Highfield Resources Ltd (ASX:HFR) has attracted a buy recommendation from Foster Stockbroking and maintains a 12-month share price target of $1.56 based on the analysts risk evaluation.
Notably, Foster Stockbroking has highlighed the catalysts for the surging share price which include:
- Award of construction licences;
- Finalisation of contractor agreement;
- Updated DFS;
- Finalisation of financing;
- FID; and
- Commencement of construction.
Investment highlights:
Muga purchase contracts now at 85%: HFR reported that purchase orders for 85% of equipment were signed, important in ensuring that long-lead items can be secured within the timeline envisaged by the company. Key equipment includes screens and cyclones and the bolter miner.
The balance of equipment required include dryers, separators, thickeners and flotation columns, the company is expecting to formalise these orders during the current quarter.
Construction licences awaited: HFR made submissions to both town halls in Navarra and Aragon for construction licences for the reprocessing plant and mine. We see their award as major catalyst for project, and expect these by late 4QCY21/early1QCY22.
Meanwhile HFR continued to negotiate its construction agreement and project implementation with its partner Acciona.
DFS to be updated: The Muga DFS, last revised two years ago in October 2019, will be updated by the company during the current quarter. We believe it will assist the company as it seeks to conclude negotiations with potential financiers of the project. Reserves will also be updated. We expect financing and FID to be concluded by end 1QCY22, if not earlier.
Well-funded to FID: The company ended September with $26.5 million cash and nil debt, which should be ample to conclude its updated DFS, finalise purchase orders, and complete negotiations with financiers, town halls, and contractor, prior to FID.
Potash prices continue edging higher: Brazil’s President recently warned of the country’s reliance on imports. Brazil is a key target market for HFR due to Muga’s attractive location, from which it can enjoy higher netback than suppliers from Germany, Russia, Belarus, USA, and Canada. Prices are well up >100% this year.
Latest US$ reported prices are Brazil CFR $700/tonne; USA $710/t; SE Asia CFR $520/t; Europe CFR $490/t; and Vancouver FOB at $550/t. Our long-term price forecast is US$319/t. Crop price rises have enhanced farmer economics.