Highfield Resources Ltd Feasibility Study Update Reconfirms ‘Compelling Economics’ of Potash Project

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The latest feasibility study is based on more precise economic and technical data than the previous study, and the company is confident in the high returns over the 30 year life of the proposed mine.

Highfield Resources Ltd’s (ASX: HFR) feasibility study update for the Muga-Vipasca potash project in Spain yielded promising financial projections, including an EBITDA of around € 400 million per year at full production.

Sensitivity analysis using current fixed real spot prices for the life of the mine yields an after-tax net present value (using an 8% discount rate) (NPV 8) of 2.8 billion euros and an internal rate of return of 42% (IRR).

“This update of the feasibility study reconfirms Muga’s exceptional economy, and the effect on income of current spot prices would multiply returns,” said CEO Ignacio Salazar.

Advanced engineering and procurement

The update of the feasibility study is based on more advanced engineering and procurement than the company’s previous study.

In this study, 86% of the capital expenditure estimate is based on signed contracts, firm offers and discounted prices, compared to 59% in the previous 2019 feasibility study.

The 2021 mining plan assumes the delivery of approximately 1 million tonnes per year of muriate of potash (MOP) over a 30 year mine life, including approximately 18 year mine life from ore reserves and 12 years from the additional mineral resources and the exploration target.

With purchase contracts signed for 85% of the processing plant’s equipment, the company believes the project is almost ready for construction. Once the main equipment is acquired, the company will have a better understanding of the engineering required for the processing plant.

“The updated figures have been prepared with a significantly higher degree of confidence as a result of all the engineering and procurement work in recent months,” said Salazar.

Investment confidence

The latest feasibility study confirms that the economics of this project would justify a lifespan of 30 years. The company has a high degree of confidence in its updated investment figures with phase 1 investments of 398 million euros and phase 2 investments of 209 million euros.

Highfield continues to work with its financial advisor, Endeavor Financial, to secure appropriate funding for Phase 1.

Based on its assessment of the Muga project and following positive feedback on a draft terms sheet by a potential syndicate of lenders, the company is targeting debt of around 300 million euros to start construction on the phase. 1.

“With supporting shareholders, potential strategic investors and significant leverage, Highfield is well positioned to fund Muga,” said Salazar. “The team is ready to take Muga forward in construction and realize the intrinsic value of this project.”

Project timeline

The company plans to start construction in the first half of 2022 after pre-construction preparation.

This assumes that an agreement is reached on the construction contract and the maximum price with the construction partner. This also takes into account the success of sourcing long-lead items, as the local town hall issues building permits, and the company will finalize all outstanding debt with help. from Endeavor Financials.

Main risks

The main risks for the project include the future conversion of additional resources and the exploration target into ore reserves, the unfavorable evolution of the potash price or of the main operating costs, the adherence to the approval deadlines of the project by the authorities, uncertain future technical results and the financing of the project.


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