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Karnalyte Resources completes nitrogen pre-feasibility study

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World Fertilizer,

Karnalyte Resources has completed its previously-announced nitrogen pre-feasibility study and that it will continue its disciplined consideration of the Proteos nitrogen project in Saskatchewan, Canada. The nitrogen pre-feasibility study is part of the ongoing strategic planning process of the Board and management in charting the future for the company.

With input from local advisors in Canada, including Wood Canada, the prefeasibility study was initially prepared by Karnalyte’s strategic partner and largest investor, Gujarat State Fertilizers and Chemicals Limited (GSFC), and ultimately updated and completed by Karnalyte. GSFC is India’s premier fertilizer and chemical manufacturing company and has over five decades of relevant experience in the production, sale and distribution of nitrogen fertilizer.

The pre-feasibility study provided a review of key elements of the project, including site location, production process and technology options, process selection for both the ammonia and urea plants, and an analysis of raw material, utility and product specifications. The study also considered the environmental implications and risks inherent in the project, provided financial analysis and laid out a project implementation plan and schedule. While the pre-feasibility study is not sufficient to conclusively arrive at a project execution decision, it allows the company to determine whether the Proteos nitrogen project should remain in consideration as part of the company’s future business strategy.

The pre-feasibility study’s key conclusions included:

  • the preliminary economic viability of the Proteos nitrogen project, with an internal rate of return and equity rate of return that approaches company benchmarks, based on the average pricing over the past four years for bulk urea and ammonia;
  • potential market growth of urea in Saskatchewan to approximately 2.64 million t, up from current demand estimates of approximately 1.2 million t, based on Government of Saskatchewan information; and
  • the project’s implementation is expected to require three years following the preparation of a detailed project report and assuming a positive investment decision and commencement of construction by Karnalyte.

While Karnalyte is encouraged by the results of the pre-feasibility study, Karnalyte will continue to consider the Proteos nitrogen project with discipline and caution. As previously announced, Karnalyte intends to engage an independent strategic consultant. Karnalyte will now include the consideration of the Proteos nitrogen project in the scope of work required from the strategic consultant who, in the course of its full review of Karnalyte’s strategic options, will independently review the pre-feasibility study.

The idea for the Proteos nitrogen project was first announced in the spring of 2018. At that time the company announced that with the help of its strategic partner, GSFC, it would invite expressions of interest to help the company understand the capital required to develop the project in Saskatchewan and explore the viability of the Proteos nitrogen project. The various expressions of interest the company received provided a wide range of estimation of capital required to develop the project where the difference between the lowest and highest estimated capital costs equalled approximately US$1 billion. The company also considered engaging an independent third party to prepare a feasibility study of the Proteos nitrogen project. The cost estimates received for the requisite work, however, were between CAN$2 and CAN$5 million.

After a change in management in the fall of 2019, and recognising that stakeholders had not received a meaningful update on the Proteos nitrogen project until that time, the current Board and management concluded that it would be in the best interest of Karnalyte and its shareholders to find a less costly alternative to spending between CAN$2 million and CAN$5 million on a feasibility study, given the company’s cash resources at the time. Current management and the Board worked with GSFC to prepare the pre-feasibility study at a cost of CAN$65 000, which now allows Karnalyte to continue considering the Proteos nitrogen project with discipline and with a focus on preserving value and the interests of all shareholders, and as part of the company’s ongoing strategic planning.

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Fertilizer project news Urea news Ammonia news