Spanish potash play Highfield Resources (ASX:HFR) has already negotiated MoUs that exceed the Muga project’s planned 1-million-tonne a year capacity.

Now the company has an environmental permit in hand for Muga it plans to start converting those MoUs to formal deals.

The Muga project lies right in the heart of an intensive agricultural region called Navarre, which is well known for its vegetables and wine.

And potash is used as a fertiliser.

“A couple of years ago we had MoUs in excess of our full million tonne capacity,” Highfield managing director Peter Albert told Stockhead.

“There’s a real desire to get a hold of the Muga potash because firstly, where we are located, and secondly, people like to see [new] competition coming in, especially in the European marketplace.

“We will need to relook at those MoUs. The debt financing arrangements will require us in the first instance to have MoUs and then move into more formal contracts.

“We’ve got plenty of time to do that, but we’ve also got plenty of interest.”


Only ASX potash player in Spain

Highfield is the only ASX-listed company with potash projects in Spain, giving the company decent first mover advantage – particularly given there is not much competition from European companies either.

In Europe there are just two big producers – Israel-headquartered ICL, which owns the Iberpotash mine in Spain, and German heavyweight K+S.

This means end users are looking for other sources of supply at the same time as demand is growing.

With global population continuing to grow, this trend is expected to continue. The consensus view by potash market analysts is around 2.5 to 3 per cent growth each year.

By the time Highfield comes into production in around three years, global potash demand is expected to have reached 75 million tonnes, climbing from 67 million tonnes currently. That’s almost 12 per cent growth.

Albert said a June visit to Montreal, Canada  saw plenty of interest from blenders and offtakers.

“Now that we have the environmental permit, we’re starting to get a lot more interest in securing some of those arrangements,” he said.

“It’s something that we’ll be working on in the coming months.”

Highfield’s main market focus will be Europe and Brazil.

The Muga project will start out producing 500,000 tonnes each year, eventually expanding to 1 million tonnes each year.

“The more we can sell locally in terms of the southern European market the better and we’ll be growing that marketplace,” Albert explained.

“We expect be placing a good deal of our product early [in Europe], but we also have a very attractive market in Brazil as well.”