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FeRtILIseR sPotLIGHt

Muga mining

concession on track

ichard Crookes expects to receive a min- constant dialogue with mining authorities
Ring concession for Highfield Resources and making sure that the concession sub-
Ltd’s Muga potash project in Spain by the mission is progressing through the system.”
end of the year. Fast forward to the award of a mining con-
Spain has been one of the countries most cession and it will then be a matter of revis-
impacted by COVID-19, but in positive signs iting the banks who agreed to finance the Richard Crookes
the infection rate was reportedly “gradually 500,000 tpa Muga potash project.
slowing” in the country at the beginning of A syndicate of major European commer- duction can be attributed to Saskatchewan,
last month, and workers continued to effec- cial banks had previously approved debt Russia and Belarus and while those players
tively transition to remote working conditions. credit of €185 million for the development of could churn out large quantities on demand
“We are probably in daily communica- Muga, which is based on a two-phased ap- and control pricing, Crookes said they were
tion with the relevant approval authorities. proach starting with an initial capex of €368 disciplined in their approach.
We have to talk to the Mines Department million. Meanwhile, given fertiliser application is
and Environmental Department in Navarra, Phase two capex required to double MoP seasonal, producers are accustomed to
Aragon and Madrid; three approval au- production is €208 million, with C1 cash building up inventories and scaling back
thorities are making decisions because of costs being €82/t (including salt by-product), production when necessary, which keeps
the way the project straddles the provincial NPV €1.97 billion and IRR 25%. the supply and demand equation in good
boundary between Navarra and Aragon,” “We anticipate resurrecting the previously balance.
Highfield chairman Crookes told Paydirt. approved project finance debt facility that “The good thing is that the MoP market is
“The Government is obviously working we had for the project when we thought we growing at about 2-3% per annum [CAGR],
from home, but our guys are actually finding were going to get permitted for the project a from currently about 68-69 mtpa,” Crookes
they are answering their phones and taking couple of years ago. There was a four-bank said.
calls and we are in this pretty good space syndicate with €185 million from European “As much as the large projects can prob-
now. The mining concession documentation banks on offer,” Crookes said. ably meet that increased demand, there is
was submitted as we were closing the office “Assuming the banks open up for busi- room for good projects like ours with low
on March 13 and they are processing it. Our ness later this year, and I am sure they will, capital intensity, low opex and reasonable
timeline hasn’t changed yet, however given we will dust that off and get it reapproved margins in good locations to come in and
the situation we still expect to receive the as we get the mining concession approval. capture local market share without disrupt-
Hopefully we will ing the market.”
resurrect that circa Globally, potash prices were low at the
€200 million debt time of print, but encouragingly for Highfield
facility and we will the price of $US275/t (€250/t) was nearly
try and fill the gap $US65/t higher than the Vancouver FOB
with some off-taker price, while Brazil was faring a little better.
finance and new Potash supply from Brazil into South East
equity. We are Asia has been curbed due to restrictions im-
pretty confident that posed to flatten the coronavirus curve.
the project is strong While prices have also come off in Eu-
enough to attract rope, a premium remains for Highfield.
that funding. There “We talk about the location benefits of our
has been success project being in those markets which have a
A mining concession for Muga is anticipated by the end of 2020 in the project fi- higher premium and higher net back to the
nancing market for producer. Almost all of our first module of
mining concession by the end of the year.” some other potash projects recently and I production will be sold into our local market
Highfield was granted environmental ap- see no reason why with this project – being and that ensures we retain the best prices,
proval for Muga in 2019 and followed up with in a good location – shouldn’t get financed.” the best net backs possible,” Crookes said.
submissions for power and water permits Crookes admitted the market was diffi- As construction of Muga gets closer, Eu-
plus other permits required for the start of cult to break into, however, Muga’s position ropean potash consumers have started po-
construction. in northern Spain means it can easily sup- sitioning themselves for off-take.
“Given we are doing mostly desktop work, ply key demand areas in Europe and its low Earlier this year, Swiss-based agri-trader
the engineering work can continue, we have freight costs allows for access to the Brazil- Keytrade AG signed a MoU to buy 300,000t
increased communication through Microsoft ian and other potential overseas markets. of MoP from Muga.
Teams ensuring that the work streams are Africa is a region Highfield has identified Highfield sees the potential future part-
progressing. We can work remotely, there for growth and Crookes is confident his com- nership with Keytrade delivering “enhanced
was some field work, it wasn’t critical and pany can emerge in an industry dominated insights into the MoP market which will be
that has now been paused,” Crookes said. by large producers. invaluable in the first years of production”.
“Now it’s about ensuring that we are in It is estimated that 80-90% of global pro-
– Mark Andrews

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