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Highfield Resources secures equity agreements to fund Muga potash project development

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By Imelda Cotton - 
Highfield Resources ASX HFR Mina Muga potash mine capital raise agreements
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Highfield Resources’ (ASX: HFR) has signed equity agreements with Yankuang Energy Group, Beijing Energy International and Singapore Taizhong Global Development to deliver the remaining funding for Phase 1 development of its Muga potash project in Spain.

The agreements comprise a cornerstone placement of US$220 million as well as Highfield’s US$286m inter-conditional acquisition of Yankuang subsidiary Yancoal Canada Resources, which owns the Southey potash project in Canada.

The transaction is expected to result in Yankuang becoming Highfield’s majority shareholder.

Diversified potash company

Highfield managing director Ignacio Salazar said the transactions were expected to fully fund the construction-ready Muga project and transform Highfield into a globally diversified potash company with projects in tier-1 jurisdictions.

“This is an outstanding outcome which will kickstart Muga construction and put Highfield on a very strong platform for growth in the future,” he said.

“Upon completion of this deal, we believe we will have the assets, the team and the capital to unlock and create significant value for our company.”

Cornerstone placement

The cornerstone placement is priced at A$0.50 per new Highfield share and represents a 63% premium to the company’s 30-day volume-weighted average price.

Yankuang, Beijing Energy and Taizhong have respectively agreed to subscribe for up to US$90m, US$50m and US$30 million in new shares.

Highfield has confirmed that an undisclosed fourth strategic investor will subscribe for US$20m worth of shares at the same price and it is in negotiations with other investors to raise a further US$50m.

If the total subscriptions under all the equity agreements exceed US$220m before completion of the cornerstone placement, Yankuang reserves the right to reduce its commitment.

Short-term funding

Highfield has announced it will also raise up to US$15m (A$22.4m) in short-term funding to support planned activities until the completion of the transaction.

The raising will take the form of an institutional placement priced at A$0.2989 per share to raise approximately US$12m (A$17.9m) and will feature a US$7m (A$10.4m) unconditional component and a US$5m (A$7.5m) conditional placement.

The company will also undertake a share purchase plan to raise US$3m (A$4.5m) at the same price per share, with eligible shareholders able to increase their holding by up to $30,000 without incurring any brokerage or transaction costs.

Highfield’s major shareholder EMR Capital has confirmed it will subscribe for up to US$5m.