Annual Report
31 December 2017
highfieldresources.com.au
ABN 51 153 918 257
Contents
Page
Corporate Directory
Chairman’s Letter
Chief Executive Officer’s Letter
Sustainability Report
Directors’ Report
Financial Report
Consolidated Statement of Profit or Loss and
Other Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
ASX Additional Information
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Corporate Directory
Directors
Mr. Derek Carter (Non-Executive Chairman)
Mr. Peter Albert (Managing Director & CEO)
Ms. Pauline Carr (Non-Executive Director)
Mr. Richard Crookes (Non-Executive Director)
Mr. Jim Dietz (Non-Executive Director)
Mr. Owen Hegarty (Non-Executive Director)
Company Secretary
Mr. Donald Stephens
Registered Office & Principal Place of Business
169 Fullarton Road
DULWICH, SA 5065
Telephone:
+61 8 8133 5000
Facsimile:
+61 8 8431 3502
Website:
highfieldresources.com.au
Share Registry
Advanced Share Registry Pty Ltd
110 Stirling Highway
NEDLANDS, WA 6009
Telephone:
+61 8 9389 8033
Facsimile:
+61 8 9389 7871
Auditor
HLB Mann Judd
Level 4, 130 Stirling Street
PERTH, WA 6000
Telephone:
+61 8 9227 7500
Facsimile:
+61 8 9227 7533
Stock Exchange
Australian Securities Exchange
(Home Exchange: Perth, Western Australia)
ASX Code: HFR
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Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Chairman’s
Letter
Dear Shareholders
As a result of changing our reporting period end from June to
December, it is only a short six months since my last letter
to you. These six months have seen intense activity by the
Company, especially in the area of our environmental permit
application. Most of the work required by the Company was
completed prior to the period end, although two reports
remained to be submitted to the authorities in Madrid by
interested parties, both of which have now been submitted.
The quality of technical work and the relationships that
have been established with all authorities over the past 18
months as well as the positive feedback received, reinforce
the Company’s confidence that a positive environmental
declaration will be issued by the authorities. Once we receive
the environmental permit, we will be in a position to secure
the mining concession and necessary construction permits
and whilst these will likely take several months, we anticipate
that the process will be relatively straightforward.
Potash prices have continued their slow but steady recovery
with prices typically up by US$20-30/tonne during 2017. Also,
most forecasts predict further steady rises in 2018. This
continued improvement reaffirms our confidence about the
medium and long term outlook for the commodity, and we
remain committed to developing the remarkable Muga project
into a business which will operate profitably in any market
environment.
I would like to thank my fellow board members, the
management team and all of our employees for their efforts
during the past six months. Moreover, I would like to thank
all of our shareholders for their continued support and I look
forward to a successful next year.
Derek Carter
23 March 2018
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Highfield Resources Limited 31 December 2017 Annual Report to Shareholders 4
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Chief Executive
Officer’s Letter
Another key initiative during the period was the signing of an
updated MOU with Acciona for construction activities at the
Muga Project. Acciona has continued to provide advice and
support to the business since its initial engagement some two
years ago.
At Highfield and its Spanish subsidiary Geoalcali we have an
uncompromising belief that working in accordance with our
Core Values of Commitment, Respect, Excellence and Attitude
will deliver the outcomes that all of us as stakeholders are
seeking. I would like to take this opportunity to thank all of
the team at Geoalcali as well as the Highfield Board for their
commitment, support and dedication. It is an outstanding
group of professionals.
Muga is clearly a great project and our first and overriding
priority is to bring the Muga Mine into operation. Exploration
activities on the projects on our tenements are advancing
in line with Company plans and will accelerate once Muga
commences construction.
I look forward to a challenging but successful year ahead in
2018 for the Company.
Peter Albert
23 March 2018
Dear Shareholders
The past six months have been a period of intense activity for the
management team. During May and June 2017, the authorities
in Madrid completed their initial review of the Company’s
revised submission and in July 2017 they initiated the formal
process of seeking input from all relevant government and
other interested parties. Reports and comments from all
those parties, except two, were received prior to the end of
November 2017. In parallel, the Company decided to initiate
a voluntary second public exposition of its environmental
submission which commenced in early September 2017 and
was completed by mid-October 2017. By the end of November
2017, the Company had formally responded to all submissions
in both the formal and voluntary process – except of course
for the two outstanding reports. The Company considers
that in all of this documentation, there was nothing material
or significant that could impact on the authorities’ ability to
issue an environmental permit to the Company. The two
outstanding reports were received in January and February
2018 and MAPAMA has subsequently requested, as the final
step in the process, that the Company provide more detail
and clarification around the areas of seismicity, subsidence,
and salt by-product management. MAPAMA has requested
that this clarification be provided within three months. I remain
confident that the work completed over the past 18 months
will yield the result that the Company and all stakeholders
desire.
Once the environmental permit is received, the Company
can then formally commence the application for the mining
concession and various construction permits required. Whilst
all of the authorities required to issue these permits have been
actively engaged in the process to date, it is not possible to
actually submit applications until the environmental permit
is received and any conditions are well understood. These
construction permits may take some months to receive but it is
understood to be mostly a procedural process. The Company
has been in dialogue with the relevant bodies and has already
prepared preliminary documentation in anticipation of when
formal applications can commence.
Whilst the environmental permitting process has been
advancing, the team has also been taking the opportunity
to review other aspects of the project. Of particular note are
additional metallurgical testwork seeking to optimise the
flowsheet, mining studies to confirm and optimise decline
development and mine planning, and planning and tendering
of early packages to enable commencement of construction
as soon as the relevant permits are received.
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Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Sustainability
Report
6
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders 7
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders About this section
Since 2015, Highfield Resources, with its
subsidiary Geoalcali, has published sustainability
report summaries within the Company´s annual
reports, as well as standalone sustainability reports
published on the Group´s corporate webpages. The
information in these reports covered the financial
years ended 30 June.
As a result of changing its reporting period end
from June to December, from 2018 the Group will
align its future annual reports and sustainability
reports on a calendar basis. As a transitional
measure, rather than prepare a standalone
sustainability report based on Global Reporting
Initiative (“GRI”) Standards for the short reporting
period for the six months 1 July 2017 to 31
December 2017, the Company has decided that
its next GRI sustainability report will instead cover
the 18 months period 1 July 2017 to 31 December
2018.
This section therefore represents an abbreviated
sustainability report that is not based on GRI
Standards. It covers the six months financial
period from 1 July 2017 to 31 December 2017,
reporting on reporting on corporate social
responsibility (“CSR”) initiatives which are aligned
with the Company’s corporate vision of creating
a sustainable potash business. The sustainability
strategy of the Company continues its focus
on four fundamental areas: Our Business, Our
Environment, Our People and Our Community.
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Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Our Business
MILESTONES IN THE PERMITTING PROCESS
The Company has continued its environmental evaluation process in order to obtain the Environmental Impact Statement -
Declaración de Impacto Ambiental (“DIA”) (or “DIA”) for the Muga Project.
MILESTONES IN THE PERMITTING PROCESS
( CONSULTATION OF AFFECTED ENTITIES AND STAKEHOLDERS AND VOLUNTARY SECOND PUBLIC CONSULTATION PROCESS)
June 2017
July 2017
The completed updated documentation was presented on 28 April 2017 to the Ministry of
Agriculture, Fishing, Food and Environment (“MAPAMA”) which in turn passed it to the Ministry
of Industry, Energy, Tourism and Digital Agenda (“MINETAD”) as the next step in the process.
MAPAMA commenced its technical evaluation that will form the basis of the official DIA response.
MINETAD as the responsible coordinator for the process, commenced a Consultation of Affected
Entities and Stakeholders for the updated documentation in accordance with Article 37.5 of the
Environmental Evaluation Law 21/2013.
Geoalcali decided to submit the updated documentation voluntarily to a second public consultation
period, making it available to all stakeholders. The documents within this new public exposition
were:
_ Mine Development Plan;
_ Environmental Impact Assessment; and
_ Restoration Plan.
September 2017
While there was no legislative requirement for Geoalcali to undertake a second public consultation,
due to the nature of the Project and the time elapsed since the first consultation, Geoalcali believed,
and continues to believe, that it is important to provide stakeholders with the information related
to the Project which formed the basis of the environmental submission on 28 April 2017. It also
provides a stronger basis for the authorities to support the granting of the DIA and reduces the risk
of a later challenge by any party that may feel it has not been appropriately consulted.
November 2017
Geoalcali received submissions with comments and recommendations from interested parties,
administrations and other entities, excluding the reports from Instituto Geológico y Minero de
España (“IGME”) and from the Ebro river water management authority, Confederación Hidrográfica
del Ebro (“CHE”), which were received in January and February 2018, respectively.
Geoalcali presented responses to all submissions received to date.
Geoalcali confirmed that it had received copies of the two remaining reports submitted to MAPAMA
by IGME and CHE in January and February.
March 2018
The Company also confirmed that MAPAMA had completed its review of the reports received
from all of the referral authorities, and had requested further clarification, within three months,
on seismicity, subsidence and salt by-product management, as the final step in the environmental
permitting process.
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Highfield Resources Limited 31 December 2017 Annual Report to ShareholdersSustainability Report COMMITMENT TO
TRANSPARENCY AND
PUBLIC INFORMATION
The permitting process for the Muga Project has included a
public consultation held in 2015 as required under Article 36
of Environmental Evaluation Law 21/2013. The legislation
also requires the Consultation of Affected Entities and
Stakeholders under Article 37.5 of Environmental Evaluation
Law 21/2013. This process commenced in July 2017. Parallel
to the Consultation of Affected Entities and Stakeholders,
Geoalcali carried out a voluntary second public consultation,
not required by law but as a commitment to inform all
stakeholders about the updated documentation that improved
the project, including suggestions incorporated from the 2015
public consultation process and suggestions from Affected
Entities and Stakeholders.
The voluntary second public consultation commenced in
September 2017 to avoid the summer holiday period and to
ensure a greater stakeholder participation. It was officially
endorsed and published in the Government Gazettes of
Aragon, Navarra and the Central Government. The duration of
this consultation, as regulated by law, was 30 days.
In addition to the permitting process Geoalcali also published
the updated documentation on its corporate website, making it
accessible to anyone with an interest in the project. Geoalcali
also held an Open Doors event in the town of Sangüesa close to
the intended mine site, inviting the surrounding communities
to participate in a transparent communication forum.
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Highfield Resources Limited 31 December 2017 Annual Report to ShareholdersSustainability Report ANALYSIS OF SUBMISSIONS
FROM STAKEHOLDERS
Geoalcali is committed to listening to all stakeholders’
suggestions. Stakeholders have participated in the official
consultation phase and they also have constant access to
information generated by Geoalcali through a number of
different open communication channels (further explained in
the section “Our Community”).
As a response to the Consultation of Affected Entities and
Stakeholders, Geoalcali has received reports from:
_ Ten Departments in the Administration. None of which
have indicated a critical impact nor administrative or
technical obstacle/barrier. Many have confirmed their prior
observations and indications integrated in the technical
documentation;
_ Two political parties (EH Bildu of Sangüesa and Chunta
Aragonesista). These parties requested that Geoalcali hold
a new public information period, which has been carried
out through the voluntary public consultation process.
They also provided a number of suggestions regarding the
project, to which responses have been given; and
_ Five reports with submissions from three ecologist
associations and two individuals which have received
responses to the questions presented.
The communities surrounding the project have a total
population of 6,550 inhabitants:
As part of the voluntary second public consultation, Geoalcali
has also received submissions from:
Aragón
_ Four government departments, which as mentioned
above do not refer to the project having a critical impact;
_ Four local administrations of towns within 50 kilometres of
the Muga Project, whose questions have been addressed;
_ Three political parties, whose questions have been
addressed;
_ Seven associations, four of whom are ecologist
associations; and
_ Two formats of submissions drafted by an anti-mine
platform and an ecologist association were signed in total
by 610 individuals (only 93 of whom are from the region).
received 19 submissions
By contrast, during the first public consultation in 2015,
Geoalcali
from government
departments and 3 formats of submissions from the same
anti-mine platform and an ecologist association, signed by 476
individuals, only 124 of whom were from the region.
As a proportion of the population, the number of submissions
per person from the surrounding communities fell from 1.9 per
100 persons during the first public consultation to 1.4 during
the second.
Undués de Lerda
Urriés
Sos del Rey Católico
Navardún
Los Pintanos
Navarra
Sangüesa
Javier
Liédena
Rocaforte
Yesa
61
37
614
43
44
5,020
103
303
40
285
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Highfield Resources Limited 31 December 2017 Annual Report to ShareholdersSustainability Report ENHANCING OUR CORE
VALUES
Our core values are Commitment, Respect, Excellence and
Attitude (“CREA”). Behaving according to these core values
is fundamental to the Company´s vision of developing a
successful, sustainable potash business with respect for
stakeholders and the environment.
For this reason, a number of initiatives have been carried out
to encourage all employees to uphold the core values of the
Company.
“The commitment to CREA is
absolutely necessary for each
and every one of us. CREA is the
fundamental glue that keeps us
united!”
The Company believes that maintaining an open and respectful
two way communication with staff is crucial for understanding
the Company’s vision and strategy and emphasises the
commitment of the Company towards an honest and
transparent work environment. The following initiatives helped
the Group reinforce this philosophy:
_ Lunches with Peter - in which a group of five or six
people at a time get together to talk with the CEO in a
relaxed environment. All employees are presented with
this opportunity.
_ Coffee talks - brief talks or themed presentations from
specific team members on topics of interest. During the
six months period a number of coffee talks have also been
presented by local professionals on a variety of beneficial
topics such as sport activity, nutrition, and mindfulness.
_ CREA(tive) Competition - employees were asked to
submit creative ideas that will help improve any aspect of
the Company. The awards were presented at a Christmas
Party alongside the Health and Safety awards (see below).
The winning ideas, chosen from over 30 entries, were:
CEO, Peter Albert
- Using 360 degree feedback to evaluate Geoalcali´s
management and workforce;
- Installation of solar panels on the roofs of the Muga
Mine buildings to produce energy and offset greenhouse
gas emissions; and
- Creation of a team planning board where employees
identify their current tasks and stay informed of others´
tasks, in order to carry out work punctually and improve
distribution of the workload.
_ Awareness via Communication material - new corporate
materials have been used to promote the CREA values
and their increasing incorporation into the daily lives of our
employees.
_ Performance Review Process - at the end of the
calendar year all personnel have an annual performance
assessment based on achievement of personal goals and
alignment with CREA values. A six months interim review
is also performed half way through the year.
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Highfield Resources Limited 31 December 2017 Annual Report to ShareholdersSustainability Report Our Environment
ENVIRONMENTAL
AWARENESS CAMPAIGNS
ZERO ENVIRONMENTAL
INCIDENTS
During the period, no environmental incidents occurred in the
workplace, fulfilling the Company’s environmental protection
objective of zero environmental accidents during exploration
drilling activities.
The following environmental awareness campaigns were
carried out during the six months period:
Use of Green Search Engine Technology in our
Offices
This initiative consists of the installation of Ecosia as a search
engine on our office computers. Ecosia donates 80% of its
profits from search advertising revenue to support tree planting
programmes around the world. Desertification of land due to
deforestation is a cause of poverty with huge implications
for environmental, social and economic improvements in
disadvantaged areas.
The Importance of Recycling
Panels have been created and displayed on Geoalcali’s
premises highlighting the benefits of recycling and waste
separation as well as the problems produced by excess waste
generation and dumping and the lack of management of these
aspects. The Company believes that a few simple habits can
have a positive effect in the environment.
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Highfield Resources Limited 31 December 2017 Annual Report to ShareholdersSustainability Report OPEN DOORS EVENT
On 11 October 2017, an Open Doors Event was held in the
warehouse in Sangüesa that Geoalcali uses for its exploration
programme.
Approximately 200 local people were able to see first-hand
all the information regarding the Muga Project. Among the
attendees were the mayors of towns and villages close to
the Muga Mine location including Sangüesa, Javier, Yesa,
Ezprogui, Liédena, Cáseda, Lumbier, Petilla de Aragón, Undués
de Lerda, Sada and Rocaforte, as well as members of different
associations and representatives from Cederna Garalur and
Adefo (regional institutions that help boost these rural areas).
The event was also attended by more than 50 students from
the Institute of Professional Training of Lumbier.
Along a route established inside the warehouse, the attendees
were able to understand details of the current phase of the
project, the environmental management processes and the
economic and social benefits that will be generated by the
Muga Mine. The visitors were also able to meet the Geoalcali
management and technical team members to discuss the
project.
Our Community
ENGAGEMENT WITH THE
COMMUNITY
Since its inception, the Company has been committed to
transparency as key to an open and continuous communication
with the local communities. Different talks, presentations and
diverse activities have been undertaken by Geoalcali and such
activities will continue throughout all stages of the project.
Our communication activities in numbers
up to the end of December 2017 have
included:
_ More than 1,400 people have been involved in
information processes;
_ 12 information days on various subjects have been
carried out;
_ Two public consultations have been held for the Muga
Project, the second carried out voluntarily by Geoalcali;
_ The complete information portfolio for Muga Mine is
available on the website;
_ Adoption of a voluntary Public Participation Process
methodology, a pioneer example in the industry;
_ More than 22 update communications have been sent
out;
_ Geoalcali has distributed 18,000 information leaflets in
communities close to the Muga Mine location;
_ Installation of suggestion boxes in nearby towns;
_ More than 4,000 people have subscribed to Geoalcali´s
database;
_ Some local Councils have initiated a section to provide
information on Muga Mine on their websites; and
_ More than 200 people attended the Open Doors Event.
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Highfield Resources Limited 31 December 2017 Annual Report to ShareholdersSustainability Report COMMUNITY FEEDBACK
While some have expressed their disagreement about the
Muga Project, no complaints have been made about the
conduct of the Company.
A number of queries were received in 2017 from both the
website and suggestion boxes, all of which have been
answered. As with the questionnaires noted above, there
were more queries in the second half of 2017 compared with
the first half, confirming increasing interest in the project.
Received
Answered
H1
5
5
H2
17
17
100%
100%
CERTIFICATES AND
RECOGNITION
In 2017 Geoalcali received the renewal of its Corporate Social
Responsibility certificates from the Governments of both
Navarra and Aragón.
PARTICIPATION FROM THE
LOCAL COMMUNITY
As shown in the graph below, there were 83 questions or
comments from the community in the second half of 2017
through Geoalcali’s “Queremos escucharte” (“We want to
listen to you”) online and offline questionnaires, compared
with 20 in the first half of 2017.
Number of communications by type and
quarter during 2017
The above graph shows that 68% of comments were in favour
of the project, 5% against and 27% from those who wish to
know more about the project. The majority of the requests for
more information came from the Open Doors Event, indicating
increased interest in the project and the success of the event
in encouraging participation from the community. One of
the key questions in the questionnaires is “¿Piensas que el
Proyecto traerá riqueza a la zona?” (Do you think the project
will bring wealth to the region?) with responses indicating that
93% of those who have participated agree with the positive
economic impact the project will have on the region.
Do you believe the project will benefit the
region economically?
Geoalcali received its InnovaRSE certificate from the
Government of Navarra
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Highfield Resources Limited 31 December 2017 Annual Report to ShareholdersSustainability Report THE GEOALCALI FOUNDATION
The Geoalcali Foundation continues to support initiatives that aim to contribute to a better future and improved social
well-being in the neighbouring communities. These initiatives are based on the Foundation´s four pillars which are
shown below and which are also part of the UN’s Sustainability Development Goals:
_ Social Integration;
_ Sustainable Communities;
_ Quality Education; and
_ Commitment to the Environment.
Over the course of 2017, and especially in the six months ended in December, a variety of new projects were developed,
while longer term initiatives continued to be supported. Initiatives in the second half of the year were:
Geoalcali Foundation Pillar
Social
Integration
Sustainable
Communities
Quality
Education
Commitment
to the
Environment
ISO 26000 guidelines
& UN Sustainability
Development Goals
Geoalcali Foundation Initiative
Initiatives that promote
Health
School Programme “Growing
Healthy Together”
Medical and ambulance
expenses during local festivities
in Sangüesa
Development and access
to technology
Alta Cinco Villas Community
e-learning programme
Support for Liedena’s cultural
heritage initiatives
Promotion of Education
and Culture
Penultimate trip of the Irati train
school history programme
Employment Creation and
Activity Development
Social Investments
Brotherhood of Santa Bárbara
festivities
Improvement of facilities for
the reuse, resale, salvage,
recycing or disposal of electric
waste
Charity gala to raise money for
solidarity projects for children
with disabilities
Cadete football tournament,
“Castiliscar Histórica”
School transport services for
Undués de Lerda
Production of benefit calendars
with Anfas, an association
that helps in the integration
of disadvantaged people in
Sangüesa
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Highfield Resources Limited 31 December 2017 Annual Report to ShareholdersSustainability Report
Our People
HEALTH AND SAFETY
STAFF TRAINING
During the six months financial period, employees of Geoalcali
engaged in both office work and activities in the field and
there were no accidents or incidents. However, during an
exploration drilling campaign a contractor suffered a minor
musculoskeletal injury, due to overstrain when handling the
drill string. This lost time injury resulted in a short period of
absence from work.
Geoalcali continues to strive
for the achievement of zero
accidents amongst all persons
engaged in our project activities –
whether employees, contractors
or consultants.
On 1 June 2017, an incentives programme was created to
increase the engagement of employees in a positive culture of
health and safety and environmental management.
The aim of this programme is to have zero incidents and
accidents in the work place. This goal cannot be achieved
without active employee participation and all employees need
to be aware of the importance of creating a culture that strives
for excellence and best practices in health and safety.
The incentives programme takes into account the individual
contribution of each worker, in terms of all types of risks
detected and proposed preventative measures.
Following the end of the 2017 incentives programme period,
the Incentives Committee assessed, both qualitatively and
quantitatively, the 11 proposals received, and made awards to
two employees.
During the six months financial period, 449 training hours were
completed including: English and Spanish language courses
to improve internal and external communication; a specialised
advanced Excel training course for a technical member of the
team with a high level of Excel knowledge who then gave
internal training to others; and a course on the management
of grants for training activities to understand the process of
obtaining grants applicable to Geoalcali.
Safety training was provided to the warehouse operators on
topics including low voltage electrical maintenance work.
TOWARDS A HEALTHY
LIFESTYLE
Encouraging healthy habits
Geoalcali is committed to improving the health and fitness of
its employees. In addition to the provision of fresh fruit for
employees, weekly mindfulness sessions are carried out for
those who wish to learn how to relax the mind, focus their
attention and calmly handle day to day life. Sports activities are
also encouraged to promote health in the workplace. All these
initiatives are included within the Healthy Living programme.
Certificates and Recognition
During the period, Geoalcali presented its initiatives to
promote healthy habits to the Sello y Premio Azul (Healthy
Company Certificate and Award) organised by Mutua Navarra.
This entity awarded Geoalcali the Sello Empresa Saludable
(Healthy Company Certificate) as well as placing Geoalcali as a
finalist with three other businesses in Navarra.
Geoalcali also received the renewal of the Reconcilia Seal, a
certificate awarded to companies for their efforts in promoting
work-life balance.
Flu vaccination campaign
The flu is one of the principal causes of absence in the
workplace which occurs every year and affects a large number
of workers on a national level. The best form of preventing
the illness is providing free vaccination to the employees.
Geoalcali’s vaccination campaign took place between 30
October and 23 November 2017.
17
Highfield Resources Limited 31 December 2017 Annual Report to ShareholdersSustainability Report Directors’
Report
18
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders 19
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders The Directors present their report for Highfield Resources Limited (“Highfield Resources”, “Highfield”, or “the Company”) and its
subsidiaries (“the Group”) for the six months ended 31 December 2017.
The Company changed its financial year end date from 30 June to 31 December to align with the Spanish financial year and the
Company has elected to present an “annual report” for the six months transitional financial period ended 31 December 2017. The
comparative period disclosures are for the year ended 30 June 2017.
DIRECTORS
The names, qualifications and experience of the Company’s Directors in office during the period and until the date of this report
are as follows. Directors were in office for the entire period unless otherwise stated.
Mr. Derek Carter
Mr. Peter Albert
Ms. Pauline Carr
Mr. Richard Crookes
Managing Director and Chief
Executive Officer, BSc (Hons), EMBA,
FAusIMM, MIOM3, CEng
Independent Non-Executive
Director, BEcon, MBA, FAICD, FCIS,
FGIA
Ms. Carr has over 25 years’
commercial experience in
management, corporate
governance and compliance,
mergers and acquisitions, investor
and stakeholder relations and
corporate restructures. She
currently provides business
improvement, compliance, risk
management, project management
and corporate governance solutions
to executive management teams
internationally. Prior to this, Ms.
Carr held senior positions with
Newmont Asia Pacific and ASX
listed Normandy Mining Limited
and worked for a number of years
in the oil and gas sector with
Exxon Mobil. She sits on several
Boards and is Deputy Chairman
of the South Australian Minerals
and Energy Advisory Council
and the Minerals and Petroleum
Expert Group. In the three years
immediately before the end of the
six months financial period, Ms.
Carr held no other directorships of
any listed companies.
Mr. Albert has over 30 years’
experience in project management,
general management and
operations management in
mining and minerals processing
in Australia, Africa and Asia. Mr.
Albert is a metallurgist and holds
an Executive MBA degree. He
is a Member of the Institute
of Materials, Minerals and
Mining (London), a Fellow of the
Australasian Institute of Mining
and Metallurgy (“AusIMM”) and
a Chartered Engineer. Mr. Albert
was awarded the “Mining CEO of
the Year” at the 2012 Asia Mining
Congress. Mr. Albert was also
awarded the “Mining Executive of
the Year” at the 2013 Asia Mining
Congress.
Before joining the Company, Mr.
Albert held CEO roles with two
Hong Kong listed organisations,
Jinchuan Group International
Resources Company and
G-Resources Group. He has held
leadership and senior executive
roles with OZ Minerals Limited,
Oxiana Limited, Shell-Billiton
(Australia), Aker Kvaerner (Australia)
and Johannesburg Consolidated
Investments (South Africa). In
the three years immediately
before the end of the six months
financial period, Mr. Albert held no
other directorships of any listed
companies.
Non-Executive Director, BSc
(Geology), Grad Dip Applied Finance
Mr. Crookes has over 28 years’
experience in the resources and
investments industries. He is a
geologist by training having worked
in the industry most recently as
the Chief Geologist and Mining
Manager of Ernest Henry Mining
in Australia (now Glencore). Prior
to Mr. Crookes joining EMR
Capital as an Investment Director
he was an Executive Director in
Macquarie Bank’s Metals Energy
Capital (MEC) Division where he
managed all aspects of the Bank’s
principal investments in mining
and metals companies as well
as the origination of numerous
Project Finance transactions. Mr.
Crookes has extensive experience
in deal origination, evaluation,
structuring, post-acquisition
management, client relationship
management, marketing and
execution of investment entry and
exits for both private and public
resources companies in Australia
and overseas. In the three years
immediately before the end of the
six months financial period, Mr.
Crookes held no other directorships
of any listed companies.
Independent Non-Executive
Chairman, BSc, MSc, FAusIMM(CP)
Mr. Carter has over 40 years’
experience in exploration and
mining geology and management.
He held senior positions in the
Shell Group of Companies and
Burmine Ltd before founding
Minotaur Gold NL in 1993. He is
the former Chairman of Petratherm
Limited (resigned 31 March 2014)
and Minotaur Exploration Ltd
(resigned November 2016), and a
former board member of Intrepid
Mines Ltd (resigned November
2015) and Mithril Resources Ltd
(resigned December 2014), all ASX
listed companies. In the three years
immediately before the end of the
six months financial period, Mr.
Carter held no other directorships
of any listed companies.
Mr. Carter is a former President of
the South Australian Chamber of
Mines and Energy, former board
member of the Australian Gold
Council, is a member of the South
Australian Minerals and Energy
Advisory Council and the South
Australian Minerals and Energy
Council, and a former Chairman of
the Minerals Exploration Advisory
Group. He was awarded AMEC’s
Prospector of the Year Award
(jointly) in 2003 and is a Centenary
Medallist.
20
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Mr. Jim Dietz
Mr. Owen Hegarty
COMPANY SECRETARY
Independent Non-Executive
Director, B.Eng (Chem), M.Eng
(Chem)
Mr. Dietz has over 42 years’
experience in the fertiliser, chemical
and petroleum industries, primarily
in senior operational roles. From
2000 until 2010, he was Chief
Operating Officer of Potash
Corporation of Saskatchewan
(“PotashCorp”), the world’s largest
fertiliser company. Prior to that
position, Mr. Dietz held a variety
of other senior management
roles, including President of
Nitrogen, during his 17 year career
with PotashCorp. During that
time, Mr. Dietz was responsible
for global operations as well as
Safety, Health, and Environment
performance and Procurement. Mr.
Dietz also represented PotashCorp
on the Board of Directors of Arab
Potash Company. Mr. Dietz is
a Chemical Engineer and holds
both a Masters and Bachelors
designation from the Ohio State
University. In the three years
immediately before the end of the
six months financial period, Mr.
Dietz held no other directorships of
any listed companies.
Non-Executive Director, BEc (Hons),
FAusIMM
Mr. Hegarty has over 40 years’
experience in the global mining
industry. He spent 25 years
with Rio Tinto where he was
Managing Director of Rio Tinto
Asia and Managing Director of
the Group’s Australian copper
and gold business. He was the
founder and CEO of Oxiana Limited
Group which grew from a small
exploration company to a multi-
billion dollar Asia Pacific focused
base and precious metals producer,
developer and explorer.
Mr. Hegarty is the Executive
Chairman of specialist resources
private equity firm, EMR Capital,
Highfield’s largest shareholder and
cornerstone investor. In 2006, Mr.
Hegarty was awarded the AusIMM
Institute Medal and in 2008 the
G.J. Stokes Memorial Award for his
achievements and leadership in the
mining industry.
In the three years before the end of
the six months financial period Mr.
Hegarty, is, or has been, a director
of various listed and unlisted
resources companies including
Hong Kong listed G-Resources
Group Ltd, Fortescue Metals Group
Ltd, Tigers Realm Coal Limited and
EMR Capital. He is also a member
of a number of Government and
industry advisory groups.
Mr. Donald Stephens, BA (Acc), CA
Mr. Stephens has over 25 years’
experience in the accounting,
mining and services industries,
including 14 years as a partner
of HLB Mann Judd (SA), a firm
of Chartered Accountants. He
is a Chartered Accountant and
corporate adviser specialising in
small cap ASX listed entities.
Mr. Stephens is a director of
Mithril Resources Limited, Gooroo
Ventures Limited and Petratherm
Limited. Additionally he is Company
Secretary of Mithril Resources
Limited, Duxton Broadacre Farms
Limited and Duxton Water Limited
and various other unlisted public
companies. Mr. Stephens is a
former director of Papyrus Australia
Limited (resigned 24 August 2015),
Reproductive Health Science
Limited (resigned 1 September
2015), Odin Metals Limited
(formerly Lawson Gold Limited)
(resigned February 2018) and Crest
Minerals Ltd (resigned February
2016).
Directors’ Report
21
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Board Committees
REMUNERATION AND NOMINATION COMMITTEE
The principal purpose of the Committee is to assist the Board in fulfilling its governance and oversight responsibilities in relation
to remuneration practices so that they:
_ Link rewards to the creation of value for shareholders;
_ Facilitate operational excellence by attracting and retaining talent;
_ Fairly and responsibly reward individuals having regard to individual and Highfield targets and performance as well as
industry remuneration conditions; and
_ Comply with applicable regulatory obligations.
In addition, the Committee oversees selected nomination activities so that boards within the Highfield Group comprise individuals
who are best able to discharge the responsibilities of directors having regard to the law and excellence in governance standards.
The members of the Remuneration and Nomination Committee are Ms. Pauline Carr (Chairman), Mr. Richard Crookes and Mr.
Jim Dietz.
AUDIT, BUSINESS RISK AND COMPLIANCE COMMITTEE
The principle purpose of the Committee is to assist the Board in fulfilling its governance and oversight responsibilities relating to:
_ The integrity of financial accounting practices and reporting;
_ Risk management;
_ Internal control framework and internal audit;
_ External audit function; and
_ Compliance with the Corporations Act, ASX Listing Rules and the ASX Corporate Governance and Principles.
The members of the Audit, Business Risk and Compliance Committee are Ms. Pauline Carr (Chairman), Mr. Derek Carter and Mr.
Richard Crookes.
22
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Interests in the Securities of the Company
As at the date of this report, the interests of the Directors in the securities of Highfield Resources Limited are:
Director
Ordinary Shares
Options –
exercisable at $0.75
each on or before
11 September 2018
Options –
exercisable at $2.00
each on or before
30 June 2019
Options –
exercisable at $1.85
each on or before
18 November 2024
Options –
exercisable at $1.34
each on or before
30 June 2025
Derek Carter
Peter Albert
Pauline Carr
Richard Crookes
Jim Dietz
Owen Hegarty
9,221,504
1,500,000
1,000,000
-
-
78,000
30,000
-
50,000
-
-
-
-
-
-
-
3,000,000
1,820,654
1,000,000
-
1,000,000
-
-
-
-
-
-
-
-
-
Results of Operations
The Company’s net loss after taxation attributable to the members of Highfield Resources Limited for the six months ended 31
December 2017 was $469,661 (year ended 30 June 2017: $7,081,884).
Dividends
No dividend was paid or declared by the Company during the six months financial period and up to the date of this report.
Corporate Structure
Highfield Resources Limited is a company limited by shares, which is incorporated and domiciled in Australia. Through its 100%
owned subsidiary KCL Resources Limited Highfield owns 100% of Geoalcali SL (“Geoalcali”), a Spanish incorporated company
which holds the Group’s five exploration projects.
Nature of Operations and Principal Activities
The principal activity of the Company during the six months financial period was mineral exploration and progressing its flagship
Muga Project.
Directors’ Report
23
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Review of Operations
Highfield Resources Limited is a potash company listed on the Australian Securities Exchange with five 100% owned potash
projects located in Spain´s potash producing Ebro Basin.
MUGA PROJECT
The Company’s flagship Muga Project is targeting the relatively shallow sylvinite beds in the Muga Project area that covers about
80km2. Mining is planned to commence at a depth of approximately 350 metres from surface and is therefore ideal for a relatively
low cost conventional mine accessed via a dual decline, as demonstrated in the Company’s Muga Project Optimisation Study
completed in November 2015.
MUGA PROJECT APPROVALS PROCESS
On 12 July 2017 the Company reported that it had
elected to open the Muga Project to a voluntary second
period of public consultation.
is
the
(“MINETAD”), which
On 11 September 2017 the Company reported that
it had completed all the required documentation to
commence the voluntary second public consultation
and that the Ministerio de Energía, Turismo y Agenda
Digital
responsible
coordinating authority, had lodged the documentation
with the Government gazette on 2 September 2017. The
30 working day public review period commenced on
4 September 2017. The documents that were available
for stakeholders to review included the documentation
submitted to the Ministerio de Agricultura y Pesca,
Alimentación y Medio Ambiente (“MAPAMA”) on
28 April 2017 as well as the mine development and
restoration plans.
In its Quarterly Activities Report for the quarter ended
30 September 2017 released on 19 October 2017, the
Company reported that the voluntary second public
consultation period had closed on 16 October 2017 and
that it would work closely with the relevant authorities
to address any new items that may be raised by
stakeholders of the Muga Project.
The quarterly report also stated that in early October,
Geoalcali had hosted an Open Doors Event at its
facilities in Sangüesa, close to the location of the
project. In total, approximately 200 people, including the
mayors of most local town halls, took the opportunity
to visit and hear about the Muga Project from members
of Highfield’s team in Spain.
In its presentation made to the Highfield Annual
General Meeting on 30 November 2017 the Company
reaffirmed that it considered itself to be in the final
stage of the Declaración de Impacto Ambiental (“DIA”)
process, with continued close engagement with local
communities which remain extremely supportive, and
that in its opinion there should be no impediment to a
positive DIA being issued.
Figure 1: Map of Highfield’s Muga Project
24
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders It also highlighted that:
_ following a positive DIA the Department of Mines can
consider the award of the Mining Concession, and
_ construction permits will be necessary from local town
halls and from the Ebro river water management authority,
Confederación Hidrográfica del Ebro (“CHE”), including
permits for power connections and power lines, roads,
and the plant and underground works.
In its Quarterly Activities Report for the quarter ended 31
December 2017 released on 23 January 2018, the Company
reported that Highfield had responded to all comments raised
during the voluntary second consultation process. Importantly,
no new material issues were raised during this process and
the number of comments submitted was less than in the first
consultation process in 2015. In the same Quarterly Activities
Report the Company reported that MINETAD had provided
Highfield with all but two of the reports submitted to it by
interested parties and stakeholders as part of MINETAD’s
final Consultation of Affected Entities and Stakeholders, and
that the Company had provided responses to all comments
and items raised in those reports, which it did not consider to
contain any material or significant negative matters.
In its corporate presentation of 15 February 2018 the Company
provided an estimated timeline, starting from award of the DIA,
of three to six months for receipt of the Mining Concession
and six to twelve months for receipt of construction permits.
During March 2018 the Company confirmed that it had received
copies of the two remaining reports submitted to MAPAMA by
Instituto Geológico y Minero de España (“IGME”) and CHE
in January and February 2018. In its Environmental Permitting
Update of 21 March 2018 the Company reported that
MAPAMA had completed its review of the reports received
from all of the referral authorities, and had requested further
clarification, within three months, on three items, namely
seismicity, subsidence and salt by-product management.
The Company remains confident of receiving its DIA, Mining
Concession and construction permits.
MUGA PROJECT TECHNICAL UPDATE
In its 19 October 2017 Quarterly Activities Report for the
quarter ended 30 September 2017, the Company reported
that it was conducting additional confirmatory metallurgical
test work including a full, end-to-end, test of the process flow
sheet and some additional tests to address areas which could
be improved through design changes. This may lead to some
optimisation of the current process flow sheet, following
which the Company and Bovis will finalise the project cost and
schedule review announced in Highfield’s June 2017 Quarterly
Activities Report dated 18 July 2017.
In its Quarterly Activities Report for the quarter ended 31
December 2017 released on 23 January 2018, the Company
reported that it had continued to work on updating the capital
cost estimates from the Muga Optimisation Study, which
was released to the market in November 2015. During the
December quarter, metallurgical test work continued at the
Saskatchewan Research Council (“SRC”) in Canada. This test
work was completed in the first quarter of 2018, as expected.
As noted above, this will result in some improvements to
the current process design. The impact of these is being
determined and potentially may include re-sizing and changes
to some equipment to improve overall recoveries and reduce
operating risk. There is likely to be some cost escalation in
the more than two years since the last cost estimates were
published, and some further increases are likely as a result
of the equipment changes and resizing, as well as increases
required as a result of permitting requirements.
The December Quarterly Activities Report also announced that
tendering and evaluation of the first design and construction
package was complete.
REVISED MOU SIGNED WITH ACCIONA
As reported in its September Quarterly Activities Report of
19 October 2017, the Company signed a new and revised
Memorandum of Understanding (“MOU”) on 2 October 2017
with Acciona Infraestructuras (“Acciona”), a well credentialed,
global construction firm based in Spain with experience in
complex industrial projects. Highfield and Acciona entered
into a collaboration agreement in December 2015, following
which they collaborated to review capital cost estimates
and schedules for various parts of the Muga Project. Under
the revised MOU Acciona was appointed as the preferred
construction contractor
the
construction of the Muga Mine.
for selected packages
in
PROJECT FINANCING
In August 2015, the Company announced a project finance
mandate with four Mandated Lead Arrangers (“MLAs”) for
long term project facilities to fund the construction of the
Muga Project.
During the six months ended 31 December 2017, the Company
continued its dialogue with its project finance syndicate with
respect to the €185 million facility for Muga. It also engaged
with other potential providers of capital.
Highfield remains confident of putting in place its debt
financing following receipt of all approvals, to support a final
investment decision and the commencement of construction.
Directors’ Report
25
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders VIPASCA PROJECT
The Vipasca Project area includes the majority of the
Vipasca permit, the entire Borneau permit and half
of the Osquia permit. It is located adjacent to the
Muga Project and covers approximately 120km2. The
tenement is highly prospective for economic potash
mineralisation, with a primary focus on the deeper,
higher grade, P1 and P2 potash horizons.
During the quarter ended 30 September 2017, the
Company completed a drill hole at Vipasca designed
to test the deeper mineralisation towards the west,
beyond the north west extension of the deposit.
Preliminary analysis of the core indicated a steeper
dip in the bedding relative to the surrounding area
than had been expected. In addition, some faulting
was encountered, which led the Company to believe
the evaporite unit was significantly deeper than first
expected. The drill hole was abandoned at 1,022 metres
without crossing the evaporitic unit or the expected
marker horizons above.
During the quarter ended 31 December 2017, limited
additional work was carried out. Parts of Vipasca are
now deemed highly unlikely to yield an economic
Reserve and the Company is now in a position to focus
on the identified more prospective areas. A further
three holes are planned in 2018.
Figure 3: Map of Highfield’s Pintanos Project
26
Directors’ Report
Figure 2: Map of Highfield’s Vipasca Project
PINTANOS PROJECT
Highfield´s 100% owned Pintanos Project abuts the
Muga Project and covers an area of 60km2. Depths
from surface to mineralisation commence at around
500m. The Company is building on substantial historical
potash exploration information which includes seven
drill holes and ten seismic profiles completed in the
late 1980s.
During the six months ended 31 December 2017,
limited additional work was carried out.
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders SIERRA DEL PERDÓN PROJECT
Highfield´s 100% owned Sierra del Perdón (“SdP”)
Project is located south east of Pamplona and covers
approximately 145km2. Sierra del Perdón is a brownfield
project which previously hosted two potash mines
operating from the 1960s until the late 1990s producing
nearly 500,000 tonnes of K60 MOP per annum. The
evaporite was historically mined primarily for sylvinite
but also for carnallite, before the mine closure in 1996
due to relatively low potash prices of around US$100/
tonne. There is potential for potash exploitation in new,
unmined areas in the Sierra del Perdón Project area.
During the quarter ended 30 September 2017, limited
work was carried out at SdP. During the quarter
ended 31 December 2017, an exploration drill hole was
completed at SdP, the results of which are expected by
the end of the March 2018 quarter.
After a number of years of exploration work, the
Company has now reached the point where it will
focus further work on the most prospective areas of
SdP and will relinquish the less prospective part of the
tenements. This is likely to occur in the next six months
and a further three holes are planned on the highly
prospective areas identified at SdP.
Figure 4: Map of Highfield’s Sierra del Perdón Project
IZAGA PROJECT
The Izaga Project covers an area of more than 100km2,
where historic drill holes and 2D seismic show a
relatively continuous evaporite with drill hole intersects
containing potash. With further positive exploration
results, the project could display similar attributes to
the Muga Project.
During the six months ended 31 December 2017,
limited additional work was carried out.
Figure 5: Map of Highfield’s Izaga Project
Directors’ Report
27
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Geoalcali Foundation
Corporate
The Geoalcali Foundation is a not-for-profit Spanish foundation,
supported exclusively by Geoalcali. It was established to
deliver projects into the communities in which the Company
will operate its mines.
LAPSE OF CLASS B PERFORMANCE
SHARES
PROJECTS
The Company’s community engagement programme
continues to be well received. A programme highlighting
clever fertiliser use was launched in regional primary schools
in October 2015 and has so far reached over 4,000 school
children in the regions of Navarra and Aragón.
The Geoalcali Foundation currently provides ongoing support
to over 20 community projects and since its establishment
in September 2014 has been involved in over 105 community
projects with town halls, social associations, foundations and
scientific/agricultural organisations.
On 29 November 2017 the Company announced that
50,000,000 Class B Performance Shares had lapsed. The
Class B Performance Shares were issued on the basis that
they would be converted to ordinary shares upon the receipt,
to the reasonable satisfaction of Highfield, of all referral
approvals required to construct and operate a 500,000 tonne
per annum potash mine on the Muga Project (including all
required government approvals, water and energy contracts
necessary to operate the mine) prior to 18 October 2017, being
the expiry date of the performance shares. The Directors’
assessment was that the vesting conditions had not been met
and therefore that the performance shares had lapsed.
DIRECTORS
There were no changes in Directors during the six months
ended 31 December 2017.
28
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Annual Review of Ore Reserves and Mineral
Resources
In accordance with ASX Listing Rule 5, the Company has performed an annual review of all JORC-compliant ore reserves and
mineral resources as at 31 December 2017. Rounding differences may occur.
MUGA PROJECT
A maiden Ore Reserve for the Muga Project was calculated as part of the Definitive Feasibility Study as released to the ASX on
30 March 2015.
An updated Ore Reserve for the Muga Project was calculated as part of the project optimisation released to the ASX on 17
November 2015. The Company considers this Ore Reserve to be accurate as at 31 December 2017.
Table 1: Muga Ore Reserves Summary
31 December 2017
30 June 2017
30 June 2016
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Proved
Probable
Total Proved & Probable
81.6
172.1
253.7
11.7%
11.4%
11.5%
81.6
172.1
253.7
11.7%
11.4%
11.5%
81.6
172.1
253.7
11.7%
11.4%
11.5%
Highfield released an update to the existing JORC-compliant Mineral Resource Estimate (“MRE”) to the ASX on 24 February
2015.
A further update to this MRE was released to the ASX as part of the project optimisation study on 17 November 2015. The
Company considers this MRE to be accurate as at 31 December 2017. The MRE includes all Ore Reserves shown above in Table 1.
Table 2: Muga Mineral Resources Summary
31 December 2017
30 June 2017
30 June 2016
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Measured
Indicated
Total Measured & Indicated
Inferred
Total
75.1
149.4
224.5
39.2
263.7
13.6%
13.3%
13.4%
13.8%
13.5%
75.1
149.4
224.5
39.2
263.7
13.6%
13.3%
13.4%
13.8%
13.5%
75.1
149.4
224.5
39.2
263.7
13.6%
13.3%
13.4%
13.8%
13.5%
Directors’ Report
29
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders SIERRA DEL PERDÓN PROJECT
Highfield released a maiden MRE for the Sierra del Perdón Project to the ASX on 7 April 2015. The Company considers this MRE
to be accurate as at 31 December 2017.
Table 3: Sierra del Perdón Mineral Resources Summary
31 December 2017
30 June 2017
30 June 2016
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Measured
Indicated
Total Measured & Indicated
Inferred
Total
-
41.8
41.8
40.3
82.1
-
10.7%
10.7%
10.5%
10.6%
-
41.8
41.8
40.3
82.1
-
10.7%
10.7%
10.5%
10.6%
-
41.8
41.8
40.3
82.1
-
10.7%
10.7%
10.5%
10.6%
PINTANOS PROJECT
Highfield released a maiden MRE for the Pintanos Project to the ASX on 20 November 2013. During the year ended 30 June
2017, two drill holes were completed at the Pintanos Project (see the Company’s ASX Quarterly Activities Report released on 24
April 2017). The results of both holes were unfavourable compared with the block model which informed the maiden Mineral
Resource Estimate released on 20 November 2013 and therefore adversely impacted the tonnage available to be classified as
inferred resources. Nonetheless, the Company continues to believe the exploration potential for Pintanos remains strong and will
continue exploration of the project.
As a result of the above, a revised MRE was prepared, as summarised in Table 4 below. See further details in the ASX Additional
Information section on page 98 of the Company’s Annual Report for the year ended 30 June 2017. The Company considers this
MRE to be accurate as at 31 December 2017.
Table 4: Pintanos Mineral Resources Summary
31 December 2017
30 June 2017
30 June 2016
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Measured
Indicated
Total Measured & Indicated
Inferred
Total
-
-
-
70.7
70.7
-
-
-
11.9%
11.9%
-
-
-
70.7
70.7
-
-
-
11.9%
11.9%
-
-
-
187.0
187.0
-
-
-
11.2%
11.2%
30
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders SUMMARY
A summary of Highfield’s total Ore Reserves and Mineral Resources is shown below.
Table 5: Highfield Total Ore Reserves Summary (all projects)
31 December 2017
30 June 2017
30 June 2016
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Proved
Probable
Total Proved & Probable
81.6
172.1
253.7
11.7%
11.4%
11.5%
81.6
172.1
253.7
11.7%
11.4%
11.5%
81.6
172.1
253.7
11.7%
11.4%
11.5%
Table 6: Highfield Total Mineral Resources Summary (all projects)
The MRE includes all Ore Reserves shown above in Table 5.
31 December 2017
30 June 2017
30 June 2016
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Measured
Indicated
Total Measured & Indicated
Inferred
Total
75.1
191.2
266.3
150.2
416.5
13.6%
12.7%
13.0%
12.0%
12.6%
75.1
191.2
266.3
150.2
416.5
13.6%
12.7%
13.0%
12.0%
12.6%
75.1
191.2
266.3
266.5
532.8
13.6%
12.7%
13.0%
11.5%
12.2%
Directors’ Report
31
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Corporate Governance – Resources and Reserve
Calculations
Due to the nature, stage and size of the Company’s existing operations, the Company has historically concluded that there would
be insufficient efficiencies or additional governance benefits gained by establishing a separate mineral resources and ore reserves
committee responsible for reviewing and monitoring the Company’s processes for calculating mineral resources and ore reserves
and for ensuring that the appropriate internal controls are applied to such calculations. However, the establishment of such a
committee, at an appropriate time, is under consideration. In the meantime the Company continues to ensure that all Mineral
Resource calculations are prepared by a competent, senior geologist and are reviewed and verified independently by a qualified
person. In addition, the existing composition of the Highfield Board of Directors includes two qualified geologists.
Significant Changes in the State of Affairs
There have been no significant changes in the state of affairs of the Group during the six months financial period, other than as
set out in this report.
Significant Events After the Reporting Date
There have been no significant events after the reporting date requiring disclosure in this report.
Likely Developments and Expected Results of
Operations
The Directors have excluded from this report any further information on the likely developments in the operations of the Company
and the expected results of those operations in future financial periods, as the Directors believe that it would be speculative and
prejudicial to the interests of the Company.
Environmental Regulations and Performance
The operations of the Company are presently subject to Environmental Regulation under the laws of the Commonwealth of
Australia and of Spain. The Company has been at all times in full environmental compliance with the conditions of its licences.
32
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Share Options
As at the date of this report there were 51,007,221 unissued ordinary shares under options. The details of the options are as
follows:
Number
3,350,000
9,500,000
750,000
4,000,000
4,832,221
1,500,000
5,350,000
17,175,000
4,550,000
51,007,221
Exercise Price
$
$0.75
$0.75
$1.00
$1.25
$1.34
$1.85
$1.85
$2.00
$2.50
Expiry Date
30 June 2018
11 September 2018
30 June 2018
30 June 2018
30 June 2025
30 June 2024
18 November 2024
30 June 2019
30 June 2019
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
The following options were issued during the six month period:
_ 4,832,221 options with an exercise price of $1.34, expiring on 30 June 2025
_ 1,500,000 options with an exercise price of $1.85, expiring on 30 June 2024
No options were exercised or lapsed during the six months period.
Indemnification and Insurance of Directors and
Officers
The Company has made an agreement indemnifying all the Directors and officers of the Company against all losses or liabilities
incurred by each Director or officer in their capacity as Directors or officers of the Company to the extent permitted by the
Corporations Act 2001. The indemnification specifically excludes willful acts of negligence.
The Company paid insurance premiums in respect of Directors’ and Officers’ Liability Insurance contracts for current Directors
and officers of the Company and of the Company’s controlled entities. The liabilities insured are damages and legal costs that
may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of
entities in the Group. The total amount of insurance premiums paid has not been disclosed due to confidentiality reasons.
Directors’ Report
33
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
Directors’ Meetings
The numbers of meetings of Directors and Committees held during the six months financial period and the number of meetings
attended by each Director were as follows:
Director
Directors’ Meetings
Remuneration and Nomination
Committee
Audit, Business Risk and
Compliance Committee
Derek Carter
Peter Albert
Pauline Carr
Richard Crookes
Jim Dietz
Owen Hegarty
A
5
5
5
5
5
5
B
5
5
5
5
5
4
A
4
4
4
4
4
4
B
4*
3*
4
4
4
4*
A
2
2
2
2
2
2
B
1
2*
2
2
1*
1*
A number of meetings held during the time the Director held office.
B number of meetings attended. Note that Directors may attend Committee Meetings without being a member of that Committee.
* Attendance at meeting by invitation
Proceedings on Behalf of Company
No person has applied for leave of the Court to bring proceedings on behalf of the Company or intervene in any proceedings
to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings. The Company was not a party to any such proceedings during the six months financial period.
Corporate Governance
In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of Highfield support
and adhere to the principles of sound corporate governance. The Board recognises the recommendations of the Australian
Securities Exchange Corporate Governance Council, and considers that Highfield is in compliance to the extent possible with
those recommendations which are of importance and add value to the commercial operation of a listed proposed resources
development company.
The Company has established a set of corporate governance policies and procedures and these can be found, together with the
Company’s Code of Business Ethics and Conduct, on the Company’s website: www.highfieldresources.com.au.
Auditor Independence and Non-Audit Services
Section 307C of the Corporations Act 2001 requires the Company’s auditors to provide the Directors of Highfield with an
Independence Declaration in relation to the audit of the financial report. A copy of that declaration is included at page 77 of the
annual report. No non-audit services were provided by the Company’s auditor.
34
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
Audited Remuneration Report
This report, which forms part of the Directors’ report, outlines the remuneration arrangements in place for the key management
personnel (KMP) of Highfield Resources Limited for the six months ended 31 December 2017. The information provided in this
remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001.
The remuneration report details the remuneration arrangements for KMP who are defined as those persons having authority and
responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director
(whether executive or otherwise) of the Group.
DETAILS OF DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL
Directors
Derek Carter
Peter Albert
Pauline Carr
Richard Crookes
Jim Dietz
Owen Hegarty
Key Management
Mike Norris
Non-Executive Chairman
Managing Director and Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Financial Officer
All of the above were KMPs for the entire six months financial period.
Directors’ Report
35
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders REMUNERATION POLICY
The Board is responsible for determining and reviewing compensation arrangements for the Directors and senior executives
reporting to the Managing Director. The broad policy is to ensure that remuneration properly reflects the individuals’ duties and
responsibilities and that remuneration is fair and competitive in attracting, retaining and motivating quality people with appropriate
skills and experience. At the time of determining remuneration consideration is given by the Board to the Group’s financial
circumstances and performance.
As part of its suite of corporate governance policies and procedures, the Board has adopted a formal Remuneration and Nomination
Committee Charter and Remuneration Policy.
In early 2017 the Committee and Board reviewed the remuneration framework for executives and established the following
parameters.
Level
Short Term Incentive
Long Term Incentive1
Managing Director
Up to 80% of fixed remuneration
75% Corporate KPIs and 25% Personal KPIs2
Senior Executives
Up to 60% of cash remuneration
(60% Corporate KPIs and 40% Personal KPIs )
Senior Management
Up to 40% of cash remuneration
(40% Corporate KPIs and 60% Personal KPIs)
Up to 100% of fixed remuneration in the form of options
subject to performance hurdles
Up to 75% of fixed remuneration in the form of options
subject to performance hurdles
Up to 50% of fixed remuneration in the form of options
subject to performance hurdles
1 The performance vesting conditions of each grant are aligned to the creation of long term value for shareholders. Market based performance
(being the relative performance of the Company’s share price over a three year period against the S&P/ASX 300 Resources Index (XKR)) accounts
for 50% of vesting conditions. Total Shareholder Return over the three year assessment period accounts for the remaining 50% of the vesting
conditions. In general, the participant must also remain employed with the Company for a continuous period of three years from the grant date.
2 The Board has subsequently determined that with effect from 1 January 2018 the weighting of Mr. Albert’s STI be changed to 100% for corporate
and strategic KPIs.
REMUNERATION PHILOSOPHY
The Company and its controlled entities aim to position themselves so that the total remuneration paid to their employees will
be at the median of the market. The Remuneration and Nomination Committee will undertake a market benchmarking review of
executive positions at least once every three years to ensure that the Company’s remuneration offerings remain competitive with
its contemporary peer group.
USE OF REMUNERATION CONSULTANTS
The Board and the Remuneration and Nomination Committee seek and consider advice from independent remuneration
consultants to ensure that they have relevant information to the determination of all facets of remuneration relating to the KMP
and senior executives reporting to the Managing Director. The engagement of remuneration consultants is governed by the
Remuneration and Nomination Committee Charter which sets the protocols and restrictions around the interaction between
management and the consultants with a view to minimising the risk of any undue influence occurring and ensuring compliance
with the Corporations Act 2001 requirements.
The advice and recommendations of consultants are used by the Board and Committee as a guide in formulating remuneration
and policy. Decisions are made by the Board after its own consideration of the issues, but having regard to the advice of the
Committee and consultants.
36
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders REVIEW OF KMP REMUNERATION
To ensure that the KMP remuneration remains consistent with the Company’s remuneration policy, KMP and senior executive
remuneration is reviewed annually by the Board with the assistance of the Remuneration and Nomination Committee and, as
required, external remuneration consultants. When performing the remuneration review, the Board considers:
_ the Company’s remuneration policy and practices;
_ relevant market benchmarks;
_ the skills and experience required of each role in order to grade positions accurately and attract high calibre people; and
_ strategy, business plans and budgets.
COMPONENTS OF REMUNERATION OF OTHER KPM AND SENIOR EXECUTIVES
Total Fixed Remuneration (“TFR”)
At-risk remuneration
Short Term Incentive (“STI”)
Long Term Incentive (“LTI”)
Base remuneration that reflects
the job size, role, responsibilities
and professional competence
of each executive, according to
their knowledge, experience and
accountabilities and considering
external market relativities.
Variable, performance based, annual
cash incentive plan designed to
reward high performance against
challenging, clearly defined and
measurable objectives that are based
on a mix of Corporate and Personal
KPI targets that are set to incentivise
superior performance.
The Board may determine from time
to time that the STI be paid in shares
in lieu of cash.
The equity component of the at-risk
reward opportunity, linked to the
creation of shareholder value.
The mix of fixed and at-risk remuneration varies depending on the role and level of executive, and also depends on the performance
of the Company and individual. Compared with other employees, senior positions have a greater proportion of at-risk remuneration
and have a higher proportion of their at-risk remuneration assessed on Company performance KPIs.
NON-EXECUTIVE DIRECTOR (“NED”) REMUNERATION
On appointment to the Board, each NED enters into a service agreement with the Group in the form of a letter of appointment.
The letter summarises the Board policies and terms, including compensation, relevant to the Director.
NED remuneration is reviewed annually by the Board. NEDs receive a fixed fee remuneration consisting of an annual base Board
fee with additional fees for any committee positions they hold. From time to time and in accordance with the Constitution the
Board may also award once off extra exertion amounts where they determine such payments are warranted.
The aggregate remuneration for NEDs has been set at an amount not to exceed $500,000 per annum. This amount may only be
increased with the approval of Shareholders at a general meeting.
Directors’ Report
37
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders DETAILS OF NED REMUNERATION
Fees
Board
Remuneration and Nomination Committee
Audit, Business Risk and Compliance Committee
Chairman per annum
$
Member per annum
$
90,000
15,000
15,000
60,000
7,500
7,500
All NEDs (including the Chairman) are entitled to be reimbursed for travelling and other expenses properly incurred by them in
attending any meeting or otherwise in connection with the business or affairs of the Company.
KEY PERFORMANCE INDICATORS FOR SHORT TERM INCENTIVES
Key Performance Indicators (“KPIs”) are aligned to reflect corporate and strategic objectives. KPIs are reviewed by the Company’s
Remuneration and Nomination Committee and approved by the Board. The KPIs of the Managing Director and his direct reports
are also reviewed by the Committee, and typically cover targets in respect of safety, permitting, finance, project delivery, investor
relations and social responsibility. The KPIs of the Managing Director were cascaded down to his direct reports as appropriate to
their areas of responsibility.
The KPIs for the six months financial period ended 31 December 2017 were assessed in accordance with the parameters
established in early 2017 as set out in the Remuneration Policy section above. The STI for the Managing Director was based
on 75% for corporate and strategic KPIs and 25% for personal KPIs. The STIs for direct reports of the Managing Director were
based on a weighting of between 40% and 60% for corporate and strategic KPIs and between 60% and 40% for personal KPIs.
The Board has determined that with effect from 1 January 2018 the weighting of Mr. Albert’s STI be changed from 75% for
corporate and strategic KPIs and 25% for personal KPIs to 100% for corporate and strategic KPIs.
Summary Corporate and Strategic KPI Performance
For the six months ended 31 December 2017 corporate and strategic KPI performance outcomes for KMPs were assessed as
follows:
Weighting for 2017
%
2017 Outcome
%
15
25
20
40
100
15
24
19
-
58
KPI Category
Safety, Health, Environmental and Community
Financials
Project Progress
Approvals
Total
38
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Short Term Incentive Award
The remuneration of the Managing Director, Peter Albert, and the Chief Financial Officer, Mike Norris, for the six months financial
period included cash bonuses in respect of meeting STI KPIs agreed by the Board. The STI awards relate to the achievement
of KPIs for the year ended 30 June 2017 for which the bonus cost was approved by the Board and paid during the six months
ended 31 December 2017, and the achievement of KPIs for the six months ended 31 December 2017 for which the bonus cost
was accrued at the end of the period and paid in February 2018. The cost of both awards is therefore included in the financial
statements for the six months ended 31 December 2017.
LTI PERFORMANCE AND OUTCOMES FOR 2017
Awards granted under the Highfield Resources Limited LTI Plan consist of share options which are granted for no consideration
and carry no dividend or voting rights. Following vesting and subsequent exercise of the options one ordinary share in the
Company will be allocated per option.
The vesting conditions of each grant are aligned to the creation of long term value for shareholders. Market based performance
(being the relative performance of the Company’s share price over a three year period against the S&P/ASX 300 Resources Index
(XKR)) accounts for 50% of vesting conditions. Total Shareholder Return over the three year assessment period accounts for the
remaining 50% of the vesting conditions.
In general, the KMP must also remain employed with the Company for a continuous period of three years from the grant date.
Details of the prior awards for relevant KMP are set out in the Remuneration Report section of the Annual Report for the year they
were granted, under the heading Options Affecting Remuneration.
Directors’ Report
39
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders DETAILS OF REMUNERATION
Details of the nature and amount of each element of the remuneration of each Director and other key management personnel of
the Group for the six months ended 31 December 2017 are as below:
Short term
Options
Post-employment
Base
Salary
$
Fees
$
STI
Awards1
$
Other
Benefits
$
Share-
Based
Payments
$
Super-
annuation
$
Benefits
$
Performance
related
%
Total
$
Six months ended
31 December 2017
Directors
Derek Carter
Peter Albert
Pauline Carr
Richard Crookes
Jim Dietz
Owen Hegarty
Key Management
-
48,750
-
-
-
332,376
-
442,048
105,7042
268,073
-
-
-
-
45,000
37,500
33,750
30,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
48,750
-
1,148,201
23%
45,000
37,500
33,750
30,000
-
-
-
-
589,042
1,932,243
20%
20%
Mike Norris
188,932
-
253,194
29,0203
117,896
521,308
195,000
695,242
134,724
385,969
1 The STI awards relate to the achievement of KPIs for the year ended 30 June 2017 for which the bonus cost was approved by the Board and paid
during the six months ended 31 December 2017, and the achievement of KPIs for the six months ended 31 December 2017 for which the bonus
cost was accrued at the end of the period. The cost of both awards is therefore included in the financial statements for the six months ended
31 December 2017.
2 Benefits relate to paid private accommodation and in-country residency allowance.
3 Benefit relates to paid private accommodation.
40
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
Details of remuneration for the year ended 30 June 2017 are shown below:
Short term
Options
Post-employment
Year ended 30 June 2017
Base
Salary
$
Fees
$
STI
Awards4
$
Other
Benefits
$
Share-
Based
Payments
$
Super-
annuation
$
Benefits
$
Performance
related
%
Total
$
Directors
Derek Carter
Peter Albert1
Pauline Carr
Richard Crookes
Jim Dietz
Anthony Hall2
Owen Hegarty
Pedro Rodriguez3
Key Management
-
-
-
-
-
-
97,500
518,245
-
-
-
168,2005
166,667
90,000
75,000
67,500
-
-
-
-
-
-
87,500
420,000
60,000
-
20,833
88,834
1,2006
-
-
-
-
-
-
-
289,394
289,394
-
-
Mike Norris
31,127
330,482
88,183
23,8176
22,188
549,372
828,815
597,017
193,217
767,643
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
97,500
-
853,112
20%
90,000
75,000
356,894
796,894
60,000
-
-
81%
89%
-
110,867
80%
495,797
2,936,064
22%
46%
1 Peter Albert was appointed 1 September 2016.
2 Anthony Hall resigned 31 August 2016.
3 Pedro Rodriguez resigned 1 August 2016.
4 The STI award relates to the achievement of 2016 KPIs that were approved by the Board and paid during the year ended 30 June 2017.
5 Benefits relate to paid private accommodation and in-country residency allowance.
6 Benefit relates to paid private accommodation.
Directors’ Report
41
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
SHAREHOLDINGS OF DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL
The number of shares in the Company held by Directors and other key management personnel of the Group, including their
personally related parties, is set out below. There were no shares granted as compensation during the six months ended 31
December 2017.
Six months ended
31 December 2017
Balance at the start
of the period
Granted as
compensation
during the period
On exercise of
share options
Other changes
during the period
Balance at the end
of the period
Directors
Derek Carter
Peter Albert
Pauline Carr
Richard Crookes
Jim Dietz
Owen Hegarty
Key Management
Mike Norris
9,221,504
78,000
-
-
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,0001
-
-
-
-
9,221,504
78,000
30,000
-
50,000
-
-
1 Ms. Carr purchased 30,000 fully paid ordinary shares through an indirect entity in which she has an interest. The purchase was made via an on
market trade on 27 December 2017.
All equity transactions with Directors and other key management personnel other than those arising from the exercise of
remuneration options have been entered into under terms and conditions no more favourable than those the Company would
have adopted if dealing at arm’s length.
42
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
OPTION HOLDINGS OF DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL
The number of options over ordinary shares in the Company held by each Director and other key management personnel of the
Group, including their personally related parties, is set out below:
Balance at
the start of the
period
Granted as
compensation
during the
period
Exercised
during the
period
Other changes
during the
period
Balance at
the end of the
period
Exercisable
Not
exercisable
Six months ended
31 December 2017
Directors
Derek Carter
2,500,000
-
Peter Albert
Pauline Carr
Richard Crookes
3,000,000
1,820,654
1,000,000
-
Jim Dietz
1,000,000
Owen Hegarty
-
Key Management
-
-
-
-
Mike Norris
2,450,000
800,703
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,500,000
2,500,000
-
4,820,654
-
4,820,654
1,000,000
1,000,000
-
-
1,000,000
1,000,000
-
-
-
-
-
-
3,250,703
2,000,000
1,250,703
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
Options granted as part of remuneration have been valued using the binomial method (which is derived from the Black-Scholes
option pricing model but is considered more suitable for companies which do not pay dividends) taking into account the exercise
price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying
share and the risk free interest rate for the term of the option.
Options granted under the Company’s employee share option plan carry no dividend or voting rights. For details on the valuation
of options, including models and assumptions used, please refer to note 18.
Directors’ Report
43
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
TRANSACTIONS WITH DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL
Transactions with key management personnel were made at arm’s length at normal market prices and normal commercial terms.
There were no transactions with key management personnel for the six months ended 31 December 2017 other than those
disclosed above.
OPTIONS AFFECTING REMUNERATION
The terms and conditions of options granted during the six months ended 31 December 2017 affecting remuneration in the
current or future reporting periods are as follows:
Grant date
Number
granted
Expiry
date/last
exercise
date
Fair value
per option
at grant
date
Exercise
price per
option
Value of
options at
grant date1
Number
of options
vested
Vested
Max value
yet to vest
Directors
Derek Carter
-
-
-
-
-
-
Peter Albert
13/12/17
1,820,654
30/06/25
$0.147
$1.34
$268,073
Pauline Carr
Richard Crookes
Jim Dietz
Owen Hegarty
Key Management
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Mike Norris
13/12/17
800,703
30/06/25
$0.147
$1.34
$117,896
2,621,357
$385,969
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$268,073
-
-
-
-
-
$117,896
$385,969
1 The value at grant date has been calculated in accordance with the models and assumptions as disclosed in note 18.
44
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
KMP EMPLOYMENT ARRANGEMENTS
The remuneration arrangements for KMP are formalised in employment agreements. These agreements provide for the payment
of fixed remuneration, performance related STI bonuses, other short term benefits, and participation, where eligible, in the
Company’s LTI Plan.
Executive Director
Mr. Albert is employed under an employment agreement which has no fixed term. The notice period is three months. Depending
on the reason for a termination of his employment, Mr. Albert may be entitled to severance benefits of up to 12 months’ cash
remuneration (based on an average of his previous annual remuneration), or other minimum severance benefits set by Spanish
law, as applicable. During the six months ended 31 December 2017 Mr. Albert’s total fixed remuneration was $332,376. The
Board has determined that with effect from 1 January 2018 the weighting of Mr. Albert’s STI be changed from 75% for corporate
and strategic KPIs and 25% for personal KPIs to 100% for corporate and strategic KPIs. Also with effect from 1 January 2018,
a CPI adjustment of 2% has been applied to Mr. Albert’s annual base salary. As a result, Mr. Albert’s annual base salary has
increased from €426,341 per annum to €434,868 per annum. No other changes have been made to Mr. Albert’s base salary or
to his short term or long term variable performance based incentives.
Non-Executive Directors
On appointment to the Board, each Non-Executive Director enters into a service agreement with the Group in the form of a
letter of appointment. The letter summarises the Board policies and terms, including compensation, relevant to the Director. The
aggregate remuneration for Non-Executive Directors has been set at an amount not to exceed $500,000 per annum. This amount
may only be increased with the approval of Shareholders at a general meeting. The period of appointment is in accordance with
the Company’s Constitution and the Corporations Act 2001 (Cth), including the provisions of the constitution which relate to the
rotation of Directors.
Other Key Management Personnel
Mr. Norris is employed under an employment agreement which has no fixed term. The notice period is three months. Depending
on the reason for a termination of his employment, Mr. Norris may be entitled to a payment equal to three months of his annual
salary. During the six months ended 31 December 2017 Mr. Norris’s total fixed remuneration was $188,932. With effect from 1
January 2018, a salary adjustment has been made to Mr. Norris’s annual base salary, resulting in an increase from €250,000 per
annum to €260,000 per annum. No other changes have been made to Mr. Norris’s remuneration.
Directors’ Report
45
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders LOANS TO DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL
There were no loans to Directors or other key management personnel during the six months ended 31 December 2017 (year
ended 30 June 2017: nil).
VOTING AND COMMENTS MADE AT THE COMPANY’S NOVEMBER 2017 ANNUAL
GENERAL MEETING
Highfield Resources Limited received more than 99.90% of “yes” votes on its remuneration report for the financial year ended
30 June 2017. The Company did not receive any specific feedback at the AGM or during the current period on its remuneration
practices.
PERFORMANCE MEASURED BY LOSS PER SHARE
The table below shows the performance of the Company measured by loss per share:
Six months
ended
31 December
2017
Year ended
30 June 2017
Year ended
30 June 2016
Year ended
30 June 2015
Year ended
30 June 2014
Year ended
30 June 2013
Loss per share (cents)
Share price (at period end)
Share price High for the reporting period
Share price Low for the reporting period
(0.14)
$1.03
$1.20
$0.82
(2.22)
$0.96
$1.49
$0.90
(3.42)
$1.38
$2.04
$1.03
(4.38)
$1.48
$2.08
$0.52
(4.12)
$0.58
$0.68
$0.33
(4.22)
$0.36
$0.36
$0.13
46
Directors’ Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders End of Audited Remuneration Report
Signed on behalf of the Board in accordance with a resolution of the Directors.
Peter Albert
Managing Director and Chief Executive Officer
Pamplona, Spain
23 March 2018
Directors’ Report
47
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Financial
Report
48
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders 49
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Consolidated Statement of Profit or Loss and Other
Comprehensive Income
for the six months ended 31 December 2017
Continuing Operations
Revenue - interest received
Gain on foreign exchange
Listing and share registry expenses
Professional and consultants’ fees
Employee costs
Share-based payments expense
Travel and accommodation
Donations
Depreciation
Realised loss on derivative financial instrument
Other expenses
Loss before income tax
Income tax expense
Net loss for the year
Other comprehensive income
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations
Other comprehensive income for the period net of tax
Total comprehensive income/(loss) for the period
Loss per share
Basic loss per share (cents)
Diluted loss per share (cents)
31 December 2017
(6 months)
$
Note
30 June 2017
(12 months)
$
7,470
1,933,428
(89,762)
(424,910)
(1,141,015)
(314,606)
(54,564)
(65,579)
(60,392)
-
(259,731)
198,888
218,151
(118,668)
(1,204,704)
(1,180,536)
(2,104,245)
(234,447)
(281,568)
(122,697)
(1,931,736)
(320,322)
3
18
23
17(e)
(469,661)
(7,081,884)
5
-
-
(469,661)
(7,081,884)
1,898,112
1,898,112
1,428,451
(0.14)
(0.14)
718,072
718,072
(6,363,812)
(2.22)
(2.22)
6
6
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
50
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
Consolidated Statement of Financial Position
as at 31 December 2017
Current Assets
Cash and cash equivalents
Other receivables
Total Current Assets
Non-Current Assets
Investments
Other receivables
Property, plant and equipment
Deferred exploration and evaluation expenditure
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Total Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Accumulated losses
Total Equity
Note
31 December 2017
$
30 June 2017
$
7
8
8
9
10
11
12
13
14
65,576,728
789,292
66,366,020
5,525
70,899
154,996
94,090,220
94,321,640
160,687,660
2,674,217
2,674,217
2,674,217
69,559,873
1,272,773
70,832,646
5,360
-
203,378
86,742,052
86,950,790
157,783,436
1,513,050
1,513,050
1,513,050
158,013,443
156,270,386
172,399,841
22,628,135
(37,014,533)
158,013,443
172,399,841
20,415,417
(36,544,872)
156,270,386
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
Financial Report
51
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
Consolidated Statement of Changes in Equity
for the six months ended 31 December 2017
Year ended 30 June 2017
Issued
capital
$
Accumulated
losses
$
Share-
based
payments
reserve
$
Foreign
exchange
translation
reserve
$
Option
premium
reserve
$
Total
$
Balance at 1 July 2016
166,353,807
(29,462,988)
17,390,615
201,485
1,000
154,483,919
Total comprehensive loss for the year
Loss for the period
Other comprehensive income - foreign currency translation
Total comprehensive loss for the year
Transactions with owners in their capacity as owners
Conversion of options
Cost of issue
Share-based payment
-
-
-
(7,081,884)
-
(7,081,884)
6,085,000
(38,966)
-
-
-
-
-
-
-
-
-
2,104,245
-
718,072
718,072
-
-
-
-
-
-
-
-
-
(7,081,884)
718,072
(6,363,812)
6,085,000
(38,966)
2,104,245
Balance at 30 June 2017
172,399,841
(36,544,872)
19,494,860
919,557
1,000
156,270,386
Six months ended 31 December 2017
Balance at 1 July 2017
172,399,841
(36,544,872)
19,494,860
919,557
1,000
156,270,386
Total comprehensive income for the period
Loss for the period
Other comprehensive income - foreign currency translation
Total comprehensive income for the period
Transactions with owners in their capacity as owners
Share-based payment
-
-
-
-
(469,661)
-
(469,661)
-
-
-
-
1,898,112
1,898,112
-
314,606
-
-
-
-
-
(469,661)
1,898,112
1,428,451
314,606
Balance at 31 December 2017
172,399,841
(37,014,533)
19,809,466
2,817,669
1,000
158,013,443
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
52
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
Consolidated Statement of Cash Flows
for the six months ended 31 December 2017
Cash flows from operating activities
Payments to suppliers and employees
Interest received
Other receipts including GST/VAT received
31 December 2017
(6 months)
$
Note
30 June 2017
(12 months)
$
(1,634,017)
(4,761,933)
7,740
383,249
206,720
776,128
Net cash used in operating activities
7
(1,243,298)
(3,779,085)
Cash flows from investing activities
Purchase of plant and equipment
Payments for exploration and evaluation expenditure
Net cash used in investing activities
Cash flows from financing activities
Proceeds from conversion of options
Payments for share issue costs
Net cash provided by financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of exchange rate fluctuations on cash
Cash and cash equivalents at the end of the period
7
(6,608)
(4,666,667)
(4,673,275)
-
-
-
(5,916,573)
69,559,873
1,933,428
65,576,728
(50,512)
(24,874,724)
(24,925,236)
6,085,000
(38,966)
6,046,034
(22,658,287)
93,931,744
(1,713,584)
69,559,873
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Financial Report
53
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
Notes to the Consolidated Financial Statements
for the six months ended 31 December 2017
1. CORPORATE INFORMATION
The financial report of Highfield Resources Limited (“Highfield
Resources”, “Highfield” or “the Company”) for the six
months ended 31 December 2017 was authorised for issue
in accordance with a resolution of the Directors on 23 March
2018.
In preparing the consolidated financial statements, all
intercompany balances and
income and
expenses and profit and losses resulting from intra-company
transactions have been eliminated in full. Unrealised losses
are also eliminated unless costs cannot be recovered.
transactions,
The Company has changed its financial year end date from
30 June to 31 December and this has necessitated the
presentation of an “annual report” for the six month transitional
financial period ended 31 December 2017. The comparative
period disclosures are for the year ended 30 June 2017.
Highfield is a company limited by shares incorporated in
Australia whose shares are publicly traded on the Australian
Securities Exchange. The nature of the operations and the
principal activities of the Company are described in the
Directors’ Report.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements are general purpose financial
statements, which have been prepared in accordance with
the requirements of the Corporations Act 2001, Australian
Accounting Standards and other authoritative pronouncements
of the Australian Accounting Standards Board. The financial
statements have also been prepared on a historical cost basis.
The presentation currency is Australian dollars.
(b) Compliance Statement
The financial report complies with Australian Accounting
Standards, which include Australian equivalents to International
Financial Reporting Standards (AIFRS). Compliance with AIFRS
ensures that the financial report, comprising the financial
statements and notes thereto, complies with International
Financial Reporting Standards (IFRS).
(c) Basis of Consolidation
The consolidated financial statements comprise the financial
statements of Highfield Resources Limited (‘the Company’)
and its subsidiaries at 31 December 2017 and at 30 June 2017
in the comparative period (‘the Group’).
Subsidiaries are those entities over which the Company has
the power to govern the financial and operating policies so
as to obtain benefits from their activities. The existence and
effect of potential voting rights that are currently exercisable
or convertible are considered when assessing whether a
Company controls another entity.
(d) Foreign Currency Translation
(i) Functional and presentation currency
Items included in the financial statements of each of the
Company’s controlled entities are measured using the
currency of the primary economic environment in which the
entity operates (‘the functional currency’). The functional
and presentation currency of Highfield Resources Limited
is Australian dollars. The functional currency of the Spanish
subsidiary is the Euro.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation at
period end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or
loss.
(iii) Group entities
The results and financial position of all the Group entities (none
of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
_ assets and liabilities for each statement of financial
position presented are translated at the closing rate at
the date of that statement of financial position;
_ income and expenses for each statement of profit or
loss and other comprehensive income are translated at
average exchange rates (unless this is not a reasonable
approximation of the rates prevailing on the transaction
d a t e s , i n w h i ch c a s e i n c o m e a n d e x p e n s e s a r e
translated at the dates of the transactions); and
_ all resulting exchange differences are recognised as a
separate component of equity, being the foreign exchange
translation reserve.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities are taken
to shareholders’ equity.
When a foreign operation is sold or any borrowings forming
part of the net investment are repaid, a proportionate share of
such exchange differences is recognised in the statement of
profit or loss and other comprehensive income, as part of the
gain or loss on sale where applicable.
54
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders (e) Segment Reporting
For management purposes, the Group is organised into
one main operating segment, which involves development
of potash mines in Spain. All of the Group’s activities are
interrelated, and discrete financial information is reported to
the Managing Director (Chief Operating Decision Maker) as a
single segment.
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been
recognised for the asset in previous periods.
Accordingly, all significant operating decisions are based upon
analysis of the Group as one segment. The financial results
from this segment are equivalent to the financial statements
of the Group as a whole.
Where a decision has been made to proceed with development
in respect of a particular area of interest, the relevant
exploration and evaluation asset is tested for impairment and
the balance is then reclassified to development.
(f) Changes in accounting policies and
disclosures
Where an area of interest is abandoned, any expenditure
carried forward in respect of that area is written off.
The Directors have reviewed all of the new and revised
Standards and Interpretations issued by the AASB that are
relevant to the Group’s operations and effective for future
reporting periods. It has been determined by the Directors
that there is no impact, material or otherwise, of the new and
revised Standards and Interpretations on the Company, and
therefore no change will be necessary to Group accounting
policies.
(g) Exploration and evaluation expenditure
Exploration and evaluation expenditures in relation to each
separate area of interest are recognised as an exploration and
evaluation asset in the period in which they are incurred where
the following conditions are satisfied:
(i) the rights to tenure of the area of interest are current; and
(ii) at least one of the following conditions is also met:
(a) the exploration and evaluation expenditures are expected
to be recouped through successful development and
exploitation of the area of interest, or alternatively, by its
sale; or
(b) exploitation and evaluation activities in the area of
interest have not at the balance date reached a stage
which permits a reasonable assessment of the existence
or otherwise of economically recoverable reserves, and
active and significant operations in, or in relation to, the
area of interest are continuing.
Exploration and evaluation assets are initially measured at
cost and include acquisition of rights to explore, studies,
exploratory drilling, trenching and sampling and associated
activities and an allocation of depreciation and amortisation of
assets used in exploration and evaluation activities. General
and administrative costs are only included in the measurement
of exploration and evaluation costs where they are related
directly to operational activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment
when facts and circumstances suggest that the carrying
amount of an exploration and evaluation asset may exceed
its recoverable amount. The recoverable amount of the
exploration and evaluation asset (for the cash generating
unit(s) to which it has been allocated being no larger than the
relevant area of interest) is estimated to determine the extent
of the impairment loss (if any).
(h) Income Tax
The income tax expense or benefit for the period is the tax
payable or receivable on the current period’s taxable income
or loss based on the applicable income tax rate for each
jurisdiction adjusted by changes in deferred tax assets and
liabilities attributable to temporary differences and to unused
tax losses.
The current income tax charge is calculated on the basis of
the tax laws enacted or substantively enacted at the end of
the reporting period. Management periodically evaluates
positions taken in tax returns with respect to situations in
which applicable tax regulation is subject to interpretation.
It establishes provisions where appropriate on the basis of
amounts expected to be paid to the tax authorities.
Current tax assets and liabilities for the current and prior
periods are measured at the amount expected to be recovered
from or paid to the taxation authorities. The tax rates and tax
laws used to compute the amount are those that are enacted
or substantively enacted by the balance date.
Deferred income tax is provided on all temporary differences
at the balance date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences except when:
_ the deferred income tax liability arises from the initial
recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and that, at
the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; or
_ the taxable temporary difference is associated with
investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary
difference can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable
future.
Deferred income tax assets are recognised for all deductible
temporary differences and the carry-forward of unused tax
assets and unused tax losses, to the extent that it is probable
that taxable profit will be available against which the deductible
temporary differences and the carry-forward of unused tax
credits and unused tax losses can be utilised, except when:
Financial Report
55
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders _ the deferred income tax asset relating to the deductible
deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor
taxable profit or loss; or
_ the deductible temporary difference is associated with
investments in subsidiaries, associates or interests
in joint ventures, in which case a deferred tax asset is
only recognised to the extent that it is probable that
the temporary difference will reverse in the foreseeable
future and taxable profit will be available against which
the temporary difference can be recognised.The carrying
amount of deferred income tax assets is reviewed at each
balance date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to
allow all or part of the deferred income tax asset to be
recognised.
Unrecognised deferred income tax assets are reassessed at
each balance date and are recognised to the extent that it
has become probable that future taxable profit will allow the
deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at
the tax rates that are expected to apply to the period when
the asset is recognised or the liability is settled, based on tax
rates (and tax laws) that have been enacted or substantively
enacted at the balance date.
Income taxes relating to items recognised directly in equity
are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only
if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and
liabilities relate to the same taxable entity and the same
taxation authority.
(i) Other taxes
Revenues, expenses and assets are recognised net of the
amount of GST/VAT, except where the amount of GST/VAT
incurred is not recoverable from the government. In these
circumstances the GST/VAT is recognised as part of the cost
of acquisition of the asset or as part of an item of the expense.
Receivables and payables in the statement of financial position
are shown inclusive of GST/VAT.
The net amount of GST/VAT recoverable from, or payable to,
the government is included as part of receivables or payables in
the statement of financial position. Cash flows are presented
in the statement of cash flows on a gross basis, except that
the GST/VAT component of investing and financing activities,
which is receivable from or payable to the government, is
disclosed as operating cash flows.
recoverable amount. An asset’s recoverable amount is the
higher of its fair value less costs to sell and its value in use
and is determined for an individual asset, unless the asset
does not generate cash inflows that are largely independent
of those from other assets or group of assets and the asset’s
value in use cannot be estimated to be close to its fair value.
In such cases the asset is tested for impairment as part
of the cash- generating unit to which it belongs. When the
carrying amount of an asset or cash-generating unit exceeds
its recoverable amount, the asset or cash-generating unit is
considered impaired and is written down to its recoverable
amount.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value
of money and the risks specific to the asset. Impairment
losses relating to continuing operations are recognised in
those expense categories consistent with the function of the
impaired asset unless the asset is carried at revalued amount
(in which case the impairment loss is treated as a revaluation
decrease).
An assessment is also made at each balance date as to
whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased.
If such indication exists, the recoverable amount is estimated.
A previously recognised impairment loss is reversed only if
there has been a change in the estimates used to determine
the asset’s recoverable amount since the last impairment loss
was recognised. If that is the case the carrying amount of the
asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss
been recognised for the asset in prior periods.
Such reversal is recognised in profit or loss unless the asset
is carried at revalued amount, in which case the reversal is
treated as a revaluation increase. After such a reversal the
depreciation charge is adjusted in future periods to allocate
the asset’s revised carrying amount, less any residual value,
on a systematic basis over its remaining useful life.
(k) Cash and cash equivalents
Cash comprises cash at bank and in hand. Cash equivalents
are short term, highly liquid investments that are readily
convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value. Bank overdrafts are
shown within borrowings in current liabilities in the statement
of financial position.
For the purposes of the statement of cash flows, cash and
cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
(j) Impairment of non-financial assets other
than goodwill
The Company assesses at each balance date whether there
is an indication that an asset may be impaired. If any such
indication exists, or when annual impairment testing for an
asset is required, the group makes an estimate of the asset’s
(l) Trade and other payables
Trade payables and other payables are carried at amortised cost
and represent liabilities for goods and services provided to the
Group prior to the end of the period that are unpaid and arise
when the Group becomes obliged to make future payments in
respect of the purchase of these goods and services.
56
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders (m) Derivative financial instruments and
hedging
The Group uses derivative financial instruments to hedge
its risks associated with foreign currency fluctuations. Such
derivative financial instruments are initially recognised at fair
value on the date on which a derivative contract is entered into
and are subsequently remeasured to fair value. Derivatives
are carried as assets when their fair value is positive and as
liabilities when their fair value is negative. Any gains or losses
arising from changes in the fair value of derivatives are taken
directly to net profit or loss for the period.
(n) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
Provisions are not recognised for future operating losses.
When the Group expects some or all of a provision to be
reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain. The expense
relating to any provision is presented in the statement of
comprehensive income net of any reimbursement.
Provisions are measured at the present value or management’s
best estimate of the expenditure required to settle the present
obligation at the end of the reporting period.
If the effect of the time value of money is material, provisions
are discounted using a current pre-tax rate that reflects
the risks specific to the liability. When discounting is used,
the increase in the provision due to the passage of time is
recognised as an interest expense.
(o) Issued capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new
shares or options for the acquisition of a new business are
not included in the cost of acquisition as part of the purchase
consideration.
(p) Revenue
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are net
of returns, trade allowances, rebates and amounts collected
on behalf of third parties. Revenue is recognised to the extent
that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. The following
specific recognition criteria must also be met before revenue
is recognised:
Interest income
Interest revenue is recognised on a time proportionate basis
that takes into account the effective yield on the financial
asset.
(q) Earnings per share
Basic earnings/loss per share is calculated as net profit/loss
attributable to members, adjusted to exclude any costs of
servicing equity (other than dividends) and preference share
dividends, divided by the weighted average number of ordinary
shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit/loss
attributable to members, adjusted for:
_ costs of servicing equity (other than dividends) and
preference share dividends;
_ the after tax effect of dividends and interest associated
with dilutive potential ordinary shares that have been
recognised as expenses; and
_ other non-discretionary changes in revenues or expenses
during the period that would result from the dilution of
potential ordinary shares;
divided by the weighted average number of ordinary shares
and dilutive potential ordinary shares, adjusted for any bonus
element.
(r) Share-based payment transactions
(i) Equity settled transactions:
The Company provides benefits to individuals acting as, and
providing services similar to, employees (including Directors)
of the Company in the form of share-based payment
transactions, whereby individuals render services in exchange
for shares or rights over shares (‘equity settled transactions’).
There is currently an Employee Long Term Incentive Plan
(“ELTIP”) in place, which provides benefits to Directors and
individuals providing services similar to those provided by an
employee.
The cost of these equity settled transactions with employees
is measured by reference to the fair value at the date at which
they are granted. The fair value is determined by using the
binomial method (which is derived from the Black-Scholes
option pricing model but is considered more suitable for
companies which do not pay dividends), taking into account
the terms and conditions upon which the instruments were
granted, as discussed in note 18. The expected price volatility
is based on the historic volatility of the Company’s share price
on the ASX.
In valuing equity settled transactions, no account is taken of
any performance conditions, other than conditions linked to
the price of the shares of Highfield Resources Limited (‘market
conditions’).
The cost of the equity settled transactions is recognised,
together with a corresponding increase in equity, over the
period in which the performance conditions are fulfilled,
ending on the date on which the relevant employees become
fully entitled to the award (‘vesting date’).
The cumulative expense recognised for equity settled
transactions at each reporting date until vesting date reflects (i)
the extent to which the vesting period has expired and (ii) the
number of awards that, in the opinion of the Directors of the
Company, will ultimately vest. This opinion is formed based on
Financial Report
57
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders the best available information at balance date. No adjustment is
made for the likelihood of the market performance conditions
being met as the effect of these conditions is included in the
determination of fair value at grant date. The charge or credit
to profit or loss for a period represents the movement in
cumulative expense recognised at the beginning and end of
the period.
No expense is recognised for awards that do not ultimately
vest, except for awards where vesting is conditional upon a
market condition. Where the terms of an equity settled award
are modified, as a minimum an expense is recognised as if
the terms had not been modified. In addition, an expense is
recognised for any increase in the value of the transaction as
a result of the modification, as measured at the date of the
modification.
Where an equity settled award is cancelled, it is treated as if
it had vested on the date of the cancellation, and any expense
not yet recognised for the award is recognised immediately.
However if a new award is substituted for the cancelled award,
and designated as a replacement award on the date that it is
granted, the cancelled and new award are treated as if they
were a modification of the original award, as described in the
previous paragraph.
The cost of equity-settled transactions with non-employees
is measured by reference to the fair value of goods and
services received unless this cannot be measured reliably,
in which case the cost is measured by reference to the fair
value of the equity instruments granted. The dilutive effect, if
any, of outstanding options is reflected in the computation of
earnings/loss per share (refer to note 6).
(ii) Cash settled transactions:
The Company may also provide benefits to employees in
the form of cash-settled share-based payments, whereby
employees render services in exchange for cash, the amounts
of which are determined by reference to movements in the
price of the shares of the Company.
The cost of cash-settled transactions is measured initially
at fair value at the grant date using the binomial method
taking into account the terms and conditions upon which the
instruments were granted. This fair value is expensed over
the period until vesting with recognition of a corresponding
liability. The liability is remeasured to fair value at each balance
date up to and including the settlement date with changes in
fair value recognised in profit or loss.
(s) Critical accounting estimates and
judgements
The application of accounting policies requires the use of
judgements, estimates and assumptions about carrying values
of assets and liabilities that are not readily apparent from other
sources. The estimates and associated assumptions are based
on historical experience and other factors that are considered
to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions are recognised in the period in which
the estimate is revised if it affects only that financial period, or
in the period of the revision and future periods if the revision
affects both current and future periods.
58
Financial Report
Exploration and evaluation expenditure
The application of the Group’s accounting policy for exploration
and evaluation expenditure requires judgment in determining
whether future economic benefits are likely either from future
exploitation or sale or where activities have not reached a
stage which permits a reasonable assessment of the existence
of reserves. The determination of a Joint Ore Reserves
Committee (JORC) resource is itself an estimation process
that requires varying degrees of uncertainty depending on sub-
classification and these estimates directly impact the point of
deferral of exploration and evaluation expenditure. The deferral
policy requires management to make certain estimates
and assumptions about future events or circumstances, in
particular whether an economically viable extraction operation
can be established. Estimates and assumptions made may
change if new information becomes available.
Share-based payment transactions
The Company measures the cost of equity-settled transactions
and cash-settled share-based payments with employees
and third parties by reference to the fair value of the equity
instruments at the date at which they are granted. The fair
value of the options at the grant date is determined using
the binomial method taking into account the terms and
conditions upon which the instruments were granted and the
assumptions detailed in note 18.
(t) New and amended standards adopted by
the Group
No new or amended standards were adopted by the Group
during the period.
(u) New standards and interpretations not yet
adopted
A number of new standards, amendments to standards
and interpretations issued by the AASB which are not yet
mandatorily applicable to the Group have not been applied
in preparing these consolidated financial statements. Those
which may be relevant to the Group are set out below. The
Group does not plan to adopt these standards early.
_ AASB 9 Financial Instruments and associated Amending
reporting period
for annual
Standards
commencing 1 January 2018)
(applicable
The Standard will be applicable retrospectively and
includes revised requirements for the classification and
measurement of financial instruments, revised recognition
and derecognition requirements for financial instruments
and simplified requirements for hedge accounting. Key
changes made to this standard that may affect the Group
on initial application include certain simplifications to the
classification of financial assets, simplifications to the
accounting of embedded derivatives, and the irrevocable
election to recognise gains and losses on investments in
equity instruments that are not held for trading in other
comprehensive income. The Directors anticipate that the
adoption of AASB 9 will not have a material impact on the
Group’s financial statements.
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders _ AASB 15 Revenue from Contracts with Customers
(applicable to annual reporting periods commencing on or
after 1 January 2018).
When effective, this Standard will replace the current
accounting requirements applicable to revenue with a
single, principles-based model. Except for a limited number
of exceptions, including leases, the new revenue model in
AASB 15 will apply to all contracts with customers as well
as non-monetary exchanges between entities in the same
line of business to facilitate sales to customers and potential
customers.
The core principle of the Standard is that an entity will
recognise revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for the goods or services. To achieve this objective,
AASB 15 provides the following five step process:
- identify the contract(s) with a customer;
- identify the performance obligations in the contract(s);
- determine the transaction price;
- allocate the transaction price to the performance
obligations in the contract(s); and
- recognise revenue when (or as) the performance
obligations are satisfied.
This Standard will require retrospective restatement, as well
as enhanced disclosures regarding revenue. The Directors
anticipate that the adoption of AASB 15 will not have a
material impact on the Group’s revenue recognition and
disclosures.
_ AASB 16 Leases (applicable to annual reporting periods
commencing on or after 1 January 2019).
AASB 16 removes the classification of leases as either
operating leases or finance leases for the lessee, effectively
treating all leases as finance leases. Short term leases (less
than 12 months) and leases of a low value are exempt from
the lease accounting requirements. Lessor accounting
remains similar to current practice. The Directors anticipate
that the adoption of AASB 16 will not have a material impact
on the Group’s financial statements.
_ Other standards not yet applicable
There are no other standards that are not yet effective and
that would be expected to have a material impact on the
Group in the current or future reporting periods and on
foreseeable future transactions.
Financial Report
59
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders 3. EXPENSES
Professional and consultants’ fees
Consulting and Directors’ fees
Corporate advisory fees
Legal fees
Other
31 December 2017
(6 months)
$
30 June 2017
(12 months)
$
(302,622)
(39,079)
(29,680)
(53,529)
(424,910)
(973,073)
(15,329)
(124,644)
(91,658)
(1,204,704)
4. AUDITOR’S REMUNERATION
The auditor of Highfield Resources Limited is HLB Mann Judd (WA Partnership)
Amounts received or due and receivable by the parent auditor for:
- an audit or review of the financial report
30,000
38,000
The auditor of Geoalcali SL is Bové Montero Y Asociados, an affiliate firm of HLB International
Amounts received or due and receivable by the subsidiary auditor for:
- an audit or review of the financial report
5. INCOME TAX
a) Income tax expense
Major component of tax expense for the year:
Current tax
Deferred tax
30,036
60,036
24,334
62,334
-
-
-
-
-
-
(b) Numerical reconciliation between aggregate tax expense recognised in the statement of
profit or loss and other comprehensive income and tax expense calculated per the statutory
income tax rate.
A reconciliation between tax expense and the product of accounting loss before income tax multiplied by the Company’s applicable
tax rate is as follows:
Loss from continuing operations before income tax expense
Tax at the Australian rate of 27.5%
Share-based payments
Non-deductible expenses
Non-assessable income
Income tax benefit not brought to account
Income tax expense
60
Financial Report
(469,661)
(129,157)
86,517
19,166
(533,007)
556,481
-
(7,081,884)
(1,947,518)
578,667
-
-
1,368,851
-
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
(c) Deferred tax
The following deferred tax balances have not been bought to account:
Liabilities
Total exploration and evaluation expenditure
Offset by deferred tax assets
Deferred tax liability recognised
Assets
31 December 2017
(6 months)
$
30 June 2017
(12 months)
$
-
-
-
-
-
-
Losses available to offset against future taxable income
9,189,951
9,091,323
Share issue costs deductible over five years
Accrued expenses
Deferred tax assets offset against deferred tax liabilities
Net deferred tax asset not recognised
(d) Unused tax losses
Unused tax losses
Potential tax benefit not recognised at 27.5%
The benefit for tax losses will only be obtained if:
-
-
-
-
-
-
9,189,951
9,091,323
33,418,005
9,189,951
33,059,358
9,091,323
i. the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the
deductions for the losses to be realised;
ii. the Company continues to comply with the conditions for deductibility imposed by tax legislation; and
iii. no changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the losses.
The balances in notes 5(c) and 5(d) for the current period include the losses available to offset against future taxable income for
the Company’s Spanish subsidiary as well as for the Company itself. The comparative information for the year ended 30 June
2017 has been amended to be consistent with the current period.
6. LOSS PER SHARE
Loss used in calculating basic and diluted EPS
(469,661)
(7,081,884)
Weighted average number of ordinary shares used in calculating basic loss per share
329,225,003
319,455,861
Effect of dilution:
Share options
-
-
Adjusted weighted average number of ordinary shares used in calculating diluted loss per share
329,225,003
319,455,861
Number of Shares
There is no impact from 51,007,221 options outstanding at 31 December 2017 (30 June 2017: 44,675,000) on the earnings per
share calculation because they are anti-dilutive. These options could potentially dilute basic EPS in the future. There have been no
transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares
or potential ordinary shares outstanding between 31 December 2017 and the date of completion of these financial statements.
Financial Report
61
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
7. CASH AND CASH EQUIVALENTS
Reconciliation of cash
Cash at bank
Reconciliation of operating loss after tax to net cash flow from operations
Loss after tax
Non-cash and non-operating items in operating loss after tax:
Share-based payments
Net (gain)/loss on foreign exchange
Depreciation
Change in assets and liabilities
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
8. OTHER RECEIVABLES
Current
GST receivable
VAT receivable
Other
Non-current
Guarantees
31 December 2017
(6 months)
$
30 June 2017
(12 months)
$
65,576,728
69,559,873
(469,661)
(7,081,884)
314,606
(1,933,428)
60,392
412,299
372,494
(1,243,298)
39,686
80,660
668,946
789,292
70,899
70,899
2,104,245
1,713,584
122,697
440,888
(1,078,615)
(3,779,085)
23,233
466,096
783,444
1,272,773
-
-
GST/VAT receivable and other receivables are non-interest bearing and generally receivable on 30 day terms. They are neither
past due nor impaired. The amount is fully collectible. Due to the short term nature of these receivables, their carrying value is
assumed to approximate their fair value. Other receivables mainly represent guarantees provided to third parties.
62
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
9. PROPERTY, PLANT AND EQUIPMENT
Cost
Accumulated depreciation and impairment
Net carrying amount
Movements in Plant & Equipment:
Opening balance
Additions
Net exchange differences on translation
Depreciation charge for the period
Closing balance
31 December 2017
(6 months)
$
30 June 2017
(12 months)
$
533,543
(378,547)
154,996
203,378
6,608
5,402
(60,392)
154,996
511,185
(307,807)
203,378
326,009
50,512
(50,446)
(122,697)
203,378
10. DEFERRED EXPLORATION AND EVALUATION EXPENDITURE
Exploration and Evaluation phase - at cost
Opening balance
Exploration and evaluation expenditure incurred during the period
Net exchange differences on translation
Closing balance
86,742,052
5,455,341
1,892,827
94,090,220
63,022,168
23,804,905
(85,021)
86,742,052
The ultimate recoupment of costs carried forward for exploration and evaluation expenditure is dependent on the successful
development and commercial exploitation or sale of the respective mining areas.
11. TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accruals
844,665
33,789
1,795,763
2,674,217
903,595
16,852
592,603
1,513,050
Trade payables, other payables and accruals are non-interest bearing and generally payable on 30 day terms. Due to the short term
nature of these payables, their carrying value is assumed to approximate their fair value.
Financial Report
63
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
12. ISSUED CAPITAL
(a) Issued and paid up capital
Issued and fully paid
(b) Movements in ordinary shares on issue
31 December 2017
(6 months)
$
30 June 2017
(12 months)
$
172,399,841
172,399,841
31 December 2017
(6 months)
30 June 2017
(12 months)
Number of shares
$
Number of shares
$
Opening Balance
329,225,003
172,399,841
310,825,003
166,353,807
Shares issued upon conversion of unlisted options1
Transaction costs on share issue
-
-
-
-
18,400,000
-
6,085,000
(38,966)
329,225,003
172,399,841
329,225,003
172,399,841
1 December 2017
_ No shares were issued during the six months ended 31 December 2017.
June 2017
_ 4,000,000 shares were issued upon conversion of unlisted options exercisable at $0.20, expiring on 19 October 2016.
_ 4,400,000 shares were issued upon conversion of unlisted options exercisable at $0.20, expiring on 1 November 2016.
_ 1,100,000 shares were issued upon conversion of unlisted options exercisable at $0.30, expiring on 31 January 2017.
_ 7,000,000 shares were issued upon conversion of unlisted options exercisable at $0.40, expiring on 31 May 2017.
_ 500,000 shares were issued upon conversion of unlisted options exercisable at $0.60, expiring on 31 January 2017.
_ 500,000 shares were issued upon conversion of unlisted options exercisable at $0.60, expiring on 30 June 2017.
_ 900,000 shares were issued upon conversion of unlisted options exercisable at $0.75, expiring on 30 June 2018.
(c) Ordinary shares
The Company does not have authorised capital nor par value in respect of its issued capital. Ordinary shares have the right to
receive dividends as declared and, in the event of a winding up of the Company, to participate in the proceeds from sale of all
surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle their holder to one
vote, either in person or proxy, at a meeting of the Company.
(d) Capital risk management
The Company’s capital comprises share capital and reserves less accumulated losses amounting to a net equity of $158,013,443
at 31 December 2017. The Company manages its capital to ensure its ability to continue as a going concern and to optimise returns
to its shareholders. The Company was ungeared at period end and not subject to any externally imposed capital requirements.
Refer to note 17 for further information on the Company’s financial risk management policies.
64
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
(e) Share Options
As at the date of this report there were 51,007,221 unissued ordinary shares under options. The details of the options are as
follows:
Number
3,350,000
9,500,000
750,000
4,000,000
4,832,221
1,500,000
5,350,000
17,175,000
4,550,000
51,007,221
Exercise Price $
$0.75
$0.75
$1.00
$1.25
$1.34
$1.85
$1.85
$2.00
$2.50
Expiry Date
30 June 2018
11 September 2018
30 June 2018
30 June 2018
30 June 2025
30 June 2024
18 November 2024
30 June 2019
30 June 2019
No option holder has any right under the options to participate in any other share issue of the Company or any other entity. The
following options were issued during the six month period:
_ 4,832,221 options with an exercise price of $1.34, expiring on 30 June 2025
_ 1,500,000 options with an exercise price of $1.85, expiring on 30 June 2024
No options were exercised or lapsed during the six month period.
For full details refer to note 18.
(f) Performance Shares
As at 30 June 2017 there were 50,000,000 Class B performance shares on issue. On 18 October 2017 all Class B performance
shares lapsed without having met the conditions for conversion. For full details refer to note 13.
Financial Report
65
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
13. RESERVES
Share-based payments reserve
Foreign exchange translation reserve
Option premium reserve
Performance share reserve
Movements in Reserves
Share-based payments reserve
Opening balance
Share-based payments expense
Closing balance
31 December 2017
(6 months)
$
30 June 2017
(12 months)
$
19,809,466
2,817,669
1,000
-
19,494,860
919,557
1,000
-
22,628,135
20,415,417
19,494,860
314,606
19,809,466
17,390,615
2,104,245
19,494,860
The share-based payment reserve is used to record the value of equity benefits provided to Directors and executives as part of
their remuneration and non-employees for their goods and services. Refer to note 18 for further details of the securities issued
during the six months ended 31 December 2017.
Foreign exchange translation reserve
Opening balance
Foreign exchange translation difference
Closing balance
919,557
1,898,112
2,817,669
201,485
718,072
919,557
The foreign exchange differences arising on translation of foreign controlled entities are taken to the foreign exchange translation
reserve.
Option premium reserve
Opening balance
Issue of unlisted options
Closing balance
1,000
-
1,000
The option premium reserve is used to record the amount received on the issue of unlisted options.
Performance share reserve
Opening balance
Movement in the period
Closing balance
-
-
-
1,000
-
1,000
-
-
-
The performance share reserve was used to record the value of performance shares issued to KCL shareholders for the acquisition
of the Company’s Spanish potash projects at $0.23 per share based on the Directors’ assessment of the likelihood of the
performance shares being converted to ordinary shares. All Class A performance shares were converted in 2015. The remaining
balance at 30 June 2015 of $11,500,000 represented 50,000,000 Class B performance shares issued at $0.23 per share on the
basis that they would be converted to ordinary shares upon the receipt, to the reasonable satisfaction of Highfield of all referral
approvals required to construct and operate a 500,000 tonne per annum potash mine on the Project (including all required
government approvals, water and energy contracts necessary to operate the mine) prior to 18 October 2017, being the expiry date
of the performance shares.
During the year ended 30 June 2016 a fair value adjustment was made to reduce the performance share reserve balance to nil,
based on the Directors’ assessment that the Class B performance shares were unlikely to be converted. On 18 October 2017 all
Class B performance shares lapsed without having met the conditions for conversion.
66
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
14. ACCUMULATED LOSSES
Movements in accumulated losses were as follows:
Opening balance
Loss for the period
Closing balance
31 December 2017
(6 months)
$
30 June 2017
(12 months)
$
(36,544,872)
(469,661)
(37,014,533)
(29,462,988)
(7,081,884)
(36,544,872)
15. DIRECTORS AND OTHER KEY MANAGEMENT PERSONNEL DISCLOSURES
Remuneration of Directors and Other Key Management Personnel
Details of the emoluments of the Directors and other key management personnel of the Company for the period are as follows:
Short term employee benefits
Share-based payments
Total
1,546,274
385,969
1,932,243
2,168,421
767,643
2,936,064
Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling
the major activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Group.
16. RELATED PARTY DISCLOSURES
(a) Key management personnel
Please refer to note 15 “Directors and Other Key Management Personnel Disclosures”.
(b) Subsidiaries
The consolidated financial statements include the financial statements of Highfield Resources Limited and the subsidiaries listed
in the following table:
Name of Entity
KCL Resources Limited
Geoalcali SL
Equity Holding
Country of Incorporation
31 December
2017
30 June 2017
Australia
Spain
100%
100%
100%
100%
Financial Report
67
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
17. FINANCIAL RISK MANAGEMENT
Exposure to foreign currency risk, credit risk, liquidity risk and interest rate risk arises in the normal course of the Company’s
business. The Company uses different methods as discussed below to manage risks that arise from these financial instruments.
The objective is to support the delivery of the financial targets while protecting future financial security.
(a) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The
Company manages liquidity risk by maintaining sufficient cash facilities to meet the operating requirements of the business and
investing excess funds in highly liquid short term investments. The responsibility for liquidity risk management rests with the
Board of Directors.
Alternatives for sourcing future capital needs include the Company’s cash position and the issue of equity instruments, as well as
debt financing. These alternatives are evaluated to determine the optimal mix of capital resources for capital needs. The Directors
expect that present levels of liquidity along with future capital raising will be adequate to meet expected capital needs.
Maturity analysis for financial liabilities
Financial liabilities of the Company comprise trade and other payables.
(b) Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial
instruments. The Company’s exposure to market risk for changes to interest rate risk relates primarily to its earnings on cash and
term deposits. The Company manages the risk by investing in short term deposits.
By 30 June 2017 the Company had converted substantially all of its cash and cash equivalents into Euros, being the primary
currency in which it expects to make expenditure for the development of the Muga Mine. As a result the Company’s interest
income decreased from $2.4m in the year ended 30 June 2016 to $0.2m in the year ended 30 June 2017 and only $7,470 in the
six months ended 31 December 2017, reflecting the fact that interest rates on Euro balances are negligible.
Interest rate sensitivity
The following table demonstrates the sensitivity of the Company’s statement of profit or loss and other comprehensive income
to a reasonably possible change in interest rates, with all other variables constant.
Increase 75 basis points
Decrease 75 basis points
Effect on Post Tax Loss ($)
Increase/(decrease)
Effect on Equity incl. accumulated
losses ($) Increase/(decrease)
31 December 2017
(6 months)
30 June 2017
(12 months)
31 December 2017
(6 months)
30 June 2017
(12 months)
14,407
(7,470)
23,431
(23,431)
14,407
(7,470)
23,431
(23,431)
A sensitivity of 75 basis points has been used as this is considered reasonable given the current level of both short term and
long term Australian Dollar interest rates. The change in basis points is derived from a review of historical movements and
management’s judgement of future trends.
(c) Credit Risk Exposures
Credit risk represents the risk that the counterparty to the financial instrument will fail to discharge an obligation and cause the
Company to incur a financial loss. The Company’s maximum credit exposure is the carrying amounts on the statement of financial
position. The Company holds financial instruments with credit worthy third parties. At 31 December 2017, 99% of the Company’s
cash and cash equivalents were held in financial institutions with a rating from Standard & Poors of AA or above (long term). The
Company had no past due or impaired debtors as at 31 December 2017.
68
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders (d) Foreign Currency Risk
The Company undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations
arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the balance date
expressed in Australian dollars were as follows:
Euro
US dollars
GB pounds
Canadian dollars
Total
Liabilities ($)
Assets ($)
31 December 2017
30 June 2017
31 December 2017
30 June 2017
2,245,829
1,373,424
63,723,750
66,888,789
58,315
12,277
170,232
2.486.653
56,583
7,796
-
12,733
13,059
-
-
-
-
1,437,803
63,736,483
66,901,848
The monetary assets and liabilities in the table above for the current period include the balances of the Company’s Spanish
subsidiary as well as for the Company itself. The comparative information for the year ended 30 June 2017 has been amended to
be consistent with the current period.
Foreign currency sensitivity analysis
The Company is exposed to Euro currency fluctuations. The following table details the Group’s sensitivity to a 10% increase and
decrease in the Euro against the Australian dollar on the above foreign currency denominated monetary assets and liabilities,
expressed in Australian dollars.
31 December 2017
Profit or loss
Other equity
30 June 2017
Profit or loss
Other equity
(e) Fair Value
Euro Movement
Increase ($)
Decrease ($)
6,805,535
6,805,535
7,273,783
7,273,783
(5,568,165)
(5,568,165)
(5,951,277)
(5,951,277)
The carrying amounts of current receivables and current payables are considered to be a reasonable approximation of their fair
value. The Company did not hold any financial instruments measured at fair value at 30 June 2017 or 31 December 2017. During
the year ended 30 June 2017 the Company incurred a realised loss of $1,931,736 as a result of closing a foreign exchange
derivative used to hedge against the risks associated with foreign currency fluctuations.
Financial Report
69
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
18. SHARE-BASED PAYMENTS
Share-based payment transactions recognised as operational expenses in the Consolidated Statement of Profit or Loss and Other
Comprehensive Income during the period were as follows:
Options granted during the period
Options granted in prior periods
31 December 2017
(6 months)
$
119,318
195,288
314,606
30 June 2017
(12 months)
$
1,775,100
329,145
2,104,245
The Company previously operated an employee share option plan (“ESOP”). Under this plan executive officers, employees and
eligible contractors of Highfield Resources Limited were granted options and could nominate a relative or associate to receive
the options. On 18 November 2016, the Company’s shareholders approved a new equity incentive plan known as ´Highfield
Resources Limited Employee Long Term Incentive Plan’ (“ELTIP”) and the issue of securities under the ELTIP. Subject to the
attainment of performance hurdles and vesting conditions participants in this plan may receive options. The objective of this plan
is to assist in the recruitment, reward, retention and motivation of senior managers and consultants. The fair value at grant date of
options granted during the period was determined using the binomial method, as described in note 2(r), taking into account the
exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share and the
risk free interest rate for the term of the option.
The table below summarises options granted during the six months ended 31 December 2017:
Grant Date
Expiry date
Exercise price
13/12/2017
30/06/2025
13/12/2017
18/11/2024
$1.34
$1.85
Number at
start of the
period
Granted
during the
period
Exercised
during the
period
Lapsed during
the period
Number at
end of the
period
Exercisable
at end of the
period
-
-
4,832,2211
1,500,0002
6,332,221
-
-
-
-
-
4,832,221
1,500,000
6,332,221
-
-
-
1 Comprises 1,820,654 and 800,703 options granted as part of the Managing Director’s and the Chief Financial Officer’s respective
incentive based remuneration packages, and 2,210,864 other options granted under the Employee Long Term Incentive Plan.
The options will vest on satisfaction of the following Vesting Conditions during the three year vesting period commencing on 1
July 2017 and ending on 30 June 2020:
(a) Market Based Performance:
50% of the options will be assessed for vesting based upon the Company’s relative share price performance at the start of
the vesting period, being the 20 day Volume Weighted Average Price (VWAP) of the Company’s shares immediately preceding
1 July 2017, to the closing price of the Company’s shares at the conclusion of the vesting period, being the 20 day VWAP
immediately preceding 30 June 2020, versus the performance of the S&P/ASX 300 Resources Index (XKR) for the same period,
in accordance with a defined scale as follows:
_ Below 10% of index performance = nil vesting;
_ Between -10% and (0%) of index performance = vests 2.5% per 1% so “at index” 25% vests; and
_ Above index performance = vests at 3% per 1% so at 25% above index 100% vests; and
(b) Total Shareholder Return (TSR):
50% of the options will be assessed for vesting based upon the Company’s TSR from the opening price of the Company’s
shares at the start of the Vesting Period to the closing price of the Company’s shares at the conclusion of the vesting period.
The performance measure is absolute performance based on compound annual growth rate achieved in TSR. The proportion
of the TSR Options that vests into shares will be determined in accordance with the following vesting scale:
_ Zero to 10% = vests at 3% per 1% so at 10% TSR 30% vests;
_ Above 10% = vests at 7% per 1% so at 20% TSR 100% vests.
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Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
2 Represents options granted to advisors in recognition of past and future contributions. The options will vest on satisfaction of
the following Vesting Conditions during the three year vesting period commencing on 1 July 2016 and ending on 30 June 2019:
(a) Market Based Performance:
50% of the options will be assessed for vesting based upon the Company’s relative share price performance at the start of
the vesting period, being the 20 day Volume Weighted Average Price (VWAP) of the Company’s shares immediately preceding
1 July 2016, to the closing price of the Company’s shares at the conclusion of the vesting period, being the 20 day VWAP
immediately preceding 30 June 2019, versus the performance of the S&P/ASX 300 Resources Index (XKR) for the same
period, in accordance with a defined scale as follows:
_ Below 10% of index performance = nil vesting;
_ Between -10% and (0%) of index performance = vests 2.5% per 1% so “at index” 25% vests; and
_ Above index performance = vests at 3% per 1% so at 25% above index 100% vests;
(b) Total Shareholder Return (TSR):
50% of the options will be assessed for the vesting based upon the Company’s TSR from the opening price of the Company’s
shares at the start of the Vesting Period to the closing price of the Company’s shares at the conclusion of the vesting period.
The performance measure is absolute performance based on compound annual growth rate achieved in TSR. The proportion
of the TSR Options that vests into shares will be determined in accordance with the following vesting scale:
_ Zero to 10% = vests at 3% per 1% so at 10% TSR 30% vests;
_ Above 10% = vests at 7% per 1% so at 20% TSR 100% vests.
The model inputs for options granted during the six months ended 31 December 2017 included:
a) options were granted for no consideration;
b) expected lives of the options range from 6.9 to 7.6 years;
c) share price at grant date was $0.90;
d) expected volatility was 50%;
e) expected dividend yield of Nil; and
f) a risk free interest rate of 2.2%.
Financial Report
71
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders The table below summarises options granted during the year ended 30 June 2017:
Grant Date
Expiry date
Exercise price
15/08/2016
30/06/2019
18/11/2016
18/11/2024
18/11/2016
30/06/2019
28/04/2017
18/11/2024
$2.50
$1.85
$2.00
$1.85
Number at
start of the
period
Granted
during the
period
Exercised
during the
period
Lapsed during
the period
Number at
end of the
period
Exercisable
at end of the
period
-
-
-
-
3,850,0001
3,000,0002
2,000,0003
2,830,0002
11,680,000
-
-
-
-
(50,000)
3,800,000
3,000,000
-
-
2,000,000
2,000,000
-
-
(480,000)
2,350,000
-
(530,000)
11,150,000
2,000,000
1 Employees were granted 3,850,000 options exercisable at $2.50 each on or before 30 June 2019:
(a) 3,050,000 options vested on 30 June 2017.
(b) 750,000 options will vest on the earlier of 30 June 2018 (provided that the optionholder remains in their capacity as an
employee of the Company on this date) and the occurrence of a change of control event.
(c) 50,000 options lapsed during the period.
2 Employees were granted 5,830,000 options, exercisable at $1.85 each on or before 18 November 2024, of which 480,000
options lapsed during the period. The remaining options will vest on satisfaction of the following Vesting Conditions during the
three year vesting period commencing on 1 July 2016 and ending on 30 June 2019:
(a) Market Based Performance:
50% of the options will be assessed for vesting based upon the Company’s relative share price performance at the start of the
vesting period, being the 20 day Volume Weighted Average Price (VWAP) of the Company’s shares immediately preceding 1 July
2016, to the closing price of the Company’s shares at the conclusion of the vesting period, being the 20 day VWAP immediately
preceding 30 June 2019 versus the performance of the S&P/ASX 300 Resources Index (XKR) for the same period, in accordance
with a defined scale as follows:
_ Below 10% of index performance = nil vesting;
_ Between -10% and (0%) of index performance = vests 2.5% per 1% so “at index” 25% vests;
_ Above index performance = vests at 3% per 1% so at 25% above index 100% vests;
(b) Total Shareholder Return (TSR):
50% of the options will be assessed for the vesting based upon the Company’s TSR from the opening price of the Company’s
shares at the start of the Vesting Period to the closing price of the Company’s shares at the conclusion of the vesting period. The
performance measure is absolute performance based on compound annual growth rate achieved in TSR.
The proportion of the TSR Options that vest into shares will be determined in accordance with the following vesting scale:
_ Zero to 10% = vests at 3% per 1% so at 10% TSR 30% vests;
_ Above 10% = vests at 7% per 1% so at 20% TSR 100% vests.
3 Directors were granted 2,000,000 options, exercisable at $2.00 each on or before 30 June 2019. No vesting conditions apply.
The model inputs for options granted during the six months ended 31 December 2017 included:
a) options were granted for no consideration;
b) expected lives of the options range from 2.6 to 8.0 years;
c) share price at grant date ranged from $1.06 to $1.42;
d) expected volatility ranging from 36% to 57%;
e) expected dividend yield of Nil; and
f) a risk free interest rate ranging from 1.75% to 2.09%.
72
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
19. GEOGRAPHIC SEGMENT ANALYSIS
(a) Revenue – Interest Received
Australia
Spain
(b) Non-current Assets
Australia
Spain
31 December 2017
(6 months)
$
7,470
-
7,470
30 June 2017
(12 months)
$
198,888
-
198,888
-
94,321,640
94,321,640
-
86,950,790
86,950,790
20. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD
There have been no significant events after the reporting period requiring disclosure in this report.
21. CONTINGENT ASSETS AND LIABILITIES
There are no known contingent assets or liabilities as at 31 December 2017 (June 2017: Nil).
22. DIVIDENDS
No dividend was paid or declared by the Company in the six months ended 31 December 2017 or the period since the end of the
six months financial period and up to the date of this report. The Directors do not recommend that any amount be paid by way of
dividend for the six months ended 31 December 2017.
23. GEOALCALI FOUNDATION
As part of its Community Engagement Program, the Company established a not-for-profit Spanish foundation called the Geoalcali
Foundation (“Foundation”). The Foundation is supported exclusively by Geoalcali and since its inauguration in September 2014 has
been involved in over 70 community projects.
24. COMMITMENTS
At 31 December 2017, the Group had entered into a number of contracts as part of the development of the Muga Potash Project
located in Spain. The expected payments in relation to these contracts which were not required to be recognised as liabilities at
31 December 2017 amounted to approximately $20.3m. The contracts are able to be terminated by the Company at any point in
time. The minimum amount payable following termination is approximately $1.0m.
Financial Report
73
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
25. PARENT ENTITY INFORMATION
The following information relates to the parent entity, Highfield Resources Limited, at 31 December 2017 and for the six months
then ended. The information presented here has been prepared using consistent accounting policies with those presented in
note 2.
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Total Equity
Profit/(loss) of the parent entity
Other comprehensive income for the period
Total comprehensive income/(loss) of the parent entity
31 December 2017
$
65,018,756
157,587,556
(311,507)
(311,507)
30 June 2017
$
69,083,472
156,302,756
(75,247)
(75,247)
157,276,049
156,227,509
172,399,841
19,810,466
(34,934,258)
157,276,049
31 December 2017
(6 months)
$
733,934
-
733,934
172,399,841
19,495,860
(35,668,192)
156,227,509
30 June 2017
(12 months)
$
(6,313,792)
-
(6,313,792)
74
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
Directors’ Declaration
In accordance with a resolution of the Directors of Highfield Resources Limited, I state that:
1. In the opinion of the Directors:
a) the financial statements and notes of Highfield Resources Limited for the six months ended 31 December 2017 are in
accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the Group’s financial position as at 31 December 2017 and of its performance for the period
ended on that date; and
ii. complying with Accounting Standards (including the Australian Accounting Interpretations), the Corporations Regulations
2001 and other mandatory professional reporting requirements; and
b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(b).
2. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
3. This declaration has been made after receiving the declaration by the Managing Director and the Chief Financial Officer
required to be made in accordance with sections of 295A of the Corporations Act 2001 for the six months ended 31 December
2017.
On behalf of the Board
Peter Albert
Managing Director and Chief Executive Officer
Pamplona, Spain
23 March 2018
Financial Report
Financial Report
75
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders 76
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Auditor’s Independence Declaration
Financial Report
77
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Independent Auditor’s Report
78
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Financial Report
79
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders 80
Financial Report
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Financial Report
81
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders ASX Additional
Information
82
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders 83
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Additional information required by the Australian Securities Exchange Ltd and not shown elsewhere in this report is as follows.
The information is current at 14 March 2018.
DISTRIBUTION OF SHARE HOLDERS
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001- and over
TOTAL
Ordinary Shares
Number of Holders
Number of Shares
209
422
349
865
212
2,057
104,788
1,338,751
2,842,054
29,703,885
295,235,525
329,225,003
There were 85 holders of ordinary shares holding less than a marketable parcel.
TOP TWENTY SHARE HOLDERS
The names of the twenty largest holders of quoted equity securities are listed below:
Name
J P MORGAN NOMINEES AUSTRALIA LIMITED
MR. WARREN WILLIAM BROWN + MRS. MARILYN HELENA BROWN
WWB INVESTMENTS PTY LTD
W W B INVESTMENTS PTY LTD
DEREK CARTER + CARLSA CARTER
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BRING ON RETIREMENT LTD
BNP PARIBAS NOMS PTY LTD
MR. DANIEL EDDINGTON + MRS. JULIE EDDINGTON
CELTIC CAPITAL PTE LTD
MR. CRAIG PETER BALL + MRS. SUZANNE KATHERINE BALL
CITICORP NOMINEES PTY LIMITED
MR. MICHAEL ANDREW WHITING + MRS. TRACEY ANNE WHITING
JONERIC PTY LTD
JAWAF ENTERPRISES PTY LTD
WOOTOONA INVESTMENTS PTY LIMITED
DORICA NOMINEES PTY LTD
KANBAH PTY LTD
PETER DAVID FERGUSON PTY LTD
HGT INVESTMENTS PTY LTD
84
ASX Additional Information
Number of shares
136,688,552
15,921,550
11,850,000
7,728,450
7,721,504
7,119,202
5,826,397
4,119,558
3,870,000
3,600,000
3,292,384
2,926,606
2,715,718
2,701,076
2,250,000
2,150,538
2,150,000
1,900,000
1,855,000
1,750,000
%
41.52
4.84
3.60
2.35
2.35
2.16
1.77
1.24
1.18
1.09
1.00
0.89
0.82
0.82
0.68
0.65
0.65
0.58
0.56
0.53
228,136,535
69.30
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
SUBSTANTIAL SHAREHOLDERS
The following table shows holdings of five per cent or more of voting rights in Highfield Resources Limited’s shares as notified to
the Company under the Australian Corporations Act 2001, Section 671B as at 14 March 2018.
Title of class
Registered holder of securities
Identity of person or group
Date of last
notice
Number
owned
Percentage
of total voting
rights2
Ordinary Shares
JP Morgan Nominees Australia Limited
EMR Capital Investment (No. 2) Pte Ltd1
15/05/2015
104,038,875
Ordinary Shares
JP Morgan Nominees Australia Limited
AustralianSuper Pty Ltd1
28/07/2017
16,524,841
Ordinary Shares
Various holders
W W B Investments Pty Ltd1
08/11/2017
35,500,000
31.60%
5.02%
10.79%
1Being the group listed and its associated entities
2 The percentages quoted are based on the total voting rights conferred by ordinary shares in the Company as at 14 March 2018
of 329,225,003
UNLISTED OPTIONS
Class
Number
Holders with more than 20%
Options over ordinary shares exercisable at $0.75 on or before 30 June 2018
3,350,000 Bentley Capital Limited 800,000 options
Options over ordinary shares exercisable at $0.75 on or before 11 September 2018
9,500,000
John Claverley 2,500,000 options
Ernest Hall 2,000,000 options
Options over ordinary shares exercisable at $1.00 on or before 30 June 2018
750,000 Kien Huynh 300,000 options
Options over ordinary shares exercisable at $1.25 on or before 30 June 2018
4,000,000
Options over ordinary shares exercisable at $2.00 on or before 30 June 2019
17,175,000
Bentley Capital Limited 1,000,000 options
Michael Schlumpberger 1,500,000 options
JAWAF Enterprises Pty Ltd
4,000,000 options
Options over ordinary shares exercisable at $2.50 on or before 30 June 2019
4,550,000 Bentley Capital Limited 1,000,000 options
Options over ordinary shares exercisable at $1.85 on or before 18 November 2024
5,350,000 Sonedala Albert 2,000,000 Options
Options over ordinary shares exercisable at $1.34 on or before 30 June 2025
4,832,221 Sonedala Albert 1,420,654 Options
Options over ordinary share exercisable at $1.85 on or before 30 June 2024
1,500,000
Isaac Querub 1,000,000 Options
Sixto Jimenez 500,000 Options
ASX Additional Information
85
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders ON-MARKET BUY BACK
There is no current on-market buy back.
VOTING RIGHTS
All ordinary shares carry one vote per share without restriction. Options have no voting rights.
USE OF PROCEEDS
In accordance with listing rule 4.10.19, the Company confirms that it has used cash and assets in a form readily convertible to cash
in a way consistent with its business objectives during the six months ended 31 December 2017.
86
ASX Additional Information
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders Izaga
Izaga
Izaga
Vipasca
Vipasca
Muga
Muga
Muga
Muga
Muga
Pintanos
Pintanos
Pintanos
SCHEDULE OF TENEMENTS
Highfield’s Spanish potash projects are located in the Ebro potash producing basin in Northern Spain. Details are shown in the
table below.
Project
Region
Permit Name
Permit Type Applied
Granted
Ref#
Area Km2 Holder
Structure
Sierra del Perdón Navarra
Quiñones
Investigation 19/07/2011
07/08/2012
35760
Sierra del Perdón Navarra
Adiós
Investigation 19/07/2011
07/08/2012
35770
Sierra del Perdón Navarra
Ampliación de Adiós
Investigation 26/10/2012
14/02/2014
35880
Navarra
Girardi
Investigation 28/04/2015
26/01/2017
35950
Navarra
Osquia
Investigation 28/04/2015
12/01/2017
35970
Navarra
Palero
Investigation 12/05/2017
Pending
36000
Navarra
Vipasca
Investigation 06/11/2013
11/12/2014
35900
Navarra
Borneau
Investigation 28/04/2015
12/01/2017
35960
Geoalcali SL 100%
Geoalcali SL 100%
Geoalcali SL 100%
Geoalcali SL 100%
Geoalcali SL 100%
Geoalcali SL 100%
Geoalcali SL 100%
Geoalcali SL 100%
32,48
75,60
40,90
148,98
38,57
57,42
11,76
107,75
38,92
80,33
119,25
Navarra
Goyo
Investigation 19/07/2011
24/12/2012
35780
27,72
Geoalcali SL 100%
Navarra
Goyo Sur
Investigation 25/07/2014
Pending
35920
8,96
Geoalcali SL 100%
Aragón
Fronterizo
Investigation 21/06/2012
05/02/2014
Z-3502/N-3585 9,80
Geoalcali SL 100%
Aragón
Muga
Investigation 29/05/2013
07/04/2014
3500
20,40
Geoalcali SL 100%
Aragón
Muga Sur
Investigation 25/09/2014
Pending
3524
Aragón
Molineras 10
Investigation 20/11/2012
06/03/2014
3495/10
Aragón
Molineras 20
Investigation 19/02/2013
Pending
3495/20
Aragón
Puntarrón
Investigation 08/05/2014
Pending
3510
Geoalcali SL 100%
Geoalcali SL 100%
Geoalcali SL 100%
Geoalcali SL 100%
7,28
74,16
18,20
16,80
30,24
65,24
Total
515,38
ASX Additional Information
87
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders
Project locations are shown in the following map*.
*The potential quantity and grade of the Exploration Target is conceptual in nature and there has been insufficient exploration to estimate a Mineral
Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource
88
ASX Additional Information
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders IMPORTANT INFORMATION AND DISCLAIMERS
Forward Looking Statements
This Report includes certain ‘forward looking statements’. All statements, other than statements of historical fact, are forward
looking statements that involve various risks and uncertainties. There can be no assurances that such statements will prove
accurate, and actual results and future events could differ materially from those anticipated in such statements. Such information
contained herein represents management’s best judgment as of the date hereof based on information currently available. The
company does not assume any obligation to update any forward looking statement.
Competent Person Statement
The Review of Operations contained within this annual report was prepared by Mr. Peter Albert, CEO and Managing Director
of Highfield Resources. The information in this document that relates to Ore Reserves, Mineral Resources, Exploration Results
and Exploration Targets is based on information prepared by Mr. José Antonio Zuazo Osinaga, Technical Director of CRN, S.A.,
Managing Director of CRN, S.A. and Mr. Manuel Jesús Gonzalez Roldan, Geologist of CRN, S.A. Mr. José Antonio Zuazo Osinaga
is a licensed professional geologist in Spain, and is a registered member of the European Federation of Geologists, an accredited
organization to which the Competent Person (CP) under JORC Code Reporting Standards must belong in order to report Exploration
Results, Mineral Resources, Ore Reserves or Exploration Targets through the ASX. Mr. José Antonio Zuazo Osinaga has sufficient
experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is
undertaking to qualify as a CP as defined in the 2012 Edition of the JORC Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves.
89
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders 90
Highfield Resources Limited 31 December 2017 Annual Report to Shareholders