China's Minmetals terminates strategic deal negotiations with Highfield Resources

In a recent announcement, Highfield Resources (ASX:HFR) revealed that a planned US$300 million equity subscription transaction with China Minmetals and its subsidiary Qinghai Salt Lake (QSL) has been cancelled. However, the company's flagship asset, the Muga Potash Project, remains unaffected by this development.

The Muga potash project, spanning approximately 46 square kilometres in the provinces of Navarra and Aragón in Northern Spain, continues to attract significant international investment. Yankuang Energy Group, among others, is among Highfield's strategic investors.

Despite the cancellation of the aforementioned deal, Highfield remains committed to its strategic objectives and delivering long-term value to shareholders. The company has stated that if the transactions with China Minmetals and QSL are not completed, it plans to finance the construction phase of the Muga Potash Project through a combination of project-level debt and equity from existing shareholders.

EMR Capital, another key financier, has reserved all of its rights under the convertible notes and has been constructively engaging with Highfield regarding future opportunities. It's important to note that the Muga potash project is not part of the future opportunities under discussion.

The Muga potash project is a significant employment generator, with President of Navarra, Maria Chivite, stating that its promotion will create 800 jobs. The project has not been the focus of the shareholder call held after the cancellation of the US$300 million equity subscription transaction.

The proposed investment in the Muga potash project involved a combination of direct equity investment and existing convertible notes held by key financiers. Initial technical assessments were finalised by China Minmetals and QSL, but they have yet to set project valuation and implementation timelines.

The proposed transaction was first announced on May 13, 2025, and a non-binding letter of intent was amended on July 18 with an extension of the exclusivity period for Qinghail to complete its due diligence. Despite the challenges in finalising mutually acceptable commercial terms, the construction of the Muga potash project is not yet affected.

The Muga potash project does not receive funding from the convertible notes issued to Potash (Muga) Investment, EMR Capital, or other cornerstone investors. The project continues to move forward, with Highfield engaging in constructive discussions with its investors to ensure its successful development.