Promisingly, the company completed the final steps to secure mining concessions covering the Fronterizo, Muga and Goyo areas, which make up the Muga Project.
Looking ahead, Highfield intends to negotiate a construction agreement with construction partner Acciona and progress financial discussions to secure debt and equity funding.
Mining Concession update
In May 2021, Highfield’s subsidiary Geoalcali SLU received the last report required in the final section of the Mining Concessions (MC) from the environmental department of Aragón.
Following this important step, on May 26, 2021, the mining authorities of Madrid, Aragón and Navarra, having completed their review, submitted the final MC text to the Government’s lawyer for a final legal review.
Consequently, This was the last step before the granting of the MC on July 1, 2021.
Map of Muga Project and Vipasca permit.
Highfield completed its drilling program at the Vipasca permit area in the first half of 2020.
As a result of the interpretation of the geological information obtained in recent years at Vipasca, the central and western sectors of the tenement were relinquished in January 2021, as they are not seen as favourable areas to develop exploration works.
The results of the geological works carried out showed that the potash unit is too deep in those areas, situated at least 1,100 metres in depth.
Subsequently, Highfield preserved only the eastern sector, closest to Muga.
During the first quarter of 2021, Highfield prepared a HAZOP (Hazard and Operability Analysis) report which assesses the operational risk and undertakes performance stress tests of the final designs.
The company will expedite other pre-construction activities, such as finalise an equipment procurement and manage the local town hall construction licences in Navarra and Aragón
Furthermore, Highfield has also shared the necessary information with its preferred construction contractor, Acciona, to progress negotiation of the construction agreement and the project implementation.
Sales and marketing
During the second quarter of 2021, the potash market experienced supply constraints that have encouraged discussions with traders, potential offtake partners and logistics partners interested in strategic participation in the project.
Promisingly, Highfield has been developing its transport and logistics strategy, which is key to developing and implementing its sales and marketing plan.
The company continues to engage in ongoing offtake discussions with other potential wholesale customers, distributors and global traders for the entire production capacity of MOP and salt from the Muga Mine.
In accordance with its financing strategy, Highfield has worked closely with Endeavour Financial, a leading independent advisor, since its appointment on November 30, 2020.
The company’s work on the debt financing in conjunction with Endeavour has accelerated after the MC award, being now able to finalise it.
Preparation for financiers’ independent technical, social, environmental and market due diligence is underway.
The company is now able to engage in more detail with its key brokers and strategic partners as it evaluates all financing options before the start of construction works.
Highfield ended the half-year with $12.6 million in the bank, while some of its key expenses related to engineering above and below ground, a second payment for a crystallizer and a down payment to kick-off the works to upgrade the electric substation that will feed the Muga Potash Mine during commissioning.
In the fourth quarter of 2020, Highfield was advised that the second three-year extension application for the Ampliación de Adiós permit was rejected by the mining department of the Government of Navarra for the Sierra Del Perdon Project (SDP).
Subsequently, the company appealed this decision in line with the ongoing process of the other two SDP permits.
Based on local Spanish legal advice, the continued lack of a resolution to the appeal is not seen as a reflection of the merits of the appeal, nor does it represent a significant change with an adverse effect on the entity.
The drill hole AA-02 that was planned in 2020 has been delayed until the final resolution of these appeals.
At Pintantos Project, Highfield was granted a three-year extension to the drilling permit at Molineras 1 in 2020.
Regarding the drilling permit at Molineras 2, in 2019 Highfield re-initiated the application process for this permit following the conclusion of the public consultation period.
However, it continues to await the award of the permit and the company’s application for the Puntarrón permit also remains outstanding.
Importantly, the current priority for the company is the development of Muga.
Events after reporting date
On July 1, 2021, the company was granted the key mining concession for the three areas comprising the Muga Project, namely Fronterizo, Muga and Goyo.
This decisive milestone sets the new priorities of the company for the following months, these being accelerating the pre-construction activities and reviewing the financing options, for both debt and other sources of capital.
Importantly, an equity placing of A$15 million and a Share Purchase Plan raise of A$3.1 million was completed in August and September 2021, respectively, through Canaccord and Fosters pursuant to the company’s existing 15% placement capacity.