Highfield Resources Ltd (ASX:HFR) has updated the feasibility study (FS) for its Muga-Vipasca Potash Project in Spain after external due diligence was undertaken in the project finance phase and progress was made by the technical team.
In light of global inflationary pressures, the company has raised the capex estimate of the project by about 9% to €662 million, comprising €436 million for phase one and €226 million for phase two.
No change has been made in the update to the mineral resources and mine plan in the FS revealed in December 2021, with Muga still expected to produce up to 1 million tonnes per annum of muriate of potash over a mine life of 30 years, comprising about 18 years of mine life from ore reserves and 12 years from additional resources and the exploration target.
The mine plan design for Muga.
A compelling project
Muga’s updated parameters are based on more advanced engineering and firmer capex estimates as well as price changes due to inflation, which provide a higher level of confidence in the project assumptions.
The parameters underpinning the numbers include updated energy prices, foreign exchange rates and potash prices, with the exception of parameters such as recoveries, salt by-product production and potash production, which have not changed since the December 2021 update.
Despite these changes, the update reconfirms the fundamentals of the project, with a net present value (NPV) of €1.82 billion and an internal rate of return (IRR) of 21.2%.
At full production, the project’s earnings before interest, taxes, depreciation and amortisation (EBITDA) is estimated to be about €410 million per annum.
Outstanding value
Highfield chief executive officer Ignacio Salazar said: “We are delighted to announce an update to the feasibility study for the Muga Project following the rigorous due diligence process undertaken during the project financing process.
“The company has done a lot of work with the banks in reviewing and mitigating the effect of the current global inflationary environment resulting in a thoroughly reviewed and updated feasibility study which reconfirms the outstanding value of the Muga Project.
“The current geopolitical situation as well as Muga being the next European potash mine reinforces both the compelling strategic nature and the status of the project.”
More financing on the way
Highfield recently announced that it had secured €320.6 million in senior secured project financing from four financial institutions to help fund the construction and development of Muga.
The company is holding discussions with potential strategic partners as well as looking into other sources of capital to fully cover Muga’s financing needs.
Read more about the FS update here.
Unique project
Highfield Resources is focused on the construction of its flagship low-cost, low-capex Muga Project in Spain, having been granted the mining concession in July 2021 and the construction licence in Aragón in June 2022.
Muga is a unique project, with shallow mineralisation. With no aquifers above it, there is no need to build a shaft.
Quality and readily-available infrastructure is already in place in the region and importantly, the Muga Project is in the heart of a European agricultural region with a lack of potash supply.
Highfield’s potash tenements of Muga-Vipasca, Pintanos and Sierra del Perdón are in the Ebro potash-producing basin in Northern Spain, covering an area of around 250 square kilometres.