Yankuang’s US$376M Investment Clears FIRB, Boosting Highfield’s Muga Financing

Strategic Financing Milestone

Highfield Resources has made significant strides in its strategic transaction with Yankuang Energy Group Co., Ltd, a move central to the development of its flagship Muga Potash mine in northern Spain. The Australian Foreign Investment Review Board (FIRB) issued a statement of no objection to Yankuang's proposed subscription for up to US$376 million worth of ordinary shares at A$0.50 per share. This approval clears a critical regulatory hurdle, enabling Highfield to advance its plan to raise US$220 million in equity capital from Yankuang and other strategic investors.

The equity raise is part of a broader transaction that includes the acquisition of the Southey potash project in Saskatchewan, Canada, from Yankuang’s subsidiary Yancoal Canada Resources. Valued at US$286 million, this acquisition aims to diversify Highfield’s asset base and position it as a globally diversified potash company.

Refining Project Financing

Alongside equity developments, Highfield is actively negotiating amendments to its Senior Secured Project Finance Facility, originally signed in December 2022. The company has requested extensions to key project milestones, updates to the repayment schedule, and waivers related to change of control provisions to better align with the construction and development timeline of the Muga Project.

Highfield is also progressing terms with Macquarie Specialised Asset Services for an equipment operating lease facility, converting part of the €25 million facility into a lease contract for critical mining equipment. These financing refinements reflect Highfield’s intent to tailor its capital structure to the evolving needs of the Muga Project as it moves closer to full-scale construction.

Navigating Regulatory Challenges

The quarter was not without challenges. An adverse court ruling related to the Goyo mining concession, one of three concessions underpinning the Muga mine, raised procedural concerns about the administrative coordination in granting the concession. Importantly, production from Goyo is not expected until after year six of the mine plan, mitigating immediate operational impact.

The Government of Navarra has confirmed it is actively reviewing the ruling to rectify the procedural flaw and has not relinquished the concession. This ongoing resolution process will be critical to maintaining the integrity of the Muga Project’s mining rights.

Corporate and Financial Position

Highfield’s shareholders have demonstrated support for the company’s strategic direction, ratifying prior equity issues and approving the issuance of new shares to Meritz Securities at an Extraordinary General Meeting held in December 2024. The company ended the quarter with A$12 million in cash, a slight decrease from the previous quarter, reflecting ongoing development and financing activities.

Operational cash outflows and investing activities continue to support the advancement of the Muga Project, with the company prudently managing its resources to ensure sufficient funding to complete the cornerstone placement and the Southey acquisition.

Looking Ahead

Highfield’s immediate priorities for the first quarter of 2025 include finalising the strategic financing process, securing shareholder approval for the creation of the new globally diversified potash company with Yankuang Energy, and completing the construction readiness plan for Muga. The company’s ability to navigate regulatory complexities and secure aligned financing will be pivotal as it transitions from development to construction.