Highfield Resources Ltd (ASX:HFR) has struck binding deals with Yankuang Energy Group Co Ltd and strategic investors, including Beijing Energy International Holding Co Ltd and Singapore Taizhong Global Development Pte Ltd, to secure the remaining funding for the Muga potash project and acquire the Southey potash project in Saskatchewan, Canada.
The transaction includes a US$220 million equity raise through the cornerstone placement, under which Yankuang Energy and other strategic investors will subscribe for new shares at A$0.50 per share, representing a 64% premium to the company’s last closing price.
Construction-ready potash mine
This investment will fully fund the Muga Phase 1 project, a construction-ready potash mine in Spain.
Additionally, Highfield will acquire Yancoal Canada Resources, a subsidiary of Yankuang Energy and owner of the Southey project, for US$286 million.
This acquisition will be paid in new shares, making Yankuang Energy the majority shareholder of Highfield. Highfield’s CEO expressed confidence in the transaction, stating that it will "position the company as a globally diversified, pure-play potash company."
The Southey project, a greenfield potash mine, is 60 kilometres north of Regina, Saskatchewan.
It has received significant investment and completed a feasibility study in 2016.
Highfield plans to use solution mining technology for potash extraction at Southey, a proven and environmentally favourable method.
The transaction is expected to complete in early 2025, subject to regulatory approvals and Highfield shareholder consent.
Highfield’s board has recommended that shareholders vote in favour of the deal, pending a favourable independent expert assessment.
Outstanding outcome
CEO and managing director Ignacio Salazar said: “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.
“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.
“On completion of this deal, we believe we will have the assets, the team and the capital to unlock and create significant value for Highfield.”