Name and Location
Muga potash project, Spain.

Client
Highfield Resources.

Project Description
The Muga potash project has been optimised to enhance operational efficiencies, sales and marketing activities, and life-of-mine in preparation for construction. Proven and probable ore reserves have increased from 146-million tonnes, at an average grade of 12.7% potassium oxide, to 253-million tonnes, with an average grade of 11.5%, an increase of 73% on the definitive feasibility study (DFS).

The optimisation study has altered the mine plan to include:
– an additional sylvinite seam (Capa A), resulting in an increased mine life from 24 years to 47 years. This new mine plan excludes any potential upside from the substantial exploration target;
– a combination of continuous miners and road headers to increase productivity in production and infrastructure development;
– an increased number of main infrastructure galleries in the mine plan from one to three to reduce ramp-up risk and increase likely operational efficiency;
– increasing the size of:
• the underground conveyor belt system to cater for an increase in underground tonnage and enable better expansion options;
• storage to enable more flexibility in smoothing grade profile to the processing plant;
• the conveyor belt to surface in one decline to 1 500 t/h of material; and
• the processing plant and its flexibility to deal with higher throughput of material;
– altering mine and process plant design to deliver a constant 90 000 t/m of granular K60 (1.08-million tonnes a year) for the balance of the revised 47-year mine life; and
– factoring in potential mine expansion into design to allow for seamless expansion of production in the future.

Similar to the DFS, the principal mining horizons will be accessed by two straight line declines, about 2.5 km and 2.6 km in length. The total cross-sectional area of each decline is 35.7 m2, a slight increase on the DFS number.

The declines will access the same mining horizon at two different points. The eastern decline reaches the mineralised horizon at 440 m below surface and the western decline at about 452 m below surface. Underground extraction will be by room-and-pillar mining using a combination of continuous miners and road headers to optimise extraction efficiency and selectivity in varying orebody heights. Additionally, continuous miners will be used for the ongoing mining development, including new transport drifts and main transport galleries.

Net Present Value/Internal Rate of Return
The optimisation study has increased the project’s net present value from $1.42-billion to $1.46-billion, at a 10% discount rate; and from $1.80-billion to $2.04-billion, at an 8% discount rate.

Value
Phase 1 capital expenditure in the optimisation study has increased
marginally from €249-million to €267-million.

Duration
The initial production targeted is scheduled for 2017.

Latest Developments
Highfield Resources has signed its first memorandums of understanding (MoUs) with three large European fertiliser companies for up to 320 000 t/y of K60 muriate of potash (MoP) in offtake from the company’s Muga mine.

The company has deliberately focused on major consumers in Spain and southern France. The nonbinding MoUs are for the supply of MoP to customers within the southern European fertiliser market, close to Muga.

The MoUs are considered a positive development and “derisking milestone” for Highfield.

The current European potash price premium and Highfield’s ability to truck directly to consumer depots on a just-in-time basis will result in the company’s receiving a substantial premium over first-on-board Vancouver prices.

Highfield is also hosting ongoing discussions with additional parties in the European and North African market, including wholesale customers, as well as potential global trading partners, for remaining production from the Muga mine.

Highfield has noted that European mine closures and expansions are expected to remove a net one-million tonnes of MoP production from these markets by 2020.

Further, the MoUs provide a framework for further negotiation of long-term contracts for the supply of MoP to a variety of blending parties, the closest of which is less than 100 km from Muga.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
Not stated.

Contact Details for Project Information
Highveld Resources, tel +34 948 050 577 or fax +34 948 050 578.