Highfield secures finance for potash development

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After years of setbacks, largely thanks to a protracted approvals process, it has secured a non-binding indicative term sheet for a €312.5 million senior secured project financing package with experienced European mining finance lenders Societe Generale, ING Bank, and Natixis for a €300 million senior secured project financing, plus a cost overrun facility. 

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The EMR Capital-backed company said other Spanish banks has expressed an interest in participating in the 10-year financing deal, which includes a 2.5-year grace period. It should cover a substantial portion of the €398 million pre-production capital required to complete the construction of Muga's phase one underground development. While the facility still needs the lenders to complete final due diligence and credit approvals, Highfield CEO Ignacio Salazar said it was a critical milestone for the much-anticipated development. "Following an extensive due diligence process by independent experts, we managed to increase the debt facility in quantity and in tenor compared to original expectations, which shows the merits and the growing confidence in the Muga project," he said. An original terms sheet from 2017 offered €185 million for phase one. The company completed a cost review of its 2019 bankable feasibility study last year, with inflation pushing the total expected capex requirement for both phases to €607 million.  Phase two is expected to cost €209 million. Highfield remained confident about the costs given 86% of the capex estimate was based on signed contracts, firm offers, and updated prices. The underground mining project is forecast to generate earnings of around €400 million per annum over 30 years at full production of one million tonnes per annum. The company says it is robust enough to cope with lower prices and has half the capex requirement of rival projects globally. It has non-binding agreements for more than its expected 500,000tpa phase one output. It hopes to begin construction this year, with first production in 2024. Muga is expected to be one of only two potash mines in southern Europe The company raised A$18 million in fresh equity in September at 52c and started the year with $22 million. Highfield's shares were last traded at 99c on the ASX. The stock has traded between 42c and $1.08 over the past year.  

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