Highfield Resources (ASX:HFR) announced that it has entered into binding agreements with several companies for a transaction centred on its transformation into a globally diversified potash company.
The company said the transaction includes agreements with Yankuang Energy Group (OTCQX:YZCHF,HKEX:1171), as well as strategic investors, including Beijing Energy International Holding and Singapore Taizhong Global Development.
Highfield will raise US$220 million in equity capital through Yankuang Energy, the strategic investors and other entities. They will receive new shares at AU$0.50 per share, a 64 percent premium above the company’s last closing price.
Yankuang Energy, Beijing Energy and Singapore Taizhong have respectively agreed to subscribe for up to US$90 million, US$50 million and US$30 million worth of new shares, amounting to US$170 million.
To bring the amount up to US$220 million, Highfield has set up a non-binding letter of intent with another strategic investor that may subscribe for US$20 million worth of new shares. The company is also in talks with additional strategic investors regarding subscriptions for another US$50 million in new shares.
As part of the deal, the construction-ready Muga Phase 1 project of Highfield is expected to be fully funded.
Muga is Highfield’s flagship project, and the company believes it is one of the most competitive potash projects globally. It covers about 46 square kilometres in the provinces of Navarra and Aragón in Northern Spain.
Through the transaction, Highfield will also acquire Yankuang Energy’s subsidiary Yancoal Canada Resources, which wholly owns the Southey potash project, for consideration amounting to US$286 million. This amount will be paid in new shares and will result in Yankuang being Highfield’s majority shareholder.
Southey is a greenfield project established in 2011 located approximately 60 kilometers north of Regina in Saskatchewan, Canada. Highfield said it intends for it to be a solution mining potash project.
With the addition of Southey, Highfield is expected to become “a leading pure play potash company with a diversified portfolio of projects in tier-1 jurisdictions underpinned by strong ESG credentials.”
“This is an outstanding outcome which is expected to result in the commencement of Muga construction and puts Highfield on a very strong platform of growth for the future,” said Ignacio Salazar, CEO and managing director.
“We are delighted to have reached agreement with organisations with the reputation, track record and balance sheet strength of Yankuang Energy, Beijing Energy, and Taizhong," added the Highfield executive.
Highfield has also entered a non-binding letter of intent with another strategic investor concerning a subscription for US$20 million in new shares; it is negotiating with other strategic investors for a further US$50 million in new shares.
Assuming that all conditions of the transaction are satisfied, Highfield is anticipating completion in early 2025.
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Securities Disclosure: I, Gabrielle de la Cruz, hold no direct investment interest in any company mentioned in this article.
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