Highfield’s Funding Extension Highlights Risks in Completing Major Potash Transaction

Strategic Financial Support Amid Transition

Highfield Resources Limited (ASX: HFR) has announced it has secured a standby loan facility of up to €1.15 million from its strategic investor EMR Capital Resources Fund III, LP. This financial backing is designed to provide the company with working capital flexibility as it navigates a critical strategic transition period. The loan facility, which remains subject to definitive documentation, aims to support ongoing operations and administrative expenses while Highfield advances its broader transaction plans.

The loan terms include a fixed coupon at market rates and a maturity date set six months from the first drawdown, with provisions for earlier repayment upon certain events such as an equity raise or completion of the transaction with Yankuang Energy Group Co., Ltd. Notably, the principal amount starts at €0.65 million but can increase to €1.15 million if specific milestones are met.

Extending Convertible Loan Notes

In addition to the new loan facility, EMR Capital has agreed to extend the maturity date of its existing convertible loan notes. The new maturity is set for 31 July 2025, with an automatic 75-day extension if a binding term sheet with Qinghai Salt Lake Industry Co., Ltd. is entered into by 30 June 2025. This extension aligns with Highfield’s ongoing efforts to finalize a transformative transaction that would create a globally diversified potash company.

Progress on Transformative Transaction

Highfield is actively progressing negotiations with Yankuang Energy and Qinghai Salt Lake Industry, a subsidiary of China Minmetals Corporation. The transaction involves a significant equity capital raise of US$220 million and the acquisition of the Southey potash project in Saskatchewan, Canada. These moves are intended to strengthen Highfield’s position in the global potash market and accelerate development of its flagship Muga Project in Spain.

Chairman Paul Harris emphasized the strategic importance of EMR’s support, noting it reflects confidence in both Highfield and the Muga Project’s value. He described the company’s current phase as a natural evolution towards securing the optimal partnership structure for development.

The Muga Project’s Strategic Significance

The Muga Project stands out for its high-margin, low-capital expenditure profile, with unique geological advantages such as shallow mineralization and no aquifers above the deposit, eliminating the need for shaft construction. Located in a European agricultural region with a potash supply deficit, Muga is well positioned to meet regional demand. The project has received all key permits and licenses, setting the stage for full-scale construction.

As Highfield advances this strategic transition, the new financial support and extended loan maturities provide crucial runway. The company’s ability to secure long-term partnerships and complete the transaction will be pivotal in unlocking value for shareholders and positioning itself competitively in the potash sector.