Highfield Resources Ltd
Annual Report 2019

Plain-text annual report

Annual Report 31 December 2019 highfieldresources.com.au ABN 51 153 918 257 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders Contents Corporate Directory Letter from the Chairman and Acting CEO 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 Page 2 4 9 45 83 84 85 86 87 88 111 112 113 119 1 Corporate Directory Directors Company Secretary Registered Office & Mr. Richard Crookes Mr. Donald Stephens Principal Place of Business Non-Executive Chairman and Acting Chief Executive Officer Ms. Pauline Carr Independent Non-Executive Director Mr. Roger Davey Independent Non-Executive Director Mr. Jim Dietz Independent Non-Executive Director Mr. Brian Jamieson Non-Executive Director Mr. Isaac Querub Independent Non-Executive Director 169 Fullarton Road DULWICH, SA 5065 Telephone +61 8 8133 5000 Facsimile +61 8 8431 3502 Website highfieldresources.com.au 2 2 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersShare Registry Auditor Stock Exchange Advanced Share Registry Pty Ltd Pricewaterhouse Coopers 110 Stirling Highway NEDLANDS, WA 6009 Telephone +61 8 9389 8033 Facsimile +61 8 9389 7871 Level 11/70 Franklin Street ADELAIDE, SA 5000 Telephone +61 8 8218 7000 Facsimile +61 8 8218 7999 Australian Securities Exchange (Home Exchange: Perth, Western Australia) ASX Code HFR 3 3 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersLetter from the Chairman and Acting CEO Dear Shareholders, 2019 marked my first year as Chairman of your Company, having been elected at last year’s AGM in May 2019 following the retirement of Derek Carter, your founding Chairman. Of course, I have been a director of Highfield Resources since 2013, so I am no stranger to the Company and our stakehol- ders, however the role of the Chair has felt like an important step-up for me personally. I have received greater contact from shareholders and much closer interaction with our CEO, as well as developing more significant relationships with the Non-Executive directors. To all, I would like to thank you for your continual support and encouragement. I couldn’t have wished for a better start, with the award of our long-awaited and critical environmental approval (Declaración de Impacto Ambiental or DIA) for the Muga Project in June 2019, just two weeks into the job. The credit for this though is not mine, but belongs to our outstanding team in Pamplona, led superbly by our then CEO, Peter Albert and ably supported by his predominantly Spanish team. Special mention must go to Ricardo Perez, Head of External Relations, for his tireless efforts to deliver this outcome, a result of his excellent communications and relationships with all the relevant approval authorities developed over several years. Ricardo in turn is supported by an excellent team and in addition, all the technical departments must be also congratulated for their detailed contributions to the permitting submissions. The next important milestone is to secure the Mining Concession and we are well advanced in this process, having submitted all documentation to the Authorities on 13 March 2020. The award of the DIA was a defining achievement for the Company. Although always anticipated, it was nonetheless a tremendous outcome which demonstrated to all stakehol- ders the Company’s commitment to social, environmental 4 Highfield Resources Limited 31 December 2019 Annual Report to Shareholdersand technical excellence for the Muga Project and mine. The in Vipasca to continue to prove up the potash potential in authorities in Madrid as well as those in Aragón and Navarra this tenement abutting Muga. In 2020 we anticipate brin- are commended for their diligence and commitment in as- ging this work together and updating our Resources and sisting the Company in achieving an outcome with excellent Reserves at Muga-Vipasca. During the year we also comple- and sustainable ESG outcomes. In 2019, we also made significant improvements to the de- sign of the mine, especially in the process plant. As a conse- quence of the environmental permit requirements, we have improved environmental outcomes by advancing the engi- neering of the vacuum salt device as well as the backfilling facility. These units have been successfully integrated into the overall plant design yielding improved recoveries and project financial outcomes. In making these achievements, we have been working in close co-operation with some of the best international technical expertise available in the potash industry, out of Germany. ted closure activities on some tenements which demonstra- ted little economic potential and then released those tene- ments back to the Government. The potash sector remains an attractive place to invest, with continued strong demand growth for fertilizers and potash in particular. While we are seeing a number of new speciality sulphate of potash (SOP) projects being developed, muriate of potash (MOP), which our Muga Project will deliver, remains the dominant form of potash produced and consumed, and the supply response from the major potash producers is well managed to match global demand. This maintains our attractive forecast margins. In particular, the European MOP Part of our focus in 2019 has been to ensure that we are ex- price premium over other markets remains stable and su- tracting the best value from our exploration programme. To pports our view that Muga will be one of the best located this end, we have undertaken significant drilling campaigns and profitable potash projects in the world. This will provide “The award of the DIA was a defining achievement for the Company. Although always anticipated, it was nonetheless a tremendous outcome which demonstrated to all stakeholders the Company’s commitment to social, environmental and technical excellence for the Muga Project and mine.” 5 Highfield Resources Limited 31 December 2019 Annual Report to Shareholdersa very sound foundation for the success of a capital raising when the time comes to complete the project financing for Muga. Notwithstanding the current depressed pricing for MOP, we agree with the UK based independent commodity analysis group, CRU that markets will improve over the next few years as we move into production. Like all organisations across the world, we have been faced with the challenges of the Covid-19 virus pandemic. Highfield has been proactive in dealing with these, almost from the first mention of this as a potential global risk. The well-being of our staff is our pri- mary concern and responsibility and we have enacted robust business continuity measu- res. At the time of writing, all staff are healthy and working remotely with activity as near to normal as possible. Fortunately, as a pre-operations company, we have far fewer risks than many others. We are required to operate within the constraints of broader measu- res being imposed in Spain and may suffer the ensuing impacts and consequences. We remain confident that these measures will keep our staff safe and promote a return to business as usual within a manageable timeframe. I would finally like to acknowledge the CEO transition that will occur this year. We are sad- dened that Peter Albert decided to leave the Company, and step down from the Board, at the end of January 2020 to relocate his family back to Australia. Peter was in the role for three and a half years and was instrumental in developing a new team and a strong cor- porate culture, guided by our vision and core values, known locally as CREA (Commitment, Respect, Excellence and Attitude), as well as securing the DIA. His legacy is a strong values-based team that will continue to deliver well into the future and allow us to build a successful, sustainable potash business. We were very fortunate to have had Peter as our leader and I wish him and his family all the best for the future. Importantly Peter continues to be available as a consultant to the Company, assisting where required. The Company has engaged a global search firm to find a replacement CEO and is well advanced in its international recruitment process, and I will remain as Acting CEO until a new CEO commences. Richard Crookes Chairman and Acting Chief Executive Officer 27 March 2020 “In particular, the European MOP price premium over other markets remains stable and supports our view that Muga will be one of the best located and profitable potash projects in the world.” 6 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders 7 7 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders 8 8 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders Sustainability Report CEO letter About this section Sustainability focus Sustainability mapping Performance highlights 9 9 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersLetter from the Chairman and Acting CEO Dear Readers, This is the Group’s fifth annual report on Sustainability. It is appropriate to consider the Company’s stance in res- Today, our team is more united than ever and I would like to believe that one of the aspects key to the development of the Muga Project has been to instil in the whole team a strong commitment to our CREA core values, being Commitment, Respect, Excellence and Attitude. I am a strong advocate of the concept that navigating as a team with clearly articula- ted corporate values is the foundation for success of any business. I am convinced that our values have contributed to the development of a strong and effective team, with an unwavering commitment to high ethical, safety, social and environmental standards, capable of facing the challenges that will undoubtedly confront us in the future. Today the world is changing rapidly, accelerated by the im- pacts of climate change. The whole world faces greater cha- llenges to sustain our current environment, to turn back the clock on the negative impacts to date and to contribute to a sustainable world for future generations. Mining projects of the magnitude of Muga must be examined, implemented and monitored with the utmost rigour as we have done at Highfield. I am extremely proud of the achievements made by the team to date culminating in early June 2019 with the announcement of the DIA award, the major environmental pect of the UN’s Sustainable Development Goals which seek to encourage measures to build a sustainable world. This year, our Company has once again worked towards this vi- sion by committing to implement a large project with inte- grated initiatives that contribute to those objectives, with special emphasis on our social and natural environment. This report sets out these initiatives and highlights those that we have developed internally through our Living Values programme to embed our corporate values in our daily work. It also highlights our actions within the community, including information events such as the Open Doors event which attracted more than 400 people with whom we had the opportunity to interact and reaffirm our conviction to develop a project that respects our communities. In addi- tion, our Foundation continued to support initiatives which contribute to the well-being and development of our nearby communities. Also noteworthy, have been our efforts to rai- se awareness within our team, communities, suppliers and people in the industry regarding the importance of health and safety and to this end we organised presentations by the Central Mining Rescue Brigade, as well as school com- petitions under the heading of Safety Belongs to Everyone, But It Is My Responsibility. permit for the Muga Project. This tremendous outcome was This year the Company was a major player in the Navarra the result of years of dedicated and professional work by Government’s MinerÉtica initiative, a joint initiative with lo- the Highfield and Geoalcali team and our consultants. This cal mining industry that was undertaken to raise awareness result is a demonstration of the Group’s unwavering com- about the importance of the sector and the reality of the mitment to the highest environmental and social standards. strategic importance of projects such as Muga Mine at local, I never had any doubt that it would be achieved, nor do I regional and national levels, especially when they are being have any doubt that we will obtain the Mining Concessions developed under the highest standards of protection of the and construction permits, it is only a matter of time. environment and the community. I am confident that Muga 10 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersMine will be an international example of modern mining at the forefront of sustainability. The fertiliser industry, of which Muga will be a part, helps us to achieve the ecological transition that our planet needs. As a future potash producer, I would like to share statements from the International Fertilizer Association, that “the use of fertilisers, firstly, contributes to the forestallment of defo- restation, as they allow for increased productivity on arable land. Secondly, they also increase the carbon sequestration potential of agricultural soils by contributing to the buildup of soil organic matter. In fact, 89% of the potential for mi- tigation in the future of agriculture is based on the carbon sequestration of the soil. Carbon sequestration in cultiva- ted soils can be increased by adding organic and mineral nutrients, on the one hand, but they can also optimise the use of soil, leaving space to increase biomass production”. From a global perspective, potash is a great mineral ally in the battle against climate change. Richard Crookes Chairman and Acting Chief Executive Officer 11 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders About this Section This section sets out the highlights of our fifth sustainability re- port which comprises all sustainable activities carried out during 2019 by Highfield Resources Limited (the “Company” or “Highfield” or “Highfield Resources”) and its Spanish subsidiary Geoalcali SLU (“Geoalcali”), together “the Group”. This section is a summary of the Group´s Sustainability Report 2019 that has been prepared in accordance with the GRI Standards: Core option. GRI is an international independent organisation that helps businesses, governments and other organisations understand and communicate the impact of business on critical sustainability issues such as climate change, human rights, corruption and many others. Additionally, this year, the Group continued with the integration of the Sustainability Development Goals (“SDGs”) into its corporate re- porting by using the Business Reporting on SDGs guideline develo- ped by GRI and the United Nations Global Compact and the Basic Guide Communication on Progress of United Nations Global Compact since Geoalcali has recently submitted its application as a signatory member. These international guidelines are the most widely adopted fra- meworks and contribute to the Group’s commitment to transparency and accountability. We want to preserve our high standards in sustai- nability performance. This will require effort in all areas of the Group’s activities, and will include adopting international frameworks which provide a universal language for corporate responsibility for all busi- nesses regardless of size, complexity or location. We firmly believe that adopting these guidelines will help us assess, define, implement, measure and communicate our sustainability stra- tegy and will contribute to the Group’s long-term success. Sustainability reports offer an opportunity for our stakeholders to review the Group’s performance and to contact us with sugges- tions or comments on the content in the report. Development, im- plementation and disclosure of responsible corporate practices is key to our business. This report outlines our Sustainability Focus and our Performance Highlights which describe the main actions that have been undertaken in the following areas: Our Business, Our Environment, Our People, and Our Community, because that is how the Group articulates its Sustainability Framework. For further information visit: https://www.highfieldresources.com.au/sustainability-reports/ 12 12 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders 13 13 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersSustainability Focus “As the Chairman of the Board of Directors of Highfield Resources, I believe our duty to shareholders is to protect their investment from any potential downside risk both over the short and long-term time horizons. The best way to achieve this is to understand and manage not only technical, financial and external risk, but increasingly ESG factors, as an integrated part of the strategy and management of the Company. The overall aim is to protect and enhance project commercial value by achieving positive political and stakeholder outcomes, within a robust governance framework” Richard Crookes Chairman, Highfield Resources 14 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders Our Journey for Sustainability The Group understands that the implementation of corpo- rate sustainability strategies is critical for business suc- cess. Since its inception, the Company has implemented Environmental, Social and Governance factors by adopting a broad view of issues and impacts in order to be able to address every aspect that is key for a successful outcome. In order to understand where sustainability efforts should be concentrated, the Group undertakes internal and exter- nal analysis to identify those issues that have the biggest impact and are most relevant to the business and to stake- holders. The Group has engaged actively with its stake- holders and keeps innovating via different communication channels to maintain a constant dialogue. Identifying key environmental, social and governance issues through engagement methods for each stakeholder group has helped the Group define commitments and goals in or- der to drive the Company´s efforts towards minimising ne- gative impacts and at the same time seize opportunities to maximise benefits. These commitments and goal setting are backed up by specific systems and detailed processes that are monito- red and tracked to allow the Company to detect areas for improvement. This is summarised in the graphic below where the Group’s vision and core values form the centre of our strategy. The Group divides its sustainable focus in four main areas: Our Business, Our Environment, Our People and Our Community – these combined, form our Sustainability Framework. 15 15 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersSustainability Framework 16 16 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersVision and Values The Group’s vision is “to build a successful, sustainable, potash business with respect for stakeholders and the environment”. The vision of the Company is encompased by its core values CREA Commitment, Excellence, Respect, and Attitude which lay the foundations of the eight principles of our sustainable roadmap outlined below: 1. Integrate an ethical management that considers risk analysis to guarantee the best results for our stakeholders 2. Adopt best practices in health and safety with the aim of guaranteeing the protection of our employees and our communities 3. Ensure the best environmental results, optimising energy use and the responsible management of resources 5. Uphold the principles of diversity to ensure that equality is part of our corporate culture 6. Look for continuous improvement through measurement mechanisms with the aim of achieving excellence in all our activities 7. Always act with integrity, honesty and equanimity with all our stakeholders 4. Encourage the participation and communication of our communities to ensure that their expectations and needs are considered 8. Adopt an approach that is consistent with our vision and corporate values in our decision-making processes, as the main drivers to generate value and a sustainable outcome 17 17 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersSustainability Mapping Stakeholders Process The Group has several mechanisms in place to communicate acceptable to the majority of stakeholders, especially local with its stakeholders and will continue to do so throughout communities. The information received and the media mo- the life of the Project. At this early stage of the Project, regu- nitoring of our activities form the basis of our stakeholder lar consultation is essential to ensure that requirements are plan refinement and will contribute to continuous improve- agreed upon, and a delivery solution is negotiated that is ment of our stakeholder engagement. Material topics identified Business Development Environmental Topics Safety issues Sustainable approach 1 3 Receipt of necessary Permits 6 Water Management Anti-Corruption Measures 8 Waste Management 2 5 4 Wealth Creation 9 Restoration of the area 7 Generation of Quality Employment Ensure employee Health and Safety 10 Community Involvement Prioritise Health and Safety in the Community 18 18 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersStakeholder Type How Frequency Material Topics Local Communities Physical suggestion boxes located in the communities involved in the Project Monthly 4 7 10 Local Communities Online access through the “We want to listen to you” tab for suggestions, consultations and questions from citizens and residents of the area Daily 1 4 6 7 8 Local Communities Events and forums Twice a year 1 4 6 7 8 Local Communities Monitoring Press Daily 3 5 6 8 Town Councils Official application process Weekly 1 6 8 Town Councils Regular meetings Monthly 1 4 Town Councils Physical suggestion boxes located in the communities involved in the Project Monthly 10 Suppliers Directly involvement with relevant department Daily 1 4 7 Government Organisations Official application process and regulatory affairs Weekly 5 8 9 Non-Governmental Organisations and Local Organisations Non-Governmental Organisations and Local Organisations Non-Governmental Organisations and Local Organisations Online access through the “We want to listen to you” tab for suggestions, consultations and questions from citizens and residents of the area Daily 1 Informative events 5 6 8 10 Monitoring press Daily 1 3 5 8 Local Organisations Regular meetings Quarterly 4 7 Investors Interaction with Investor Relations Department and senior management Weekly 1 19 19 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersGoal Setting, Monitoring and Disclosing Strategic Objective Material Aspect Environmental SDGs Employee / Worker SDGs Community / Society SDGs 1 2 3 4 5 6 7 8 9 To secure all necessary environmental, construction and operating permits 1 To build and to successfully operate the first phase of the Muga Mine (0.5 Mtpa MOP) 2 4 5 6 7 8 To develop the plans and financing for the second stage of the Muga Mine (to 1 Mtpa MOP) 74 10 To build, operate and maintain a high level of workplace health and safety 2 5 To conduct our business with regard to all environmental regulations and best practice To work diligently with the various communities close to the mine to optimise our social performance and thereby secure and maintain support for Our Project To work with the various government departments and regulators in a transparent and engaging manner to secure their trust and enable them to supervise our activities appropriately To secure all necessary funding for the first phase of the Muga Project and have plans and commitments in place for the implementation of the second phase To comply fully with all pertinent legislation 86 9 3 5 6 7 8 10 2 3 5 6 98 10 4 10 2 3 5 6 8 9 1 4 7 10 10 To develop plans and studies for the potential implementation of future projects within the Group’s current tenement holding 11 To become the Employer of choice within our sector and environment 2 3 4 7 10 12 To return value to our shareholders 4 20 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersWe have incorporated international sustainability guidelines comply with Global Compact guidelines. The results of in- that help us assess and measure our performance and that corporating these principles are disclosed through our sus- have been aligned in accordance with our strategic goals. tainability reporting commitment in the standalone version The Company also supports and seeks to actively contribu- of this report. te to the achievement of the SDGs. Geoalcali has recent- ly applied to become a signatory member of the UN Global As a summary, the following graphic shows how the Company has integrated its strategic objectives, aligning them with Compact. Therefore, the Company will also incorporate the identified material topics resulting from the stakeholder the section Communication on Progress (COP) in order to engagement process and its impact on the SDGs. Strategic Objective Material Aspect Environmental SDGs Employee / Worker SDGs Community / Society SDGs 1 2 3 4 5 6 7 8 9 To secure all necessary environmental, construction and operating permits To build and to successfully operate the first phase of the Muga Mine (0.5 Mtpa MOP) To develop the plans and financing for the second stage of the Muga Mine (to 1 Mtpa MOP) To build, operate and maintain a high level of workplace health and safety To conduct our business with regard to all environmental regulations and best practice To work diligently with the various communities close to the mine to optimise our social performance and thereby secure and maintain support for Our Project To work with the various government departments and regulators in a transparent and engaging manner to secure their trust and enable them to supervise our activities appropriately To secure all necessary funding for the first phase of the Muga Project and have plans and commitments in place for the implementation of the second phase To comply fully with all pertinent legislation To develop plans and studies for the 10 potential implementation of future projects within the Group’s current tenement holding To become the Employer of choice within 11 our sector and environment 12 To return value to our shareholders 21 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersPerformance Highlights Our Business DIA Award Confirms High Environmental Standards of Muga Project Geoalcali received its environmental permit approval (DIA) in June 2019. This is one of the Company’s greatest achie- vements after a comprehensive and rigorous process that involved a vast number of stakeholders and entities which analysed the Project, evaluating environmental aspects and their impact in order to determine its compatibility with the environment. All entities and stakeholders had the oppor- tunity to put forward suggestions and the Project has in- corporated optimised measures as a result of this process. Muga Project enhancements enable a more sustainable project The Company continued working on the optimisation of the operations by bringing forward the scheduled commence- ment of the backfilling process to enhance residue mana- gement. This has resulted in the reclassification of costs for the backfilling equipment from sustaining capital to up- front capital. In addition, improvements in the process plant equipment were incorporated, as well as significant impro- vements in recovery, bringing forward production of com- mercial vacuum salt, and earlier commencement of residue management and treatment of by-products. As a result, the Muga Project will start reducing waste at a very early stage and the by-product management and commercial plan will increase the Project profitability. These technical enhancements deliver a number of value adding and improved environmental outcomes and achie- ve improved compliance with the DIA environmental permit issued by the Ministry for Ecological Transition (Ministerio para la Transición Ecológica, or “MITECO”). 22 22 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersContinuing the Development of a Sustainable Potash Business During this year the Company continued making progress as outlined below: — Completion of metallurgical test work and process plant design resulting in a recovery increase to over 90% meaning the operation will be much more efficient; — The Company signed a Non-binding Memorandum of Understanding (MOU) with Ameropa AG for the sale of up to 250,000 tonnes of MOP per annum from the Muga Potash Mine; — Continued exploration work on our Vipasca area of interest with encouraging results; — Muga Project updated to incorporate DIA environmental enhancements that included revised capital costs, operating costs and estimated financial outcomes resulting in significantly improved Project economics; — Award of a number of detailed design and construction packages; — Continued advancing the Mining Concession and the construction permits processes which are the next permits necessary to progress the Project into the construction phase; and — Continued our strong focus on ESG by engaging with multiple stakeholders to maintain continuous communications and address in an ethical manner, any area of concern. This work ensures that the Company will be prepared for the next steps of the Muga Project development. Strong Governance The Board of Directors of Highfield Resources has established high standards for the Company’s employees, officers and directors. It is the duty of the Board of Directors to oversee the management of the Company’s business and to ensure the Company as a who- le and the Company´s representatives behave in a manner that aligns with the Company´s high standard of corporate and social responsibilities. The Group periodically reviews its procedures and policies and suggests changes to ensure high ethical standards are met. This year the Code of Business Conduct and Ethics included enhancements in the Whistleblower Policy and the Continuous Disclosure Policy. The Group publishes its corporate governance policies, Code of Business Conduct and Ethics and its Board and committee charters on Highfield’s website at https://www.highfieldresources.com.au/corporate-governance/ 23 23 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersRecognitions and Awards InnovaRSE Certificate RSA 2020 certificate Receipt of the Reporting Award as a result of our efforts in implementing sustainable management Aragón Social Responsibility Seal for the fourth con- secutive year Bonus 2018 Industrial Foundation of Navarra Award The Company received the Bonus 2018, a health and The Human Resources Department of Geoalcali recei- safety recognition for having a low accident rate ved a recognition award by the Industrial Foundation of Navarra for sharing their best practices in order to achieve a ‘stronger and more competitive’ industrial community Association of Foundations of Navarra Award Award by the Association of Foundations of Navarra in the Culture Category for the Project Roman Heritage as a Tourist and Development Resource in Liédena, a tourism and cultu- ral initiative aimed at discovering and publicising the weal- th of the Roman heritage that surrounds the local area of Navarra and that, at the same time, culturally links the peo- ple with their neighbours from nearby Aragonese towns 24 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersPartnerships for the SDGs and Strengthen Industry Relationships During this year Geoalcali joined other mining companies, mining associations and the Mines Department of the Government of Navarra to raise awareness of how responsi- ble mining and minerals help us achieve a more sustainable world, by launching the MinerÉTICA forum. MinerÉTICA was part of the celebration of European Minerals Day, a European initiative to bring the minerals world closer to society. As well as distribution of information materials in Navarra, exhibitions, workshops, visits to mining activities and conferences have been programmed. Among the activities included in the forum was the inau- guration of the Company´s mineral exhibition “Essential Minerals for a Sustainable Future” in which people had the opportunity to learn about the Sustainability Development Goals and how they relate to the mineral resource industry. “Essential Minerals for a Sustainable Future” was displa- yed in the Environmental Education Museum of Pamplona (Museo de Educación Ambiental de Pamplona). Numerous organisations and institutions throughout Spain have shown interest in showcasing this exhibit, which emphasises the importance of minerals in our daily lives and the value of sustainability as the cornerstone of mining today. The inauguration event included a conference on the use of minerals in daily life delivered by Esther Lasheras, chemistry professor and head of the rock and mineral collection of the Science Museum of the University of Navarre. A mineral workshop also took place at the Environmental Education Museum, as part of the MinerÉTICA forum activi- ties. Visitors were able to learn to differentiate some of the most used minerals, their main properties and to find out in which products they are used, in a fun and educational way. The Company also worked collaboratively with the Universidad de Navarra in the organisation of the I Sustainability Forum “Mazingira” in which members of the World Business Council for Sustainable Development among other sustainability leaders shared their vision about future trends with students, mining professionals and busi- ness representatives. The Company also participated in the Social Innovation forum, organised by Más Humano Foundation, La Caixa Foundation and Caja Navarra Foundation. The Social inno- vation objective is a “speed dating” event between compa- nies and social associations to seek partnerships with the aim of support the SDGs focused on reducing inequalities and gender equality, among others. “Essential Minerals for a Sustainable Future” exhibit at Environmental Education Museum Esther Lasheras with MinerÉtica organisers Students during minerals workshop in MinerÉTICA 25 25 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersParticipation in Forums Mining Metals Hall (MMH) Seville 2019 At this international event in Sevilla, Sheila Maqueda, Geoalcali’s technical engineer of mines, presented the Design and Planning of the Muga Mine, during the techni- cal sessions organised by Cominroc, in a seminar entitled “Overview of the industrial minerals sector”. Geoalcali’s Director of External Relations, Ricardo Pérez Merino, also participated as a speaker at a roundtable dedicated to mi- ning and investment policies to discuss the social aspects of the Project. The MMH brought together more than 800 delegates, about 150 exhibitors, 70 speakers and around 6,000 visitors. Navarra with a Future Navarra with a Future is an intergenerational, intersectoral and inclusive forum that seeks to present jobs of the futu- re, that are already a reality in the most innovative compa- nies of Navarre, Spain and across the world. Javier Olloqui, Director of Human Resources of Geoalcali, participated in a one-on-one talk about employment opportunities. The Company also hosted an exhibit area for the Muga Project, which will help address the problem of depopulation in its local communities. Seminar on Industrial Minerals of Aindex (a Spanish mining association) The Company also attended the following conferences: Geoalcali contributed with a presentation titled ‘The Social Factor in the Muga Project’ to share its expe- rience in CSR with the mining engineer students of the Universidad Politécnica de Madrid. This educational forum aims to bring mining companies experiences to students throughout the different stages of the mining value chain. 121 Mining 121 Mining IFA Hong Kong London Montreal Argus Fertilizer Conference Malta IMARC 121 Mining Mines and Money Mining Journal Select Melbourne Sydney London London 26 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders 27 27 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersOur Environment Enhancing our Environmental Consciousness Staff training and awareness campaigns are fundamental so In addition, and with the aim of reducing our plastic con- that our actions are carried out under environmental pro- sumption, a policy of ceasing to purchase single-use plastic tection criteria, and that these criteria are also transferred utensils was established. to the appropriate external suppliers and consultants. One of the measures implemented was the installation of the avoidance of waste generation and secondly, on its Training plays a very important role, focusing efforts on organic waste collection on a voluntary basis, before be- recycling. ing legally required. This measure was implemented both in Geoalcali’s main office and in the Company’s core sheds in Beriain and Sangüesa. 28 28 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersStaff awareness campaigns Talks and Events Internal Communications Waste Management Strategy at Muga Mine. 7 communications in intranet “World Environmental Day”, focusing on the problem of air polution. 3 awareness posters A week long “Challenge to reduce air pollution” in which all workers proposed daily actions throughout the week, in order to raise awareness and make those actions become habits. Awareness event about Climate Change given by an external guest expert in meteorology who presents meteorological information on radio and in newspapers and magazines, as a speaker in events for National Geographic and the University of Barcelona and by presenting weather information in El País Digital, Telemadrid and TVE programme “Aquí la Tierra”. We learned the differences between climate and meteoronogy, and what Climate Change means, and discusses the impact of human activity as a factor in increasing natural climate change. 29 29 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersEffective environmental management Prior to the commencement of each field work programme, whatever its purpose or dimensions, the Geoalcali’s Environmental Department carries out, based on updated official cartography, an environmental evaluation to detect which natural elements could be affected in order to mitiga- te any potential negative impact. With regard to mining exploration drilling activities, a pre- ventive measure has been the implementation of watertight containers at the drilling site for the temporary storage of water and drilling muds until they are removed, acting as a reservoir to contain potential excess rainwater. Protocols in the event of an environmental accident Geoalcali is committed to the prevention of envi- ronmental accidents, by implementing preventive measures to minimise the environmental impact in all the Mina Muga Project phases as well as in its headquarter office and field work during explora- tion activities. However, in the event of an environmental acci- During drilling activities, platforms are prepared with wa- dent, Geoalcali has established a protocol that terproof sheets that allow for the collection of any acciden- describes the steps to be taken (Contain, Warn and tal spill of oils or saline water without these reaching the Remedy) and a directory of contacts required for ground or ground water. each situation. In addition, the earth extracted for the preparation of the site and for the excavation of the ponds is used to build a barrier under the ponds that will act as a protection barrier against liquid spills. All waste generated during the design phase and explora- tion activities are managed in accordance with the legisla- tion and delivered to authorised and official waste manage- ment entities. In the office and in its core sheds, organic waste is alre- ady being managed. Although this is not yet a legal obliga- tion in Navarra, it is a commitment to good environmental practices. 30 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersIntensified Environmental Protection Measures in Muga Project The Group understands that environmental protection is a that its actions should go beyond the immediate vicinity of fundamental pillar on which its entire business is based, not its facilities. It is therefore committed to the development of only in terms of minimising any potentially negative impacts several initiatives that, together with the international SEO/ of its industrial activity, but also in terms of conserving the Bird Life organisation, will be carried out in the area of the natural environment on which it is built and its surroundings. mine as well as more widely within the communities of in- Geoalcali understands that the protection of the ecosystems and habitats in which animal and plant species live requires terest from the start of the construction phase and will be maintained throughout the life of the mine. Monitoring and controls Water management Waste management In 2019, the Muga Mine Environ- The Muga Mine Water Management During the year the Mining Waste mental Monitoring Programme was up- System, designed under the principle Management Plan has been updated dated according to the requirements of non-contamination of the water and incorporated into the Restoration included in the DIA. The monitoring environment, has also been updated. Plan, as required by the DIA. The salt programme establishes an exhaustive The construction plan for the ramps waste volumes on surface during the control over potentially contaminating now includes specific waterproofing production phase will be lower and factors, the form of measurement, the using the jet-grouting technique to will be completely removed during the parameters measured, and the maxi- reduce drainage and therefore the vo- final restoration of the mine, with no mum thresholds established. It also lume of water stored in the plant. waste remaining on the surface after the dismantling and restoration pro- cess is finalised. serves to verify the effectiveness of the preventive actions adopted and, where necessary, to improve them or establish new measures. The process plant is designed to use water of variable salt concentration and to recirculate the process water in such a way as to minimise the use of water. During this year, a local company specialising in hydrogeology has op- timised the design of the water envi- ronment control network, which inclu- des surface and groundwater control points in the area of the Muga process plant, downstream and area of the po- tash deposit. This network provides information to detect any variation in the qualitative and quantitative para- meters of the water, ensuring appro- priate measures can be carried out as may be necessary. 31 31 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersOur Community Reinforcing our Community Engagement After the DIA award, in July 2019 the Company hosted an Later, in September 2019, the Company hosted a two-day information session in Javier, welcoming 13 mayors and 17 Open Doors information event. The Company welcomed other representatives from our local communities, as well as around 400 visitors from nearby communities. The atten- five members of public institutions. The feedback collected dees included people from local schools, retired persons during the event indicated that 97% of the attendees su- clubs, local companies, local and regional suppliers, local ci- pport the Project. Topics dealt with included water mana- tizens, mayors, government representatives and ecologists. gement, traffic and environmental monitoring. The Company had the opportunity to explain these topics as well as other queries around employment and community opportunities. The feedback collected from the community representati- ves was used to design an information event for others in the community. During the year the Company increased community partici- pation as well as positive feedback as indicated in the chart below. 2016 2017 2018 2019 H1 H2 H1 H2 H1 H2 H1 H2 In favour Not in favour No opinion but more info requested 4 0 0 0 0 0 16 54 73 31 17 97 1 3 4 25 1 4 2 5 0 0 1 7 32 32 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersZero grievances from local communities Grievance Mechanism Depopulation Exploration activities may cause issues related to The Company participated in a Depopulation theme ra- land access, environmental disturbances or po- dio programme, to discuss this issue of great relevan- tential impacts on cultural heritage or sacred sites. ce for the local communities of Muga. The programme Therefore, Geoalcali has set up a formal grievan- involved local mayors, local businessmen, government ce procedure making available, through notices in and university experts who addressed the issue with the local town councils and at drilling sites, a for- the aim of raising awareness and speeding up solutions. mal channel to address any complaint or concern. The conclusion was that employment opportunities, Geoalcali treats any such communications very se- such as those that Muga will bring to the community, riously and keeps track of the commitments it has are a key factor, but that other socio-economic and te- made in response to ensure proper stakeholder chnical developments are necessary to ensure existing engagement. The Company has also installed suggestions boxes in local town halls to ensure communications with residents and newcomers remain committed to the area for the long term. The broadcast had around 37,000 lo- cal listeners. local residents that do not have access to online Also, it is worth noting that Cederna Garalur (the rural channels. development organisation of Sangüesa) expressed its gratitude to Geoalcali as a company which demonstra- tes a spirit of continuous collaboration. Depopulation Radio Programme at Sos del Rey Católico Town Hall 33 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersSupporting the Communities’ Initiatives Through our Foundation, the Company continued su- pporting local initiatives with a special focus on Quality Education, Social Integration, Sustainable Communities and Protection of the Environment. Quality education Donation of sound equipment to the Luis Gil Public School Donation of Digital white board to the Isidoro Gil de Jaz Public School February 2019 February 2019 The Association of Fathers and Mothers of the Luis Gil The Geoalcali Foundation contributed to the acquisition School, carrying out the idea of the school’s management of a digital white board for the Isidoro Gil de Jaz Public of providing the centre with sound equipment for the School of Sos del Rey Católico. subjects of physical education, psychomotor skills, dance and body expression, conveyed this idea to the Geoalcali Foundation which supported the initiative. This initiative will aid in improving the development of classes and in- crease the number of activities carried out by the centre. The Luis Gil Public School of Sangüesa is a regional cen- tre that welcomes students not only from Sangüesa but also from nearby towns including Liédena, Yesa, Eslava, Gallipienzo, Javier, Aibar and Cáseda. Subsequently, most of the students continue their studies at the Sangüesa Institute and the IES Sierra de Leyre. The Isidoro Gil de Jaz School is located in the municipality of Sos del Rey Católico in the northwest region of the pro- vince of Zaragoza in Aragón. This area is called Altas Cinco Villas and is very close to the border with Navarra and is currently one of the most depopulated regions in Spain. 34 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersSchool transport service in Undués de Lerda September 2019 Donation of school supplies for the Babyteca October 2019 The Geoalcali Foundation maintained its support for the transportation service for children in the town of Undués de Lerda who study at the Sangüesa Institute, thus im- proving the quality of life of residents and helping working parents with children who need to travel to school. The service is also open to all residents of the town, es- pecially those of older age, in order to facilitate their daily transportation needs. Located at an altitude of 633 meters, with just over 50 registered residents, Undués de Lerda continues fighting tirelessly against depopulation, a great peril that afflicts The Geoalcali Foundation understands that the integra- tion of rural women into the workforce is a fundamental pillar for sustainable development in the region. Therefore, it continues to actively support the maintenance of the Babyteca facilities of Sos del Rey Católico, by contributing part of the costs of the school supplies which are needed to provide a proper service. The Babyteca of Sos welcomes children everyday be- tween the ages of 0 and 3 years old. There is no other service provided in the region for this age range. With 400 residents and a notably aged population, Sos seeks to maintain its own service in order to attract young families most of the towns and villages of the region. to the town. 35 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersSocial integration Sponsorship of the Conference on the Hospital Order of Saint John of Jerusalem Sponsorship of the Project Convivium Yesa August 2019 September 2019 In an effort to support local traditions and healthy habits, The Geoalcali Foundation supported this conference the Geoalcali Foundation worked jointly on the organisa- which focused on the era of splendour of the Order, its tion of training activities aimed at prevention of disease beneficial work and its military activities. and bad health and promotion of equality, creativity and This conference was organised by the City Council of imagination in the town of Yesa. Castiliscar, the Association of Friends of the Museum of The Convivium Yesa, named after the town that gives the Order of Saint John of Jerusalem, and the Castilliscar its name to the reservoir located between Navarra and “Encomienda”, historic association and was hosted by the Aragon, offers activities such as the restoration of utensils president of the Royal Academy of Fine Arts of San Luis, with great tradition and reception such as the Zezenzusko Domingo Buesa. The conference, whose attendance provided university credits to the students, featured several presentations given by experts and was inaugurated and closed, res- pectively, by the University and Culture Council of the Government of Aragón .This type of activity raises aware- ness of Aragonese heritage, as well as attracting tourism and students to a region with highly depopulation rates. or “Torico de Fuego”, a metal framework in the shape of a bull, on whose spine a frame with pyrotechnic elements is placed and in front of which children and adults run, usually during the celebration of local festivities. Financial support to the VII Edition of the Roman Festival October 2019 The Geoalcali Foundation, in its commitment to boost cultural assets in the local communities, supported the City Council of Liédena in the dissemination of its Roman heritage, including guided visits to the Museum of Santa Criz de Eslava and the Musas de Orellano. During its Roman Festival event, Liédena and its Roman villa were transformed into a stage for theatre, music, artisans, and street entertainment in a Roman ambience setting. 36 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersSustainable Communities Donation of exercise equipment to the elderly May 2019 With the help of the Geoalcali Foundation, the Liédena City Council started a series of activities during the year aimed at the physical wellbeing and health care of its residents. The Geoalcali Foundation contributed to the acquisition of exercise equipment suitable for the elderly of the town. Workshops on memory and how to age in a healthy way, as well as zumba or yoga classes, make up the majority of the activities offered and promoted by the Liédena town hall. Financial support to build a playground in Rocaforte May 2019 The Geoalcali Foundation has contributed to the cons- truction of a small playground where children can enjoy their free time, with modern swings and a slide, on a rub- ber floor which creates a safe environment for games and entertainment in this small village in the surroundings of Sangüesa. 37 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersProtection of the Environment Sponsorship of the Juan Migueliz Leyre Trail Race in aid of the reclamation of local trails October 2019 The Geoalcali Foundation collaborated with the Trotecuto Mountain Club in the recovery of two trails, which in ad- dition to being used in the Juan Migueliz Leyre Mountain Trail sports event, will be kept clear and marked for the use and enjoyment of neighbours and tourists throughout the year. The sporting event is organised by the Trotecuto Mountain Club, and takes place in a privileged landscape and cul- tural environment, as it runs through enclaves such as the Sierra de Leyre, the Foz de Arbayun and the Yesa Reservoir. With a start and finish at the Monastery of Leyre, it goes through places such as the Cañada Real de los Roncaleses, Paso del Oso and the top of Arangoiti, among others. This is one of the most popular events that bring together most of the communities of interest of Muga Mine. 38 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersVolunteer Programme: I Commit (Me Comprometo) The Group considers that fostering good relations with the community is one of the key elements to the success of its business project, but it is also aware that participating in experiences that involve helping others has a positive impact on the personal growth of each staff member. For this reason, as part of its social responsibility policy, this initiative is not only part of a purely philanthropic activity but also an initiative that generates shared value for the employee, the Company and the community. The programme was launched in December 2019 with several initiatives available to all staff throughout the year. Community Day Employees from Geoalcali and Bovis, the Company’s project management partner for the Muga Mine, voluntee- red in the decoration of a Christmas Tree of Undués de Lerda access roundabout and donated articles for the Social Services entity of Cinco Villas region of Aragón. 39 39 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersOur People Upholding Highest Standards in Ethical Performance in the Workplace During the year the Company launched its “Living Values” programme with the objective that our core values of Commitment, Respect, Excellence and Attitude will become ever more present in the daily work of all staff members, as guiding principles in their decisions and actions. All members of the staff were divided into groups and tas- ked to prepare different activities to raise awareness on how each of the values should be incorporated in our daily work. These activities included hosting talks by inspirational speakers that are living examples of each of these values: COMMITMENT Jesus Cia, founder of Josenea, an organic producer located in the Muga area that employs workers at risk of social exclusion with the aim of reincorporating them into the workforce. RESPECT self-control and respectful attitude under stressful situations even in the highest profile Alberto Undiano, a famous Spanish football referee that is publicly acknowledged for his matches. EXCELLENCE Maider Esparza, is a former olympic gymnast who faced demanding training from a very young age which successfully led her to the olympic games with the Spanish national team. ATTITUDE David Ruiz and Daniel Oteiza, local firemen helped us understand the importance of maintai- ning a positive attitude even in the most dangerous and demanding situations. The programme also included a team building day during which staff members put into practice the CREA values by interacting with team members in outdoor and indoor activities. The experiences and learnings from the Living Values pro- gramme have been included as part of the Company’s an- nual employee performance review, reflecting the importan- ce of the values in everything we do. 40 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersStriving for excellence in Work-Life Balance and Diversity Inclusion The Association of Women Entrepreneurs and Managers of Navarra (AMEDNA) held a working session in November 2019 to exchange good practices in the field of work-life balance. Geoalcali was chosen as a “Good Practice Example”. Estíbaliz García, from the Human Resources de- partment, was the guest speaker who explained the policies implemented by Geoalcali to 17 companies and entities of Navarra, including the Regional Government. Geoalcali is aware of the importance of diversity inclusion. Several activities were undertaken to raise awareness during International Women´s Day , notably hosting a video confe- rence talk by Anna Tudela, former Vice President of Diversity, Regulatory Affairs and Corporate Secretary of GoldCorp, a large Canadian gold producer and an active role model in the defence of good corporate governance practices, especially in diversity issues. The Company also contributed to #MiningTogether initiati- ve, a three-month video storytelling campaign, sponsored by Anglo American and De Beers Group to promote gender equality and inclusion in the mining sector. The Company is committed to implement initiatives to at- tract and retain female talent which currently represents 37% of the staff. “I have a very strong belief that the more balanced the gender ratio, the better the conversations we have and the better decisions we make as a team.” Number of Employees Year Female Male 2019 2018 13 12 22 21 Employee hire and turnover Two employees left the Company (1 male and 2 female) and 5 people have joined over 2019 (3 female and 2 male). A Healthier Workplace As part of integrating our core values CREA in our dai- ly work, the Company has implemented a Healthy Living programme, making fresh fruit available in the office and providing mindfulness sessions to encourage healthy life habits for a healthy workplace. The Company also supports employees who have sporting hobbies by sponsoring contests and races with a special focus on those sport events that are held in the commu- nities near Muga. An example is the “Javierada” pilgrimage, a popular Navarran tradition that is celebrated every year by parti- cipants trekking or cycling to the village of Javier. A group of Geoalcali staff took part in this initiative that is part of the cultural heritage of this region in Spain. Richard Crookes Chairman, Highfield Resources The Company has in place an Employee Benefit Programme that gives access to an extensive health insurance plan at a beneficial rate. 41 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersBuilding a Strong Safety Culture Health and safety at work are a top priority, as well as a The event highlighted the importance of the experience legal and social obligation. The Group is aware that taking and knowledge accumulated by the Central Mining Rescue its health and safety obligations seriously and promoting Brigade of Asturias, and the selflessness and social com- best practice in these aspects, at all levels, is not only key to mitment of this professional body. preventing injuries but also contributes to the development of a responsible and healthier society. The Company is also making efforts to promote a health and safety culture in the Muga communities. Several talks As part of the celebration of the World Day for Safety and in local schools were organised in order to engage with the Health at Work, Geoalcali invited the Central Mining Rescue future generations. Brigade of Asturias, a prestigious rescue group with 107 years´ experience, to address its employees. The Company and the Geoalcali Foundation also organised a Health and Safety contest titled “Are you Safe?” where all The event, under the heading of Safety Belongs to Everyone, schools in the region entered in a competition to design a But It Is My Responsibility, was attended by all the Geoalcali Health and Safety Awareness campaign. The winning school staff, as well as by former potash miners of Navarra from received financial support to invest in preventative measu- the Santa Bárbara Brotherhood in Beriain, members of the res to guarantee safe conditions in their facilities. Promoting Navarra Civil Guard Command, mining technicians from the a Health and Safety culture in our local communities is not Government of Navarra, other mining and related compa- only key to prevent injuries and illnesses, but it also contri- nies, representatives from AEMINA (Business Association of butes to the development of a more conscious and healthier Miners in Navarra), as well as representatives from munici- society for everyone. palities close to the Muga Mine Project. Mining Rescue Brigade of Asturias visits Geoalcali Health and Safety Manager, Pelayo Iglesias, in the local school of Sangüesa. 42 42 Sangüesa students participated in the Company´s contest “Are you safe?” Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersH&S Training First Aid Course (Mutua Navarra) 10 Hours training for new employees on H&S manual (2hrs. 5 employees) + 3 Hours training in H&S manual for fieldwork works to one employee Safe driving course (tecdrive) 8HRS. 13 EMPLOYEES 2HRS. 5 EMPLOYEES Programme for the improvement of the preventive culture based on “Human and Organisational Performance (HOP)” delivered by Prevencontrol. Several modules: 1. Leadership management 11hrs. 16 Employees 2. Awareness middle management 3hrs. 11 Employees 3. Workers’ awareness 6hrs. 15 Employees 4. Workshop hop 3hrs. 9 Employees 5. Operational learning workshop 6hrs. 7 Employees 6. Workshop “design thinking” 3hrs. 6 Employees *Two minor incidents were registered of employees that were either travelling to or from work ZERO ACCIDENTS* A step further in Health and Safety management During 2019, Geoalcali engaged Audinor, a specialised The audit analysed both the procedures and systems in pla- health and safety auditor with the aim of ensuring that all ce today and also assessed areas of improvements in the health and safety management systems and protocols are future protocols that will be put in place in the next phases being considered. This audit was a voluntary measure the of the development of Muga. Company established in order to achieve best practices in an area which is key for the Company´s success today and in the future. 43 43 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 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 financial year ended 31 December 2019. 44 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders Directors’ Report Directors Board Committees Interests in the Securities of the Company Results of Operations Dividends Corporate Structure Nature of Operations and Principal Activities Review of Operations Geoalcali Foundation Corporate Annual Review of Ore Reserves and Mineral Resources Corporate Governance – Resources and Reserve Calculations Significant Changes in the State of Affairs Significant Events After the Reporting Date Likely Developments and Expected Results of Operations Environmental Regulations and Performance Share Options Indemnification and Insurance of Directors and Officers Directors’ Meetings Proceedings on Behalf of Company Corporate Governance Auditor Independence and Non-Audit Services Audited Remuneration Report End of Audited Remuneration Report 45 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. Richard Crookes Non-Executive Chairman (effective 23 May 2019, previously Non-Executive Director) and Acting Chief Executive Officer, BSc (Geology), Grad Dip Applied Finance Mr. Crookes has over 30 years’ expe- rience in the resources and invest- ments industries. He is a geologist by training having worked in the in- dustry most recently as the Chief Geologist and Mining Manager of Er- nest Henry Mining in Australia (now Glencore). Mr. Crookes most recently spent six years with EMR Capital as an Investment Director and prior to that, 12 years as an Executive Di- rector 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 Fi- nance transactions. Mr. Crookes has extensive experience in Funds Ma- nagement, deal origination, evalua- tion, structuring, and execution of investment entry and exits for both private and public resources compa- nies in Australia and overseas. In the three years immediately before the end of the financial year, Mr. Crookes held two other directorships of lis- ted companies (Chairman Black Rock Mining Ltd BKT:ASX, since October 2017; Executive Director Lithium Power International Ltd LPI:ASX, sin- ce October 2018). Mr. Peter Albert Managing Director and Chief Executive Officer, BSc (Hons), EMBA, FAusIMM, MIOM3, CEng (resigned 31 January 2020) Mr. Albert has over 30 years’ expe- rience in project management, ge- neral 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 Ma- terials, 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 Con- gress. Mr. Albert was also awarded the “Mining Executive of the Year” at the 2013 Asia Mining Congress. Before joining the Company, Mr. Al- bert held CEO roles with two Hong Kong listed organisations, Jinchuan Group International Resources Com- pany and G-Resources Group. He has held leadership and senior executive roles with OZ Minerals Limited, Oxia- na Limited, Shell-Billiton (Australia), Aker Kvaerner (Australia) and Johan- nesburg Consolidated Investments (South Africa). In the three years im- mediately before the end of the six months financial period, Mr. Albert held no other directorships of any listed companies. 46 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersMs. Pauline Carr Independent Non-Executive Director, BEcon, MBA, FAICD, FCIS, FGIA oil and gas sector with Exxon Mobil. She sits on several Boards and is Chancellor of the University of South Australia. She is also Chairman of the South Australian Minerals and Energy Advisory Council. In the three years immediately before the end of the fi- nancial year, Ms. Carr held no other directorships of any listed compa- nies. Ms. Carr has over 30 years’ commer- cial experience in management, cor- porate governance and compliance, mergers and acquisitions, investor and stakeholder relations and corpo- rate restructures. She currently pro- vides business improvement, com- pliance, risk management, project management and corporate gover- nance solutions to executive mana- gement 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 Mr. Roger Davey Independent Non-Executive Director, ACSM, MSc., C.Eng., Eur.Ing., MIMMM Mr. Davey is currently a Non-Execu- tive Director of a number of mining companies in the junior mining sec- tor. He is a Chartered Mining Engineer with over 45 years’ experience in the international mining industry. Up to December 2010, he was an Assistant Director and the Senior Mining Engi- neer at N M Rothschild (London) in the Mining and Metals project finan- ce team, where for 13 years he was responsible for the assessment of the technical risk associated with all the current and prospective project loans. Prior to this his experience covered the financing, development and operation of both underground and surface mining operations in gold and base metals at senior ma- nagement and Director level in South America, Africa and the United King- dom. He is fluent in Spanish. His previous positions include Di- rector, Vice president and General Manager of Minorco (AngloGold) subsidiaries in Argentina (1994 - 1997), where he had responsibili- ty for the development of the Cerro Vanguardia, open pit gold-silver mine in Patagonia; Operations Director of Greenwich Resources plc, London (1984 - 1992), with gold interests in Venezuela, Sudan, Egypt and Austra- lia; Production Manager for Blue Cir- cle Industries in Chile (1979 - 1984); and various production roles from graduate trainee to mine manager, in Gold Fields of South Africa (1971 - 1978). Mr Davey is a graduate of the Cam- borne School of Mines, England and holds a Master of Science degree in Mineral Production Management from Imperial College, London Uni- versity. He is a Chartered Engineer (C.Eng.), a European Engineer (Eur. Ing.) and a Member of the Institute of Materials, Minerals and Mining (MIM- MM). 47 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersMr. Jim Dietz Independent Non-Executive Director, B.Eng (Chem), M.Eng (Chem) industries, primarily Mr. Dietz has over 42 years’ expe- rience in the fertiliser, chemical and petroleum 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 Nitro- gen, during his 17 year career with PotashCorp. During that time, Mr. Dietz was responsible for global ope- rations as well as Safety, Health, and Mr. Brian Jamieson Non-Executive Director, FCA, FAICD Mr. Jamieson has over 40 years’ ex- perience in the advisory, manufac- turing, resources and technology industries in Australia and offshore. He is presently Non-Executive Chair- man of ASX listed companies Meso- blast Limited and Sigma Healthcare Limited. Mr. Jamieson was a Non-Executi- ve Director of ASX listed Oxiana/OZ Minerals Limited from 2005 to 2015 and served as Chairman of Audit Risk and Compliance, Nomination and Re- muneration, and Due Diligence Com- mittees. He was a Non-Executive Director of Tatts Group Limited from 2005 to December 2017 and served as the Chairman of Audit and Risk Committee, Chairman of the Due Dili- gence Committee and member of the Remuneration Committee. He was also a Non-Executive Director of ASX listed Tigers Realm Coal from 2010 to 2015 and chaired various commi- ttees. Mr Jamieson retired from the board of Mesoblast Limited on 31 Environment performance and Pro- curement. 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 financial year, Mr. Dietz held no other directorships of any listed companies. March 2019. Mr. Jamieson was Chief Executive of Minter Ellison Melbourne from 2002- 2005. Prior to joining Minter Ellison, Mr. Jamieson was Chief Executive Officer at KPMG Australia from 1998- 2000, Managing Partner of KPMG Melbourne and Southern Regions from 1993-1998 and Chairman of KPMG Melbourne from 2001-2002. Prior to the merger of Touche Ross & Co and Peat Marwick Hungerfords to form KPMG, Mr. Jamieson was the Managing Partner for Australia for Touche Ross & Co. He has over 30 years’ experience in providing advisory and audit services to a diverse range of public and lar- ge private companies. He is also a Fellow of the Institute of Chartered Accountants in Australia and New Zealand and a Fellow of the Austra- lian Institute of Company Directors. 48 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersMr. Isaac Querub Independent Non-Executive Director Mr Querub, Master of Law and Bu- siness Administration (ICADE / Uni- versidad Pontificia de Comillas), has extensive experience in the primary sector. He was CEO of Glencore Es- paña, a company dedicated to the trading of crude oil, refined petro- leum products, nonferrous metals and minerals, coal and cereals from 1989 to 2003. He was also a member of the Asturiana de Zinc Council, CEO of Emed Mining (currently Atalaya Mi- ning) from 2012 to 2014 and is cu- rrently a partner and member of the board of Unimot in Poland, partner of Bluequest Resources AG in Swit- zerland, partner of Moka Consulting SL and partner of Andria Real Estate Investment in Spain. He is the patron of many organisations and a member of the Governing Council at the Uni- versity of Tel Aviv. COMPANY SECRETARY Mr. Donald Stephens, BA (Acc), CA (resigned February 2018), Mithril Re- sources Ltd (resigned May 2019) and Gooroo Ventures Limited (resigned January 2020). Mr. Stephens has over 25 years’ ex- perience in the accounting, mining and services industries, including 14 years as a partner of HLB Mann Judd (SA), a firm of Chartered Accoun- tants. He is a Chartered Accountant and corporate adviser specialising in small cap ASX listed entities. Mr. Stephens is a director of G Pe- tratherm Limited. Additionally, he is Company Secretary of Petratherm Limited and various other unlisted public companies. Mr. Stephens is a former director of Odin Metals Limi- ted (formerly Lawson Gold Limited) 49 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersBoard Committees Remuneration and Nomination Committee Audit, Business Risk and Compliance Committee The principal purpose of the Committee is to assist the The principle purpose of the Committee is to assist the Board in fulfilling its governance and oversight responsibili- Board in fulfilling its governance and oversight responsibi- ties in relation to remuneration practices so that they: lities relating to: — Link rewards to the creation of value for shareholders; — The integrity of financial accounting practices and — Facilitate operational excellence by attracting and re- taining talent; reporting; — Risk management; — Fairly and responsibly reward individuals having regard — Internal control framework and internal audit; to individual and Highfield targets and performance as well as industry remuneration conditions; and — External audit function; and — Comply with applicable regulatory obligations. — Compliance with the Corporations Act, ASX Listing Rules and the ASX Corporate Governance and In addition, the Committee oversees selected nomination Principles. activities so that boards within the Highfield Group compri- se individuals who are best able to discharge the responsi- bilities of directors having regard to the law and excellence in governance standards. The members of the Audit, Business Risk and Compliance Committee are Ms. Pauline Carr (Chairman), Mr. Brian Jamieson and Mr. Roger Davey. Mr. Roger Davey joined the Committee effective 1 July 2019 following Mr. Richard The members of the Remuneration and Nomination Crookes’s appointment as Chairman on 23 May 2019. Committee are Ms. Pauline Carr (Chairman), Mr. Richard Crookes and Mr. Jim Dietz. 50 Highfield Resources Limited 31 December 2019 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 Richard Crookes Pauline Carr Roger Davey Jim Dietz Brian Jamieson Isaac Querub Ordinary Shares Options – exercisable at $0.83 each on or before 30 Jun 2022 Options – exercisable at $1.29 each on or before 30 Jun 2021 - 30,000 - 50,000 - - 1,000,000 - - - - - - - 1,000,000 - 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 financial year ended 31 December 2019 was $7,526,084 (year ended 31 December 2018: $4,229,832). Dividends No dividend was paid or declared by the Company during the financial year 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 SLU (“Geoalcali”), a Spanish incorporated company which hold the Group’s three exploration projects. Nature of Operations and Principal Activities The principal activity of the Company during the financial year was mineral exploration and progressing its flagship Muga Project. 51 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersReview of Operations Highfield Resources Limited is a potash company listed on the Australian Securities Exchange with three 100% owned potash projects located in Spain´s potash producing Ebro Basin. Muga Project and Vipasca Project The Company’s flagship Muga Project is targeting the rela- confirmed the presence of potash at good grades, identif- tively shallow sylvinite beds in the Muga Project area that covers about 60km2. Mining is planned to commence at a ying the anticipated potash seams in the area and confir- ming the extension of the deposit towards the north west depth of approximately 350 metres from surface and is the- of Vipasca. V18-02 confirmed the continuity of the Vipasca refore ideal for a relatively low cost conventional mine ac- cessed via a dual decline. The Muga Project Update in October 2018 also confirmed the strategic importance of Vipasca as a potential exten- sion of the Muga Project. The Vipasca Project previously included the Vipasca permit area and the Borneau permit area to the west of the Vipasca permit. In February 2019 the Company relinquished the less prospective tenement of Borneau to focus on the higher potential Vipasca permit located adjacent to the Muga Project. Following this change the Vipasca permit, which covers approximately 27km2, is now reported with the Muga Project. The Vipasca permit is highly prospective for economic potash mineralisation, with deposit and that the mineralisation remains open towards the West. Specifically, V18-02 intersected a total of 37 me- tres of potash mineralisation including: — 4.8 metres at an average grade of 15.25% K2O from 996 metres; — 2.4 metres at an average grade of 14.18% K2O from 1119 metres; and — 8.1 metres at an average grade of 12.95% K2O from 1139 metres. V18-01 intersected a total of 1.8 metres of potash minera- lization at 9.32% K2O, confirming the continuity of the mi- neralisation towards the north-eastern edge of the Vipasca a primary focus on the deeper, higher grade, P1 and P2 po- investigation permit. tash horizons. As reported in its September Quarterly Activities Report of quarter ended 31 December 2019, with the completion of the 14 October 2019, the Company released assay analysis for holes V18-01, V18-02 and V18-041 at Vipasca. The as- drill hole V18-05. Initial visual inspection of the core from this drill hole indicates continuity of the evaporite sequence say results for holes V18-01 and V18-02 were positive and between the Muga Project and Vipasca Permit. The drilling programme at Vipasca continued during the 1Refer to relevant ASX announcement 10 October 2019, “Encouraging drill hole completed at Vipasca”. The Company confirms that it is not aware of any new information or data that materially affects the information included in the relevant market announcement. 52 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders 53 Muga Project Approvals Process Muga Project Technical Update As reported on 6 June 2019, the Company received a posi- In its March 2019 Quarterly Activities Report the Company tive Declaración de Impacto Ambiental (“DIA”) in respect of reported an updated Ore Reserves estimate for Muga, the Muga Project. This positive DIA means the Company has providing additional certainty to the Muga Project Update received the key environmental permit required to move the and confirming the technical and economic validity of the Muga Project forward. The Company continues to have constructive discussions with the authorities with regards to the Mining Concession, following the Company’s submission on 13 March 2020 of the required documentation, which was announced on 16 March 2020. The timing for the receipt of the three Mining Project. The Proved and Probable Ore Reserve was derived from the Measured and Indicated Mineral Resource relea- sed on 10 October 20181 and comprises 108.7 million ton- nes at 10.2% K2O, with a Proved Ore Reserve of 42.9 million tonnes at 10.2% K2O and a Probable Ore Reserve of 65.8 million tonnes at 10.2% K2O. Concessions from the Madrid, Navarra and Aragon mining In its Quarterly Activities Report for the quarter ended authorities cannot be confirmed with a definitive date, 30 September 2019, as well as the further clarifying in- although the positive working relationship between the formation in relation to the Muga Project released on 21 Company and the three mining authorities should assist in November 2019, the Company provided an update on the expediting these approvals. The work on other permits for construction commencement continues in parallel with the Mining Concession process. In the fourth quarter of 2019 the Company submitted its application for the relevant permits to the local water au- thority the Confederación Hidrográfica del Ebro (“CHE”). These permits are related to deviation of small rivers and other preliminary construction work associated with water improvements in terms of better technical and commer- cial outcomes, resulting from detailed test work and basic design undertaken by German engineering specialists GEA Messo GmbH and K-UTEC. Barcelona-based Grupo IDP has commenced detailed design engineering for the process plant and will work closely with engineering specialists, GEA Messo GmbH and K-UTEC, to similarly develop the enginee- ring for a timely construction start. supply to the mine site. In addition, in the same quarter As reported, engineering development continued to ad- the Company submitted all relevant power supply permit vance in line with the Project programme during the fourth documentation to the Ministries of Industry and is progres- quarter, meaning the bulk of the detailed engineering work sing the permitting and authorisations required for both is now awarded. K-Utec AG Salt Technologies continues to the temporary and permanent site electrical supplies. The progress the design for the backfilling storage and place- Company is now awaiting the issue of the administrative ment systems and will perform further test work to aid in approvals for the power supply prior to applying for the ne- the optimisation of these systems prior to design work be- cessary construction permits. ing carried out. 1Refer to relevant ASX announcement 10 October 2018, “Updated Mineral Resource Estimate – Muga Project”. The Company confirms that it is not aware of any new information or data that materially affects the information included in the relevant market announcement and that all material assumptions and technical parameters underpinning the estimate in the relevant market announcement continue to apply and have not materially changed. 54 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersSales and Marketing Update Project Financing On 11 September 2019 the Company announced the sig- The Company has continued to update its project finan- ning of a MOU for offtake from the Muga Mine with Ameropa ce syndicate with respect to the financing facility for Muga AG for the sale of up to 250,000 tonnes per annum of MOP. since receipt of the positive DIA. Highfield remains confi- Ameropa is a Swiss based agri-business highly experienced dent of securing the necessary debt and equity financing in in global production, logistics, marketing and distribution. due course, to support a final investment decision and the commencement of construction. After the end of 2019 but before the release of this report the Company also released on 6 February 2020 the sig- ning of a MOU for the offtake of a further 300,000 tonnes per annum of MOP with Keytrade AG. Keytrade is a large Swiss based agri-trader that was first established in 1997. Keytrade has substantial experience working with all types of suppliers, distributors, retailers and end-users across all fertiliser products and is active across the globe. Both MOUs will provide Highfield with an enhanced unders- tanding of the MOP market and logistical expertise. 55 55 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersPintanos Project Highfield´s 100% owned Pintanos Project abuts the Muga Project to the east and covers an area of 65km2. Depths In its Quarterly Activities Report for the quarter ended 30 September 2019 released on 14 October 2020, the Company from surface to mineralisation commence at around 500 reported that it had responded to all comments received metres. The Company is building on substantial historical during the consultation period for the award of the drilling potash exploration information which includes seven drill permit for Molineras 2, and is now waiting for the award of holes and ten seismic profiles completed in the late 1980s. the permit. 56 56 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders 57 57 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersSierra del Perdón Project Highfield´s 100% owned Sierra del Perdón (“SdP”) Project is been reached. Substantive expenditure on further explo- located south east of Pamplona and covers approximately 120km2. Sierra del Perdón is a brownfield project which pre- ration for and evaluation of mineral resources in the Adiós and Quiñones permits is planned subsequent to a positive viously hosted two potash mines operating from the 1960s outcome to the appeal. until the late 1990s producing nearly 500,000 tonnes of K60 MOP per annum. The evaporite was historically mined pri- marily 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. The Company has carefully considered the facts and cir- cumstances pertaining to the rejection, its discussions with the authorities, and the legal advice received. It has con- cluded that the continued lack of a resolution to the appeal is not a reflection on the merits of the appeal, nor does it represent a significant change with an adverse effect on The Company was advised in the fourth quarter of 2018 that the entity. The Company has concluded that the Adiós and the second three year extension application for the Adiós Quiñones permits are expected to be renewed, in the form and Quiñones permits within the Sierra del Perdón tenement of an extension, on the basis that it has strong arguments area had been rejected by the mining department of the that will result in a positive outcome to the appeal lodged Government of Navarra. The Company has obtained legal on 16 November 2018. advice and is progressing an appeal process with regards to this decision. The drill hole AA-01 carried out during the fourth quarter at Ampliación de Adiós Investigation Permit reached 422 The timing of the appeal process continues to remain un- meters. The drill hole intersected the typical potash se- certain, nonetheless, the Company remains confident of a quence of the Sierra del Perdón area. The drill hole crossed positive resolution in due course. During ongoing discus- the Carnallite member on the top of the sequence and the sions the authorities have confirmed that they are conti- Sylvinite member at the bottom. The assay result of this drill nuing to consider the appeal, but no conclusion has yet hole will be released to the market when available. 58 58 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders 5959 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersIzaga Project In February 2019 the Company relinquished the less pros- reported that a drill hole in that quarter was less prospecti- pective areas of Girardo to the north of the Osquia permit ve than expected. The Company has therefore relinquished and Palero to the west of the Osquia permit in order to focus the permit and has recorded an impairment of $0.5m in its on the more prospective Osquia permit. financial statements for the year ended 31 December 2019 In its Quarterly Activities Report for the quarter ended 31 December 2019 released on 22 January 2020, the Company in respect of deferred exploration costs. 6060 60 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersGeoalcali Foundation Corporate The Geoalcali Foundation is a not-for-profit Spanish foun- Directors dation, funded exclusively by Geoalcali. It was established to Mr. Peter Albert stepped down from his role as Chief Executive and Managing Director, and from the Board, on 31 January 2020. The Company engaged a global search firm and is well advanced in its international recruitment process. Board Chairman, Mr. Richard Crookes, is the Company’s Acting CEO until a new CEO commences. support projects in the communities in which the Company will operate its mines. Projects The Company’s community engagement programme conti- nues to be well received. The Geoalcali Foundation supports and finances projects related to its four pillars: Quality Education, Social Integration, Sustainable Communities, and Protection of the Environment. The Geoalcali Foundation currently provides ongoing support to over 10 community projects and since its establishment in September 2014 has been involved in more than 150 diffe- rent projects with town halls, social associations, foundations and scientific/agricultural organisations. The activities of the Foundation are very well known and appreciated by the local community. 61 61 Highfield Resources Limited 31 December 2019 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 2019. 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 at December 2018 and released to the ASX on 22 January 20191. The Company considers this Ore Reserve to be accurate as at 31 December 2019. Table 1: Muga Ore Reserves Summary 31 December 2019 31 December 2018 31 December 2017 Tonnes In Place (Mt) Grade K2O (%) Tonnes In Place (Mt) Grade K2O (%) Tonnes In Place (Mt) Proved Probable Total Proved & Probable 42.9 65.8 108.7 10.2% 10.2% 10.2% 42.9 65.8 108.7 10.2% 10.2% 10.2% 81.6 172.1 253.7 Grade K2O (%) 11.7% 11.4% 11.5% Highfield released an updated JORC-compliant Mineral Resource Estimate (“MRE”) to the ASX on 10 October 20182. The Company considers this MRE to be accurate as at 31 December 2019. The MRE includes all Ore Reserves shown above in Table 1. Table 2: Muga Mineral Resources Summary 31 December 2019 31 December 2018 31 December 2017 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 91.8 143.0 234.8 32.6 267.4 12.4% 12.1% 12.3% 12.9% 12.4% 91.8 143.0 234.8 32.6 267.4 12.4% 12.1% 12.3% 12.9% 12.4% 75.1 149.4 224.5 39.2 263.7 13.6% 13.3% 13.4% 13.8% 13.5% 1Refer to relevant ASX announcement 22 January 2019, “Updated Ore Reserve Estimate – Muga Project”. The Company confirms that it is not aware of any new information or data that materially affects the information included in the relevant market announcement and that all material assumptions and technical para- meters underpinning the estimate in the relevant market announcement continue to apply and have not materially changed. 2Refer to relevant ASX announcement 10 October 2018, “Updated Mineral Resource Estimate – Muga Project”. The Company confirms that it is not aware of any new information or data that materially affects the information included in the relevant market announcement and that all material assumptions and technical parameters underpinning the estimate in the relevant market announcement continue to apply and have not materially changed. 62 Highfield Resources Limited 31 December 2019 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 20151. The Company considers this MRE to be accurate as at 31 December 2019. Table 3: Sierra del Perdón Mineral Resources Summary 31 December 2019 31 December 2018 31 December 2017 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. As a result, a revised MRE was prepared and reported in the ASX Additional Information section of the Company’s annual report for the year ended 30 June 20172, as summarised in Table 4 below. The Company continues to believe the exploration potential for Pintanos remains strong and will continue exploration of the Project. The Company considers this MRE to be accurate as at 31 December 2019. Table 4: Pintanos Mineral Resources Summary 31 December 2019 31 December 2018 31 December 2017 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% - - - 70.7 70.7 - - - 11.9% 11.9% 1Refer to relevant ASX announcement 7 April 2015, “Maiden Resource Estimate for Second Project”. The Company confirms that it is not aware of any new inform- ation or data that materially affects the information included in the relevant market announcement and that all material assumptions and technical parameters underpinning the estimate in the relevant market announcement continue to apply and have not materially changed. 2Refer to relevant ASX announcement 28 September 2017, “Annual Report 2017”. The Company confirms that it is not aware of any new information or data that materially affects the information included in the relevant market announcement and that all material assumptions and technical parameters underpinning the estimate in the relevant market announcement continue to apply and have not materially changed 63 Highfield Resources Limited 31 December 2019 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 2019 31 December 2018 31 December 2017 Tonnes In Place (Mt) Grade K2O (%) Tonnes In Place (Mt) Grade K2O (%) Tonnes In Place (Mt) Grade K2O (%) Proved Probable Total Proved & Probable 42.9 65.8 108,7 10.2% 10.2% 10.2% 42.9 65.8 108.7 10.2% 10.2% 10.2% 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 2019 31 December 2018 31 December 2017 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 91.8 184.8 276.6 143.6 420.2 12.4% 11.9% 12.0% 11.7% 11.9% 91.8 184.8 276.6 143.6 420.2 12.4% 11.9% 12.0% 11.7% 11.9% 75.1 191.2 266.3 150.2 416.5 13.6% 12.7% 13.0% 12.0% 12.6% 64 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersCorporate Governance – Mineral Resources and Ore Reserves Calculations Due to the nature, stage and size of the Company’s existing calculations. However, the establishment of such a commit- operations, the Company has historically concluded that tee, at an appropriate time, remains under consideration. In there would be insufficient efficiencies or additional gover- the meantime, the Company continues to ensure that all drill nance benefits gained by establishing a separate mineral results and Mineral Resource calculations are validated by resources and ore reserves committee responsible for re- a competent, senior geologist and are reviewed and verified viewing and monitoring the Company’s processes for calcu- independently by a qualified person. In addition, the existing lating mineral resources and ore reserves and for ensuring composition of the Highfield Board of Directors includes a that the appropriate internal controls are applied to such qualified geologist. Significant Changes in the State of Affairs Significant Events After the Reporting Date There have been no significant changes in the state of An outbreak of a new strain of coronavirus, Covid-19, emer- affairs of the Group during the financial year, other than as ged after the end of the reporting period and has caused set out in this report. Likely Developments and Expected Results of Operations The Directors have excluded from this report any further in- formation 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. considerable challenges and disruption to global equity markets. While there was no material effect on the Financial Statements for the year ended 31 December 2019, the co- ronavirus outbreak is still evolving and potential future im- pacts are unable to be quantified. The Group is in the ex- ploration and evaluation phase and has not yet commenced development activities. Environmental Regulations and Performance The operations of the Company are presently sub- ject 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. 65 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersShare Options As at the date of this report there were 22,836,150 unissued ordinary shares under options. The details of the options are as follows: Number 3,000,000 1,000,000 3,221,170 1,818,171 1,622,191 4,832,221 7,342,397 22,836,150 Exercise Price $ $1.29 $0.83 $0.83 $0.83 $0.83 $1.34 $1.29 Expiry Date 30 June 2021 30 June 2022 31 December 2022 31 December 2023 31 December 2024 30 June 2025 31 December 2025 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 financial year: — 1,000,000 options with an exercise price of $0.83, expiring on 30 June 2022 — 3,221,170 options with an exercise price of $0.83, expiring on 31 December 2022 — 2,779,471 options with an exercise price of $0.83, expiring on 31 December 2023 — 2,479,867 options with an exercise price of $0.83, expiring on 31 December 2024 The following options lapsed during the financial year: — 6,850,000 options with an exercise price of $1.85, expiring on 30 June 2024 — 4,550,000 options with an exercise price of $2.50, expiring on 30 June 2019 — 17,175,000 options with an exercise price of $2.00, expiring on 30 June 2019 The following options were cancelled during the financial year: — 961,300 options with an exercise price of $0.83, expiring on 31 December 2023 — 857,676 options with an exercise price of $0.83, expiring on 31 December 2024 66 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders Indemnification and Insurance of Directors and Officers The Company has made an agreement indemnifying all the current Directors and officers of the Company and of the Directors and officers of the Company against all losses or Company’s controlled entities. The liabilities insured are liabilities incurred by each Director or officer in their capaci- damages and legal costs that may be incurred in defending ty as Directors or officers of the Company to the extent per- civil or criminal proceedings that may be brought against mitted by the Corporations Act 2001. The indemnification the officers in their capacity as officers of entities in the specifically excludes willful acts of negligence. Group. The total amount of insurance premiums paid has The Company entered into insurance policies in respect of Directors’ and Officers’ Liability Insurance contracts for not been disclosed due to confidentiality reasons. Directors’ Meetings The numbers of meetings of Directors and Committees held during the financial year and the number of meetings attended by each Director were as follows: Directors’ Meetings Remuneration and Nomination Committee Audit, Business Risk and Compliance Committee Director Derek Carter Peter Albert Pauline Carr Richard Crookes Roger Davey Jim Dietz Owen Hegarty Brian Jamieson Isaac Querub A 5 10 10 10 10 10 5 10 10 B 5 10 9 10 9 10 3 9 9 A 3 5 5 5 5 5 3 5 5 B 2* 4* 5 5 2* 5 1* 3* - A 2 6 6 6 6 6 2 6 6 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. B 1 6* 6 5 5 3* 1* 5 1* 67 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders 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 financial year. Corporate Governance In recognising the need for robust standards of corporate behaviour and accountability, the Directors of Highfield su- pport and adhere to the principles of sound corporate go- vernance. 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 exploration and 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. 68 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersAuditor Independence and Non-Audit Services Section 307C of the Corporations Act 2001 requires the Company’s auditor to provide the Directors of Highfield with an Independence Declaration in relation to the audit of the finan- cial report. A copy of that declaration is included at page 112 of the annual report. As shown in note 4, non-audit services totaling $6,000 were provided by the Company’s auditor. Audited Remuneration Report This report, which forms part of the Directors’ report, outlines the remuneration arrange- ments in place for the key management personnel (KMP) of Highfield Resources Limited for the year ended 31 December 2019. 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 exe- cutive or otherwise) of the Group. Details of Directors and Other Key Management Personnel Directors Derek Carter Independent Non-Executive Chairman (resigned 23 May 2019) Peter Albert Pauline Carr Richard Crookes Managing Director and Chief Executive Officer (resigned 31 January 2020) Independent Non-Executive Director Non-Executive Chairman (appointed 23 May 2019) and Acting Chief Executive Officer Roger Davey Independent Non-Executive Director Jim Dietz Independent Non-Executive Director Owen Hegarthy Non-Executive Director (resigned 23 May 2019) Brian Jamieson Non-Executive Director Isaac Querub Independent Non-Executive Director Key Management Mike Norris Chief Financial Officer 69 Highfield Resources Limited 31 December 2019 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 peo- ple with appropriate skills and experience. At the time of determining remuneration, con- sideration 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. The Committee and Board have established the following parameters as part of the remu- neration framework for executives: Level Short Term Incentive Long Term Incentive1 Managing Director Up to 80% of fixed remuneration 100% Corporate KPIs Up to 100% of fixed remuneration in the form of options subject to performance hurdles or vesting conditions Senior executives Up to 60% of fixed remuneration (of which up to 60% is Corporate KPIs and the remainder Personal KPIs) Up to 75% of fixed remuneration in the form of options subject to performance hurdles or vesting conditions 1 The exercise price of options is set at a premium to the share price at the date of grant, in order to provide an incentive linked to the longer term performance of the Company relative to the market. The premium for options granted during the year was 25%. In general, the participant must remain emplo- yed with the Company at the vesting assessment date of the options. Remuneration Philosophy The Company and its controlled entities aim to position themselves so that the total re- muneration paid to employees will be competitive relative to the relevant 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 remune- ration offerings remain competitive with its contemporary peer group. 70 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders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 re- levant information to the determination of all facets of remuneration relating to the KMP and senior executives. The engagement of remuneration consultants is governed by the Remuneration and Nomination Committee Charter which sets the protocols and restrictions around the inte- raction between management and the consultants with a view to minimising the risk of any undue influence occu- rring 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 formula- ting 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. 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 con- sultants. 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. 71 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersComponents of Remuneration of Other KMP and Senior Executives Total Fixed Remuneration (“TFR”) 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. At-risk remuneration Short Term Incentive (“STI”) Long Term Incentive (“LTI”) 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 has the flexibility to pay the STI in shares if it deems this is a more appropriate mechanism as befits the Company’s status at different junctures in time. The equity component of the at-risk reward opportunity, linked to the creation of shareholder value and retention. The mix of fixed and at-risk remuneration varies depending on the role and level of executive, and also depends on the perfor- mance 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 periodically 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 non-recurring extra exertion amounts where it determines such payments are warranted. The Board has determined that Mr. Crookes receive an extra exertion amount of $30,000 per month as Acting Chief Executive Officer. The aggregate remuneration for NEDs has been set at an amount not to exceed $1,000,000 per annum after the Shareholders’ approval at the general meeting held on 24 May 2018. This amount may only be increased with the approval of Shareholders at a general meeting. 72 Highfield Resources Limited 31 December 2019 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 $ 120,000 18,000 18,000 60,000 9,000 9,000 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 the senior executives reporting directly to him are also reviewed by the Committee and approved by the Board. They typically cover targets in respect of safety, permitting, finance, project delivery, investor relations and social responsibility. In addition the senior executives also have personal KPIs appropriate to their areas of responsibility. The KPIs for the year ended 31 December 2019 were assessed in accordance with the parameters set out in the Remuneration Policy section above. The STI for the Managing Director was based on 100% for corporate and strategic KPIs. The STIs for other senior executives were based on a weighting of up to 60% for corporate and strategic KPIs and the remaining percentage for personal KPIs. The level of achievement of KPIs is assessed as Threshold, Target or Stretch, whereby the KPI weighting is multiplied by 85%, 100% or 115% respectively. As a result, the KPI outcome may exceed the KPI weighting. Summary Corporate and Strategic KPI Performance For the year ended 31 December 2019 the STI corporate and strategic KPI performance outcomes for KMPs were assessed as follows: KPI Category Safety, Health, Environmental and Community Financials Project Progress Approvals Total Short Term Incentive Award Weighting for 2019 % 2019 Outcome % 10 25 25 40 100 10 - - - 10 The remuneration of the Managing Director, Peter Albert, and the Chief Financial Officer, Mike Norris, for the financial year 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 31 December 2019 for which the bonus cost was approved by the Board for payment in April 2020. The cost of the achievements of KPIs for the year ended 31 December 2019 is included as an expense in the financial statements for the year ended 31 December 2019. 73 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersLTI Performance and Outcomes for 2019 Awards granted under the Highfield Resources Limited LTI Plan consist of share options which are granted for no considera- tion 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 exercise price of options is set at a premium to the share price at the date of grant, in order to provide an incentive linked to the longer term performance of the Company relative to the market. The premium for options granted during the year was 25%. In general, the KMP must also remain employed with the Company at the vesting assessment date of the options. 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 year ended 31 December 2019 are as below: Short term Options Post-employment Base Salary $ Fees $ STI Awards1 $ Other Benefits2 $ Share- based Payments $ Super- annuation $ Prescribed Benefits $ Performance related % Total $ Year ended 31 December 2019 Directors Derek Carter (resigned 23 May 2019) - 49,087 - - - 4,663 - 53,750 - Peter Albert (resigned 31 January 2020) 716,147 - 57,512 274,904 282,527 Pauline Carr Richard Crookes Roger Davey Jim Dietz Owen Hegarty (resigned 23 May 2019) Brian Jamieson Isaac Querub Key Management Mike Norris - - - - - - - 96,000 102,500 64,500 69,000 25,000 63,014 60,000 - - - - - - - - - - - - - - - 232,200 - - - - - 430,532 - 91,370 123,959 596,871 - - - - - - 5,986 - - - 1,331,090 21% 96,000 - 334,700 69% - - - - - - - 64,500 69,000 25,000 69,000 60,000 - 1,242,732 - - - - - 48% 33% 1,146,679 529,101 148,882 398,863 1,111,598 10,649 - 3,345,772 1 The STI awards relate to the achievement of KPIs for the year ended 31 December 2019 for which the bonus cost was approved by the Board for payment in April 2020. The cost of the STI award is included in the financial statements for the year ended 31 December 2019. 2 Benefits relate to paid private accommodation and in-country residency allowance. 74 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders Details of remuneration for the year ended 31 December 2018 are shown below: Short term Options Post-employment Year ended 31 December 2018 Base Salary $ Fees $ STI Awards1 $ Other Benefits $ Share-based Payments $ Super- annuation $ Prescribed Benefits $ Performance related % Total $ Directors Derek Carter Peter Albert Pauline Carr Richard Crookes Roger Davey Jim Dietz Owen Hegarty Brian Jamieson Isaac Querub Key Management Mike Norris - 117,808 - - - 11,192 - 129,000 - 686,655 - 235,083 229,0612 186,906 - 1,337,705 14% - - - - - - - 126,0003 78,000 36,167 69,000 60,000 36,758 43,218 - - - - - - - - - - - - - - - - 158,004 - - 158,004 158,004 3,492 - - - - - - - - - - - - - - - 126,000 78,000 - - 194,171 81% 69,000 60,000 198,254 201,222 - - 80% 79% 12% 24% 410,540 - 138,748 63,7404 83,814 - 696,842 1,097,195 566,951 373,831 292,801 744,732 14,684 - 3,090,194 1 The STI awards relate to the achievement of KPIs for the year ended 31 December 2018 for which the bonus cost was approved by the Board and paid in March 2019. The cost of the STI award is included in the financial statements for the year ended 31 December 2018. 2 Benefits relate to paid private accommodation and in-country residency allowance. 3 Includes a non-recurring extra exertion payment of $30,000 awarded by the Board. 4 Benefit relates to paid private accommodation. 75 Highfield Resources Limited 31 December 2019 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 per- sonally related parties, is set out below. There were no shares granted as compensation during the year ended 31 December 2019. Year ended 31 December 2019 Directors Balance at the start of the period Granted as compensation during the period On exercise of share options Other changes during the period1 Balance at the end of the period Derek Carter (resigned 23 May 2019) 9,221,504 Peter Albert (resigned 31 January 2020) Pauline Carr Richard Crookes Roger Davey Jim Dietz Owen Hegarty (resigned 23 May 2019) Brian Jamieson Isaac Querub Key Management Mike Norris 78,000 30,000 - - 50,000 - - - - - - - - - - - - - - - - - - - - - - - - (9,221,504) - - - - - - - - - - 78,000 30,000 - - 50,000 - - - - 1 The other change during the period represents an adjustment to exclude shares held by Derek Carter as he was not a Director at the end of the period. All equity transactions with Directors and other key management personnel other than those arising from the exercise of re- muneration 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. 76 Highfield Resources Limited 31 December 2019 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 period1 Balance at the end of the period Cancelled2 Exercisable Not exercisable Year ended 31 December 2019 Directors Derek Carter (resigned 23 May 2019) 1,000,000 - Peter Albert (resigned 31 January 2020) 7,812,941 2,933,040 1,000,000 - - 1,000,000 1,000,000 1,000,000 1,000,000 2,000,000 - - - - - - - - - - - - - - (1,000,000) - - - - (3,000,000) (1,818,976) 5,927,005 1,114,064 4,812,941 (1,000,000) - - (1,000,000) - - - - - - - - 1,000,000 1,000,000 1,000,000 1,000,000 - - - - -1,000,000 1,000,000 (1,000,000) - 1,000,000 1,000,000 - - - - - - - 4,592,481 1,360,737 - (2,450,000) - 3,503,218 516,852 2,986,366 Pauline Carr Richard Crookes Roger Davey Jim Dietz Brian Jamieson Isaac Querub Key Management Mike Norris Owen Hegarty (resigned 23 May 2019) - 1 Other changes during the period represent expiry of options. 2 Options cancelled reflect the cancellation of options granted to Mr. Albert during the period which had a vesting condition of continuing employment on 31 December 2020 and 31 December 2021. Mr. Albert’s resignation on 31 January 2020 means that this vesting condition will not be fulfilled. No option holder has any right under the options to participate in any other share issue of the Company. 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 valua- tion of options, including models and assumptions used, please refer to note 18. 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 year ended 31 December 2019 other than those disclosed above. 77 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders Options Affecting Remuneration The terms and conditions of options granted during the year ended 31 December 2019 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 (resigned 23 May 2019) - - - - - - - - Peter Albert (resigned 31 January 2020) 23/05/19 1,114,064 31/12/22 $0.2536 $0.83 $282,527 1,114,064 $282,527 Pauline Carr Richard Crookes Roger Davey Jim Dietz Owen Hegarty (resigned 23 May 2019) Brian Jamieson Isaac Querub Key Management Mike Norris 23/05/19 961,300 31/12/23 $0.2940 $0.83 $282,622 23/05/19 857,676 31/12/24 $0.3219 $0.83 $276,086 - - - - - - - - - - - - 23/05/19 1,000,000 30/06/22 $0.2322 $0.83 $232,200 1,000,000 $232,200 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 21/06/19 516,852 31/12/22 $0.4011 $0.83 $207,309 516,852 $207,239 - - -2 -2 - - - - - - - - 21/06/19 445,980 31/12/23 $0.4439 $0.83 $197,971 21/06/19 397,905 31/12/24 $0.4815 $0.83 $191,591 - - - - $197,971 $191,591 5,293,777 $1,670,306 2,630,916 $721,966 $389,562 1 The value at grant date has been calculated in accordance with the models and assumptions as disclosed in note 18. 2 These options were cancelled after the end of the period because Mr. Albert’s resignation on 31 January 2020 means their vesting condition of continuing employment on 31 December 2020 and 31 December 2021 will not be fulfilled. 78 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders KMP employment arrangements The remuneration arrangements for KMP are formalised in employment agreements. These agreements provide for the pay- ment 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 was employed under an employment agreement which had no fixed term. The notice period was three months. Depending on the reason for a termination of his employment, Mr. Albert may have been entitled to severance benefits of up to 12 months’ cash remuneration (based on an average of his previous annual fixed remuneration), or other minimum severance benefits set by Spanish law, as applicable. Mr. Albert was not entitled to severance benefits nor were any paid as a result of his resignation from the Company. With effect from 1 January 2018 the weighting of Mr. Albert’s STI was changed from 75% for corporate and strategic KPIs and 25% for personal KPIs to 100% for corporate and strategic KPIs. During the year ended 31 December 2019 Mr. Albert’s total fixed remuneration was €444,834 ($716,147). During the year Mr. Albert’s base salary increased by 2.5% from €434,868 ($686,655) to €445,740, equal to $713,789 at the year end exchange rate. No changes were made to Mr. Albert’s short term or long term variable performance based incentives during the year ended 31 December 2019. 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 le- tter of appointment. The letter summarises the Board policies and terms, including compensation, relevant to the Director. The aggregate remuneration for Non-Executive Directors is set at an amount not to exceed $1,000,000 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, 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 an- nual fixed salary. During the year ended 31 December 2019 Mr. Norris’s base salary increased from €260,000 ($410,540) to €269,000 ($430,532). In addition, the Board determined that Mr. Norris be provided with a €5,000 per month in-country residency allowance, effective 1 June 2019. No other changes were made to Mr. Norris’s short term or long term variable per- formance based incentives during the year ended 31 December 2019. 79 Highfield Resources Limited 31 December 2019 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 year ended 31 December 2019 (year ended 31 December 2018: nil). Voting and Comments Made at the Company’s May 2019 Annual General Meeting Highfield Resources Limited received more than 87.65% of “yes” votes on its remuneration report for the financial year ended 31 December 2018. The Company did not receive any specific feedback at the AGM or during the current period on its remu- neration practices. Performance Measured by Loss per Share The table below shows the performance of the Company measured by loss per share: Year ended 31 December 2019 Year ended 31 December 2018 Six months ended 31 December 2017 Year ended 30 June 2017 Year ended 30 June 2016 Year ended 30 June 2015 Loss per share (cents) Share price (at period end) Share price High for the reporting period Share price Low for the reporting period (2.28) $0.68 $1.01 $0.57 (1.28) $0.64 $1.13 $0.48 (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 80 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersEnd of Audited Remuneration Report Signed on behalf of the Board in accordance with a resolution of the Directors. Richard Crookes Chairman and Acting Chief Executive Officer 27 March 2020 81 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders 82 82 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders 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 83 83 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersConsolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2019 Note 31 December 2019 $ 31 December 2018 $ Continuing Operations Gain on foreign exchange Listing and share registry expenses Professional and consultants’ fees Director and employee costs Share-based payments expense Travel and accommodation Donations Depreciation Impairment of deferred exploration and evaluation expenditure Other expenses Interest paid Loss on foreign exchange Loss before income tax Income tax expense Net loss for the period Other comprehensive income Items that may be reclassified to profit and loss Exchange differences on translation of foreign operations Other comprehensive (loss)/ income for the period net of tax Total comprehensive loss for the period Loss per share 3 18 9 10 19 - 3,239,906 (98,700) (385,351) (3,038,678) (2,334,854) (66,404) (92,464) (55,203) (493,503) (767,753) (59,452) (133,722) (76,612) (396,829) (2,435,614) (1,200,804) (74,257) (190,391) (90,095) (2,785,316) (110,379) (109,441) - (7,526,084) (4,229,832) - - (7,526,084) (4,229,832) (988,618) (988,618) (8,514,702) 3,955,046 3,955,046 (274,786) Basic and diluted loss per share (cents) 6 (2.28) (1.28) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 84 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders Consolidated Statement of Financial Position as at 31 December 2019 Current Assets Cash and cash equivalents Other receivables Total Current Assets Non-Current Assets 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 2019 $ 31 December 2018 $ 7 8 8 9 10 11 12 13 14 39,980,018 738,552 40,718,570 55,157,707 1,042,187 56,199,894 516,733 116,726 69,076 121,566 116,966,324 105,421,745 117,599,783 105,612,387 158,318,353 161,812,281 5,339,651 5,339,651 5,339,651 2,653,731 2,653,731 2,653,731 152,978,702 159,158,550 172,618,930 172,618,930 29,130,221 27,783,985 (48,770,449) (41,244,365) 152,978,702 159,158,550 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 85 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders Consolidated Statement of Changes in Equity for the year ended 31 December 2019 Year ended 31 December 2018 Issued capital $ Accumulated losses $ Share-based payments reserve $ Foreign exchange translation reserve $ Option premium reserve $ Total $ Balance at 1 January 2018 172,399,841 (37,014,533) 19,809,466 2,817,669 1,000 158,013,443 Total comprehensive loss for the period Loss for the period Other comprehensive income - foreign currency translation Total comprehensive loss for the period Transactions with owners in their capacity as owners Conversion of options Cost of issue Share-based payment - - - (4,229,832) - (4,229,832) 225,000 (5,911) - - - - - - - - 1,200,804 - 3,955,046 3,955,046 - - - - - - - - - (4,229,832) 3,955,046 (274,786) 225,000 (5,911) 1,200,804 Balance at 31 December 2018 172,618,930 (41,244,365) 21,010,270 6,772,715 1,000 159,158,550 Year ended 31 December 2019 Balance at 1 January 2019 Total comprehensive loss for the period Loss for the period Other comprehensive loss - foreign currency translation Total comprehensive loss for the period Transactions with owners in their capacity as owners Conversion of options Cost of issue Share-based payment 172,618,930 (41,244,365) 21,010,270 6,772,715 1,000 159,158,550 - - - - - - (7,526,084) - (7,526,084) - - - - - - - 2,334,854 - (988,618) (988,618) - - - - - - - - - (7,526,084) (988,618) (8,514,702) - - 2,334,854 Balance at 31 December 2019 172,618,930 (48,770,449) 23,345,124 5,784,097 1,000 152,978,702 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 86 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders Consolidated Statement of Cash Flows for the year ended 31 December 2019 Cash flows from operating activities Payments to suppliers and employees Interest paid Other receipts including GST/VAT received Net cash used in operating activities 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 Note 31 December 2019 $ 31 December 2018 $ (4,124,221) (3,125,453) (59,452) 1,048,745 (109,443) 740,234 7 (3,134,928) (2,494,662) (49,361) (57,130) (11,398,108) (11,449,984) (11,447,469) (11,507,114) - - - 225,000 (5,911) 219,089 Net decrease in cash and cash equivalents (14,582,397) (13,782,687) 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 55,157,707 (595,292) 39,980,018 65,576,728 3,363,666 55,157,707 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 87 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders Notes to the Consolidated Financial Statements for the year ended 31 December 2019 1. Corporate Information The financial report of Highfield Resources Limited (“Highfield Resources”, “Highfield” or “the Company”) for the year ended 31 December 2019 was authori- sed for issue in accordance with a resolution of the Directors on 27 March 2020. Highfield is a company limited by shares domiciled and incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The na- ture of the operations and the principal activities of the Company are described in the Directors’ Report. 88 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders2. Summary of Significant Accounting Policies a) Basis of Preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Highfield Resources Limited is a for-profit entity for the purpose of preparing the financial statements. The financial statements have also been prepared on a historical cost basis. The presentation currency is Australian dollars. b) Compliance Statement The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). c) Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries (“the Group”) at 31 December 2019 and at 31 December 2018 in the comparative period. 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. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intercom- pany transactions have been eliminated in full. Unrealised losses are also elimina- ted unless costs cannot be recovered. d) Foreign Currency Translation i) Functional currency The functional currency for each entity in the Group is the currency of the pri- mary economic environment in which that entity operates. For the Australian entities, including Highfield Resources Limited, this is Australian dollars. For the Spanish subsidiary this is Euros. ii) Transactions and balances Transactions denominated in other currencies are translated into the functional currency at the exchange rate prevailing at the date of the transaction or valua- tion where items are re-measured. Monetary assets and liabilities denominated in foreign currency are retranslated at year end exchange rates. Foreign exchange gains and losses resulting from the settlement of such tran- sactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. 89 Highfield Resources Limited 31 December 2019 Annual Report to Shareholdersiii) Presentation currency The Group’s financial statements are presented in Australian dollars. On consolidation, income statement items for each entity are translated from the functio- nal currency into Australian dollars at average rates of and amortisation of assets used in exploration and eva- luation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs where they are related directly to ope- rational activities in a particular area of interest. exchange where the average is a reasonable approxi- Exploration and evaluation assets are assessed for im- mation of rates prevailing on the transaction date. The pairment when facts and circumstances suggest that Consolidated Statement of Financial Position items the carrying amount of an exploration and evaluation are translated into Australian dollars at period end ex- asset may exceed its recoverable amount. The recove- change rates. e) Segment Reporting Operating segments are reported in a manner consis- tent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director. The Group has identified a single segment focused on development of potash mines in Spain. All of the Group’s activities are rable amount of the exploration and evaluation asset (for the cash generating unit(s) to which it has been alloca- ted being no larger than the relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revi- sed estimate of its recoverable amount, but only to the extent that the increased carrying amount does not ex- ceed the carrying amount that would have been deter- mined had no impairment loss been recognised for the interrelated and financial information is reported to the asset in previous periods. Managing Director in this manner. f) Exploration and evaluation expenditure Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an ex- ploration and evaluation asset in the period in which they are incurred where the following conditions are satisfied: Where a decision has been made to proceed with de- velopment 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. Where an area of interest is abandoned, any expenditure carried forward in respect of that area is written off. i) the rights to tenure of the area of interest are current; and g) Income Tax ii) at least one of the following conditions is also met: a) the exploration and evaluation expenditures are expected to be recouped through successful de- velopment and exploitation of the area of interest, or alternatively, by its sale; or b) exploration 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 reco- verable reserves, and active and significant ope- rations in, or in relation to, the area of interest are continuing. 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 differen- ces 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 appro- priate on the basis of amounts expected to be paid to Exploration and evaluation assets are initially measu- the tax authorities. red at cost and include acquisition of rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation 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 90 Highfield Resources Limited 31 December 2019 Annual Report to Shareholderstax rates and tax laws used to compute the amount are Unrecognised deferred income tax assets are reasses- those that are enacted or substantively enacted by the sed at each balance date and are recognised to the balance date. extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax is provided on all temporary diffe- rences at the balance date between the tax bases of Deferred income tax assets and liabilities are measured assets and liabilities and their carrying amounts for fi- at the tax rates that are expected to apply to the period nancial reporting purposes. Deferred income tax liabilities are recognised for all ta- xable 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 when the asset is recognised or the liability is settled, based on tax rates (and tax laws) that have been enac- ted 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 enti- — the taxable temporary difference is associated with ty and the same taxation authority. investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the h) Other taxes temporary difference can be controlled and it is pro- bable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets are recognised for all de- ductible 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: — the deferred income tax asset relating to the deduc- tible temporary difference arises from the initial re- cognition 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 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 taxation authority. In these circumstances the GST/VAT is recog- nised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and pa- yables in the statement of financial position are shown inclusive of GST/VAT. The net amount of GST/VAT recoverable from, or paya- ble 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 in- vesting and financing activities, which is receivable from or payable to the government, is disclosed as operating cash flows. — the deductible temporary difference is associated i) Impairment of assets with investments in subsidiaries, associates or in- terests 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 Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment available against which the temporary difference can whenever events or changes in circumstances indicate be recognised. The carrying amount of deferred in- that the carrying amount may not be recoverable. An come tax assets is reviewed at each balance date impairment loss is recognised for the amount by which and reduced to the extent that it is no longer proba- the asset’s carrying amount exceeds its recoverable ble that sufficient taxable profit will be available to amount. The recoverable amount is the higher of an allow all or part of the deferred income tax asset to asset’s fair value less costs of disposal and value in be recognised. use. For the purposes of assessing impairment, assets 91 Highfield Resources Limited 31 December 2019 Annual Report to Shareholdersare grouped at the lowest levels for which there are Provisions are measured at the present value or mana- separately identifiable cash inflows which are largely gement’s best estimate of the expenditure required to independent of the cash inflows from other assets or settle the present obligation at the end of the reporting groups of assets (cash-generating units). Non-financial period. assets other than goodwill that suffer an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. j) Cash and cash equivalents If the effect of the time value of money is material, pro- visions are discounted using a current pre-tax rate that reflects the risks specific to the liability. When discoun- ting is used, the increase in the provision due to the pas- sage of time is recognised as an interest expense. Cash comprises cash at bank and in hand. Cash equiva- lents are short term, highly liquid investments that are m) Issued capital 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. 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 attributa- For the purposes of the statement of cash flows, cash ble to the issue of new shares or options for the acqui- and cash equivalents consist of cash and cash equi- sition of a new business are not included in the cost of valents as defined above, net of outstanding bank acquisition as part of the purchase consideration. overdrafts. k) Trade and other payables Trade payables and other payables are carried at amor- tised cost and represent liabilities for goods and servi- ces provided to the Group prior to the end of the period that are unpaid and arise when the Group becomes obli- ged to make future payments in respect of the purchase of these goods and services. Trade and other payables are presented as current liabi- lities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. l) 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 em- bodying 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 con- tract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually cer- tain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. 92 n) Revenue The Group currently has no contracts with customers. Interest income is recorded using the effective interest method. o) 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 pre- ference share dividends, divided by the weighted ave- rage 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 asso- ciated with dilutive potential ordinary shares that have been recognised as expenses; and — other non-discretionary changes in revenues or ex- penses 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. Highfield Resources Limited 31 December 2019 Annual Report to Shareholdersp) Share-based payment transactions i) Equity settled transactions: The Company provides benefits to individuals acting as, and providing services similar to, employees (in- cluding Directors) of the Company in the form of sha- re-based payment transactions, whereby individuals render services in exchange for shares or rights over No expense is recognised for awards that do not ulti- mately vest, except for awards where vesting is con- ditional 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 shares (“equity settled transactions”). There is cu- modification. rrently an Employee Share Option Plan (ESOP) 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 em- ployees 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 ter- ms and conditions upon which the instruments were granted, as discussed in note 18. The expected pri- ce 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 con- ditions linked to the price of the shares of Highfield Resources Limited (“market conditions”). The cost of the equity settled transactions is recogni- sed, 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 (“ves- ting date”). The cumulative expense recognised for equity sett- led 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 ultima- tely vest. This opinion is formed based on 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 re- cognised at the beginning and end of the period. Where an equity settled award is cancelled, it is trea- ted 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-em- ployees 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 op- tions 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 refe- rence to movements in the price of the shares of the Company. The cost of cash-settled transactions is measured ini- tially 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. 93 Highfield Resources Limited 31 December 2019 Annual Report to Shareholdersq) Critical accounting estimates and judgements directly impact the point of deferral of exploration and The application of accounting policies requires the use of judgements, estimates and assumptions about carr- ying values of assets and liabilities that are not readily apparent from other sources. The estimates and asso- ciated 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 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. r) New and amended standards adopted by the Group on an ongoing basis. Revisions are recognised in the The Group adopted the following new or revised accoun- period in which the estimate is revised if it affects only ting standards in the period. that financial period, or in the period of the revision and future periods if the revision affects both current and future periods. Exploration and evaluation expenditure — AASB 16 Leases was adopted by the Group with effect from 1 January 2019. However, as the Group currently has no long term leases (more than 12 months), and as short term leases (less than 12 months), leases of a low value, and mineral leases are exempt from the The application of the Group’s accounting policy lease accounting requirements, there was no material for exploration and evaluation expenditure requires impact on the Group’s current period results nor any judgement in determining whether future economic restatement of previously reported financial results. benefits are likely either from future development or sale or where activities have not reached a stage which s) New standards and interpretations not yet adopted 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 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. 94 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders3. Expenses Professional and consultants’ fees Corporate advisory fees Legal fees Other 31 December 2019 $ 31 December 2018 $ (280,451) (27,838) (77,062) (385,351) (237,934) (52,004) (106,891) (396,829) For the year ended 31 December 2019, Director costs are reported within Director and employee costs in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. In the comparative period Director costs of $581,635 have therefore been reclassified from Professional and consultants’ fees to Director and employee costs. 4. Auditors’ Remuneration The auditor of Highfield Resources Limited is PricewaterhouseCoopers Australia “PwC” Amounts received or due and receivable by the parent auditor for: - an audit or review of the financial report - other services Remuneration of other related entities of “PwC” Amounts received or due and receivable by the subsidiary auditor for: - an audit or review of the financial report 51,276 6,000 38,000 - 29,632 86,908 29,062 67,062 95 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders 5. Income Tax a) Income tax expense Major component of tax expense for the period: Current tax Deferred tax 31 December 2019 $ 31 December 2018 $ - - - - - - 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 The tax on the Group’s loss before tax differs from the theoretical amount that would arise using the applicable tax rate prevailing in the countries in which the Group operates as follows: Loss from continuing operations before income tax expense (7,526,084) (4,229,832) Tax calculated at domestic tax rates applicable to profit/(losses) in the respective countries (2,282,815) (1,268,950) Share-based payments Non-deductible expenses Net income tax benefit not brought to account Income tax expense 86,676 1,975,790 220,349 - 170,807 117,232 980,911 - c) Deferred tax The following deferred tax balances have not been brought to account: Losses available to offset against future taxable income Net deferred tax asset not recognised 14,317,912 14,317,912 13,335,397 13,335,397 d) Unused tax losses Unused tax losses Potential tax benefit not recognised at the domestic tax rate in the respective countries The benefit for tax losses will only be obtained if: 50,269,259 44,451,323 14,317,912 13,335,397 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. 96 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders 6. Loss per Share 31 December 2019 $ 31 December 2018 $ Loss used in calculating basic and diluted EPS (7,526,084) (4,229,832) Weighted average number of ordinary shares used in calculating basic loss per share 329,525,003 329,399,387 Number of Shares Effect of dilution: Share options - - Adjusted weighted average number of ordinary shares used in calculating diluted loss per share 329,525,003 329,399,387 Basic and diluted loss per share (cents) (2.28) (1.28) There is no impact from the 22,836,150 options outstanding at 31 December 2019 (31 December 2018: 43,749,618) 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 2019 and the date of completion of these financial statements. 7. Cash and Cash Equivalents Reconciliation of cash Cash at bank 39,980,018 55,157,707 Reconciliation of operating loss after tax to net cash flow from operations Loss after tax (7,526,084) (4,229,832) Non-cash and non-operating items in operating loss after tax: Share-based payments Net (loss)/gain on foreign exchange Impairment of deferred exploration and evaluation expenditure Depreciation Change in assets and liabilities Decrease in trade and other receivables Increase in trade and other payables Net cash used in operating activities 2,334,854 133,722 493,503 55,203 (65,524) 1,439,398 1,200,804 (3,239,906) 2,785,316 90,095 537,759 361,102 (3,134,928) (2,494,662) 97 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders 8. Other Receivables Current GST receivable VAT receivable Guarantees Deposits Non-current Guarantees 31 December 2019 $ 31 December 2018 $ 47,443 653,338 - 37,771 738,552 516,733 516,733 43,629 367,744 601,836 28,978 1,042,187 69,076 69,076 GST/VAT receivable and other receivables are non-interest bearing and generally receivable on terms between 30 and 45 days. 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. Guarantees and deposits represent amounts provided to third parties. At 31 December 2019 guarantees totaling $460,686 have been reclassified from current receivables to non-current receivables 9. Property, Plant and Equipment Cost Accumulated depreciation and impairment Net carrying amount Movements in Property, Plant and Equipment Opening balance Additions Net exchange differences on translation Depreciation charge for the period Closing balance 658,279 (541,553) 116,726 121,566 51,959 (1,596) (55,203) 116,726 614,213 (492,647) 121,566 154,996 49,125 7,540 (90,095) 121,566 98 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders 10. Deferred Exploration and Evaluation Expenditure 31 December 2019 $ 31 December 2018 $ Exploration and Evaluation phase - at cost Opening balance Exploration and evaluation expenditure incurred during the period Net exchange differences on translation Impairments Closing balance 105,421,745 13,115,579 (1,077,497) (493,503) 94,090,220 10,408,122 3,708,719 (2,785,316) 116,966,324 105,421,745 The Company was advised in the fourth quarter of 2018 that the second three year extension application for the Adiós and Quiñones permits within the Sierra del Perdón tenement area had been rejected by the mining department of the Government of Navarra. The Company has obtained legal advice and is progressing an appeal process with regards to this decision. The timing of the appeal process continues to remain uncertain, nonetheless, the Company remains confident of a positive resolution in due course. During ongoing discussions the authorities have confirmed that they are continuing to consider the appeal, but no conclusion has yet been reached. Substantive expenditure on further exploration for and evaluation of mineral resources in the Adiós and Quiñones permits is planned in 2020 subsequent to a positive outcome to the appeal. The Company has carefully considered the facts and circumstances pertaining to the rejection, its discussions with the authorities, and the legal advice received. It has concluded that the continued lack of a resolution to the appeal is not a reflection on the merits of the appeal, nor does it represent a significant change with an adverse effect on the entity. The Company has concluded that the Adiós and Quiñones permits are expected to be renewed, in the form of an extension, on the basis that it has strong arguments that will result in a positive outcome to the appeal lodged on 16 November 2018. The Company’s assessment was therefore that no circumstances in accordance with paragraph 20 of AASB 6 had occurred that would indicate that the carrying amount of the exploration and evaluation expenditure for the Sierra del Perdón tenement area may exceed its recoverable amount. As indicated the Company is confident its appeal will be successful. While not its expectation, the Company believes an impairment of $13m would be appropriate in the event that the appeal were not successful. An impairment expense of $493,503 (2018: $2,785,316) was recorded in the current period in relation to the Izaga area of interest, which has been relinquished, and represents expenses previously deferred in relation to this project. 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 2,046,145 27,196 3,266,310 5,339,651 1,214,314 40,135 1,399,282 2,653,731 Trade payables, other payables and accruals are non-interest bearing and generally payable on terms between 30 and 45 days. Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value. 99 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders 12. Issued Capital a) Issued and paid up capital 31 December 2019 $ 31 December 2018 $ Issued and fully paid 172,618,930 172,618,930 b) Movements in ordinary shares on issue 31 December 2019 31 December 2018 Number of shares $ Number of shares $ Opening Balance 329,525,003 172,618,930 329,225,003 172,399,841 Shares issued upon conversion of unlisted options1 Transaction costs on share issue - - - - 300,000 - 225,000 (5,911) 329,525,003 172,618,930 329,525,003 172,618,930 1 December 2019 — No shares were issued during the year ended 31 December 2019. December 2018 — 250,000 shares were issued upon conversion of unlisted options exercisable at $0.75, expiring on 30 June 2018. — 50,000 shares were issued upon conversion of unlisted options exercisable at $0.75, expiring on 11 September 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 $152,978,702 at 31 December 2019. The Company manages its capital to ensure its ability to continue as a going concern and ultimately 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. 100 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders e) Share Options As at the date of this report there were 22,836,150 unissued ordinary shares under options. The details of the options are as follows: Number 3,000,000 1,000,000 3,221,170 1,818,171 1,622,191 4,832,221 7,342,397 22,836,150 Exercise Price $ $1.29 $0.83 $0.83 $0.83 $0.83 $1.34 $1.29 Expiry Date 30 June 2021 30 June 2022 31 December 2022 31 December 2023 31 December 2024 30 June 2025 31 December 2025 No option holder has any right under the options to participate in any other share issue of the Company. The following options were issued during the financial year: — 1,000,000 options with an exercise price of $0.83, expiring on 30 June 2022 — 3,221,170 options with an exercise price of $0.83, expiring on 31 December 2022 — 2,779,471 options with an exercise price of $0.83, expiring on 31 December 2023 — 2,479,867 options with an exercise price of $0.83, expiring on 31 December 2024 The following options lapsed during the financial year: — 6,850,000 options with an exercise price of $1.85, expiring on 30 June 2024 — 4,550,000 options with an exercise price of $2.50, expiring on 30 June 2019 — 17,175,000 options with an exercise price of $2.00, expiring on 30 June 2019 The following options were cancelled during the financial year: — 961,300 options with an exercise price of $0.83, expiring on 31 December 2023 — 857,676 options with an exercise price of $0.83, expiring on 31 December 2024 No options were exercised during the financial year ended 31 December 2019. For full details refer to note 18. 101 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders f) Summary of options granted under the Long Term Incentive (LTI) Plan Opening Balance Granted Exercised Cancelled Lapsed 31 December 2019 31 December 2018 Average exercise price per share option Number of options Average exercise price per share option Number of options $1.81 $0.83 - $0.83 $2.04 $1.19 43,749,618 9,480,508 - (1,818,976) (28,575,000) 22,836,150 $1.57 $1.29 $0.75 - $0.82 $1.81 51,007,221 10,342,397 (300,000) - (17,300,000) 43,749,618 Vested and exercisable at year end $1.02 7,221,170 $1.68 31,975,000 13. Reserves Share-based payments reserve Foreign exchange translation reserve Option premium reserve Movements in Reserves Share-based payments reserve Opening balance Share-based payments expense Closing balance 31 December 2019 $ 31 December 2018 $ 23,345,124 5,784,097 1,000 21,010,270 6,772,715 1,000 29,130,221 27,783,985 21,010,270 2,334,854 23,345,124 19,809,466 1,200,804 21,010,270 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 year ended 31 December 2019. Foreign exchange translation reserve Opening balance Foreign exchange translation difference Closing balance 6,772,715 (988,618) 5,784,097 2,817,669 3,955,046 6,772,715 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 1,000 - 1,000 The option premium reserve is used to record the amount received on the issue of unlisted options. 102 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders 14. Accumulated Losses Movements in accumulated losses were as follows Opening balance Loss for the period Closing balance 31 December 2019 $ 31 December 2018 $ (41,244,365) (7,526,084) (37,014,533) (4,229,832) (48,770,449) (41,244,365) 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 Post-employment 2,223,525 1,111,598 10,649 3,345,772 2,330,778 744,732 14,684 3,090,194 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 SLU Equity Holding Country of Incorporation 31 December 2019 31 December 2018 Australia Spain 100% 100% 100% 100% 103 Highfield Resources Limited 31 December 2019 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 these 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 where appropriate 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. The contractual maturities of all trade and other payables are less than 6 months. 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 where appropriate. The Company holds substantially all of its cash and cash equivalents in Euros, being the primary currency in which it expects to make expenditure for the development of the Muga Mine. In the year ended 31 December 2019 $566 were earned on Australian dollar balances and $60,018 were charged on Euro balances, reflecting the fact that interest rates on Euro balances are negative In 2018 interest earned on Australian dollar balances totalled $6,665 and charges on Euro balances were $116,106. During the year ended 31 December 2019 the Company moved its Euro balances to banks that do not charge negative interest. Interest rate sensitivity The following table demonstrates the sensitivity of the Company’s statement of profit or loss and other comprehensive income to a reasonably possible change in interest rates, with all other variables constant. Effect on Post Tax Loss ($) (Increase)/decrease Effect on Equity incl. accumulated losses ($) Increase/(decrease) 31 December 2019 31 December 2018 31 December 2019 31 December 2018 Increase 75 basis points Decrease 75 basis points 933 (566) 6,567 (6,567) 933 (566) 6,567 (6,567) A sensitivity of 75 basis points has been used as this is considered reasonable given the current level of both short term and long term Australian dollar interest rates. The change in basis points is derived from a review of historical movements and management’s judgement of future trends. 104 Highfield Resources Limited 31 December 2019 Annual Report to Shareholdersc) Credit Risk Exposures Credit risk represents the risk that the counterparty to the financial instrument will fail to discharge an obligation and cause the Company to incur a financial loss. The Company’s maximum credit exposure is the carrying amounts on the statement of financial position. The Company holds financial instruments with credit worthy third parties. At 31 December 2019, 99% of the Company’s cash and cash equivalents were held in financial institutions with a rating from Standard & Poors of BBB+ or above (long term). The Company had no past due or impaired debtors as at 31 December 2019. d) Foreign Currency Risk The Company undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising forward foreign exchange contracts. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the balance date expressed in Australian dollars were as follows: Euro US dollars GB pounds Canadian dollars Total Liabilities ($) Assets ($) 31 December 2019 31 December 2018 31 December 2019 31 December 2018 5,223,706 2,994,965 40,494,872 54,635,744 23,240 14,590 - 87,537 55,243 1,621 14,111 14,047 - - - - 5,261,536 3,139,366 40,508,983 54,649,791 The monetary assets and liabilities in the table above for the current period include the balances of the Company’s Spanish subsidiary as well as for the Company itself. Foreign currency sensitivity analysis The Company is exposed to Euro currency fluctuations. The following table details the Group’s sensitivity to a 10% increase and decrease in the Euro against the Australian dollar on the above foreign currency denominated monetary assets and liabilities, expressed in Australian dollars. 31 December 2019 Profit or loss Other equity 31 December 2018 Profit or loss Other equity e) Fair Value Euro Movement Increase ($) Decrease ($) 3,916,384 3,916,384 5,723,381 5,723,381 (3,204,313) (3,204,313) (4,682,766) (4,682,766) 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 derivative instruments measured at fair value at 31 December 2018 or 31 December 2019. 105 Highfield Resources Limited 31 December 2019 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 2019 $ 31 December 2018 $ 1,803,299 531,555 2,334,854 626,887 573,917 1,200,804 The Company operates an equity incentive plan known as ´Highfield Resources Limited Employee Long Term Incentive Plan’ (“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. The fair value at grant date of options granted during the period was determined using the binomial me- thod, as described in note 2(p), 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 year ended 31 December 2019: Grant Date Expiry date Exercise price 23/05/2019 30/06/2022 21/06/2019 31/12/2022 21/06/2019 31/12/2023 21/06/2019 31/12/2024 $0.83 $0.83 $0.83 $0.83 Number at start of the period Granted during the period Exercised during the period Cancelled during the period Number at end of the period Exercisable at end of the period - - - - 1,000,0001 3,221,1702 2,779,4713 2,479,8674 9,480,508 - - - - - - - 1,000,000 1,000,000 3,221,170 3,221,000 (961,300)5 1,818,171 (857,676)5 1,622,191 - - (1,818,976) 7,661,532 4,221,000 1 Options granted to the new Non-Executive Chairman appointed at the Company’s AGM on 23 May 2019. There are no service vesting or performance vesting conditions in respect of these options. 2 Options granted to the Managing Director, Chief Financial Officer and other employees. The options vested on sati faction of the recipient’s continued employment vesting condition at 31 December 2019. 3 Options granted to the Managing Director, Chief Financial Officer and other employees. The options will vest on satisfaction of the recipient’s continued employment vesting condition at 31 December 2020. 4 Options granted to the Managing Director, Chief Financial Officer and other employees. The options will vest on satisfaction of the recipient’s continued employment vesting condition at 31 December 2021. 5 Options cancelled relate to options granted to the Managing Director Mr. Albert during the period which had a vesting con- dition of continuing employment on 31 December 2020 and 31 December 2021. Mr. Albert’s resignation on 31 January 2020, which was announced on 6 December 2019, means that this vesting condition would not be fulfilled. The model inputs for options granted during the year ended 31 December 2019 included: a) options were granted for no consideration; b) expected lives of the options range from 3.1 to 5.5 years; c) share price at grant date ranged from $0.685 to $0.900; d) expected volatility of 58%; e) expected dividend yield of Nil; and f) a risk free interest rate of 0.89%. 106 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders The table below summarises options granted during the year ended 31 December 2018: Grant Date Expiry date Exercise price 08/06/2018 30/06/2021 08/06/2018 31/12/2025 $1.29 $1.29 Number at start of the period Granted during the period Exercised during the period Lapsed or cancelled during the period Number at end of the period Exercisable at end of the period - - 3,000,0001 7,342,3972 10,342,397 - - - - - - 3,000,000 3,000,000 7,342,397 - 10,342,397 3,000,000 1 Comprises 1,000,000 options granted to each of the three Non-executive Directors appointed during 2018 as confirmed at the AGM on 24 May 2018. There are no service vesting or performance vesting conditions in respect of these options. 2 Represents options granted to the Manager Director, Chief Financial Officer and other employees. The options will vest on satisfaction of the following Vesting Conditions during the three year vesting period commencing on 1 January 2018 and ending on 31 December 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 prece- ding 1 January each year, to the closing price of the Company’s shares at the conclusion of the vesting period, being the 20 day VWAP immediately preceding 31 December 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; 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 2018 included: a) options were granted for no consideration; b) expected lives of the options range from 3.0 to 7.5 years; c) share price at grant date ranged from $0.725 to $1.005; d) expected volatility ranged from 21% to 53%; e) expected dividend yield of Nil; and f) a risk free interest rate ranging from 2.09% to 2.20%. 107 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders 19. Geographic Segment Analysis a) Net interest (paid)/received Australia Spain b) Non-current Assets Australia Spain 31 December 2019 $ 31 December 2018 $ (59,452) (109,441) - - (59,452) (109,441) - - 117,599,783 105,612,387 117,599,783 105,612,387 108 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders 20. Significant Events after the Reporting Period An outbreak of a new strain of coronavirus, Covid-19, emerged after the end of the reporting period and has caused considerable challenges and disruption to global equity markets. While there was no mate- rial effect on the Financial Statements for the year ended 31 December 2019, the coronavirus outbreak is still evolving and potential future impacts are una- ble to be quantified. The Group is in the exploration and evaluation phase and has not yet commenced development activities. 21. Contingent Assets and Liabilities There are no known contingent assets or liabilities as at 31 December 2019 (December 2018: Nil). 22. Dividends No dividend was paid or declared by the Company in the year ended 31 December 2019 or the period since the end of the twelve 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 year ended 31 December 2019. 23. Geoalcali Foundation As part of its Community Engagement Programme, the Company established a not-for-profit Spanish foundation called the Geoalcali Foundation (“Foundation”). The Foundation is supported ex- clusively by Geoalcali and since its inauguration in September 2014 has been involved in over 150 community projects. 24. Commitments At 31 December 2019, 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 liabili- ties at 31 December 2019 amounted to approxima- tely $59.4m. The contracts are able to be terminated by the Company at any point in time. The amount payable following termination would be approxima- tely $1.0m. 109 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders25. Parent Entity Information The following information relates to the parent entity, Highfield Resources Limited, at 31 December 2019 and for the year 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 (Loss)/profit of the parent entity Other comprehensive income for the period Total comprehensive (loss)/income of the parent entity 31 December 2019 $ 31 December 2018 $ 39,872,950 153,052,297 (308,437) (308,437) 55,328,002 159,340,261 (225,440) (225,440) 152,743,860 159,114,821 172,618,930 23,346,124 (43,221,195) 172,618,930 21,011,270 (34,515,379) 152,743,860 159,114,821 31 December 2019 $ 31 December 2018 $ (8,705,815) - (8,705,815) 418,878 - 418,878 110 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersDirectors’ Declaration In accordance with a resolution of the Directors of Highfield Resources Limited, I state that: In the opinion of the Directors: a) the financial statements and notes of Highfield Resources Limited for the year ended 31 December 2019 are in accor- dance with the Corporations Act 2001, including: i) complying with Accounting Standards (including the Australian Accounting Interpretations), the Corporations Regulations 2001 and other mandatory professional reporting requirements, and ii) giving a true and fair view of the Group’s financial position as at 31 December 2019 and of its performance for the financial year ended on that date, and b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, and c) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2(b). This declaration has been made after receiving the declaration by the Acting Chief Executive Officer and the Chief Financial Officer required to be made in accordance with section 295A of the Corporations Act 2001 for the year ended 31 December 2019. 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(cid:73)(cid:88)(cid:79)(cid:73)(cid:76)(cid:79)(cid:79)(cid:72)(cid:71)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:72)(cid:87)(cid:75)(cid:76)(cid:70)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:71)(cid:72)(cid:17)(cid:3) 113 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders(cid:3) (cid:3) (cid:50)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:68)(cid:70)(cid:75)(cid:3) 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(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:83)(cid:68)(cid:76)(cid:81)(cid:15)(cid:3)(cid:75)(cid:68)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:86)(cid:78)(cid:76)(cid:79)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3) (cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:87)(cid:72)(cid:81)(cid:70)(cid:76)(cid:72)(cid:86)(cid:17)(cid:3) 114 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders(cid:3) (cid:3) (cid:46)(cid:72)(cid:92)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3) 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(cid:73)(cid:82)(cid:85)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:85)(cid:71)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:182)(cid:86)(cid:3) (cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:88)(cid:86)(cid:87)(cid:85)(cid:68)(cid:79)(cid:76)(cid:68)(cid:81)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3) (cid:54)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:17)(cid:3)(cid:3) 115 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders(cid:3) (cid:3) (cid:50)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3) 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(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:71)(cid:72)(cid:86)(cid:70)(cid:85)(cid:76)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:10)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:17)(cid:3) 116 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders(cid:3) (cid:3) (cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:80)(cid:88)(cid:81)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3) 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31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders ASX Additional Information 119 119 Highfield Resources Limited 31 December 2019 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 26 March 2020. 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 192 381 322 868 228 1,991 82,924 1,156,932 2,641,212 30,978,010 294,665,925 329,525,003 There were 251 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 WWB INVESTMENTS PTY LTD MR. WARREN WILLIAM BROWN + MRS. MARILYN HELENA BROWN DEREK CARTER + CARLSA CARTER CITICORP NOMINEES PTY LTD MR. BENJAMIN JOHN HAAN BRING ON RETIREMENT LTD MR. DANIEL EDDINGTON + MRS. JULIE EDDINGTON CELTIC CAPITAL PTE LTD MR. CRAIG PETER BALL MR. MICHAEL ANDREW WHITING + MRS. TRACEY ANNE WHITING JONERIC PTY LTD PETER DAVID FERGUSON PTY LTD. WOOTOONA INVESTMENTS PTY LTD CRX INVESTMENTS PTY LTD KANBAH PTY LTD DORICA NOMINEES PTY LTD CARINYA INVESTMENTS PTY LTD HGT INVESTMENTS PTY LTD GREENSLADE HOLDINGS PTY LTD 120 Number of shares 136,477,238 19,528,450 15,971,550 7,721,504 5,633,541 4,080,000 4,000,000 3,870,000 3,500,000 3,292,384 2,715,718 2,701,076 2,278,000 2,150,538 2,000,000 2,000,000 2,000,000 1,870,000 1,750,000 1,650,076 % 41.42 5.93 4.85 2.34 1.71 1.24 1.21 1.17 1.06 1.00 0.82 0.82 0.69 0.65 0.61 0.61 0.61 0.57 0.53 0.50 225,190,075 68.34 Highfield Resources Limited 31 December 2019 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 26 March 2020. Title of class Registered holder of securities Identity of person or Group Date of last notice Percentage of total voting rights2 Number owned Ordinary Shares JP Morgan Nominees Australia Limited EMR Capital Investment (No. 2) Pte Ltd1 15/05/2015 104,038,875 31.57% Ordinary Shares JP Morgan Nominees Australia Limited Australian Super Pty Ltd1 28/07/2017 17,007,898 5.16% Ordinary Shares Various holders WWB Investments Pty Ltd1 08/11/2017 35,500,000 10.77% 1 Being 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 26 March 2020 of 329,525,003 Unlisted Options Class Number Holders with more than 20% Options over ordinary shares exercisable at $1.29 on or before 30 June 2021 3,000,000 Isaac Querub 1,000,000 options; Roger Davey 1,000,000 options; and Brian Jamieson 1,000,000 options. Options over ordinary shares exercisable at $0.83 on or before 30 June 2022 1,000,000 Richard Crookes 1,000,000 options; Options over ordinary shares exercisable at $0.83 on or before 31 December 2022 3,221,170 Sonedala Albert 1,114,064 options. Options over ordinary shares exercisable at $0.83 on or before 31 December 2023 1,818,171 Mike Norris 445,980 options. Options over ordinary shares exercisable at $0.83 on or before 31 December 2024 1,622,191 Mike Norris 397,905 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 $1.29 on or before 31 December 2025 7,342,397 Sonedala Albert 2,192,287 options. 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 year ended 31 December 2019. 121 Highfield Resources Limited 31 December 2019 Annual Report to Shareholders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 Sierra del Perdón Navarra Adiós Investigation 19/07/2011 Application in process 35760 Application in process 35770 22.88 Geoalcali SLU 100% 59.40 Geoalcali SLU 100% Sierra del Perdón Navarra Ampliación de Adiós Investigation 26/10/2012 14/02/2014 35880 40.90 Geoalcali SLU 100% Vipasca Navarra Vipasca Investigation 06/11/2013 11/12/2014 35900 27.30 Geoalcali SLU 100% Muga Muga Muga Navarra Goyo (area under concession process) Investigation 19/07/2011 24/12/2012 35780 14.79 Geoalcali SLU 100% Navarra Goyo Sur Investigation 25/07/2014 13/12/2019 35920 8.96 Geoalcali SLU 100% Aragón Fronterizo (area under concession process) Investigation 21/06/2012 05/02/2014 Z-3502/N-3585 8.70 Geoalcali SLU 100% 27.30 123.18 Muga Aragón Muga Muga Muga Fronterizo (area outside concession process) Muga (area under concession process) Muga (area outside concession process) Investigation 21/06/2012 05/02/2014 Z-3502/N-3585 1.10 Geoalcali SLU 100% Investigation 29/05/2013 07/04/2014 3500 15.08 Geoalcali SLU 100% Investigation 29/05/2013 07/04/2014 3500 5.32 Geoalcali SLU 100% Aragón Aragón Aragón Muga Sur Investigation 25/09/2014 Application in process 3524 7.28 Geoalcali SLU 100% 61.23 Pintanos Aragón Molineras 10 Investigation 20/11/2012 06/03/2014 3495/10 18.20 Geoalcali SLU 100% Pintanos Aragón Molineras 20 Investigation 19/02/2013 Pintanos Aragón Puntarrón Investigation 08/05/2014 Application in process 3495/20 Application in process 3510 16.80 Geoalcali SLU 100% 30.24 Geoalcali SLU 100% Total 65.24 276.95 122 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders Project locations are shown in the following map. 123 123 Highfield Resources Limited 31 December 2019 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 sta- tements will prove accurate, and actual results and future events could differ materially from those anticipated in such statements. Such information contained herein represents manage- ment’s best judgement as of the date hereof based on infor- mation currently available. The Company does not assume any obligation to update any forward looking statement. Competent Person Statement for Muga Potash Project The Review of Operations contained within this annual re- port was approved by Mr. Richard Crookes, Acting CEO and Chairman of Highfield Resources. The information in this report that relates to Ore Reserves is based on informa- tion prepared by Dr. Mike Armitage, the Chairman of SRK Consulting (UK) Limited. Dr. Mike Armitage is the Competent Person who assumes overall professional responsibili- ty for the Compliance Opinion. The information in this re- port that relates to Mineral Resources, Exploration Results and Exploration Targets is based on information prepared by Ms. Anna Fardell, Senior Consultant at SRK Consulting (UK) Limited, and Mr. Tim Lucks Principal Consultant at SRK Consulting (UK) Limited. Dr. Mike Armitage is employed by SRK Consulting (UK) Limited. The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled under the direction of Dr. Mike Armitage, who is a Member the Institute of Materials, Metals and Mining (“IMMM”) which is a ‘Recognised Overseas Professional Organisation’ (“ROPO”) included in a list pro- mulgated by the Australian Securities Exchange (“ASX”) from time to time. Dr. Mike Armitage has sufficient experience which is rele- vant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Dr. Mike Armitage consents to the inclusion in this report of the matters based on this information in the form and con- text in which it appears. Ms. Anna Fardell is a Resource Geologist employed by SRK Consulting (UK) Limited, and has at least five years’ ex- perience in estimating and reporting Mineral Resources relevant to the style of mineralisation and type of deposit described herein. Ms. Fardell is a registered member of the Australian Institute of Geoscientists (6555) and considered a Competent Person (CP) under the definitions and stan- dards described in the JORC Code 2012. Ms. Fardell takes responsibility for the Mineral Resource Statement presented here. Ms. Anna Fardell consents to the inclusion in this report of the matters based on her information in the form and con- text in which it appears. 124 Highfield Resources Limited 31 December 2019 Annual Report to ShareholdersHighfield Resources Limited 31 December 2019 Annual Report to Shareholders Competent Person Statement for Mineral Resources and Exploration Targets other than the Muga Potash Project The Review of Operations contained within this annual re- port was approved by Mr. Richard Crookes, Acting CEO and Chairman of Highfield Resources. The information in this re- port that relates to Mineral Resources, Exploration Results and Exploration Targets is based on information prepared by Mr. José Antonio Zuazo Osinaga, Technical Director of CRN, S.A.; and Mr. Manuel Jesús Gonzalez Roldan, Geologist of CRN, S.A. Mr. José Antonio Zuazo Osinaga is a licensed professio- nal geologist in Spain, and is a registered member of the European Federation of Geologists, an accredited organi- sation to which Competent Persons (CP) under JORC 2012 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 mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as CP as defined in the 2012 edition of the JORC Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. José Antonio Zuazo Osinaga and Mr. Manuel Jesús Gonzalez Roldan consent to the inclusion in this report of the matters based on their information in the form and con- text in which it appears. 125 

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