Highfield Resources (ASX:HFR) has attracted former chief operating officer of Potash Corporation of Saskatchewan (NYSE:POT) James “Jim” Dietz to its Board.
The appointment of Jim Dietz as an independent non executive director is timely as the company transitions from a successful potash explorer and developer, to a low cost, high margin potash producer.
Dietz has over 41 years’ experience in the fertiliser, chemical and petroleum industries, primarily in senior operational roles.
From 2000 until 2010, he was COO of Potash Corporation of Saskatchewan, the world’s largest fertiliser company. Before that, Dietz held a variety of other senior management roles, including President of Nitrogen, during a 17 year career with PotashCorp.
Highfield is fast tracking development of its Muga project in Northern Spain and last week doubled its mine life from 24 years to 47 years at a production rate of 1.1 million tonnes of K60 granular muriate of potash (MOP) per annum.
Proven and probable reserves grew 73% from Definitive Feasibility Study (DFS) estimates to 253 million tonnes with an average grade of 11.5% K2O and an average metallurgical recovery rate of 88% of KCl contained in sylvinite.
Initial production is projected to commence in October 2017.
A Definitive Feasibility Study scenario established earlier this year, demonstrated the project’s vast potential to be the highest margin potash mine globally in production.
Optimisation work on Muga saw even more robust project financial metrics including a post-tax, unlevered internal rate of return of 38.9% and a net present value (NPV) with a discount rate of 8% of US$2.1 billion.
Highfield´s chairman, Derek Carter, said of the appointment:
“To have an experienced senior industry professional of Jim’s calibre join the Board of Highfield is a ringing endorsement of the quality of the company’s projects and the work being done by our Spanish based project team.
"We look forward to working closely with Jim and utilising his extensive knowledge and experience in the global fertiliser market as we move our projects towards production.”
Dietz will receive cash remuneration of A$60,000 per annum and 1,000,000 options over ordinary shares in the company with a strike price of $2.00 and an expiry date of 30 June 2019.
Analysis
The appointment of Jim Dietz as an independent director is significant as it sends a signal of the quality and scale of Highfield's pre-development potash projects as the company moves toward production of its first potash asset, Muga in Spain.
Environmental clearance is expected in February 2016 to enable construction of the Muga mine to commence.
Muga is one of five Highfield 100%-owned projects located in the Ebro potash producing basin in Spain.
Dietz would have undertaken considerable due diligence on Highfield's assets and brings timely fertiliser experience to the company.
That he agreed to accept a relatively small stipend with only option upside is a harbinger of further upside in Highfield's share price of $1.51. The current dip in share price affords an opportunity to top up on Highfield.
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