Highfield Resources Terminates Finance Facility, Eyes New Funding for Muga

• Full termination of senior secured project finance facility
• Last lenders ING, HSBC, and Caja Rural de Navarra exit
• Focus on preserving cash and financial flexibility
• Active review of new funding options for Muga Project
• Muga Project holds all key permits and licenses in Spain

Highfield’s Financing Shift

Highfield Resources (ASX – HFR) has announced the full termination of its Senior Secured Project Finance Facility following the exit of the last remaining lenders, ING, HSBC, and Caja Rural de Navarra. This move marks the end of a financing structure originally signed in late 2022 and expanded in early 2023, which had supported the company’s flagship Muga Potash Project in Spain.

The decision to close out the facility comes amid Highfield’s strategic emphasis on preserving cash and maintaining financial flexibility. The company had previously negotiated the exit of other lenders including Societe Generale, BNP Paribas, and Natixis earlier this year. With the final lenders now departing, Highfield has eliminated ongoing commitment fees associated with the facility, a critical consideration given its current capital conservation priorities.

Context Around the Muga Potash Project

The Muga Project is a high-margin, low capital expenditure potash development located in Northern Spain’s Ebro basin, a region with a notable deficit in potash supply. The project benefits from shallow mineral deposits and the absence of overlying aquifers, negating the need for costly shaft construction. Highfield has secured all necessary permits and licenses, including mining concessions and construction approvals, positioning Muga for full-scale construction commencement.

Highfield’s strategic vision for Muga is ambitious, including a transformative transaction announced in mid-2024 involving Yankuang Energy Group and other strategic investors. This deal, which remains subject to regulatory approvals, includes the proposed acquisition of the Southey potash project in Canada and a substantial equity raise of US$220 million. These developments aim to create a globally diversified potash company with a strengthened financial base.

Implications and Next Steps

Terminating the project finance facility signals a clear pivot in Highfield’s funding approach. By shedding the commitment fees and obligations tied to the existing facility, the company is prioritising liquidity and flexibility as it navigates the complexities of advancing Muga and executing its broader strategic transactions. However, details on alternative funding sources and timelines remain undisclosed, leaving some uncertainty about how Highfield will bridge the gap to construction financing.

Investors and market watchers will be keen to see how Highfield balances its cash preservation strategy with the capital-intensive demands of potash project development. The company’s ability to secure new funding aligned with its strategic objectives will be critical in determining the pace and scale of Muga’s progression.

Bottom Line?

Highfield’s funding reset clears the way for new capital strategies but raises questions on how swiftly Muga’s development will advance.

Questions in the middle?

• What alternative funding options is Highfield actively considering for Muga?
• How will the termination of the facility impact the project’s construction timeline?
• What regulatory hurdles remain for the transformative transaction with Yankuang?