Karnalyte Resources Inc. Announces Update on Project Financing and Details of Annual General and Special Meeting of Shareholders and Provides Initial Response to the Dissident Shareholders to Set the Record Straight

CALGARY , Jan. 2, 2015 - Karnalyte Resources Inc. ("Karnalyte" or the "Corporation") (KRN.TO) announced today that it is in discussions in connection with obtaining financing in a targeted amount of approximately USD $700,000,000 for the development of the Wynyard Carnallite-Sylvite Project. An engagement letter was signed with an Indian financial institution in October, 2014 – well in advance of the recent dissident shareholder requisition – and due diligence and structuring discussions are now under way. The investment capital is expected to come from a syndicate of financial institutions.

Annual General and Special Meeting of Shareholders: May 12, 2015

Given the proposed financing, and following the receipt of a requisition for a shareholders' meeting, the Corporation has called an annual general and special meeting of shareholders to be held on Tuesday, May 12, 2015 (the "Meeting"). The Meeting will take place at the Delta Bessborough Hotel in Saskatoon, Saskatchewan , at the hour of 10:00 a.m. ( Saskatchewan time). The record date for shareholders entitled to vote at the Meeting will be the close of business on April 13, 2015 .

The constitution of the Corporation's board will be on the agenda, as requested in the requisition, along with the financing package (if and as applicable) and other customary annual general meeting matters. This time frame is intended to provide shareholders with the ability to properly consider the competing visions of the current board and management and Mr. Phinney and their respective business plans.

The proposed Meeting date is designed to provide the Corporation with the requisite time to further advance the proposed financing and, if possible and if required by regulatory authorities, place it before shareholders, and avoid the time and unnecessary expense of two meetings in quick succession. The Corporation's new management team and re-energized board of directors (with the addition of  Stephen Goodman , Gerald Offet and Jay Sujir ) have decided that it is in the best interests of Karnalyte and its shareholders to provide for a short period of time to seek to arrange definitive financing. A change in the make-up of the board of directors at this time could put the completion of the proposed financing arrangements at substantial risk. In the event that definitive financing documentation can be entered into more expeditiously, the Corporation intends, if practicable, to seek to hold the Meeting at an earlier date.

Initial Response to the Dissident Shareholders to Set the Record Straight

Karnalyte notes that the various communications from the dissident shareholder group have contained inaccuracies and misrepresentations. For example, the Corporation conveyed its wish to open up a dialogue with Mr. Phinney and the dissident group on December 12, 2014 , with the objective of maintaining stability while it conducted negotiations regarding potential financing. However, it was Mr. Phinney who initially agreed to meet and then abruptly cancelled the meeting. Shortly thereafter, on December 15, 2014 , Mr. Phinney filed his requisition.

While proxy solicitation rules preclude the Corporation from providing a fuller response at this time, Karnalyte looks forward to further setting the record straight and defending the interests of all shareholders. The Board of Directors has engaged Stikeman Elliott LLP as legal advisors, Longview Communications as communications advisors, and D.F. King as information and proxy solicitation agent.

The Corporation also believes that Mr. Phinney has breached applicable proxy solicitation rules and contractual and other obligations to the Corporation, and may have breached applicable securities laws. The Corporation is considering all of its legal options with respect thereto. The Corporation also intends to again seek to reach out to Mr. Phinney to seek to understand and, if appropriate, respond to, his concerns.

The Corporation also alerts shareholders to the clause buried towards the end of the most recent dissident press release, where Karnalyte shareholders are informed that "...Mr. Phinney intends to seek reimbursement from the Company for expenses reasonably incurred in connection with the Requisition and solicitation of proxies." This means that, in addition to forcing the Corporation to incur material costs associated with a distracting and unnecessary proxy contest, the dissident intends to recover his costs from the Corporation. Based on other proxy contests, these costs could be in the hundreds of thousands of dollars. The Corporation believes this would be a poor use of the Corporation's cash.

About Karnalyte Resources Inc.

Karnalyte is engaged in the business of exploration and development of high quality agricultural and industrial potash and magnesium products. Karnalyte intends to develop and extract a carnallite–sylvite mineral deposit through a known solution mining process at competitive costs and with minimal environmental impacts. Once financing is obtained to proceed with potash plant construction, the Corporation plans to operate a solution mining facility that is expected to initially produce 625,000 tonnes of potash per year, increasing to 2.125 million tonnes of potash per year. Karnalyte owns a 100% interest in Subsurface Permit KP 360A and Subsurface Mineral Lease KLSA-010 located near Wynyard, Saskatchewan , comprising a total of 85,126 acres.

Forward-Looking Statements

This press release contains forward-looking statements. The forward-looking statements contained in this document are based on certain key expectations and assumptions made by Karnalyte, including with respect to the Corporation's future operations and its ability to secure additional financing. In particular, there can be no assurance that the proposed financing package will be achievable on acceptable terms or at all. Although Karnalyte believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on the forward-looking statements because Karnalyte can give no assurance that they will prove to be correct. Since forward-looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, but are not limited to, the failure to obtain necessary regulatory approvals, failure to obtain necessary financing, risks associated with the mining industry in general (e.g., operational risks in development, exploration and production; delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of estimates and projections relating to production, costs and expenses; and health, safety and environmental risks), commodity price and exchange rate fluctuations. Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on these and other factors that could affect Karnalyte's operations and financial results are included in documents on file with Canadian securities regulatory authorities and may be accessed through the SEDAR website (www.sedar.com). The forward-looking statements contained in this document are made as of the date hereof and Karnalyte undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

SOURCE Karnalyte Resources Inc.

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