Highfield Resources Ltd (ASX:HFR) has reconfirmed the compelling economics of the Muga-Vipasca Potash Project in northern Spain in a 2023 update to its feasibility study (FS).
The update outlined the project’s “outstanding economics”, including a net present value (NPV8) of €1.82 billion ($3.03 billion), a post-tax internal rate of return of 24% and annual EBITDA of around €340 million ($565 million) at full production.
With a 30-year life of mine, production is planned over two phases to produce up to 1 million tonnes per annum of muriate of potash (MOP).
As for costs, €449 million ($7.47 million) in pre-production construction capital is required for Phase 1 and €286 million ($4.76 million) for phase 2, including 10% contingency. C1 cash costs are estimated at a competitive €108 per tonne post-salt by-product revenue.
This updated capex has a higher level of confidence, with 93% of the capex based on contracts plus firm offers compared to 76% in the 2022 feasibility study.
Strategic location
Global demand for MOP as a critical fertiliser input is expected to grow, driven by geopolitical supply diversity, population growth and declining arable land. All these factors are particularly acute in Europe.
The Muga-Vipasca Project is strategically located in northern Spain, in the middle of the European agricultural market. It will be one of only two potash mines in southern Europe.
Its close proximity to potash consumers results in low transportation costs which, for such a high-volume commodity, are key for outstanding margins and the robustness of the project through price cycles.
Construction ready
Highfield CEO Ignacio Salazar said: “We are delighted to announce the updated feasibility study for the Muga Project.
“After significant progress, now fully permitted and construction-ready, with access to all the project land and a much higher level of confidence in the capex estimate, the Muga Potash mine stands out with a value of €1.8 billion.
“The difficult global geopolitical backdrop reinforces the importance of Muga, and the strategic nature of the project for Europe.”
The project is fully permitted and construction-ready, subject to financing.
The company’s major focus is now on completing the remaining phase 1 funding, working with financial advisors, Macquarie Capital, Clarksons Securities and Endeavour Financial in negotiations with numerous parties encompassing strategic partnerships, non-dilutive royalty funding, equity and offtake agreements.