Highfield Resources Ltd has taken a major step in its push for globally diversified potash production, signing a US$300 million letter of intent with China’s largest potash producer and securing further financial backing from strategic investor EMR Capital.
In a flurry of developments unveiled this week, Highfield announced a non-binding letter of intent (LOI) for cooperation with Qinghai Salt Lake Industry Co. Ltd, a subsidiary of China Minmetals Corporation. The deal lays the groundwork for a transformative equity placement that would see Qinghai Salt Lake become Highfield’s largest shareholder – gaining a controlling interest in the company – subject to final agreements and approvals.
The US$300 million cornerstone investment is earmarked to fast-track the development of Highfield’s flagship Muga potash project in Spain and advance other strategic opportunities, including the acquisition of the Southey potash project in Saskatchewan, Canada, from Yankuang Energy Group.
Support from EMR Capital
In parallel with the LOI, Highfield announced it has secured up to €1.15 million in additional funding from EMR Capital via a stand-by loan facility to support its ongoing operations and strategic transitions. The unsecured loan carries a fixed coupon at market rates and a six-month maturity, extendable in certain circumstances, including if a binding agreement is reached with Qinghai Salt Lake.
EMR Capital has also agreed to extend the maturity of its existing convertible loan notes to July 30, or later if the Qinghai deal advances by midyear. These moves give Highfield financial breathing room as it moves through the due diligence and negotiation phase with Qinghai and continues to prepare for full-scale construction of the Muga mine.
Highfield chair Paul Harris described the developments as a strong endorsement of the company’s direction.
“The support from EMR reflects its commitment to Highfield and the strategic value of the Muga Project,” he said. “The company is undergoing a natural evolution as it moves closer to securing the right partnership structure for development.”
Global diversification
The cooperation framework with Qinghai marks a significant follow-up to Highfield’s September 2024 transaction with Yankuang Energy and other strategic investors, in which the parties agreed to raise US$220 million in equity capital and vend in the Southey project through the acquisition of Yancoal Canada.
Qinghai Salt Lake, listed on the Shenzhen Stock Exchange, is China’s largest potash producer with a current annual capacity of 5 million tonnes of potash and 40,000 tonnes of lithium carbonate. Its parent, China Minmetals, is one of China’s largest state-owned enterprises in the minerals and metals sector.
The LOI gives Qinghai exclusive rights to conduct due diligence and negotiate the placement terms until June 30, with the potential for a 75-day extension. The parties aim to sign a binding term sheet by that date, contingent on successful diligence and completion of Highfield’s acquisition of Yancoal Canada.
Highfield has confirmed that Yankuang Energy and EMR Capital shareholders are supportive of the proposed transaction and are working with the company to resolve any structural overlaps between the September agreement and the latest proposal.
Low capex, high margin
Muga, located in northern Spain’s Ebro Basin, is a low capex, high-margin project that has already secured all key permits. Unlike traditional potash projects, Muga’s shallow mineralisation and lack of overlying aquifers eliminate the need for expensive shafts, offering both cost and construction advantages.
Highfield’s three potash tenements – Muga-Vipasca, Pintanos and Sierra del Perdón – span about 250 square kilometres. Phase 1 of Muga is expected to deliver 500,000 tonnes annually, with scope to double that in later stages.
The company has reinstated trading on the ASX following the announcement, and it will hold a market call Wednesday at 4:30 pm AEST to provide further details and investor guidance.