Highfield Resources making strong progress toward construction at flagship Muga Potash Project, The Muga Project in Spain is forecast to be one of the highest margin potash mines in the world
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"Highfield Resources Ltd (ASX:HFR) made considerable progress during the
half-year ending June 30, 2021, in driving its flagship Muga Potash
Project in Spain towards the construction phase.
Promisingly, the company completed the final steps to secure mining
concessions covering the Fronterizo, Muga and Goyo areas, which make up
the Muga Project.
Looking ahead, Highfield intends to negotiate a
construction agreement with construction partner Acciona and progress
financial discussions to secure debt and equity funding.
Mining Concession update
In May 2021, Highfield’s subsidiary Geoalcali SLU received the last
report required in the final section of the Mining Concessions (MC) from
the environmental department of Aragón.
Following this important step, on May 26, 2021, the mining authorities
of Madrid, Aragón and Navarra, having completed their review, submitted
the final MC text to the Government’s lawyer for a final legal review.
Consequently, This was the last step before the granting of the MC on July 1, 2021.
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Vipasca progress
Highfield completed its drilling program at the Vipasca permit area in the first half of 2020.
As a result of the interpretation of the geological information
obtained in recent years at Vipasca, the central and western sectors of
the tenement were relinquished in January 2021, as they are not seen as
favourable areas to develop exploration works.
The results of the geological works carried out showed that the potash
unit is too deep in those areas, situated at least 1,100 metres in
depth.
Subsequently, Highfield preserved only the eastern sector, closest to Muga.
Technical update
During the first quarter of 2021, Highfield prepared a HAZOP (Hazard and
Operability Analysis) report which assesses the operational risk and
undertakes performance stress tests of the final designs.
The company will expedite other pre-construction activities, such as
finalise an equipment procurement and manage the local town hall
construction licences in Navarra and Aragón
Furthermore, Highfield has also shared the necessary information with
its preferred construction contractor, Acciona, to progress negotiation
of the construction agreement and the project implementation.
Sales and marketing
During the second quarter of 2021, the potash market experienced supply
constraints that have encouraged discussions with traders, potential
offtake partners and logistics partners interested in strategic
participation in the project.
Promisingly, Highfield has been developing its transport and logistics
strategy, which is key to developing and implementing its sales and
marketing plan.
The company continues to engage in ongoing offtake discussions with
other potential wholesale customers, distributors and global traders for
the entire production capacity of MOP and salt from the Muga Mine.
Project financing
In accordance with its financing strategy, Highfield has worked closely with Endeavour Financial, a leading independent advisor, since its appointment on November 30, 2020.
The company’s work on the debt financing in conjunction with Endeavour
has accelerated after the MC award, being now able to finalise it.
Preparation for financiers’ independent technical, social, environmental and market due diligence is underway.
The company is now able to engage in more detail with its key brokers
and strategic partners as it evaluates all financing options before the
start of construction works.
Highfield ended the half-year with $12.6 million in the bank, while some
of its key expenses related to engineering above and below ground, a
second payment for a crystallizer and a down payment to kick-off the
works to upgrade the electric substation that will feed the Muga Potash
Mine during commissioning.
Other projects
In the fourth quarter of 2020, Highfield was advised that the second
three-year extension application for the Ampliación de Adiós permit was
rejected by the mining department of the Government of Navarra for
the Sierra Del Perdon Project (SDP).
Subsequently, the company appealed this decision in line with the ongoing process of the other two SDP permits.
Based on local Spanish legal advice, the continued lack of a resolution
to the appeal is not seen as a reflection of the merits of the appeal,
nor does it represent a significant change with an adverse effect on the
entity.
The drill hole AA-02 that was planned in 2020 has been delayed until the final resolution of these appeals.
At Pintantos Project, Highfield was granted a three-year extension to the drilling permit at Molineras 1 in 2020.
Regarding the drilling permit at Molineras 2, in 2019 Highfield
re-initiated the application process for this permit following the
conclusion of the public consultation period.
However, it continues to await the award of the permit and the company’s
application for the Puntarrón permit also remains outstanding.
Importantly, the current priority for the company is the development of Muga.
Events after reporting date
On July 1, 2021, the company was granted the key mining concession for
the three areas comprising the Muga Project, namely Fronterizo, Muga and
Goyo.
This decisive milestone sets the new priorities of the company for the
following months, these being accelerating the pre-construction
activities and reviewing the financing options, for both debt and other
sources of capital.
Importantly, an equity placing of A$15 million and a Share Purchase Plan
raise of A$3.1 million was completed in August and September 2021,
respectively, through Canaccord and Fosters pursuant to the company’s
existing 15% placement capacity. "
