Highfield Resources Ltd (ASX:HFR) (FRA:23H) is ready to issue all relevant engineering documentation to its construction partner for the flagship Muga Potash Project in Spain and hopes to start building the mine in 2021.
With the appointment of Endeavour Financial as its debt financial advisor, the company has begun to move forward with its financing strategy.
Highfield is also in a position to proceed with the project as soon as the mining concession is granted, as there will be no significant new financial commitments until that point.
Achieved objectives in all areas
Highfield chief executive officer Ignacio Salazar said: “We are reaching the end of the year, having achieved our objectives in all areas of the Muga project in our control: engineering, sales, and financial.
“Despite COVID restrictions, most of the permitting work is also behind us.
“The effort we are putting into engaging with the administrations is slowly but surely bearing fruit.
“In any case, with all the preparatory project work done, we are able now to preserve cash while we push forward the final stage of permitting.
“We look forward to start building the mine next year.”
Engineering documentation
The key areas covered by the engineering documentation are the design of:
a) the mine, including the declines to the mineralisation;
b) the processing plant, and urbanisation; and
c) the tailings dewatering and the backfilling systems.
Financing update
Work on formalising the company’s debt financing strategy has already started with Endeavour Financial, to maximise the debt package as part of the overall Muga project financing strategy.
Highfield also continues to engage with key brokers and strategic partners as it prepares to secure the equity portion of the financing at some stage after the receipt of the mining concession.
Permitting update
The authorities in Aragon, Madrid and Navarra started their detailed review and analysis during the year and have split the mining concession review into five sections covering all aspects of the project.
Highfield has already replied to the authorities on all the queries raised as part of the public exposition in August and has provided prompt and comprehensive replies on questions raised on four out of the five sections.
It has maintained a high level of engagement to expedite this process as much as possible, despite the second Covid-19 lockdown starting in Spain in October this year.
The last section five, covers the restoration and emergency plans, the backfilling process and water plans.
Although the review of section five is progressing well, the authorities have advised that they will not be in a position to send their questions on the fifth and final section until after year-end.
However, to expedite the process, the authorities have split the remaining work, with Navarra focusing on reviewing section five, Aragon reviewing the answers submitted by the company on queries raised during the public exposition and the authorities in Madrid starting to draft the final mining concession text.
Financial position
Highfield has made significant progress in the last quarter of the year in engineering and ordering long-lead items, notably the bolter miner, to ensure project readiness by year-end.
In the last few months, it has implemented cash preservation measures which included headcount reduction and a significant reduction in consultant spend, to maintain a cash balance of around A$20 million by year-end.
The company is undertaking additional austerity measures to ensure that it continues to maintain a healthy cash balance and will not require any additional capital until after the Muga mining concession is granted.
Low-cost conventional mine
Highfield is targeting the relatively shallow sylvinite beds in the Muga project area that cover about 60 square kilometres in the provinces of Navarra and Aragon.
Mining is planned to commence at a depth of about 350 metres from surface and is therefore ideal for a relatively low-cost conventional mine.
It is now focusing on moving the Muga project into the construction phase by securing the mining concession and the construction permits and finalising the engineering and design work.
