Muga economics firm up

8th December 2021 By: Esmarie Iannucci - Creamer Media Senior Deputy Editor: Australasia

PERTH (miningweekly.com) – An updated feasibility study into the Muga-Vipasca potash project, in Spain, has confirmed the project’s economics.

Capital costs for the Phase 1 and Phase 2 operation have increased from the €576-million considered in the 2019 studies, to €607-million.

Capital costs for the Phase 1 operation, producing 500 000 t/y muriate of potash (MoP), have increased from €368-million to €398-million, while the Phase 2 capital expenditure, to increase production by an additional 500 000 t/y, has increased from €208-million to €209-million.

ASX-listed Highfield Resources on Wednesday told shareholders life-of-mine MOP production had declined slightly from the 30.1-million tonnes considered in 2019, to 27.5-million tonnes, with the mine life remaining unchanged at 30 years.

The project’s C1 costs have increased from €34/t to €39/t, while its net present value declined from €1.97-billion to €1.89-billion. The inernal rate of return has been estimated at 42%, with the project expected to generate earnings before interest, taxes, depreciation and amortisation of €400-million a year, at full production.

“We are delighted to announce an up-to-date feasibility study for the Muga project. Potash is a great commodity with very strong global prices and exceptional long-term fundamentals,” said Highfield CEO Ignacio Salazar.

“This feasibility study update reconfirms Muga’s outstanding economics, and the effect on revenue of current spot prices would multiply returns. The updated numbers have been prepared with a significantly higher degree of confidence following all the engineering and procurement work of the last few months.

“With supportive shareholders, potential strategic investors and a significant debt capacity, Highfield is well positioned to finance Muga. The team is ready to progress Muga into construction and realise the intrinsic value of this project.”

The Muga project in 2017 received initial credit approval from a syndicate of international lenders for a project finance facility of €185-million. Since then, the Highfield Resources has continued to derisk the project.

The company will continue to work with its financial adviser to secure an "appropriate" construction financing package for Phase 1 of the project.