/t fob Vancouver ($450/t previously)."

Valuation: "Our $11 target is 1.0x our $11.10/share 10% NAV (fully diluted, financed). Our NAV falls to $672 million from $1 billion from slightly lower realized prices; a more drawn out production scenario; and higher freight and handling costs from a more global sales mix."

Recommendation: "KRN remains rated Outperform( S ), with an $11 target price. Junior mining stocks are depressed, equity markets are challenged, and many investors are concerned about rising global potash surpluses. Amid this, KRN is the most advanced potash junior and most likely to secure mine financing. GSFC's

involvement and the expectation for a sizable debt package (we model $325 million) have the potential to entice a broader institutional equity raise (and perhaps another strategic investor) to complete Phase 1 mine financing (we

estimate $255 million of additional equity is required including another $15

million from GSFC)."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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