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HIGHFIELD RESOURCES (HFR) - Catalyzing Potash Production: CEO Ignacio Salazar on the Strategic Impact of the Muga Mine and the Global Potash Market in Europe

• Andrew Musgrave

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Unlock the secrets behind the next major European potash mine with Ignacio Salazar, CEO and MD of Highfield Resources, in this fascinating episode. Discover why potash is crucial for global food security and how the Muga potash mine in Spain is set to become a game-changer. Ignacio walks us through the long journey of the Muga project, from its discovery by a couple of ambitious geologists to overcoming the hurdles of permitting and financing, bringing it to the brink of construction.

We also explore the broader landscape of the global potash market, where Ignacio explains the significant impact of population growth and shrinking arable land on potash demand. He sheds light on the geopolitical complexities of the supply chain, dominated by just a few key players, and emphasizes the strategic advantage of Highfield Resources' European location. Tune in to hear how this project is uniquely positioned to meet the soaring demands of both European and global markets, setting a new standard for potash mining in the heart of Europe.

Andrew Musgrave:

Welcome to this episode of ASX Briefs and today we're delighted to have Ignacio Salazar, the CEO and MD of Highfield Resources. Highfield is poised to construct the next European potash mine in Spain, which represents a strategic, robust and secure new source of potash located in the heart of the European market. The flagship Muga potash mine is fully permitted and construction ready with critical mineral important to global food security. Ignacio, thanks for joining us today and welcome to the podcast.

Ignacio Salazar:

Hi, A andrew, nice to meet you.

Andrew Musgrave:

Now, if you can just start by giving us an overview of potash and also the history of the Muga potash mine in Spain.

Ignacio Salazar:

Okay, potash is a mineral fertilizer. It's one of the three famous NPK nitrogen, phosphate, potash, potassium and it's still important for food security and feeding the planet. We know population in the planet is only growing and our land is only decreasing. That equation can only work with mineral fertilizers. They are today responsible for half of the cash collection of the food supply in the planet in terms to NPK and I hope that's a very important element.

Ignacio Salazar:

The history of the company, of the project a few years ago, is typical mining junior history. A couple of geologists looking for a project. They started looking for a pretty close to a potash mine. This is north of Spain and the exploration developed successfully with the discovery of the Muga project and after that development, what typically is called an off-run period of going through the permitting, the licensing, the engineering and the feasibility and we are now shovel ready, ready to go and start construction. So a typical process that we've gone maybe through the most difficult period with the permitting and the financing and the preparation for construction, but we are there, about to start construction.

Andrew Musgrave:

And can you just talk to us about the recent developments on where you are actually at on the path to production for the mine?

Ignacio Salazar:

So very much, as I said, we like call shovel ready the sense that everything that we felt had to be prepared is done. From the point of view of the contractors, this has obviously the licensing and the permitting, as I said, very important in Europe and in Spain in particular. That was probably one of the key challenges in this project. But that is all behind us. The team is ready. We signed a couple of very key construction agreements recently and the communities and the engineering etc. The project finance loan with 36 leading European banks Socgen, Natrixis, BNP Paribas, ING Cajal Rural it's a local bank here in Navarra and HSBC. And we are hopefully concluding pretty soon the last piece of the financing, the equity part, and ready to go. So that piece, in fact everything, is ready, subject to this final step in the process, and ready to go into jumping into the construction phase that we need two years and a half of construction and then production.

Andrew Musgrave:

And if we just look at it from a macro level, what are some of the current dynamics in the global potash market and what are the company's competitive advantages as it positions itself to meet the demands of supplying both the European and the global potash market?

Ignacio Salazar:

Yes, yes, very well in the long term. As I said, with population growing, arable land decreasing, so a lot of fundamentals very strong. And then demand is there. Supply it has been in decline, especially in Europe it's a lot of old potash mines. There tends to be a lot of that capacity coming down or kind of decline.

Ignacio Salazar:

So we see very strong, fundamental, short-term, geopolitically very sensitive potash market with the key main producers globally is only a small group of countries being Canada, Russia and Belarus, number one, two, three, the three of them covering 70% of the supply globally, and following those you have Israel, China and Germany. So I mean between those six it's more than 80%. So very, I mean you are very aware of very sensitive current geopolitical position point of view and in our case, very important, being in the middle of Europe, a very, very important market with very, very short supply compared to demand. It's hard, for the demand in Europe is imported, so it's not supplied from Europe. So we will gather a very important part of that gap. Maybe the second part of your question strategic advantages from the point of view of Muga is really the location, as I said, in the middle of the European market for a high volume commodity like podcast, every time is 450 euros, something like that. So you need to move a lot of tons and it's important all this transportation costs. We are in the middle of the of the market. Compared to the main projects in Canada and Russia I am comparing that are typically in the middle of of nowhere really in in Russia or in Canada, and they need to transport very long distance by rail, by tank and by ship compared to us. So location is the most biggest strategic advantage, together with the fact that this is in an area with a lot of infrastructure. So all the infrastructure outside the mine is all in place. Again, compared to these leading projects in the world in Russia and Canada, they need to build all that infrastructure themselves and also our project is very shallow, so we will not need to build these shacks. The access to the mine will be a lot easier. So those three key strategic and definitive advantages make the difference for this project in the middle of Europe.

Andrew Musgrave:

And can you just outline briefly the economics of the project, the planned operations and your ESG profile for Muga?

Ignacio Salazar:

Absolutely so. I mean those competitive advantages were converting a very strong margin and relatively low capex investment compared to other mines. It's a mine that is very efficient to build and then generates significant margins with every ton that we will be producing Again, very small, very low transportation cost, etc. So it has an NPV of 1.8 billion euros, very strong NPV and IIR profitability of 23% and they're generating very strong EBITDA every year 100, 400 million every year at full capacity.

Ignacio Salazar:

From an ESG perspective, the company and the product has always been very strong, you can imagine, to start with the European standards applied from an environmental perspective, if nothing else, compared to the rest of the industry, we will be leading in the fact. Let me only give one example. The commitment here and the obligation we will be doing is to leave no residues, no salt residues on surface, no mineral residues on surface. So this will be what we are doing is either vaccine some of these residues or selling, upgrading the residues and sell those as salt. So this will be a mine that will be left. We will be leaving no residues on surface when it's closure, hopefully in many, many years time from now, when it's closer, hopefully, many, many years from now.

Andrew Musgrave:

And if we can just touch on partnerships and offtake agreements, how critical are these to the company's strategy and who have you secured agreements with?

Ignacio Salazar:

So, from offtake, as I said, the strongest competitive advantage is the location in the market. So it's not that we have to get rid of the products, it's really we will be taking premium price, not the way we see when we sell to off-takers. So we have non-buying agreements with more than what we need for the production of the products of Muga, of the project. But what we are doing is also, as part of the equity, the strategic work to finalize the financing and deal with off-takers and other partners, as you say. So we are really I think that we are making a lot of progress and we see a lot of advantage in this strategic process to complete the financing where we will get these partners showing you us not only partners, commercial partners, but also equity partners in the company and make the company a lot stronger and the project going forward.

Andrew Musgrave:

And just in closing, can you just give us an idea of what some of the key milestones you're looking to achieve in the next 12 months and some key reasons why investors should Highfield at right now?

Ignacio Salazar:

So the milestones are extremely clear is to complete the equity strategic process and that we put us fully funded, complete and then starting the bulk of the construction. We started some preliminary works, one, two years ago, but this will put us in a position to build a mine in two years and a half. So that is what we see, the two key milestones, very clear objectives for us and, if I well, any project. I like to think in terms of three key elements, which is asset, capital, team, the assets. We have it w With Muga. I explained the advantages. It's a very unique project, first in mine, to be built in Europe, very, very important and long-term fundamentals.

Ignacio Salazar:

Capital, I think when we conclude hopefully pretty soon this strategic process, this is going to be a company fully funded with a lot of capacity to move forward and also develop any extra projects. And the team, obviously, that has delivered the licensing, the permitting and the financing to get us to this point is not something that is so easily managed as we've done it recently. So those are the three key elements for you, prelate. I think we have three of them and I think, in conclusion, the timing. It would be very, because all of that is coming to a sort of conclusion now, but, as I say, after we've gone through all these painful process of permitting and financing, that typically is where 3D satellites are paid to board and investors are waiting for, well, the final piece of the puzzle to be put in place and the project getting real in construction and production.

Andrew Musgrave:

Well, Ignacio, thanks for your time today. It's been great to get an update on where the company is at and we look forward to further updates from Highfield Resources in the upcoming months.

Ignacio Salazar:

No thanks

Andrew Musgrave:

That concludes this episode of ASX Briefs. Don't forget to subscribe and we look forward to catching you on our next episode.