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ASX Release
30 March 2015
HIGHFIELD RESOURCES DFS CONFIRMS HIGH MARGIN, LOW
CAPEX POTENTIAL FOR MUGA POTASH MINE
Highlights
 Definitive Feasibility Study (DFS) completed delivering:
 Post tax unlevered project NPV10 of US$1.42 billion
 Post tax, unlevered IRR of 51.9%
 EBITDA in first full year of production of US$296 million (EBITDA margin of 66%)
 Ore Reserve of 146.0 million tonnes at average grade of 12.73% K20
 Initial 24 year mine life based solely on reserves
 Proposed mine is a technically robust underground conventional room and pillar operation
via twin decline access which enhances operational efficiency and reduces risk
 Average yearly, steady state production of 1.123 million tonnes of granular K60
potash with operational expenditure (“opex”) in full production estimated at US$135/tonne
 Independent expert spot potash prices discounted by 10% for contract pricing and sales
and marketing fees delivering a 2017 FOB Vancouver standard product reference price of
US$315 / tonne in real terms
 Pre-production capital cost estimated at US$256 million including a 12.5% contingency
 Total capital cost estimated at US$354 million including 12.5% contingency
 DFS peer reviewed by Canadian based international engineering firm for gap analysis on
both capex and opex
 Construction tenders to be released to Spanish contractors next quarter
 Construction remains on track for Q4 2015
Spanish potash developer Highfield Resources Limited (HFR: ASX) (“Highfield” or “the Company”) has
completed the Definitive Feasibility Study (“DFS”) for its 100% owned Muga Potash Project (“Muga” or
“the Project”), confirming its outstanding potential as a long life, high margin operation.
The DFS is based on extracting 138m tonnes of the sylvinite Ore Reserve at an average grade of 12.75%
K2O. The 138m tonnes was taken from the total Ore Reserve of 146m tonnes of sylvinite at an average
grade of 12.73% K2O calculated by independent Spanish based consultants Consultores Independientes
Highfield Resources Ltd.
ACN 153 918 257
ASX: HFR
Issued Capital
252.0 million shares
51.5 million performance shares
43.5 million options
Registered Office
C/– HLB Mann Judd
169 Fullarton Road
Dulwich, SA 5065
Australia
––––––––––––––––––
Tel: +61 8 8133 5098
Fax: +61 8 8431 3502
Head Office
Calle Navas de Tolosa,
5 - 1°B, 31002
Pamplona,
Spain
––––––––––––––––––
Tel: +34 948 050 577
Fax: +34 948 050 578
Directors
Derek Carter
Richard Crookes
Anthony Hall
Owen Hegarty
Pedro Rodriguez
Company Secretary
Donald Stephens
en Gestión de Recursos Naturales SA (“CRN”). Importantly, CRN is highly experienced with Spanish
potash mining.
The Ore Reserve was taken from the high grade sub-set of the Mineral Resource Estimate (“MRE”) of
232 million tonnes at an average grade of 13.5% K20, prepared by independent US Based Agapito
Associates (refer ASX release 24 February 2015).
Highfield’s Managing Director Anthony Hall commented:
“The DFS builds on a compelling pre-feasibility study and reconfirms Muga´s potential to be a
very low capex, high margin potash mine. We believe Muga has the potential to be the highest
margin potash mine globally in production and this is very exciting for everyone involved with the
Company.
The work of our Spanish team and predominantly Spanish based consultants has been
exceptional. I cannot overstate how important it is to have such a strong local capability.
We are now moving into a construction ready phase and anticipate releasing tenders next quarter
to ensure we are ready to commence construction in Q4 of this year as planned.”
A summary of the DFS is attached to this release.
For More Information
www.highfieldresources.com.au
Company
Investor Relations Executives
Anthony Hall
Managing Director
Ph: + 34 617 872 100
Simon Hinsley
APAC Investor Relations
Ph: +61 401 809 653
Hayden Locke
Head of Corporate Development
Ph: +34 609 811 257
Nuala Gallagher / Simon Hudson
UK Investor Relations
Ph: +44 207 920 3150
Competent Persons’ Statement
This ASX release was prepared by Mr. Anthony Hall, Managing Director of Highfield Resources. The
information in this release that relates to Ore Reserves is based on information prepared by Mr. José
Antonio Zuazo Osinaga, Technical Director of CRN, S.A.; Mr. Jesús Fernández Carrasco. Managing
Director of CRN, S.A. and Mr Manuel Jesus Gonzalez Roldan, Geologist of CRN, S.A. Mr. José Antonio
Zuazo and Mr. Jesús Fernández, are licensed professional geologists in Spain, and are registered
members of the European Federation of Geologists, an accredited organisation to which the Competent
Person (CP) under JORC Code Reporting Standards must belong in order to report Exploration Results,
Mineral Resources, or Ore Reserves through the ASX. Mr. José Antonio Zuazo-Osinga has sufficient
experience which is relevant to the style of mineralisation and type of deposit under consideration and
to the activity which they are undertaking to qualify as a CP as defined in the 2012 Edition of the JORC
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. The
information in this release that relates to Mineral Resources Results is based on information prepared
by Mr. Leo J. Gilbride, P.E. and Ms. Vanessa Santos, P.G. of Agapito Associates, Inc. (Agapito) of
Colorado, United States of America (USA). Mr. Gilbride is a licensed professional engineer in the State
Page 2 of 3
of Colorado, USA and is a registered member of the Society of Mining, Metallurgy and Exploration, Inc.
(SME). Ms. Santos is a licensed professional geologist in South Carolina and Georgia, USA, and is a
registered member of the SME. SME is a Joint Ore Reserves Committee (JORC) Code ‘Recognized
Professional Organization’ (RPO). An RPO is an accredited organisation to which the Competent
Person (CP) under JORC Code Reporting Standards must belong in order to report Exploration Results,
Mineral Resources, or Ore Reserves through the ASX. Mr. Gilbride is a Principal and Ms. Santos is
the Chief Geologist and Senior Associate with Agapito and both have sufficient experience which is
relevant to the style of mineralisation and type of deposit under consideration and to the activity which
they are undertaking to qualify as a CP as defined in the 2012 Edition of the JORC Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. Zuazo-Osinga, Mr.
Gilbride and Ms. Santos consent to the inclusion in the release of the matters based on their information
in the form and context in which it appears.
About Highfield Resources
Highfield Resources is an ASX-listed potash company with four 100%-owned projects located in Spain.
Highfield’s Muga, Vipasca, Los Pintanos, and Sierra del Perdón potash projects are located in the Ebro
potash producing basin in Northern Spain covering a project area of close to 400km 2. The Sierra del
Perdón project includes two former operating mines. The Company has recently completed a definitive
feasibility study for its Muga Project and is currently working towards commencing construction in the
fourth quarter of 2015.
Figure 1: Location of Highfield´s Muga-Vipasca, Pintano and Sierra del Perdón Projects in
Northern Spain
Page 3 of 3
Muga Potash Project
Definitive Feasibility Study (DFS)
Short Form Summary
Overview
Highfield Resources Limited (“Highfield” or “the Company”) is an ASX listed potash development
company with four 100% owned potash projects in Northern Spain.
The Company has completed a Definitive Feasibility Study (“DFS”) for its flagship Muga Potash Project
(the “Project”), located in northern Spain with close proximity to the Atlantic coastline of Northern Spain
and Southern France.
Figure 1: Muga Potash Project Location Map in Relation to Highfield´s Four 100% Owned Projects
The DFS builds upon the Pre-Feasibility Study (“PFS”) completed in May 2014, and confirms both the
technical viability of the Project and its ability to deliver robust financial returns under various
sensitivities.
The DFS was independently reviewed by an internationally recognised, Canada based, engineering
consultancy with substantial practical experience in potash. The purpose of the review was to perform
a gap analysis to ensure key inputs had not been missed from either the capital expenditure (“capex”)
or operational expenditure (“opex”) estimates, while also assessing each of the mining and processing
sections for fatal flaws. Importantly, the consulting firm concluded that the capex and opex were well
supported and within expected ranges. The firm also confirmed there appeared to be no fatal flaws in
the Project or errors or emissions from the capex and opex calculations.
Registered Office
Head Office
169 Fullarton Road, Dulwich, SA 5071
Calle Navas de Tolosa, 5 - 1°B, 31002 Pamplona, Spain
Tel: +61 8 8133 5098 Fax: +61 8 8431 3502
Tel: +34 948 050 577 Fax: +34 948 050 578
www.highfieldresources.com.au/
DFS Financial Highlights
Pre-production capex is estimated at US$256m with total capex estimated at US$354m including a
12.5% contingency.
This delivers a total K60 granular potash product of 1.123m tonnes per annum in full production. Opex
in full production is estimated at US$135 per tonne. This includes all transport to key customer markets.
The key financial metrics are:
-
A post-tax, unlevered, internal rate of return (“IRR”) for the Project of 51.9%; and
A net present value (NPV) using a discount rate of 10% (NPV10) of US$1.42bn.
Both calculations use spot potash price estimates provided by independent fertiliser consultants, Integer
Research (“Integer”), with a reduction of 10%. Half of the reduction (5%) is to account for sales and
marketing costs and the other half (5%) represents the current potash market dynamic where contract
pricing is often discounted to spot market pricing.
Proven and Probable Ore Reserve
The Ore Reserve used in the DFS for mine design is based upon the updated Mineral Resource
estimate (“MRE”), calculated by independent Agapito Associates, Inc. (“Agapito”) based on all drilling
completed by Highfield at the Project (refer ASX Release of 24 February 2015).
The total MRE comprises 302.4 million tonnes with an average grade of 11.5% K20, with 80% falling
under the Measured and Indicated Resource categories. Within the global MRE, Agapito estimated a
smaller higher grade subset comprising an undiluted 232Mt at an average grade of 13.5% K 2O that
includes a Measured and Indicated MRE of an undiluted 178Mt with an average grade of 13.4% K 2O.
The high grade subset has formed the basis for the mine design for the DFS and the subsequent
calculation of the Ore Reserve estimate, which was completed by independent Spanish consultants
Consultorers Independientes en Gestión de Recursos Naturales S.A (“CRN”).
Zone
Proven Reserves
Millions of
Tonnes
Average
Grade
% K2 0
Probable Reserve
Millions of
Tonnes
Average
Grade
% K2 0
Proven and Probable Reserves
Millions of
Tonnes
Average
Grade
% K2 0
East Zone
10.54
12.76%
39.39
12.80%
49.92
12.79%
West Zone
18.01
12.66%
78.08
12.71%
96.09
12.70%
Total
East and West
28.55
12.70%
117.47
12.74%
146.01
12.73%
Figure 2: Ore Reserve Summary
The DFS contemplates an initial mine life of 24 years, based only on Proven and Probable Ore
Reserves.
-2-
Mining
The principle mining horizons will be accessed via two straight line declines, approximately 2.9km and
2.5km in length respectively, accessing the same mining horizon at two different points. The eastern
decline reaches the mineralised horizon at 228 metres below surface and the western decline
approximately 348 metres below surface.
It is anticipated that the decline construction will be
completed by specialist Spanish contractors.
The dual decline strategy is anticipated to enhance operational efficiency and reduce risk. Each
underground operation and decline will deliver 50% of the 6.3m tonne production schedule to the
processing facility.
Each underground operation will have the installed capacity to up to 1.5 times of budgeted production
which is considered important as a risk mitigation mechanism to ensure the processing plant operates
at the design capacity of 400 tonnes per hour ramping to 800 tonnes per hour. This has the effect of
delivering processing efficiencies and ensuring that plant Opex is managed within expected metrics.
Underground extraction will be via room and pillar mining with equipment selected to optimise extraction
in varying ore body heights. Additional road headers will be used for the ongoing mining development,
including new transport drifts and main transport galleries. The fleet has been sized to ensure that, at
full capacity, the mine will deliver 6.3 million tonnes of sylvinite ore per annum (ROM) to the processing
facility.
Mining is assumed to target four distinct seams across different sections of the Resource horizon as
delineated in the block model constructed by Agapito. There are two dominant seams in the eastern
section of the Resource horizon referred to as Capa Zero and Capa B and there are two dominant
seams in the western section of the Resource horizon referred to as Capa 1 and Capa 2. CRN´s Ore
Reserve calculation only uses these four seams based on the DFS mine design (refer Figure 3 below).
Figure 3: Mine panel configuration by east and west zones across the four principle mining seams
-3-
Highfield elected to reduce the Ore Reserve by an additional 5% to calculate the total tonnes that will
be produced over the LOM in the DFS production schedule. This reduced the total ore to 138m tonnes
at an average grade of 12.75% K2O. The reduction was designed to account for the expectation of
increased mining dilution at the edges of extraction rooms and to adjust for the known constraints of
selective mining underground in this area.
Metallurgy
Highfield engaged Saskatoon based, independent specialist consultants, EngComp, to develop and
supervise the completion of a series of detailed metallurgical test work programs. EngComp is a world
leader in the processing of sylvinite ores and has been involved in the design process for many plants
globally.
Each component of the test work program was completed by a Spanish consultant with requisite skills
and experience in that field, under the close supervision of EngComp following the submission of a
detailed brief for each part.
Test Stream
Mineralogy & Petrography
Liberation Analysis
Attrition Scrubbing
Flotation Test
Group
University of Barcelona
SRC Labs
Advanced Mineral Processing (AMP)
AGQ Labs and Technical Services
Location
Barcelona, Spain
Saskatoon, Canada
Madrid, Spain
Seville, Spain
Figure 4: Summary of Test work Consultants
The primary objective of the program was to characterise any ores within the orebody, to evaluate each
of the ore’s expected metallurgical response to standard processing methods ensuring a representative
sample across the ore body was obtained, as well as to obtain the design parameters necessary to
develop the detailed process flow sheet and mass balance.
Two distinct ore types were identified – banded and brecciated – of which the banded is estimated to
comprise approximately 74% of the mine schedule and the brecciated estimated to comprise the
remaining 26%.
In general, the ore exhibited a positive metallurgical response, with a clear advantage for the banded
ores over the brecciated ores. EngComp believes that operational recovery rates will benefit from
additional test work designed to further refine and optimise the metallurgical process. This work is
currently in train with the Company believing higher recovery rates may result.
EngComp confirmed the metallurgical properties of the ore at the Muga Project lends itself to a simple,
proven, and technologically sound process flow sheet, which has been successfully implemented at
many operations globally.
Based on the analysis conducted and EngComp’s operational experience with similar potash
processing operations, Highfield assumes, with a ROM feed comprising 74% banded ore and 26%
brecciated ore, a constant life of mine plant recovery of 84%.
-4-
Processing
The processing flow sheet selected by Highfield is a simple two stage crushing process, an attrition
scrubbing and hydro-cyclone de-sliming stage followed by a simple, well understood, KCl (Potassium
Chloride) froth flotation circuit. This provides a simple, cost effective and technologically proven
process route.
Figure 5: Process Flow Sheet Design
Following processing, the product will be dried using fluid bed dryers and then conveyed to the
compacting and glazing facility for conversion from standard to granulated Muriate of Potash (“MOP”).
All of the product produced will be granular K60 potash, the dominant product sold in the Company´s
target markets.
Tailings and By-Product Credits
As shown above the plant produces two streams of tailings – slimes containing clay, sodium chloride
(common salt) and potassium chloride (potash) (8% to 10% by content), and salt tailings containing
sodium chloride, minimal potassium chloride (2% to 3% by content) and water. A backfilling strategy
has been designed to place all salt tailings back into the mine. Small quantities of cement will be added
to the salt tailings in a paste backfill plant on surface after which time the tailings will be piped
underground to fill voids created in mining. This has two benefits to the Project: 1. all salt tailings are
placed underground and 2. the additional competency this creates enables the secondary extraction of
a majority of the pillars. This has the effect of increasing mine extraction ratios to over 80%. The mine
plan assumes an 82% extraction ratio which is slightly lower than the estimate provided by backfilling
study engineers, K-Utec from Germany.
Around 20% of the slimes will also be added to the salt tailings and piped underground. The balance
of the slimes will be stored on surface. The Company is at concept study level on a crystallisation
-5-
option to process the slimes to product high grade potash (K62) and vacuum salt. This is likely to
provide margin enhancement when the mine is in operation but has not been factored into the DFS.
Mine Rehabilitation and Closure
The Restoration Plan is outlined in detail in the ESIA, which was submitted to the relevant authorities
in December 2014. The objective of the plan is to ensure the affected areas of the Project are restored
to their natural state.
The Company calculated a budget for full restoration of €16.2m in its detailed Environmental and Social
Impact Assessment (ESIA) submission lodged in December 2014 (refer ASX announcement 11
December 2014). The DFS, however, has adopted a more conservative position and assumes a higher
amount of 10% of upfront capex which is €33.7m in calendar year 2015 terms.
Site Layout and General Infrastructure
The Company has deliberately tried to minimise the surface footprint of the infrastructure for the Muga
Project. In addition, where possible the design has been adjusted to allow the use of natural features,
such as valleys and rises, to ensure that the visual impact of the Project on the surrounding area is
minimised.
Figure 6: Site Layout and Infrastructure
Utilities
The main energy source for the Project will be grid electricity. Highfield has secured 60MVA of capacity
that will be used primarily for the mine´s energy needs. It is estimated that less than 40MVA will be
required in full production, providing additional capacity for further expansion or salt processing.
Water, gas and telecommunications´ networks are all accessible and available within short distances
of the Project site.
-6-
Logistics
Highfield has signed non-binding MOUs with the Port of Pasajes and the Port of Bilbao (refer ASX
announcements 18 December 2014 and 20 January 2015). Both MOUs confirm the ability to ship
significant quantities of product through these ports.
For the purposes of the DFS, the Company has elected to outsource its transport solution and its port
handling and ship loading facilities. This will reduce upfront Capex estimates, but will add marginally
to the Opex estimates of the Project.
Product will be delivered, by 20 tonne trucks, from the Muga site to the Port of Pasajes, which is located
approximately 150km, mostly by multi-lane motorway, north northwest of the project area.
Markets
Highfield has identified four target markets for its product:
a.
North West Europe including Spain, France and Portugal;
b.
Brazil;
c.
US East Coast and Mid-West; and
d.
West Coast of Africa
The DFS assumes 50% of product produced is sold in granular form into Brazil and 50% is sold in
granular form into North West Europe.
Potash sales price estimates were provided by independent fertiliser market consultants, Integer.
Integer provided spot potash price estimates which the Company discounted by 10%. Half of the
reduction (5%) is to account for sales and marketing costs and the other half (5%) represents the current
potash market dynamic where contract pricing is often discounted to spot market pricing.
The table below summarises the potash price estimates used for the DFS including the discount in real
terms.
Integer MOP price forecast, 2015-2020, including 10% discount for sales and marketing
2015
2016
2017
2018
2019
FOB Vancouver, real terms
297
302
315
318
318
(US$ per tonne)
2020
300
Addressable markets CFR
Average US Standard
321
325
339
342
342
324
Brazil (granular)
342
347
360
363
363
345
Average European Granular
331
335
349
352
352
334
Figure 7: Integer MOP price forecasts, 2015-2020 (US$ per tonne) including 10% discount
-7-
Capex
Capex estimates have been estimated in accordance with the AusIMM Cost Estimation Handbook
2012, based on detailed design and first principles estimation techniques. Where possible, quoted
prices for inputs have been used with all quotes obtained from reputable suppliers.
The capex estimates have been prepared to support the development of an underground room and
pillar mine capable of delivering 6.3 million tonnes of ROM ore per annum to the processing facility,
equivalent to a processing rate of 800 tonnes per hour. Estimates have been developed from first
principles using detailed equipment lists and designs for each section of the Project, supported by
quoted pricing for the majority of costs within the estimate.
Capex is deployed over two phases. The first, pre-production phase is estimated to be €243.44 million
(US$256.25m) including a 12.5% contingency. This will enable the mine to deliver a total of 3.153
million tonnes of ROM ore to the processing plant (equivalent to 400 tonnes per hour).
The design basis for the estimate includes the construction of two declines into the mining horizon,
flotation and compacting capacity for 400 tonnes per hour of ROM processing, and drying capacity for
the full 800 tonnes per hour process facility. In addition, it includes all surface and mine infrastructure
including product storage, access roads, electricity connection, gas supply, water and communications.
Pre-Production Capex Estimate Summary
Component
Euros (m)
Underground development and Machinery
59.84
Process plant and associated infrastructure
126.36
Utilities and logistics
12.08
Sub Total
198.28
Mining Permits
2.25
EPCM and Owners Costs
15.86
Contingency (12.5%)
27.05
Total
243.44
Figure 8: Summary of Pre-Production Capital Estimate
USD (m)
62.99
133.01
12.72
208.71
2.37
16.70
28.47
256.25
Phase 2 capex corresponds with the expansion of the underground mine and sections of the
aboveground facilities to increase mining production to deliver 6.307 million tonnes of ROM ore per
annum to the process facilities and the requisite expansions of capacity at the process plant including
new buildings, flotation circuit and compaction capacity.
Phase 2 - Capex Estimate Summary
Component
Underground development and Machinery
Process plant and associated infrastructure
Utilities and logistics
Sub Total
Mining Permits
EPCM and Owners Costs
Contingency (12.5%)
Total
Euros (m)
26.32
49.82
0.00
76.14
0.62
6.09
10.36
93.21
Figure 9: Summary of Phase 2 Capital Estimate
-8-
USD (m)
27.70
52.44
0.00
80.14
0.65
6.41
10.90
98.11
Opex
In general, opex has been estimated on a € / tonne of ROM basis (assuming 6.3 million tonnes of ROM
ore per annum) and converted to a € / tonne of MOP product basis assuming production of 1.123 million
tonnes per annum of saleable granular K60 product.
Each of the mining, processing and transport costs have been built up from first principles utilising
quoted prices where possible.
The Company has included general and administrative costs of a flat €10 / tonne of granular K60
product produced which has been benchmarked against major global potash producers.
Sustaining capex has been applied at a flat 2.5% of the total Project capex.
ongoing mine development has been included in opex for mining.
It should be noted that
Depreciation has been applied assuming a generic useful life of 20 years, representing 5% per annum
of total capex and ongoing of additional expansion or sustaining capex expended at the Project.
A 12.5% contingency has been added to mining, processing and logistics´ opex estimates.
A high level summary on a cost per tonne of granular K60 product is presented below.
Operating Cost Summary - Per tonne MOP
Components
C1 Cost
- Mining
- Processing
-Transport
Sub Total
- G&A
- Sustaining Capital
Total C1 Costs
Euros / t
USD / t
35.45
40.58
19.61
95.64
10.00
7.50
113.14
37.32
42.71
20.64
100.67
10.53
7.89
119.09
C2 Costs
- Depreciation
- C1 Costs
Total C2 Costs
14.99
113.14
128.13
15.78
119.09
134.87
C3 Costs
- Royalties
- C2 Costs
Total C3 Costs
0.00
128.13
128.13
0.00
134.87
134.87
Figure 10: Summary of Operating Cost Estimate
Financial Analysis
The DFS has produced robust financial metrics including a post-tax, unlevered internal rate of return
(“IRR”) of 51.9% and a net present value (“NPV”) with a discount rate of 10% of US$1.42 billion.
The Company has run sensitivity analysis on a variety of Project parameters to ascertain any areas of
increased risk and sensitivity to the projected returns. This analysis indicates the projected returns for
the Project are most sensitive to changes in the received potash price.
-9-
The Company ran five scenarios assuming a parallel shift in received potash prices ranging from a fall
of 25% (equivalent to 2017 FOB Vancouver of US$236.25/tonne in real terms) to an increase of 25%
in received price (equivalent to 2017 FOB Vancouver of US$393.75/tonne in real terms). This analysis
shows that even in the downside scenario, the Project still delivers a post-tax NPV10 of US$556.7 million
with an unlevered post tax IRR of 29.43%.
NPV Sensitivity - Potash Price and Discount Rate - US$ millions
Potash Price Sensitivity (Parallel Shift in Prices)
Potash Price Sensitivity
-25%
-10%
0%
10%
2017 FOB Vancouver (US$/t)
236.25
283.50
315.00
346.50
Discount
8%
734.5
1,373.9
1,800.1
2,226.4
Rate
10%
556.7
1,076.1
1,422.4
1,768.6
12%
423.1
851.7
1,137.4
1,423.1
25%
393.75
2,865.8
2,288.0
1,851.7
Figure 11: NPV Sensitivity to Potash Price and Discount Rate
Changes to opex showed higher levels sensitivity to the underlying Project financial returns relative to
capex and, therefore, the Company also includes a sensitivity analysis of post-tax NPV to changes in
opex ranging from a fall of 25% to a rise of 25% in underlying cost.
NPV Sensitivity - Opex and Discount Rate - US$ millions
8%
10%
-25%
101.15
2,181.5
1,731.4
OPEX Sensitivity
-10%
0%
121.38
134.87
1,952.7
1,800.1
1,546.0
1,422.4
10%
148.36
1,647.6
1,298.7
25%
168.59
1,418.7
1,113.3
12%
1,391.9
1,239.2
1,035.6
882.9
Opex Sensitivity
C3 Cost US$/t MOP
Discount
Rate
1,137.4
Figure 12: NPV Sensitivity to Opex and Discount Rate
Finally, given the recent depreciation of the Euro relative to the US dollar, the Company has included a
sensitivity analysis for the NPV impact of exchange rate fluctuations ranging from 0.80 through to 1.10
on a USD to Euro basis.
NPV Sensitivity - Exchange Rate and Discount Rate - US$ millions
Exchange Rate Sensitivity
Discount
Rate
8%
10%
0.800
1,547.6
1,209.8
12%
955.1
Exchange Rate (USD:EUR)
0.875
0.950
1.025
1,684.7
1,800.1
1,898.7
1,325.2
1,422.4
1,505.3
1.100
1,983.8
1,577.0
1,054.1
1,269.9
1,137.4
1,208.5
Figure 13: NPV Sensitivity to Exchange Rate and Discount Rate
Stakeholders
The Company submitted its application for the environmental and mining permits in December 2014
(refer ASX announcement 11 December 2014) supported by a detailed Environmental and Social
Impact Assessment (“ESIA”). The Company is committed to delivering a sustainable mining project,
which benefits the local regions of Aragón and Navarra and ensures all environmental risks within the
Company’s control are identified and mitigation strategies are put in place to manage these risks while
also delivering outstanding results for its stakeholders.
- 10 -
The Company’s experienced, Pamplona based, Spanish management team has developed a deep
working relationship with stakeholders at all levels, including the communities surrounding the Project
via regular dialogue, community consultation and feedback sessions, right through to the senior levels
of the Spanish Government.
Highfield is committed to ensuring it achieves a real social licence to operate the Muga Mine. It has
created a Spanish Foundation called the Geoalcali Foundation (the “Foundation”) as a conduit for its
social initiatives. The Foundation is currently delivering various community initiatives and is ensuring
the local communities understand the Company´s commitment to ensure all stakeholders benefit from
the development of the Project.
Project Implementation
Highfield has developed a preliminary schedule for tender and the finality of detailed engineering and a
preliminary construction schedule. The full, detailed project schedule will be developed as the Project
proceeds to construction. A project execution plan will define all project control procedures including
procurement rules, cost and change management procedures and the construction risk management.
It will also define processes to ensure Highfield´s global philosophy with respect to safety first and
environmental best practice is achieved.
The execution philosophy a hybrid mix of EPC and EPCM in which Highfield will employ a dedicated
Owner’s Team to manage and oversee all aspects of the design and construction process. Effectively,
Highfield will assume the role of Manager, and will sub-contract all of the key components of the
execution process to specialist contractors.
A construction schedule has been developed assuming the mine is approved and concessions are
awarded by October 2015. The initial construction effort will include commencement of the decline
construction, clearance of vegetation, foundation preparations, drainage system construction, upgrade
of site roads and construction of a perimeter site control fence.
Timeline and Targeted Production Profile
The Company is seeking to commence preliminary site works and to start the construction of the two
declines in Q4 of the current calendar year. Meeting this timeline will see initial production in Q2 of
calendar year 2017. It is assumed construction takes 18 months to the point of commissioning of the
processing plant.
Construction of the second phase is scheduled to commence in Q3 of calendar year 2017 with initial
production targeted for Q4 of calendar year 2018. Full production is targeted to commence on 1
January 2019.
Figure 14: Muga Project Targeted Construction and Production Timeline
- 11 -
The ramp up profile sees the processing plant producing 10% of capacity in the first month of the
commissioning phase, 30% in the second month, 70% in the third month, 90% in the fourth month and
full production in the fifth month.
Month
Figure 15: Targeted Monthly Production Profile
__________________________________________
- 12 -
Dec-19
Oct-19
Aug-19
Jun-19
Apr-19
Feb-19
Dec-18
Oct-18
Aug-18
Jun-18
Apr-18
Feb-18
Dec-17
Oct-17
Aug-17
Jun-17
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
-
Apr-17
Tonnes of K60 Potash
Targeted Monthly Production Profile
Detailed Capex Tables
Pre-Production Capex Estimate for Underground Development and Machinery
Item
Euros (m)
Surface Infrastructure
(electrical equipment, air supply installation, access, temporary fill)
Decline Construction
(2 declines with 29.4m2portal area)
USD (m)
0.41
0.43
21.20
22.31
10.97
11.55
2.24
2.35
0.67
0.70
24.36
59.84
25.64
62.99
Primary Underground Infrastructure
(conveyor belts in decline, initial galleries and to plant, first gallery
infrastructure)
Initial Ventilation Raise
(1,000 metres @ €356 / metre)
Initial Services Installation
(electricity, pumping, air supply, communications and safety)
Machinery - Phase 1
(6 M360 roadheaders, 2 M520 roadheaders, 7 trucks, 2 loaders, 4 bolters)
Total
Pre-Production Capex Estimate for Aboveground
Item
Processing Plant
(feeding and crushing, grinding, flotation, drying, compaction)
Euros (m)
USD (m)
46.84
49.31
23.53
24.76
37.50
39.47
9.15
9.63
9.34
126.36
9.83
133.01
Civil Works and Site Preparations
(TSF, construction preliminaries, site clearance, levelling, cut-fill, drainage,
landscaping )
General Site Infrastructure
(all site buildings, permiter fencing, laboratory, weighbridge, site roads)
Storage Facility
(feed storage and product storage)
Waste Management
(800tph backfilling plant, buildings and piping)
Total
- 13 -
Pre-Production Capex Estimate and Details for Utilities
Item
Euros (m)
USD (m)
9.84
10.36
0.00
0.00
0.19
0.20
0.20
10.23
0.21
10.77
Euros (m)
USD (m)
Road Connections to Existing Highways
1.85
1.94
Local Road Improvements
0.00
0.00
Upgrade to port facilities
Total
0.00
1.85
0.00
1.94
Euros (m)
USD (m)
Engineering, Procurement and Construction Management
7.93
8.35
Owners Costs
7.93
8.35
2.25
18.11
2.37
19.07
Electrical Supply and Installation
(connection to site, substation, stanby generators, renewable generators)
Natural Gas Supply and Installation
(onsite LNG storage)
Water Supply and Installation
(supply, metering, additional pumping allowance)
Voice and Data Connections
Total
Pre-Production Capex Estimate for Logistics
Item
Pre-Production Capex Estimate for Project Delivery and Owners Costs
Item
Permit Fees
Total
- 14 -
Pre-Production Capex Estimate for Contingency
Item
Euros (m)
USD (m)
Underground
7.48
7.87
Above Ground
15.79
16.63
1.51
1.59
2.26
27.05
2.38
28.47
Pre-Production Capex Estimate Summary
Component
Underground development and Machinery
Process plant and associated infrastructure
Utilities and logistics
Sub Total
Mining Permits
EPCM and Owners Costs
Contingency (12.5%)
Total
Euros (m)
59.84
126.36
12.08
198.28
2.25
15.86
27.05
243.44
USD (m)
62.99
133.01
12.72
208.71
2.37
16.70
28.47
256.25
Phase 2 Capex Estimate for Underground Development and Machinery
Item
Euros (m)
USD (m)
0.00
0.00
0.00
0.00
6.41
6.75
0.00
0.00
0.48
0.51
19.42
26.32
20.45
27.70
Utilities and Logistics
Project Delivery and Owners Costs
Total
Surface Infrastructure
(electrical equipment, air supply installation, access, temporary fill)
Decline Construction
(2 declines with 29m2)
Primary Underground Infrastructure
(conveyor belts in decline, initial galleries and to plant, first gallery infrastructure)
Initial Ventilation Raise
(1,000 metres @ €356 / metre)
Initial Services Installation
(electricity, pumping, air supply, communications and safety)
Machinery - Phase 2
(5 M360 roadheaders, 2 M520 roadheaders, 7 trucks, 2 loaders)
Total
- 15 -
Phase 2 Capex Estimate for Aboveground
Item
Euros (m)
Processing Plant
USD (m)
39.45
41.52
0.00
0.00
10.37
10.91
0.00
0.00
0.00
49.82
0.00
52.44
Euros (m)
USD (m)
0.00
0.00
0.00
0.00
(supply, metering, additional pumping allowance)
0.00
0.00
Offsite drainage
0.00
0.00
Voice and Data Connections
Total
0.00
0.00
0.00
0.00
Phase 2 Capex Estimate for Logistics
Item
Euros (m)
USD (m)
Road Connections to Existing Highways
0.00
0.00
Local Road Improvements
0.00
0.00
Upgrade to port facilities
Total
0.00
0.00
0.00
0.00
(feeding and crushing, grinding, flotation, drying, compaction)
Civil Works and Site Preparations
(TSF, construction preliminaries, site clearance, levelling, cut-fill, drainage,
landscaping )
General Site Infrastructure
(all site buildings, permiter fencing, laboratory, weighbridge, site roads)
Storage Facility
(feed storage and product storage)
Waste Management
(800tph backfilling plant, buildings and piping)
Total
Phase 2 Capex Estimate and Details for Utilities
Item
Electrical Supply and Installation
(connection to site, substation, stanby generators, renewable generators)
Natural Gas Supply and Installation
(onsite LNG storage)
Water Supply and Installation
- 16 -
Phase 2 Capex Estimate for Project Delivery and Owners Costs
Item
Euros (m)
USD (m)
Engineering, Procurement and Construction Management
3.05
3.21
Owners Costs
3.05
3.21
Permit Fees
Total
0.62
6.71
0.65
7.07
Euros (m)
USD (m)
Underground
3.29
3.46
Above Ground
6.23
6.55
Utilities and Logistics
0.00
0.00
0.84
10.36
0.88
10.90
Euros (m)
26.32
49.82
0.00
76.14
0.62
6.09
10.36
93.21
USD (m)
27.70
52.44
0.00
80.14
0.65
6.41
10.90
98.11
Phase 2 Capex Estimate for Contingency
Item
Project Delivery and Owners Costs
Total
Phase 2 - Capex Estimate Summary
Component
Underground development and Machinery
Process plant and associated infrastructure
Utilities and logistics
Sub Total
Mining Permits
EPCM and Owners Costs
Contingency (12.5%)
Total
- 17 -
Detailed Opex Tables
Opex Detail for Underground Operations
Item
Labour
€ / t ROM
USD / t ROM
1.50
1.57
1.54
1.62
0.48
0.50
0.88
0.93
0.94
0.98
(7,000 litres)
0.24
0.26
Health, Safety and Communications
(PPE, radios etc.)
0.04
0.04
Sub Total
5.61
5.91
Contingency (12.5% )
0.70
0.74
Total
6.31
6.64
35.45
37.32
(production, infrastructure, transport, auxillary)
Electricity Consumption
(all vehicles electrified)
Maintenance
(main galleries, ore access galleries, ongoing transport drifts)
Consumables
(rockbolts, hydraulic fluids and specialty lubricants)
Miscellaneous & Services
(boring, ventilation supplies, hand tools, external services, etc)
Diesel Fuel
Per tonne of Product
- 18 -
Opex Detail for Above Ground Operations
Item
Labour
Euros / t ROM
USD / t ROM
0.95
1.00
1.71
1.80
0.52
0.55
0.05
0.05
0.93
0.97
0.35
0.37
pumping capacity, O&M, labour)
1.90
2.00
Sub Total
6.42
6.76
Contingency (12.5% )
0.80
0.84
Total
7.22
7.60
40.58
42.71
Euros / t
USD / t
12.83
13.51
4.60
4.84
17.43
18.35
2.18
2.29
19.61
20.64
(plant operations, maintenance, laboratory)
Electricity consumption
(processing plant, drying, compaction, general)
Gas consumption
(drying plant and glazing)
Water consumption
(processing)
Flotation reagent consumption
(desliming and flotation)
Operations and Maintenance
(flotation, drying and compaction)
Backfilling
(binders,
Per Tonne of Product
Opex Detail for Transport
Item
Road transportation
(100km to Port of Pasajes)
Port Charges and Taxes
(Port of Pasajes charges and taxes)
Sub Total
Contingency (12.5% )
Total (per tonne of product)
- 19 -
Opex Detail for Sustaining Capex, G&A and Depreciation
Item
Sustaining Capex
Euros / t
USD / t
1.33
1.40
1.78
1.87
(5% per annum of initial capex)
2.67
2.81
Total
5.78
6.09
32.49
34.20
Euros / t
USD / t
35.45
40.58
19.61
95.64
10.00
7.50
113.14
37.32
42.71
20.64
100.67
10.53
7.89
119.09
C2 Costs
- Depreciation
- C1 Costs
Total C2 Costs
14.99
113.14
128.13
15.78
119.09
134.87
C3 Costs
- Royalties
- C2 Costs
Total C3 Costs
0.00
128.13
128.13
0.00
134.87
134.87
(2.5% per annum of initial capex)
General and Administative
( €10 per tonne of product)
Depreciation
Per Tonne of Product
Operating Cost Summary - Per tonne MOP
Components
C1 Cost
- Mining
- Processing
-Transport
Sub Total
- G&A
- Sustaining Capital
Total C1 Costs
_________________________________________
- 20 -