Spanish Potash Developer Highfield Resources On Track to Production

• Highfield Resources is developing the Muga potash project in Spain, which will produce 1 million tons per year and is shovel-ready with all permits in place.
• The company recently secured €320 million in debt financing from ING and other major banks, showing confidence in the project.
• Highfield signed a €25 million convertible note with existing major shareholders EMR and Tectonic, providing further funding.
• The company has appointed an experienced potash industry executive to lead the plant construction phase.
• The project has impressive economics even at lower potash prices, with potential annual EBITDA of €300 million at 1 million tons production. The feasibility study shows NPV of €2 billion.

About Highfield Resources

Highfield Resources is a potash development company focused on bringing its flagship Muga Project in Spain into production. The Muga Project contains over 250 million tonnes of high-grade potash mineralization and is located in the potash-rich Ebro Basin, close to key infrastructure like roads, rail, power and ports.

Highfield Resources is led by CEO Ignacio Salazar and has been advancing the project since 2014. The company completed a feasibility study in 2022 outlining a two-phase development approach, starting with 500,000 tonnes per annum production scaling up to 1 million tonnes per annum. Total capital costs are estimated at 436 million euros.

Interview with Ignacio Salazar, CEO & MD of Highfield Resources

Permitting De-Risks Project

A key milestone was achieved in 2022 when Highfield Resources received its construction permit, removing a major permitting risk from the project. As CEO Salazar explained, "The key element is that was the last license or key obviously there is a lot to do always but the key license to allow us to start construction."

With permitting complete, Highfield can now move forward with financing and developing the project. Salazar highlighted that "The permitting risk is away and the permitting process is behind us."

Debt Funding Secured

On the financing front, Highfield has made excellent progress securing debt funding for the initial project development.

The company has a 320 million euro finance facility fully committed from a consortium of major banks including ING and HSBC. In addition, Macquarie Bank recently signed documentation to provide a 27 million euro equipment lease finance facility.

This provides most of the required debt funding, significantly de-risking the financing needs for the project.

Strategic Investors Provide Equity Backing

To complement the debt funding, Highfield has been working on securing strategic equity partners. Major shareholder EMR Capital, an Australian private equity firm, recently agreed to provide up to 25 million AUD in a convertible note facility.

Fellow Australian group Tectonic also agreed to provide 7 million AUD in convertible notes. These strategic investments by existing major shareholders provide a strong endorsement of the project.

Focus Now Turns to Construction

With permitting complete and financing well advanced, Highfield Resources is now focused on preparing for the construction phase. The company recently hired a new executive, Carlos Alvarez as Construction Director, who has extensive relevant experience building and operating potash projects in Spain.

The team will now work on finalizing remaining funding and getting all the pieces in place to start full-scale construction activities in coming months. As CEO Salazar noted, "We are very close to getting the financing, it is a lot of work...but we feel the amounts of money and the numbers we are working with have been run very carefully."

Attractive Market Fundamentals

The Muga Project is expected to benefit from tight supply and growing demand in the European potash market. With potash production from Russia/Belarus potentially facing long-term reductions, Highfield's low-cost production in Spain will be well positioned.

Salazar highlighted "We will have a few years even if we go through our construction now compared to many other projects that were meant to be running now and are not going ahead." The company estimates operating costs under 100 USD/tonne compared to European potash prices over 200 USD/tonne.

Conclusion

• Permitting de-risked - Highfield now has approvals to construct the Muga Project.
• Debt funding secured - 320 million euros committed from banks, 27 million equipment leasing secured.
• Strategic investors on board - Major shareholders EMR and Tectonic providing convertible note funding.
• Preparing for construction - Team being built out, finalizing plans to start full construction.
• Tight supply/demand - European potash supply reductions position Highfield well strategically.
• Attractive economics - Even at lower prices, very low operating costs provide upside.

With permitting, funding and strategic partners in place, Highfield Resources appears to have strong fundamentals and be on the right track to bring the Muga Project into production within the next 2-3 years. The company looks well positioned to capitalize on tightening European potash supply/demand dynamics.