Highfield Resources Ltd
Corporate Presentation
March 2015
ASX Code: HFR
COMPETENT PERSON STATEMENT - RESOURCES
Information relating to resources was prepared by Mr Leo Gilbride, P.Eng and Ms Vanessa Santos, P.Geo, of Agapito Associates. The Competent Person for
Resources under JORC Code standards is Mr Leo Gilbride, P.Eng and Ms Vanessa Santos, P.Geo. of Agapito Associates of Colorado, USA. Mr Gilbride is a
licensed professional engineer in the State of Colorado, USA and is a registered member of the Society of Mining, Metallurgy and Exploration Inc. Ms Santos is a
licensed professional geologist in South Carolina and Georgia, USA, and is a registered member of the Society of Mining, Metallurgy and Exploration Inc.
The Society of Mining, Metallurgy and Exploration Inc is a JORC Code ‘Recognized Professional Organization’ (RPO). An RPO is an accredited organization of
which the Competent Person under JORC Code Reporting Standards must belong in order to report Exploration Results, Mineral Resources, or Ore Reserves
through the ASX. Mr Gilbride is the Vice President of Engineering and Field Services and Ms Santos is the Chief Geologist with Agapito Associates and both have
sufficient experience to qualify as a Competent Person for the relevant style and type of mineralisation and deposit under consideration of this release. Mr Gilbride
and Ms Santos consent to the inclusion in the report of the matters based on this information in the form and context in which it appears.
COMPETENT PERSON STATEMENT – RESERVES
Information relating to reserves was 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 organization 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 is the Technical Director of CRN and he has sufficient experience which is relevant to the style of mineralization 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. José Antonio Zuazo and Mr. Jesús Fernández consent to the inclusion in the release of the matters based on their information in the form and context in which it
appears.
FORWARD LOOKING STATEMENTS
This presentation includes certain ‘forward looking statements’. All statements, other than statements of historical fact, are forward looking statements that involve
various risks and uncertainties. There can be no assurances that such statements will prove accurate, and actual results and future events could differ materially
from those anticipated in such statements.
Such information contained herein represents management’s best judgment as of the date hereof based on information currently available. The company does not
assume any obligation to update any forward looking statement.
Highfield Resources Limited
CONTENTS
APPENDICES
1.
Introduction
A1
Corporate Overview
2.
The Projects
A2
Muga, Vipasca and Pintano Projects
3.
Proven basin and proven mining and processing
A3
Sierra del Perdón Project
4.
Muga Definitive Feasibility Study
A4
Permitting
5.
Lowest capital cost
A5
2015 MOP market supply and demand
6.
First quartile margin in production
A6
Muga DFS – High level snapshot
7.
Advantages to our addressable markets
A7
Potash price assumption
8.
First quartile costs to customer
A8
Muga DFS sensitivity overview
9.
Management have built and operated mines
10. 2015 – A Company defining year
11. Summary
3
1. Introduction
• Highfield Resources is developing the Muga
Project, one of its four 100% owned potash
projects in northern Spain.
Decline accessed underground mine with project economics
boosted by first world infrastructure and domestic markets
• Located in a producing potash basin where
undergound mines have operated via decline with
simple sylvinite flotation circuit processing.
• The flagship Muga Project has the lowest capex
of any development stage potash project.
• In production Muga will have first quartile
EBITDA margins due to a combination of high
price end markets and low total cash costs to
customer.
• Management team has proven mine building
experience in Spain and operating experience in
potash.
• 2015 is a defining year for the Company.
Highway from within 7 kms of mine gate to port
Aerial photo of Port of Pasajes
Virtual image of proposed aboveground operations
4
2. The Projects
Four 100% owned potash projects in northern Spain
5
3. Proven basin and proven mining and processing
Mines in Ebro Basin have produced for close to 100 years
Mining
Highfield
Iberpotash
Decline access into underground conventional room and
pillar mine
Processing
Flotation circuit processing of sylvinite ore
Estimated 2015 MOP Production by Mining Method
5%
19%
Israeli Chemicals Ltd (ICL:IT) owns Iberpotash and on 7 August
2014, Stefan Borgas, CEO noted:
76%
“[our expansion projects in the Ebro Basin] are so
shockingly attractive … we`re putting an accelerator on”
Underground Conventional
Brines
Solution
Source: Scotiabank, HFR Research
6
4. Muga Definitive Feasibility Study
•
Post tax NPV10 of US$1.42bn
•
Post tax, unlevered IRR of 51.9%
•
EBITDA in first year of full production estimated at
$US296m
•
Initial 24 year mine life of 1.12m tonnes of potash
(K60 product) per annum in full production
•
Pre-production capital cost estimated at less than
US$256.25m (from total capital cost estimate of
US$354.36m)
•
All in cash costs to port of Bilbao of US$119 per tonne
•
Total C3 costs of US$135 per tonne
•
Realistic 2017 FOB Vancouver potash price reference of
$374 per tonne (nominal)
ASX Release 30 March 2015
Virtual image of mine storage and processing facilities
(for marketing puroposes only)
7
5. Lowest capital cost
Highfield has stand-out MOP projects in terms of total capex and capital intensity
Total capex (in absolute terms)
Eurochem: VolgaKaliy
W. Potash: Milestone
Potashcorp: Rocanville
Eurochem: Usolskiy
Encanto: Muskowekwan
Uralkali: Polovodovsky
Verde: Cerrado Verde
Karnalyte: Wynyard
Brazil Potash: Autazes
Passport: Hollbrook
Elemental: Sintoukola
Uralkali: Ust
South Boulder: Colluli
MagIndustries: Mengo
Pros. Glb'l: Hollbrook
Allana: Danakil
Highfield: Muga
Capital intensity per tonne of production
Average: US$2,093 million
-
2,000
4,000
Capital Expenditure US$ millions
6,000
W. Potash: Milestone
Eurochem: VolgaKaliy
MagIndustries: Mengo
Encanto: Muskowekwan
Brazil Potash: Autazes
Uralkali: Polovodovsky
Elemental: Sintoukola
Karnalyte: Wynyard
Eurochem: Usolskiy
Passport: Hollbrook
Verde: Cerrado Verde
South Boulder: Colluli
Allana: Danakil
Uralkali: Ust
Prospect Global
Potashcorp: Rocanville
Highfield: Muga
Average: US$807/tonne
0
500
1,000
1,500
Capital Intensity US$/tonne of Production
Source: GMP Europe Research May 2014
HFR:Muga figures from DFS
8
6. First quartile margin in production
First quartile margin is driven by high priced end markets and low total costs to customer
Project
Price at Customer
Highfield – Muga*
Belaruskali
BHP Jansen*
Intrepid Potash
K+S Legacy*
CFR Brazil / CIF NW Europe1
US$357 / tonne
Asia / Brazil / Europe1
US$348 / tonne
FOB Vancouver
US$290 / tonne
CIF US Midwest
US$432 / tonne
FOB Vancouver
US$290 / tonne
$250
$200
Estimated
EBITDA
margin
(US$ / tonne)
$150
$100
$232
$186
$136
$50
$115
$51
$$(50)
$(80)
$(63)
$(67)
$(100)
$(26)
$(8)
$(11)
$(43)
$(45)
$(37)
$(10)
$(21)
US$124
$(19)
US$162
$(11)
US$154
Estimated
$(150)
delivered cost
to customer
$(200)
(US$ / tonne)
$(80)
$(215)
$(250)
$(300)
$(58)
$(36)
$(40)
$(40)
$(25)
$(15)
$(14)
US$239
$(33)
US$317
$(350)
Operating Costs
* Under development
1 Assumes sales evenly distributed
Freight Costs
Sustaining Capital
Royalties
Corporate SG&A
EBITDA Margin
Source: Street research, Company reports and HFR estimates
9
7. Advantages to our addressable markets
Competitive access to high priced MOP markets
18.7
21.0
Estimated 2014 MOP supply and demand by region
0.8
FOB Vancouver
$290
CIF NW Europe
$363
Canada
3.8
6.5
4.2
8.7
13.0
FSU
EU*
1.5
5.5
6.5
USA
1.4
CIF US Midwest
$432
China
Middle East
CFR China
$305
12.5
9.3
0
0.8
Africa
0.3
Brazil
1.8
2.2
CFR Brazil
$350
CFR India
$322
0.5
Asia2
CFR SE Asia
$330
Sth America1
Global Totals (2014)
Production
Consumption
60.0
59.0
MOP spot
US$/mt
1Excluding Brazil
2Excluding China
MOP spot Prices in USD as at 1 Jan 2015 – Prices for Standard Product
Source: IFA, Scotiabank, Uralkali, HFR Research
10
8. First quartile costs to customer
Low total cash costs to customers with large royalty and logistics advantages
$350
$317
$300
$33
$280
$13
$250
$23
$239
$229
$212
$9
$200
$186
$154
$150
$137
$124
$100
$11
$$8
$26
$20
$6
$16
$15
$11
$21
$10
$45
$162
$19
$-
$24
$1
$30
$25
$1
$23
$25
$28
$40
$45
$15
$40
Corporate SG&A
Royalties
$15
Sustaining Capital
$36
$35
Freight Costs
$48
$37
Operating Costs
$33
$58
$43
$14
$50
$215
$171
$165
$105
$50
$80
$80
Highfield
Muga*
ICL Dead Sea
$67
$63
$63
BHP Jansen*
Belaruskali
Uralkali
$80
$PotashCorp
K+S Germany
K+S Legacy*
Mosaic
Intrepid
Source: Company Reports and street research
* Not in production. Figures are sourced from public announcements
Highfield Muga figures from DFS March 2015
11
9. Management have built and operated mines
Proven in-country team with over thirty professionals including experienced mine builders
Pedro
Rodriguez
Development
Director
Alfredo Luis
Menendez Diaz
EGM
Construction
Michael
Schlumpberger
EGM
Operations
• Geologist with over 30 years experience in Spain,
including for senior management roles for multi-nationals
including Billiton, Navan-Almagrera and Newmont
• Direct responsibility for permitting and delivery of the
Aguas Teñidas, Los Santos and Mazarrón mines
• Mining Engineer with over 30 years experience in Spain
including for HUNOSA and SADIM
• Was directly responsible for the mine and facilities
construction projects at Aguas Teñidas, Sotiel and Migollas
and for technical and procurement services at La Zarza,
Rio Tinto and Los Santos
• Mining Engineer with extensive underground mining
experience including over 21 years at PotashCorp
Aguas Teñidas CU-Pb-Zn mine
Huelva Province, Spain
Opened 2009
• Operational responsibility for the expansion and ongoing
operations at PotashCorp’s 8Mtpa Lanigan underground
mine
12
10. 2015 – A Company defining year
The transition from developer to producer
• Muga-Vipasca JORC Resource estimate upgrade
Q1
• Sierra del Perdón maiden JORC Resource estimate
• Muga Mine Definitive Feasibility Study
Q2
• Muga Mine project finance term sheets agreed
• Sierra del Perdón Scoping Study
Q3
• Muga Mine Financial Close
Q4
• Muga Mine construction commences
Brochure cover explaining the Company’s commitment
to its four pillars of corporate responsibility
13
11. Summary
•
Highfield Resources is developing the Muga Potash Project, one of its four
100% owned potash projects in Northern Spain.
•
The projects are in a producing potash basin where conventional
undergound mines have operated via decline and sylvinite flotation
circuit processing.
•
The flagship Muga Mine Project has the lowest capex of any
development stage potash project.
•
In production it will have first quartile EBITDA margins driven by
combination of high price end markets and low total cash costs to
customer.
•
A management team has been assembled with proven mine building
experience in Spain and in potash operations.
•
2015 is a defining year for the Company.
Logo of the Company’s Spanish Foundation that is currently delivering
several projects with the local communities
14
Highfield Resources Ltd
Appendices
A1. Corporate Summary
Ordinary Shares on Issue
252.0m
3.5
1.25
3.0
43.5m
Performance B* Shares
51.5m
Fully Diluted
347.0m
Undiluted Market Cap at A$1.39
(26 Mar 15)
$350m
Fully Diluted Market Cap at A$1.39
$482m
2.5
1.00
Price (A$)
Options
1.50
2.0
0.75
1.5
0.50
Cash as at 31 December 2014
~A$25m
Average Daily Volume (3months)
~310,000
1.0
0.25
0.5
0.00
0.0
Shareholders (Fully Diluted)
Spanish in-country management
21%
Broker
Recommendation
12-month Price Target
8%
Bell Potter
BUY
$1.23
EMR Capital
20%
Blue Ocean
BUY
$1.65
Other Shareholders
51%
Canaccord Genuity
BUY
$1.30
100%
Foster Stockbroking
BUY
$1.35
GMP Securities
BUY
$1.75
Numis Securities
BUY
$2.20
Pareto Securities
BUY
$1.35
Taylor Collison
BUY
$1.18
AVERAGE
$1.52
Australian based management
Total
* Performance shares were granted for acquisition of the Spanish assets with the following
milestones
B. Construction and operating approvals for production of 500,000 tonnes of potash per
annum.
16
16
Volume (m)
Fully Diluted Equity
A2. Muga-Vipasca and Pintano Projects
Over 490m tonnes of JORC Resource estimate*
covering less than 20% of Project area
Vipasca
Project Area
Muga
Project Area
≈ 15 km
Pintano Project
Area
≈ 52 km
Map of Muga-Vipasca and Pintano Project Areas showing JORC
Resource estimate, drill holes and seismic profiles
* Refer ASX Releases dated 24 February 2015 and 20 November 2013
17
A3. Sierra del Perdón Project
Photo showing mine operations at Potasas de Subiza in the mid 1990s
30
500
25
400
20
300
15
200
10
100
5
0
0
% KCl
600
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
Annual production ('000 t)
Potash Production History
Production
Grade
Source: Annual Minestrio de Industria lodgements by Mina de Potasas de Navarra and Subiza, SA
(former mine owner)
Map of Sierra del Perdón showing historic mine infrastructure
and drill holes
18
A4. Permitting
A defined permit process is underway
Lodgement
Public
Consultation
4 months
Review
Review
30 days
Mining Approval
Positive Env.
Declaration
Construction Ready
Minimal visual and environmental impact
•
Backfilling of salt tailings
•
Legislated process with recent legislative changes designed
to quicken environmental approval process
•
Strong community engagement
•
Momentum improving in Spain following recent approvals
including Ormonde Mining (21 Nov 2014) and EMED Mining
(23 Jan 2015)
Environmental
Impact Study
Mine Project
30 days
Gazetting Period
•
Mining
Concession
Construction
Application
Licence
Construction
Flow sheet of defined permit process
Virtual image of proposed aboveground processing plant
19
A5. 2015 MOP market supply and demand
2015 MOP market is tight with most producers expected to be at full capacity
•
The only spare capacity sits with PotashCorp and Mosaic
Source: BMO – 30 January 2015
20
A6. Muga DFS – High Level Snapshot
Opex Cost Summary - per tonne MOP
Total Capex Estimate Summary
Euros / t
USD / t
- Mining
35.45
37.32
- Processing
40.58
42.71
-Transport
19.61
20.64
95.64
100.67
10.00
10.53
7.50
7.89
113.14
119.09
14.99
15.78
- C1 Costs
113.14
119.09
Total C2 Costs
128.13
134.87
- Royalties
0.00
0.00
- C2 Costs
128.13
134.87
Total C3 Costs
128.13
134.87
Euros (m)
USD (m)
Underground development and Machinery
86.16
90.70
Process plant and associated infrastructure
176.17
185.45
12.08
12.72
274.42
288.86
2.87
3.02
EPCM and Owners Costs
21.95
23.11
- G&A
Contingency (12.5%)
37.41
39.37
- Sustaining Capital
Total
336.65
354.36
Total C1 Costs
Pre production Capex
243.44
256.25
C2 Costs
Utilities and logistics
Sub Total
Mining Permits
C1 Cost
Sub Total
- Depreciation
FINANCIAL HEADLINES
€
Post Tax Unlevered IRR
NPV at 10% Discount Rate
US$
51.9%
1.352bn
1.42bn
Forecast Steady State EBITDA CY19
281m
296m
Project Enterprise Value (@ 8 x CY19 EBITDA)
2.24bn
2.36bn
C3 Costs
21
A7. Potash price assumption
Potash price assumed is conservative and with a broad basis
•
Our current valuation model assumes 50% potash sales into Brazil, and 50% in NW Europe, consistent with preliminary market studies
•
Our Potash price assumption is
•
Integer independent pricing
•
Less a 10% sales and marketing fee and contract pricing discount
2016
2017
2018
2019
2020
FOB Vancouver Reference
350.00
374.00
385.00
393.00
379.00
Ave. CIF NW Eur and CFR
Brazil
396.90
421.65
434.20
443.75
430.72
Sales Commission (5%)
19.85
21.08
21.71
22.19
21.54
Contract Price Discount (5%)
19.85
21.08
21.71
22.19
21.54
375.20
379.49
390.78
399.37
387.64
Less:
Average Nett Price
Integer Report dated 17 March 2015
22
A8. Muga DFS sensitivity overview
Projects still attractive with depressed potash prices.
NPV Sensitivity – Potash Price and Discount Rate - US$ millions
Potash Price Sensitivity (Parallel Shift in Prices)
1,409.80
-30%
-15%
0%
+15%
+30%
Discount
8%
521.3
1,160.7
1,800.1
2,439.5
3,078.9
Rate
10%
383.6
903.0
1,422.4
1,941.7
2,461.1
12%
280.2
708.8
1,137.4
1,566.0
1,994.5
NPV Sensitivity - Exchange Rate and Discount Rate - US$ millions
Exchange Rate (USD:EUR)
1,409.80
0.800
0.875
0.950
1.025
1.100
Discount
8%
1,547.6
1,684.7
1,800.1
1,898.7
1,983.8
Rate
10%
1,209.8
1,325.2
1,422.4
1,505.3
1,577.0
12%
955.1
1,054.1
1,137.4
1,208.5
1,269.9
NPV Sensitivity - Capex and Discount Rate - US$ millions
Capex Sensitivity
1,409.80
-30%
-15%
0%
+15%
+30%
Discount
8%
1,895.7
1,847.9
1,800.1
1,752.4
1,704.6
Rate
10%
1,514.9
1,468.6
1,422.4
1,376.1
1,329.9
12%
1,227.0
1,182.2
1,137.4
1,092.6
1,047.8
23
REGISTERED OFFICE
169 Fullarton Road
Dulwich SA 5065
Australia
HEAD OFFICE
Avenida Carlos III, 13-15, 1B, 31002 Pamplona, Spain
T +34 948 050 577 | F +34 948 050 578
www.highfieldresources.com.au
[email protected]
FURTHER INFORMATION
Anthony Hall Managing Director T +34 617 872 100
John Claverley General Manager T +34 607 748 435
Hayden Locke Corporate Development T +34 609 811 257