Highfield Resources Ltd (ASX:HFR) is on its way to becoming a globally diversified potash company, having entered into a non-binding letter of intent for cooperation with leading Chinese energy company, Yankuang Energy Group Co. Ltd, and a number of strategic investors.
The proposed transaction, described by HFR as being potentially "transformative", would involve Highfield raising US$220 million of equity capital, securing the remaining funding for Phase 1 of its construction-ready Muga Potash Project in Spain, along with the acquisition of the Southey Potash Project in Saskatchewan, Canada, from Yankuang Energy.
This would see Highfield take its place as a leading pure-play potash company with a diversified portfolio of projects in Tier-1 jurisdictions that are underpinned by strong ESG credentials.
The combination is expected to transform Highfield into a globally diverse potash company and could position Highfield as a top 10 potash producer globally.
These projects will be supported by an experienced leadership team with a proven track record that is, initially, ready to construct Muga and then to potentially develop and construct Southey, a greenfield potash mine project that spans 390 square kilometres in Saskatchewan, Canada — a leading jurisdiction for potash mining.
Proposed cooperation and placement
The Southey project is wholly-owned by Yancoal Canada, a subsidiary of Yankuang Energy.
Of the US$220 million, Yankuang Energy intends to provide up to US$90 million to support the cornerstone placement with the other strategic investors providing at least US$130 million.
Highfield has an opportunity to unlock significant value given the support from its strong shareholder base along with its partnership with Yankuang Energy, which brings deep global connections and financial resources and is committed to support Highfield’s growth and development.
The company also expects to see synergies and value-creation opportunities from partnering with the strategic investors.
Highfield proposes to acquire Southey via a direct or indirect acquisition of 100% of the shares in Yancoal Canada, with the issue of new ordinary shares of Highfield as consideration.
Upon completion of the proposed cooperation, Yankuang Energy will become Highfield’s largest shareholder, be able to nominate the majority of the board of directors, obtain control of Highfield and will consolidate the accounts of Highfield.
Subject to the parties entering into the final agreements, Highfield’s board intends to unanimously recommend the resolutions needed to approve the proposed transaction.