Spanish potash developer Highfield Resources (ASX: HFR) ('Highfield' or 'the Company') is pleased to provide the following quarterly activities update, for its activities and those of its wholly owned Spanish subsidiary Geoalcali S.L.U. ('Geoalcali', together the 'Group'), for the period ended 30 June 2020.
The Company's flagship Muga Project ('Muga' or 'the Project') is targeting relatively shallow sylvinite beds, across approximately 60km2 located in the Provinces of Navarra and Aragon. Once operational, the Muga Mine is planned to commence mining at a depth of approximately 350 metres from surface and is therefore ideal for a relatively low-cost conventional mine.
The Vipasca Permit Area ('Vipasca') is located adjacent to Muga and covers approximately 27km2. Some areas of the tenement are highly prospective for economic potash mineralisation, with a primary focus on the deeper, higher grade potash horizons.
Muga Project Approvals Process
Following extensive engagement with the relevant mining authorities in Madrid, Aragon and Navarra, the Mining Concession documentation was submitted on 13 March 2020 (refer ASX release 16 March 2020, 'Muga Project - Mining Concession Documentation Submitted'). The grant of the Mining Concession is a key step in the critical path to construction.
Following the submission of the Mining Concession documentation, and despite the Spanish confinement programme due to Covid-19, Geoalcali maintained constant dialogue with the relevant authorities in order to expedite the process. On 22 June 2020, the nationwide Covid-19 State of Alarm in Spain was lifted, and soon after, the start of the public exposition period with respect to the Mining Concession documentation was gazetted in the National Bulletin shortly after quarter end on 4 July 2020. The public exposition period will last 30 working days after which Geoalcali will have an opportunity to respond to any queries that are brought forward. The Company estimates that the Mining Concession will be awarded by the end of the fourth quarter of 2020.
Muga Project and Vipasca Permit Exploration Update
The Muga Project Update confirmed the strategic importance of Vipasca as a potential extension of the Muga Project. Since then Geoalcali has been focusing on the more prospective areas in the east of the Vipasca permit.
The Muga Project Update confirmed the strategic importance of Vipasca as a potential extension of the Muga Project. Since then Geoalcali has been focusing on the more prospective areas in the east of the Vipasca permit.
Drill-hole V18-03 confirmed the continuity of the Vipasca ore deposit which remains open towards the west. Specifically, V18-03 intersected a total of 30.2 metres of potash mineralisation including: 1.5 metres at an average grade of 11.98% K2O from 1022 metres; 1.8 metres at an average grade of 11.29% K2O from 1060 metres and 1.5 metres at an average grade of 12.79% K2O from 1070 metres.
Drill-hole V18-05 confirmed the extension and continuity of the potash mineralisation between the Muga Project and Vipasca thereby linking these two projects.
Muga Project and Vipasca Permit Technical Update
During the quarter, design development continued to progress in line with the project programme timetable and engineering submissions were made by the principal equipment suppliers and engineering consultants. As a result, basic design of the process plant is advancing well and detailed design is ongoing. Value engineering reviews will continue throughout the development of the engineering design to optimise costs.
As part of this work, K-Utec AG Salt Technologies has completed the test work that will be used to detail the systems and components necessary for the dewatering and backfilling system and continues to progress the basic design work for the backfilling storage and placement systems. Geoalcali is also carrying out additional lab work to further optimise the salt quality specification that will be produced from the Muga Mine.
The Group is pleased to report that negotiations with Komatsu Mining Corporation for the purchase of two bolter miners have made significant progress and are close to conclusion. The bolter miners will provide underground access to the Muga deposit via twin parallel declines from surface, each over a length of 2.6 km to a depth of approximately 350 metres below surface. They will also develop three crosscuts that connect the declines, each 25 metres in length. The equipment will then be used to develop the main underground infrastructure galleries. The signing of the bolter miners purchase contract will represent a significant contract award and is a critical step in progressing the Muga Project towards production.
Geotechnical drilling and other site investigation work commenced in June 2020, as soon as free access to the site was available after the lifting of the national State of Alarm. The investigation works consist of a series of shallow drill holes (up to approximately 15 metres deep) and inspection pits across the plant site area to provide confirmation of specific ground conditions for the final detailed design of foundations and bulk earthmoving. The programme was approximately 50% complete at the end of the quarter.
Muga Project and Vipasca Permit Sales and Marketing Update
Geoalcali continued the successful execution of the Group's sales and marketing strategy by signing a nonbinding offtake MOU with Maxisalt (refer ASX release 29 April 2020, 'MOU signed for salt offtake from Muga Potash Mine'). Under this MOU, Geoalcali will provide up to 500,000 metric tonnes per annum of salt to Maxisalt, comprising 400,000 tonnes of vacuum salt, a higher value product, and 100,000 tonnes of de-icing salt. Salt is produced as a co-product of the processing of potash.
Maxisalt is an international salt distribution company located in Barcelona and a global distributor of rock salt, solar salt and vacuum salt, which is used for water treatment, industrial applications and animal feed. Maxisalt has developed a diversified network of international clients, with a particular focus on markets located in Spain and France. The sale of salt contributes economically, providing a credit that benefits the Muga Project's financials. In addition, salt sales will help maintain the low environmental footprint of the Muga Mine and will assist in ensuring full compliance with environmental conditions, including the removal of all salt from surface as part of rehabilitation of the mine site following the end of potash production. This partnership will provide Geoalcali with significant insights into the local and international salt markets as well as invaluable access to these markets during the first years of production.
Geoalcali continues to engage in ongoing offtake discussions with other potential wholesale customers, distributors and global traders for the entire production capacity of muriate of potash and salt from the Muga Mine.
Muga Project Financing
Highfield remains confident of securing the necessary debt and equity financing for Muga, which will support a final investment decision and the commencement of construction at the Company's flagship project.
Corporate
As the Covid-19 situation has evolved, the Group has been monitoring closely the guidance from the World Health Organization and the Spanish Government. The Company's primary aim is the safety and wellbeing of all employees and stakeholders.
The Group acted quickly and implemented a business continuity plan in mid-March, shortly before the Government of Spain declared a State of Alarm. As a result, during the quarter all staff members successfully worked from home and conducted all meetings online. With the State of Alarm now easing in Spain the Group will reintroduce staff to the office gradually in the coming quarter, starting with the Senior Management Team which has incorporated back to the office already on 13 July 2020. Highfield will continue to monitor the situation.
The Company's international search for a new CEO was completed during the quarter with the appointment of Mr Ignacio Salazar to the role. Ignacio has already joined the team in the Pamplona office on 20 July 2020.
Spanish born Mr Salazar is an international executive with an extensive career in the natural resources industry. He has worked in many countries throughout Europe and South America. Mr Salazar is a proven CEO and leader with extensive line management experience, most recently with the AIM and TSX listed Orosur Mining, where he enjoyed a 12 year career and prior to that, an 18 year international career in the Royal Dutch Shell group.
The Group published its Sustainability Report for the year ended 31 December 2019This report, the Group's fifth, provides a detailed overview of our the Environmental, Social and Governance ('ESG') activities. It is prepared in accordance with Global Reporting Initiative ('GRI') Standards and outlines the Group's sustainability framework and the key steps being implemented to ensure that its future operational performance will meet the high ESG standards currently in place. Further to its inclusion in our 2019 Annual Report, the Report was updated and expanded during the quarter to reflect the recent successful admission of Geoalcali as a signatory to the highly regarded United Nations ('UN') Global Compact.
Pintanos Tenement Area
Geoalcali's 100% owned Pintanos tenement area, comprising the three permits of Molineras 1, Molineras 2 and Puntarron is adjacent to the Muga Project covers an area of 65km2. Depths from surface to mineralisation commence at around 500 metres. Geoalcali is building on a substantial database of historical potash exploration information that includes seven drill holes and ten seismic profiles completed in the late 1980s. Geoalcali was granted a three year extension to the drilling permit at Molineras 1 during the quarter. Geoalcali has re-initiated the application process for the drilling permit at Molineras 2, following the conclusion of the public consultation period. During 2019 Geoalcali responded to all comments received during the consultation period and continues to await the award of the permit.
Sierra del Perdon Tenement Area
Geoalcali's 100% owned Sierra del Perdon tenement area ('SdP') comprising the three permits of Quinones, Adios and Ampliacion de Adios is located south east of Pamplona and covers approximately 120km2. SdP is a brownfield target which previously hosted two potash mines operating from the 1960s until the late 1990s, producing nearly 500,000 tonnes of potash per annum.
There is potential for potash exploitation in new, unmined areas in the SdP area. Geoalcali was advised in the fourth quarter of 2018 that the second three-year extension application for the Adios and Quinones permits had been rejected by the mining department of the Government of Navarra. The basis of the rejection of the Quinones and Adios extension application was that Geoalcali had not performed sufficient drilling and geophysics exploration when compared to the three year work plans submitted to the authorities. Geoalcali has obtained legal advice and is continuing an appeal process with regards to this decision based on the fact that the reasons for not being able to perform the work outlined were due to factors outside the Geoalcali's control. Geoalcali has carefully considered the facts and circumstances pertaining to the rejection, its discussions with the authorities, and the legal advice received. It has concluded that the continued lack of a resolution to the appeal is not a reflection on the merits of the appeal, nor does it represent a significant change with an adverse effect on the entity. Drill hole AA-02 that was planned for this quarter has been delayed with Geoalcali focusing efforts on the Muga public exposition.
Cash Position
The Company continued to prioritise the completion of detailed design for the Muga Project process plant. As part of this process it will continue to work with suppliers to obtain engineering and drawings required for the detailed design work. It also expects to sign a purchase agreement and make an initial payment during the third quarter 2020 for the bolter miners, which have a long lead time, in order to ensure they are available for the ramp excavation at the required time during the construction phase. The Company also continues to minimise overheads, while continuing to support the above mentioned engineering and detailed design work. As at 30 June 2020, the Company had A$28.7 million in cash.
Contact:
Ignacio Salazar
Tel: +34 948 050 577
About Highfield Resources
Highfield Resources is an ASX listed potash company whose 100% owned Spanish subsidiary Geoalcali holds three 100% owned tenement areas located in Spain.
Geoalcali's Muga-Vipasca, Pintanos, and Sierra del Perdon potash tenement areas are located in the Ebro potash producing basin in Northern Spain, covering an area of around 277km2. Following the granting of a positive environmental permit Geoalcali is now focusing on securing the Mining Concession and the construction permits necessary to take the Muga Project into the construction phase.
HIGHFIELD RESOURCES LIMITED 
