The Calgary-based potash company, Karnalyte, went through a roller coaster ride as the its stock had spiked almost 50 percent following the announcement that the financing talks with the Indian manufacturer Gujarat State Fertilizer and Chemicals had broken down. Gujarat State Fertilizer and Chemicals started talks with Karnalyte in March this year, aiming to draft the first phase of construction for a new potash mine at Wynyard. However, the proposed $700 million of financing was scrapped after the two parties did not manage to reach a mutually beneficial agreement.
The companies could not agree on the proposed terms of governance and the development of secondary mineral projects. Following the breakdown of the potential deal, Karnalyte said that its Vice-President of Capital Markets, Julius Brinkman, would no longer be engaged by the company. The deals that were agreed on by Gujarat State Fertilizer and Chemicals and Karnalyte will now expire on 30 September.
Potash prices have been steadily going down due to more competition, a slump in crop prices as well as the declining demand from China. Despite the new trade deals and price settlements with Chinese buyers that have been finalized in recent weeks, prices for the crop nutrient have not recovered. In contrast, potash prices dropped to almost 10-year low. The oversupply has caused PotashCorp, the world’s largest potash firm, to decrease its dividend payments for the second time this year. Yet, the company still hopes that the prices will pick up later this year.