Highfield Resources (ASX:HFR) has defined an Exploration Target of 1.04 billion tonnes at 11.5% K2O for the Pintanos Project, interpreted as the eastern extension of its flagship Muga Potash Project in northern Spain.
This covers about 60 square kilometres and is supported by extensive drilling and geophysical exploration work.
It is further supported by extensive seismic work completed by independent consultants RPS Boyd PetroSearch and includes the previous JORC Inferred Resource of 187 million tonnes.
Notably, Pintanos is potentially twice the size of Muga, which currently supports a 24 year mine at 1.1 million tonnes of potash per annum.
Drilling in the Pintanos Project area is expected to commence in the fourth quarter of this year.
In August, the company reached a project finance mandate with major European banks BNP Paribas S.A., ING Bank N.V., Société Générale Corporate & Investment Banking and Banco Santander S.A.
The banks have all received initial internal approvals based on a term sheet to participate in long term project finance facilities of up to €222 million, subject to final due diligence.
This fits neatly into the Muga capital expenditure profile of US$354 million (pre-production US$254m), which is in the bottom quartile capital intensity of $315/tpa vs. global average of $930/tpa.
Anthony Hall, managing director, commented:
“The Pintanos Exploration Target is designed to demonstrate project optionality beyond Highfield’s flagship Muga Mine development that we expect to commence constructing next Quarter.
“We have an aspiration to become a significant global potash producer and we now have delivered good visibility across our Sierra del Perdón, Vipasca and Pintanos Projects to support this objective.
“Importantly, Pintanos appears very similar to Muga, with relatively shallow mineralisation and no aquifer units, therefore demonstrating the potential for decline access to a conventional underground mine.
“Pintanos also shares other characteristics with Muga, such as world-class infrastructure and proximity to domestic markets, which position Muga in the top quartile margins for global potash producers.
“We believe our aspiration to become a significant global producer is achievable and is supported by five very compelling potash projects.”
Pintanos Potash Project
The Pintanos Project is located on contiguous investigation permits about 5 kilometres east of the Muga Potash Project.
It covers a total area of 65 square kilometres with drilling having identified the presence of the Capa 0, Capa A, Capa B and Capa 1 seams.
This shows remarkable similarities to the Muga Mine Project and leads to the interpretation of Pintanos as the eastern extension of the same mineralised structure.
Pintanos is characterised by a syncline structure that extends south east towards the town of Los Pintanos.
It is separated from Muga by a regional flexural structure, which indicates the Exploration Target Area is likely to be in the footwall section of the Javier-Undués Syncline.
Geological continuity and mineralisation at the project have been proven through a number of historical drill holes, recent Highfield drill holes, geochemical assay results, geophysical wireline, and re-interpretation of seismic data.
The deposit appears to be open in all directions, with no identified controlling structures or depth constraints.
Highfield believes the northeast, southeast and south-southwest extensions are the most compelling targets and these zones will be tested as a priority in upcoming drilling campaigns.
Analysis
While the Muga Potash Project remains the company’s primary focus, the Pintanos Exploration Target highlights the options available beyond the flagship development.
That Pintanos could be twice the size of Muga and is located just 5 kilometres to the east adds to its attractiveness.
This will certainly assist on Highfield's aspirations of becoming a significant global potash producer.
Drilling will be carried out in the fourth quarter to test the Exploration Target of 1.04 billion tonnes at 11.5% K2O.
Highfield had cash at bank of circa $118 million as at 30th June 2015.
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