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 allow for better expansion options;
• storage to allow for 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 the 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 withdrawn from the nonbinding memorandums of understanding (MoUs) for potash offtake that it signed with three large European fertiliser companies in May. The MoUs, for up to 320 000 t/y of K60 muriate of potash (MoP) from the Muga mine, have been replaced with nonbinding MoUs signed with fertiliser traders Keytrade, Ameropa and Trammo, which cover up to 600 000 t/y of K60 MoP, covering 100% of the expected phase-one production from the mine.

The (three large) fertiliser companies are active in Spanish and French markets.

Upon signing the formal documentation for these MoUs, Highfield will have achieved a key condition precedent proposed by the mandated lead arrangers for the project finance facility, which is in the final stages of negotiation.

Key Contracts and Suppliers
None stated.

On Budget and on Time?
Not stated.

Contact Details for Project Information
Highveld Resources MD Anthony Hall, tel +34 617 872 100 or fax +34 948 050 578.