Name and Location
Muga potash project, Spain.

Client
Highfield Resources.

Project Description
A definitive feasibility study has confirmed that the Muga potash project is economically feasible.

Based on ore reserves of 146-million tonnes, at an average grade of 12.73% potassium oxide, the DFS estimates that the project could deliver 1.123-million tonnes of granular potash a year over a mine life of 24 years.

The principal mining horizons will be accessed using two straight-line declines of about 2.9 km and 2.5 km, accessing the same mining horizon at two different points.

The eastern decline reaches the mineralised horizon at 228 m below surface and the western decline at about 348 m below surface. The decline construction is expected to be completed by specialist Spanish contractors.

The dual decline strategy is expected to enhance operational efficiency and reduce risk. Each underground operation and decline will deliver 50% of the 6.3-million-tonne production schedule to the processing facility.

Each underground operation will have installed capacity of up to 1.5 times the budgeted production, which is considered an important risk mitigation mechanism to ensure that the processing plant operates at the design capacity of 400 t/h, ramping up to 800 t/h. This will subsequently deliver processing efficiencies and ensure that plant operating expenditure is managed within expected metrics.

Underground extraction will use room-and-pillar mining, with selected equipment to optimise extraction at varying orebody heights. Additional road headers will be used for the ongoing mining development, including new transport drifts and the main transport galleries. The fleet has been sized to ensure that, at full capacity, the mine will deliver 6.3-million tonnes of sylvinite ore a year (run-of-mine) to the processing facility.

Mining will target four distinct seams across different sections of the resource horizon – two dominant seams in the eastern section of the resource horizon (Capa Zero and Capa B), and two dominant seams in the western section of the resource horizon (Capa 1 and Capa 2).

Highfield selected a processing flowsheet that comprises a simple two-stage crushing process, an attrition scrubbing and hydrocyclone desliming stage, followed by a simple, potassium chloride froth flotation circuit.

Following processing, the product will be dried using fluid bed dryers and then conveyed to the compacting and glazing facility for conversion from standard to granulated muriate of potash. The product will be granular K60 potash.

Net Present Value/Internal Rate of Return
The project has a post-tax net present value, at a 10% discount rate, of $1.42-billion and a post-tax unlevered internal rate of return of 51.9%.

Value
Preproduction capital costs are estimated at $256-million.

Duration
Initial production from Muga is planned for the second quarter of 2017, with production scheduled for January 2019.

Construction of the second phase is scheduled to start in the third quarter of the 2017 calendar year, with initial production scheduled for the fourth quarter of the 2018 calendar year. Full production is scheduled to start in January 2019.

Latest Developments
Highfield Resources resumed share trading on the ASX on May 11, after announcing to the market that it would raise about A$101-million through a share placement.

Highfield announced to shareholders that it would place an estimated 56.12-million shares, at a price of A$1.80 each, to institutional and sophisticated investors in Australia, Asia, Europe and North America.

The share placement would not require shareholder approval, as it falls within the company’s placement capacity.

Proceeds from the placement will be used to fund the equity component of the capital expenditure required for the Muga potash project.

The company is proceeding with detailed design and engineering, as well as other development and contracting work in preparation for full site construction to start after permitting, which is expected later this year.

Meanwhile, indicative project financing terms have been received from leading European commercial banks, which have indicated that a debt-to-equity ratio of 65% could be expected.
Key Contracts and Suppliers
None stated.

On Budget and on Time?
None stated.

Contact Details for Project Information
Highfield Resources, tel +61 8 8133 5098 or fax +61 8 8431 3502.