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Highfield Resources Adds Large Exploration Target To Muga Mine Life

Highfield Resources (ASX:HFR) has added a large Exploration Target for the north western extension of its flagship Muga Potash Project in Spain that could add substantial scale and mine life.

The Exploration Target of 127 million to 255 million tonnes of sylvinite grading 12% to 16% K2O is based on geophysical surveys that demonstrate continuity of the potash bearing evaporite.

It also abuts the Vipasca Project which is around three times the size of the current Muga Project and Exploration Target.

Drilling of the Exploration Target, which covers just two of the five possible seams identified within the total project area, is expected to start in the fourth quarter of 2015.

Targeted commencement of Muga Mine construction remains on track for the fourth quarter of 2015 with the company receiving tenders from six construction companies for construction of the two declines. Another two tenders are expected.

"We are encouraged by the addition of this Exploration Target to the Muga Project," managing director Anthony Hall said.

"Our focus remains commencing construction of the Muga Mine DFS project this year, and in the backdrop, it is important that we continue our exploration work to demonstrate the veracity of likely Muga Mine extensions and the additional four projects under our control.

"Our stated aim of becoming a significant global potash producer depends on the strength and measured development of our pipeline. We believe that all our projects are likely to be low capex, high margin long life mines - as we are proving our flagship Muga Project to be."

In May, the company raised $101 million in a private placement priced at $1.80 to institutional and sophisticated investors in Australia, Asia, Europe and North America.

Exploration Target

The Exploration Target encompasses the Capa 1 and Capa 2 seams (two of five seams encountered across the Project) and excludes any of the other project areas contiguous with the Muga Project.

Highfield chose to exclude the Capa 0, Capa A and Capa B from the Exploration Target, though continuity could exist in these three seams, mainly the Capa B.

These seams do not appear to be as thick nor as high grade as the Capa 1 and Capa 2.

Muga Potash Project

The flagship Muga Potash Project in northern Spain is targeting the relatively shallow sylvinite beds that cover an area of around 80 square kilometres.

Mineralisation commences at depths from surface of less than 200 metres and appears ideal for a relatively low-cost conventional mine accessed via a dual decline as demonstrated in the company's DFS that was completed in March 2015.

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.

A total of 38 exploration drill holes (11 historic, 27 completed by Highfield Resources) have been completed within the Project area, providing a high level of confidence with respect to continuity of the evaporite horizon, decline access and mineralisation grade across the ore body.

Analysis

Highfield Resources' Exploration Target in the northwestern area of the Muga Project has the potential to add to the existing mine life of 24 years at a production rate of 1.13 million tonnes of potash per annum.

Using a midpoint of around 190 million tonnes at 14%K2O and assuming that circa 60% converts to a Reserve, this could add a hefty 20 years to the Muga mine life.

Interestingly, the Exploration Target area abuts the Vipasca Project which is around three times the size of the current Muga Project and Exploration Target.

This creates a further level of upside in the Highfield valuation with Vipasca, which could be a project with similar or larger metrics to the Muga Project.

Muga is just one of five potash projects that Highfield holds in Spain.

Highfield remains on track to start construction of the Muga Mine in the fourth quarter of this year with tenders received from six construction companies and another two tenders expected.

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