Spanish potash developer Highfield Resources (ASX:HFR) has received a massive level of support in an equity capital raising, with A$101 million committed in a private placement from institutional and sophisticated investors in Australia, Asia, Europe and North America.
The placement will comprise 56.125 million shares at A$1.80, and was cornerstoned by private equity fund manager EMR Capital, and was strongly supported by various Australian and international institutional investors.
These funds provide a significant portion of the funding to develop the Muga Potash Mine.
The successful capital raising demonstrates to Spanish authorities and other stakeholders that the company is in a position to build the mine.
A Definitive Feasibility Study for Muga confirmed its outstanding potential as a long life, high margin operation with a very low pre-production capital expenditure requirement estimated at US$256 million.
The company is proceeding with detailed design and engineering and other development and contracting work preparatory to full site construction start after final permitting expected later in 2015.
Anthony Hall, managing director, commented:
"This is a major milestone in the company's history as it not only reflects the quality of the Muga Potash Project but also demonstrates to the referral authorities in Spain that we are in a position to build a mine.
"The placement delivers a major de-risking milestone of mine funding in combination with European commercial banks.
"We continue to have very positive discussions with leading European commercial banks - giving us confidence that proceeds from the placement, combined with other means of financing, will comfortably fund the development and construction of the Muga Mine."
Proceeds from the placement
The proceeds will be used to substantially fund the likely equity component of the pre-production capital expenditure of the company's flagship Muga Potash Project, located in northern Spain.
The company has completed a Definitive Feasibility Study for Muga which confirmed its outstanding potential as a long life, high margin operation with a very low pre-production capital expenditure requirement estimated at US$256 million.
Highfield is proceeding with detailed design and engineering and other development and contracting work preparatory to full site construction start after final permitting expected later in 2015.
Indicative project financing term sheets received from leading European commercial banks have indicated a debt-to-equity ratio of 65% can be expected.
The financing will include capital expenditure, a VAT facility, a working capital facility and potentially a cost overrun facility.
The equity raising is a huge show of support for Highfield Resources and its management team. The raising is no small feat in the current capital markets. Muga is but one of the four possible potash mines Highfield could develop.
Recently, three new permit applications applied for allows Highfield Resources to consolidate all of the potential potash bearing areas in the Navarra Province.
The newly named Izaga Project displays similar attributes to the Muga Project and could even have a substantially greater scale than the latter.
The additions to the Vipasca Project are significant which could very well become Highfield's best project.
Highfield now strategically controls the entirety of the known potash areas of the basin ensuring no competition which in turn allows for control of logistics with a much higher volume of production than Muga alone.
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