Annual Report
31 De cember
2 0 2 1
highfieldresources.com.au
HIGHFIELD RESOURCES LIMITED
ABN 51 153 918 257
Contents
Corporate Directory
Chairman’s Letter
Chief Executive Officer’s Letter
Sustainability Report
Directors’ Report
Financial Report
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Auditor’s Independence Declaration
Independent Auditor’s Report
ASX Additional Information
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Corporate Directory
Directors
Company Secretary
Mr. Richard Crookes
Ms. Katelyn Adams
Independent Non-Executive Chairman
Mr. Ignacio Salazar
CEO and Managing Director
Ms. Pauline Carr
Independent Non-Executive Director
Mr. Roger Davey
Independent Non-Executive Director
Mr. Brian Jamieson
Non-Executive Director
Registered Office &
Principal Place of Business
169 Fullarton Road
DULWICH, SA 5065
Telephone
+61 8 8133 5000
Facsimile
+61 8 8431 3502
Website
highfieldresources.com.au
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Share Registry
Auditor
Stock Exchange
Advanced Share Registry Pty Ltd
110 Stirling Highway
NEDLANDS, WA 6009
Pricewaterhouse Coopers
Level 11/70 Franklin Street
ADELAIDE, SA 5000
Telephone
+61 8 9389 8033
Telephone
+61 8 8218 7000
Facsimile
+61 8 9389 7871
Facsimile
+61 8 8218 7999
Australian Securities Exchange
(Home Exchange: Perth, Western Australia)
ASX Code
HFR
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Chairman’s Letter
Dear Shareholders,
The past year has been one of steady progress for your Company as
we advance towards the construction of the Muga Potash Mine. This
has been against a backdrop of an ongoing global pandemic, which has
affected all businesses in different ways. For us, it has been principally
about aiming to work effectively across a combination of office and
remote sites and in dealing with cost control measures, including
making severe salary reductions for all staff under a furlough scheme
and equivalent reductions in fees for Directors, in the first half of 2021.
I’m pleased to say we have emerged from this period strongly, with a
leaner workforce and Board, but with morale remaining high.
The major highlight was clearly the award in July 2021 of the long-
awaited Mining Concession for Muga, which has allowed us to
subsequently advance towards Project Financing and the start of
construction in 2022. Along the way we have secured renewed public
political support in Navarra and Aragon, have updated the Muga Project
Feasibility Study (with outstanding revised economics) and have
completed detailed engineering for the Project. A capital raise and
Shareholder Purchase Plan was successfully completed in August 2021
to support all these activities.
Events after the year-end in early 2022 have been more significant
though. Economic and trade sanctions enacted on Belarus during the
year started to restrict the export of MOP from this major producer
and exporter, which saw increases in the price of Granular MOP from
€230-240/t (cfr Europe) at the start of 2021, to €575-600/t (cfr Europe)
by the start of 2022. The recent tragic war in Ukraine and subsequent
severe sanctions placed on both Russia and Belarus, have led to circa
40% of global MOP supply no longer reaching its intended customers.
As a result, the Granular MOP price has continued to rise to €615-690/t
(cfr Europe) by the second week of March 2022. Notwithstanding the
disastrous events that have led to this outcome, Highfield is well
positioned to benefit, given Muga’s independent position outside of
the highly concentrated supply regions of Belarus/Russia and Canada,
being ideally located for the key markets of Western Europe, Brazil, US,
and Africa. In addition, industry advisors Argus estimate circa 40% of
potash capacity expansion projects in the decade ahead are in Russia,
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS which are clearly now at risk. This bodes well for Highfield as the strong bottom line economic
benefits of higher pricing will attract stronger support for Muga from financiers, off takers and
investors.
On a personal note, you may have seen that I have recently announced my intent to retire from the
Board of Directors of the Company, following over eight years of service. It has been an enjoyable,
challenging and at times frustrating journey, but I am very confident that I depart with the Company
poised for great times ahead. We are fortunate to have an excellent and highly motivated CEO & MD
leading the Company, a fantastic workforce in Spain and a very experienced and dedicated Board.
It has been a privilege to lead the Board and I would like to thank my fellow Directors and all the
employees of Highfield for their efforts and support over the years. I am delighted to hand over the
Chair to Paul Harris and I am confident that Paul will do an excellent job and successfully lead the
Company through the financing and construction of the Muga Project and onto production.
“ I’m pleased to say
we have emerged
from this period
strongly, with a
leaner workforce
and Board, but with
morale remaining
high.”
I hope to remain in contact with Shareholders and I thank you for your loyal support. I wish you all
the best in the times ahead and look forward to seeing Highfield develop as a major producer of
potash.
Richard Crookes
Chairman
23 March 2022
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Chief Executive Officer’s Letter
Dear Shareholders,
As I am writing these words, we are planning my first trip to Australia
as CEO of Highfield which is long overdue given the Covid pandemic.
I expect to finally meet many of you in person and I am really looking
forward to this trip.
These are both demanding and very exciting times at Highfield. We are
building a mine. There is massive intrinsic value in the Muga project,
which is just waiting to be unlocked by moving into construction and
operation. We are extremely motivated by this perspective and are
prepared to do what it takes to achieve it.
Progress during last year got us to this point. The grant of the mining
concession on 1 July 2021, which the Company had been actively
pursuing for some time, was our most important milestone of the
year. I made the very difficult decision to place ourselves on a furlough
scheme with a reduction of salaries for five months in the first half
of 2021 demonstrating the lengths the Company will go to move this
project forward. During the year, we also reorganized our team making
it leaner and stronger. The new team is fully committed and ready to
face any challenges in front of it.
As a Spanish national, I have been very hands on and directly involved
in building relations and engaging with our local stakeholders in Spain.
Historically many European mining projects have stumbled in this area,
where emphasis has been more about adding levels of bureaucracy
rather than encouraging efficiency or defending the public interest.
However, I have only words of gratitude for the unprecedented level of
support and the reception I have received both in Navarra and Aragón
at the highest levels. I am not expecting that everything will always
run perfectly, but it is a big comfort to see the level of Government
access we have and to know that decision-makers in Spain understand
the value of Muga for the community and are committed to support
it. Recent events in Russia and Belarus have only increased the
awareness of the strategic value of the Muga project for the country
and the European Union.
The Company has been successful in achieving a very delicate balance
between advancing the project and preserving cash. We recently
finalized the contracting of all the key equipment for the process plant,
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS “Our emphasis on
excellence and
discipline is constant
and will make the
difference in the
construction phase.”
which will protect the project against some of the inflationary pressures currently seen in the
market. In addition, this also allowed us to integrate equipment engineering into the plant design,
secure long lead items and support our cost estimates in recent reviews undertaken by banks as
part of their financing due diligence. This could not have been done without the equity raise of
A$18 million last year and I would like to thank shareholders for their support of this.
The preparation of the construction is well advanced. During 2021, in addition to preparing the
detailed engineering, we had significant engagement with our suppliers and contractors. In
conjunction with Acciona, the Company has tendered the major construction aspects of the
project in order to formalize a maximum price and a construction agreement. Our emphasis on
excellence and discipline is constant and will make the difference in the construction phase.
During the year we updated the reserves statements and the feasibility for the Muga project with
more advanced technical information which confirmed the outstanding economics of this project.
Muga is a Tier 1 project. The mineralization is shallow, there is great infrastructure already in place
in the region, and most importantly, the mine is located in the heart of a European agricultural
region with clear deficit in potash supply while our ESG credentials are world class. During last
year, we have been through a very detailed and thorough due diligence process for the banks. The
feedback from them and our advisor, Endeavour, allowed us to target a debt capacity in the project
in the order of €300 million. The quality of the project combined with the current geopolitical
situation and strong potash price environment are encouraging as is the discussion and interest
from strategic investors, and the market in general.
I want to thank Richard Crookes for his support and guidance as he is retiring from the Board after
more than eight years of service and as he remains a friend of the Company. We are welcoming
Paul Harris as our new Chairman with a very active agenda for our upcoming visit to Australia at
the end of March and early April 2022 and I very much look forward to working with him, the team
and fellow directors as we grow Highfield.
We have a great team and a great asset. Together with the trust and support of our shareholders
and community we are determined to make Highfield into a successful and sustainable potash
producer.
Ignacio Salazar
CEO and Managing Director
23 March 2022
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 8 HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Sustainability
Report
CEO Letter
About this Section
Why at the Forefront of Sustainability?
What we Have Planned and Achieved
Our Progress to Building a More Sustainable Business
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 9
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS CEO Letter
Dear Readers,
In July 2021 we received the Mining Concession for the Muga Mine. This has been the final stage of
a long, comprehensive and rigorous permitting process. At the same time, it is the starting point
of an exciting period when we will build the Muga Mine, a world-class potash project.
This Sustainability Report highlights the most relevant activities that are keeping Environmental,
Social and Governance (ESG) practices at the core of our business. It also highlights the latest
updates which are contributing to develop a more robust, innovative Project, at the forefront of
sustainability.
One of the most remarkable aspects of Muga is its positive contribution to the socioeconomic
development of the community. This was reconfirmed by the “Observatorio de la Realidad Social”,
a social department of the Government of Navarra, when they released on 4 March 2021 the
Social Baseline Study of the Muga Mine. The Study indicates that Muga has a significant positive
socioeconomic potential for the local region, with the capacity to reverse local depopulation which
is severely affecting the local communities whilst contributing to fight unemployment. Muga could
significantly boost the economies of the rural communities with new business opportunities.
In this sense, we have started our engagement with potential local suppliers through several
information sessions in the area around the mine-site. These sessions have been a great success
with more than 200 companies, and local providers participating in these sessions. The response
to these sessions by the community underlines once again the high degree of acceptance and
sentiment of urgency, that all stakeholders share with us to start the construction of Muga as soon
as possible.
Environmentally, Muga is a zero residue mine based on circular economy principles in all areas,
most importantly waste and water management. Muga is the only room and pillar potash mine in
the world that has incorporated this strong commitment of leaving no mineral residues on surface
at the end of operations.
We announced a Feasibility Study Update for the Muga Project which incorporated all conditions
in the mining concession. This Feasibility Study Update reconfirmed Muga’s strong economics
based on long-term price estimates. The updated numbers have a significantly higher degree of
confidence following the engineering and procurement work undertaken over the last few months.
In this pandemic era, we have witnessed an increase in the risk associated with political and
economic instability, which has raised awareness of the importance of strategic security over
raw materials and key minerals. The extractive industry plays a strategic role as a supplier
to industry and agriculture of many of the basic raw materials and inputs for modern society.
In this context, the European Commission’s European Raw Materials Initiative, sets as a priority
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Highfield Resources CEO, Mr. Salazar, said:
“Our priority is to generate sustainable value
for shareholders and the community. Our Muga
Mine, commencing construction this year, is
strategically placed to supply the European
market against a backdrop of increasing
demand, geopolitical uncertainty and strong
fundamentals driving potash prices to near
10-year highs.”
for a well-functioning European Union (EU) economy access to mineral raw materials and their
procurement at affordable prices. The EU strategy is based on access to raw materials, sustainable
supply chains from EU sources and reduced imports. Geopolitically, the strategic role of potash,
especially in Europe, is becoming more apparent with recent developments in Russia and Belarus ,
world leaders in potash production. In the current environment with increasing global prices, Muga
is well located strategically to serve European markets.
Potash is also a strategic commodity in helping combat climate change. The higher crop yields
generated by potash reduce the need or deforestation to provide additional arable land. Finally,
potash, as a key fertiliser, contributes to food security. The UN has stated that the imbalance
between population growth and less arable land is trending towards ‘unprecedented catastrophic
levels1’. Potash is a key enabler to reverse this trend.
With Muga, we not only have a sustainable project, but one producing a strategic and sustainable
commodity. It is a great future ahead for all of us. Let´s construct it together.
Ignacio Salazar
Chief Executive Officer
1https://news.un.org/en/story/2021/10/1102072
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS About this Section
This section is a summary of the Company’s seventh Sustainability
Report and highlights all ESG activities carried out during 2021 by
Highfield Resources Limited (the “Company” or “Highfield”) and
its Spanish subsidiary Geoalcali SLU (“Geoalcali”), together “the
Group”.
This report has been prepared in accordance with the GRI
Standards: Core option. GRI is an international independent
organization that helps businesses, governments and other
organizations understand and communicate the impact of
business on critical sustainability issues such as climate change,
human rights and corruption. Additionally, as a signatory member
to the United Nations Global Compact, the Company will publish
a standalone report that also sets out the information required
by the Communication on Progress guidelines of Global Compact
reporting initiative.
The Group is committed to sustainable practices and is carrying
out a number of actions to align its processes and policies
to international guidelines as part of its strategy to build a
resilient and robust project. The Group remains supportive of the
Sustainable Development Goals (SDGs), which seek to encourage
measures to build a sustainable world. We continue to work
towards this vision by committing to implement a significant
project with integrated initiatives that contribute to those
objectives and, with special emphasis on our social and natural
environment.
For further information visit:
https://www.highfieldresources.com.au/sustainability-reports/
or contact susana.bieberach@geoalcali.com
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 13
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Why at the Forefront of
Sustainability?
Future-facing
commodity for
a decarbonised
world in a scaling
food security
crisis
The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in
2015, provides a shared blueprint for peace and prosperity for people and the planet, now and
into the future. The world faces many challenges but among them is the alarming increase in the
world’s population and the reduction of arable land, increased deforestation that is contributing to
global warming and the urgent need to apply solutions that optimize land use in the agri-food chain,
which is responsible for a third1 of the World´s total GEI emissions.
According to the International Fertilizer Organisation, by increasing productivity on existing arable
land, fertilisers help forestall deforestation as well as the loss of other wild lands. This preserves
biodiversity and reduces the environmental impact of farming as deforestation, and loss of peatland,
wetlands and grasslands combined, represent about 10% of global GHG emissions. Increased yields
due to proper nutrient management have helped conserve one billion hectares from conversion
to cropping between 1961 and 2005, leading to carbon emission savings of 317 to 350 Gt CO2-eq,
playing a huge part in limiting the negative environmental impacts of our food systems.
Climate change is a critical topic for the world, and it requires new policies and key actions to
deliver a temperature reduction of 1.5C. The Required Policy Scenario (RPS) conclusions2 determine
that countries will establish new policies. Namely in food and land systems with huge shifts in food
production targets, land use becoming a net carbon sink within 30 years as the world reaches ‘peak
meat’ consumption in 2030, and Nature Based Solutions accelerate. Fertiliser plays a critical role
to optimise the need for more food to be produced in less land.
1https://www.fao.org/3/cb7514en/cb7514en.pdf
2https://www.vivideconomics.com/casestudy/ipr-2021-forecast-policy-scenario-and-1-5c-required-policy-scenario/
-20%
89%
Primary crops need
fertilisers to optimise
water consumption
and land use.
The use of fertilisers
reduces agricultural
land use by 20%.
89% of agriculture’s
future mitigation
potential (maximised
by smart fertiliser
use) is based on soil
carbon sequestration.
Soils can store up
50-300 tons of carbon
per hectare, which is
equivalent to
180-1,100 tons of CO2.
Fertilisers improve
soils carbon skins.
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Environmental,
social and
governance
leadership
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 whole follows the ethical
standards set out in the Code of Business Conduct and Ethics (the Code).
The Group periodically reviews Company’s procedures and policies and suggests changes to
ensure high ethical standards are met.
The Group publishes its corporate governance policies, the Code and its Board and committees’
charters on Highfields’s website at:
https://www.highfieldresources.com.au/corporate-governance/.
To understand where its sustainability efforts should be concentrated, the Group undertakes
internal and external analysis to identify those issues which have the biggest impact and are most
relevant to the business and to stakeholders. The Group has engaged actively with sustainability
consultants and its stakeholders to improve its current engagement and to define long-term
strategies for sustainable development.
Identifying key topics through relevant engagement methods for each stakeholder group remains
a top priority for the Group. This engagement helps define commitments and goals in order to
drive the Company´s efforts towards minimising negative impacts whilst seeking to maximise the
benefits.
These commitments and goals are supported by specific initiatives and plans which are monitored
to allow the Company to detect areas for improvement.
The Group divides its sustainable focus into
four main areas:
— Our Business
— Our Environment
— Our People and
— Our Community
– these combined, form our Sustainability
Framework.
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 encompassed by its core values CREA Commitment, Respect,
Excellence and Attitude.
Sustainability Roadmap
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 17
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS What we Have Planned and
Achieved
Strategic Objective
Specific Goals
Progress
To secure all necessary
environmental, construction
and operating permits.
Ministerial approval of
Mining Concession.
On the 1 July 2021 the Company received the Mining Concessions for the
Muga Project.
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
phase of the Muga Mine (to 1
Mtpa MOP).
To build, operate and maintain
a high level of workplace
health and safety.
Approval of all
construction and other
permits required.
The Company is advancing in all other permitting that is required.
Continue improving and
refining the Project.
The Company finalised construction arrangements with engineering
companies.
This includes signed contracts and the development of engineering with
process equipment suppliers for incorporation into construction projects.
In addition procedures for commissioning and the first phase of plant
operation have been developed.
2
5
7
4
6
8
Our
Business
Our
Environment
Continue the
development of the
financing strategy.
Actively worked with Endeavour Financial which has involved
coordination of the different areas of the Company to advance the
financing strategy.
4
7
11
Our
Business
Building a strong health
and safety culture.
Increasing specific H&S training to prepare for the commencement of
construction works.
Modifications for mitigation/reduction/elimination of risks implemented
in the design.
2
5
Enhancements of health
and safety protocols.
The Company developed a High Consequence Procedures (HCP) for the
treatment plant area. This involves the analysis and identification of
procedures for higher risk areas and the procedures to be followed for the
mitigation/reduction/elimination of risks.
2
5
To conduct our business with
regard to all environmental
regulations and best practice.
Strive for best
environmental outcomes
of Muga.
In 2021, improvements were made to the Project, which were described
in the Restoration Plan and incorporated into the Mining Concession with
the supervision of all the Administrations.
Enhance environmental
consciousness among
our staff.
Minimise potential
environmental impacts.
No specific staff awareness initiatives were undertaken during the year.
Optimised environmental aspects have been incorporated into
the Project’s design. Tendering protocols were updated to include
requirements to meet the Project’s environmental commitments.
Increase dialogue and
interaction with the host
communities.
Open and regular dialogue continued.
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.
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6
9
6
9
6
9
3
6
8
8
10
8
10
8
10
5
7
11
12
Material
Topics
Dimensions
1
1
Our
Business
Our
Business
Our People
Our
Community
Our People
Our
Community
Our
Environment
Our People
Our
Environment
Our People
Our
Environment
Our People
Our
Community
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Strategic Objective
Specific Goals
Progress
Efficient Company
involvement in community
initiatives.
The Company has continued working with local communities
and has received from the Government of Navarra a Social
Baseline Study that proposes strategic actions to work with
local communities.
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.
The Company will continue
to work diligently with the
Administration in all project
phases.
Increased communication with all the Administration. Explicit
support received from the President of Navarra. Increased
engagement with the Aragon Administration.
Continuing with the
development of the financing
strategy.
Actively worked with Endeavour Financial which has included
the coordination of the different areas of the Company in the
due diligence process. Successfully reviewed and updated
economic model. The Company has analysed alternative
sources of financing.
To comply fully with all pertinent
legislation.
Improve understanding of,
and preparation in respect of
applicable legal requirements.
Legal advice sought with a regional and national focus.
To develop plans and studies for
the potential implementation of
future projects within the Group’s
current tenement holding.
The Group continues
investigating the upside
potential of Muga and other
tenement areas.
The Group regularly meets to review and enhance drilling
plans to maximise upside potential.
To become the employer of choice
within our sector and environment.
Uphold high ethical standards
in the workforce.
No new specific initiatives commenced during the year.
To return value to our
shareholders.
Strong ESG focus to ensure
long-term value creation.
Comprehensive protocols and actions compiled to address a
range of possible adverse situations faced by the Company.
Rigorous monthly financial reporting for prudential and
managerial purposes.
Incorporation of governance internal procedures into the
Integrated Management System (IMS).
The Group continues
optimising the Project to build
a more sustainable business.
Feasibility Study for the Muga Project updated to include
all conditions in the Mining Concession. This Feasibility
Study Update reconfirmed Muga’s strong economics based
on long-term price estimates. The updated numbers have
a significantly higher degree of confidence following the
engineering and procurement work.
Material
Topics
Dimensions
3
6
8
5
7
11
12
3
6
8
5
7
10
11 12
2
5
8
4
6
13
3
6
9
5
8
Our
Community
Our
Business
Our
Environment
Our
Business
Our
People
9 10
Our
Community
2
5
8
1
3
6
9
4
7 11
1
3
5
7
2
4
6
8
Our
Business
Our
Environment
Our People
Our
Business
Our
Environment
9 10
Our People
11 12
13
Our
Community
1
3
5
7
2
4
6
8
9 10
11 12
13
Our
Business
Our
Environment
Our People
Our
Community
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Our Progress to Building a More
Sustainable Business
Muga Mine, at
the forefront of
sustainability
Zero Residue Mine
The Company´s Waste Management Program “KClever” is a planned waste management strategy.
It includes a recovery-of-waste approach whereby waste from processing will be transformed into
saleable by-products - one third as de-icing salt and two thirds as vacuum salt, which are then used
as raw materials in the production cycle in other sectors. Additionally, the excavated earth will be
reused to construct noise and visual barriers.
The Muga design has applied life cycle analysis to the principle of waste management hierarchy,
notably in regard to salt waste. As MOP and salt are formed together underground, the prevention
of salt waste is not possible but it has been minimised by the planned initiatives which will reduce
the waste generated over the life of the operation. The Muga design has also prioritised using waste
mine material as backfill, as well as recycling it into secondary raw materials. Together, these
measures mean that no waste will remain on surface after the end of operations.
All mining waste will
be reutilised.
Salt by-product
will be obtained
and commercialised.
Non-recoverable
waste will be
reintroduced in the
mine rooms through
dry backfilling.
Environmental
liability. At the end of
the mining activity
no waste will be left
on surface. The land’s
previous use can be
restored.
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Dry backfilling consists of reintroducing mined material to the mine
rooms after having processed it to obtain potash and salt. The process
developed by the Company excludes the use of any additional water
Dry backfilling
and the use of cement, meaning 11Mt cement will no longer be used.
Backfilling of mined rooms within 28 days.
Backfilling will also eliminate the impact on the surface as non-
recoverable waste will be reintroduced in the mine rooms within 28 days
from its extraction.
More than approx. 70Mt of waste will be reintroduced through
backfilling, eliminating both its impact on the surface, and
potential subsidence.
With regard to salt valorisation, about 15% of waste will be recovered
and transformed into saleable by-product salt, in the form of vacuum
salt and de-icing salt, resulting in less residue.
Muga’s innovative backfilling process reflects a major investment in R&D
to help ensure compliance with the highest environmental standards
whilst setting a benchmark in the mining sector in terms of waste
management.
Waste Management Solution
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HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Comprehensive
environmental
controls & full
reclamation
Under Spanish regulation, the Company is required to periodically check the state and management
of the surrounding environment, and to implement measures to protect it, as well as check the
effectiveness of such measures. These requirements are aligned to the Environmental Surveillance
Plan, which Geoalcali has already in place. During the mine’s operation quarterly reports will be
sent to the Authority. Many of the controls will also be extended and included in the Restoration
Plan that will apply during the dismantling and post closure phases. The surrounding environment
elements that are taken into consideration in these Plans cover soils, water, atmosphere, noise,
waste, ponds, surrounding heritage, biodiversity, and any other elements that could be impacted
by the activity of the Company.
22
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Electricity
optimisation
measures
reduce energy
consumption by
~15%
As part of Highfield’s commitment to energy consumption reduction, the plant and the mine are
designed to reduce both consumption and emissions, being well below the limits.
Electricity optimisation measures have been implemented to reduce energy usage by ~15%.
Efficiency measures include the implementation of IE3 efficiency motors above legal requirements
and Tier II transformers, which are a 10% more efficient than eco design ones. Furthermore, the
equipment is layered in different heights to benefit from gravity.
In relation to gas consumption, the project complies with both the legislation and the additional
improvements required by the regional authorities. In addition to this the Company has also
implemented improvements such as a high efficiency natural gas burner with low NOX emissions,
and a heat recovery system for the dryers.
Drying and compacting plant
Plants and ramp conveyors represent about 65% of power.
Energy intensity
and CO2 emissions
According to available data, the industry average for energy intensity would be between 600 and
800 kWh/t. Geoalcali’s energy intensity is expected to be 445,446 kWh/t, well below its industry
peers.
GHG Emissions intensity (tonnes CO2eq. per tonne produced): most producers’ emissions intensity
are in excess of 0.15 t CO2e per tonne produced, whereas Geoalcali’s is expected to be 0.054 t
CO2eq. To calculate this both scope 13 and 24 have been accounted for.
3Scope 1 assess direct emissions from Company’s vehicles and operations as well
as gas usage.
4Scope 2 asses the emissions derived from electricity consumption.
Energy intestiy
(KWh/t)
GHG Emissions intensity
(t CO2 per tonne produced)
Muga Mine GHG calculations have been made with reference to
the sum of potash and salt; we do not have information that other
companies have followed the same criteria.
23
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Optimised water
management:
a significant
percentage will
be sourced from
recycled water
Protecting
biodiversity and
cultural heritage
Muga Mine´s water management has been optimised to minimise fresh water consumption and
to increase recycled water usage. This means that 48% of the overall water consumption will
be water recovered from rain or different parts of the process, while the remaining 52% will be
taken from the Bardenas Canal, which is a regulated human-built infrastructure for industrial and
agricultural use. No water will be taken from a riverbed or another natural source. Consequently,
the two main elements of the Company’s water management plan are water optimisation (water
consumption will be half of what it otherwise would be if the mine’s land was used for crops such
as corn), and the exclusion of water disposal to any waterbed.
The Project’s footprint occupies a natural valley area, which is well shielded from the surrounding
area. This is beneficial because the natural terrain offers noise reduction and also largely shields
the installations from the line of sight in the surrounding areas. As the land used for the project is
mainly used for crops no resettlements are needed and no protected natural areas will be affected.
During the permitting process, extensive flora, fauna and habitat studies have been undertaken
and measures to protect them have been adopted.
The Company will work with environmental NGOs to protect and improve the surrounding habitats.
Assets of cultural interest in the surrounding area will not be affected by the industrial facilities of
Muga Mine. The project will not mine in the exclusion areas around the Javier Castle, the Bardenas
Canal or in urban areas.
Additionally, the Company is collaborating with the local communities to compile a Muga Community
Development Plan. This will include mitigation measures to address potential negative affections
as well as initiatives that will maximise the positive contributions that this project will bring to the
host communities.
24
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 25
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 25
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Stakeholder
dialogue
All of our employees are encouraged to be engaged in their working environment and to base their
decisions on the principles of sustainability. For many of our employees, this includes regular
dialogue with stakeholders to engage in discussions with relevant stakeholder groups on specific
local and regional challenges. This allows us to engage effectively and maintain a continuous
dialogue to manage properly sustainability trends, expectations and needs from our stakeholder
groups. In 2021, as in previous years, Highfield employees met with community leaders, politicians,
scholars, business people and experts in different disciplines.
Community
celebration after
mining concession
The President of Navarra accompanied by distinguished representatives from the authorities in
Navarra and Aragón, as well as representatives from the local community and Town Halls in the
Muga area and representatives of political parties in the region, participated in a celebration event
to commemorate the award of the Mining Concessions for the Muga project. The President of
Navarra, Ms. Chivite, said: “[the Project] is robust thanks to the different administrative procedures
that Muga has gone through until the Mining Concession” and she recalled that this project “has been
subject to numerous and rigorous processes, taking into account the participation of a large number
of organisations and incorporating improvements, including two periods of public consultation and
an exhaustive process of citizen participation, resulting in a sustainable and important project for the
economic recovery of the region”.
“Muga will be a project that will provide an
important boost for job creation and will be
an effective instrument in the fight against
depopulation, creating quality employment,
which will reactivate the area.”
President Chivite
President Chivite, Economy Minister, Mikel Irujo, Government representatives, Lucía Echegoyen, Mayoress of Sangüesa and the Highfield team.
26
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Forums
Employment and Training
Young Talent and Companies – Technical training opportunities forum
Local Community Forums
Following its employer of choice strategy, the Company participated
as a speaker in different forums to disseminate mining as a sector for
professional development and employment for young people, students
and workers in general.
The Company presented its Buy Local Policy to the Muga communities.
Local leaders in converstions with the Company.
We were invited to join a live radio show in Sangüesa organised by the
The Company is working with the local communities and governments
main radio station of the region with the aim at promoting visibility to
to discuss how best to coordinate its long term engagement with them.
depopulated rural areas. During this session we had the opportunity to
The Company has also initiated discussions with relevant officials about
share scenarios with key local representatives (Mayoress of Sangüesa
the need for local authorities to makes plans for areas such as housing
and Javier, as well as the Government of Navarra) and were able to
and infrastructure, for whose development they are responsible. The
explain the major benefits of the project, emphasising the importance
purpose of this engagement is to define a formal Local Liaison Group
of local suppliers.
(LLG) to help us in the definition of Muga´s Community Development
Plan.
Adefo´s Board meeting September 2021
The Company was also invited to present the Project and specifically
explain its socioeconomic impact to the ADEFO (Rural Development
Agency of Cinco Villas - Aragón) Board.
27
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 27
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Partnerships and
memberships
During International Day of Women and Girls in Science, Geoalcali participated in a school talk
aimed at promoting interest, especially among girls, in studying the different specialities offered
by the STEM careers, in order to encourage their incorporation into the industrial world and in
particular into mining, a sector that offers a wide range of possibilities in the field of science.
These talks form part of the official mining communication programme of the Government of
Navarra, MINERETICA, in which Geoalcali actively participates among other members of the mining
industry in Navarra.
MINERETICA school talks
The Company continued seeking alliances with key associations with the aim is to drive transformation in our sector, in an ethical,
socially responsible and environmentally sustainable way. During 2021 the Company joined:
— AECV, the business association of Cinco Villas;
— ALIA, the logistics cluster of Aragón;
— ADEA, the executive managers association of Aragón;
The Company continues to be a member of:
— CONFEDEM – the Spanish mining confederation;
— AINDEX – a Spanish mining association;
— AEMA – an association of mining businessmen of Aragón;
— ANEFA – a Navarra mining association; and
— AEMINA – an association of mining companies of Navarra;
— ASBA – the business association of Australia in Spain;
— FIN – the Industrial Foundation of Navarra is a non-profit
organisation created by the Official College of Industrial
Engineers of Navarra and the Association of Industrial
— IFA – International Fertilizer Association;
Engineers of Navarra.
— Navarra Chamber of Commerce – an association of
Navarra companies;
The Geoalcali Foundation is a member of the Association of Foundations of Navarra. This association is comprised of the main non-profit
associations in Navarra, both public and private.
28
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Seals and awards
Ignacio Salazar was nominated in Aragón´s most important
We have also received our RSA certificate award from
entrepreneurial award event (ADEA Award) as an executive leader of the
the Aragón Government due to our commitment to their
year in big projects category. The award event had a high attendance
official sustainability programme.
of government authorities, business leaders, politicians, and media.
This has given the Company the opportunity to present Muga Mine as a
sustainable, innovative, and key project for Aragón.
Ignacio´s nomitation at Adea awards
President Chivite, Minister Irujo and Mr. Salazar.
29
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 29
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Community,
building a future
together
Right from the beginning of the process, the Company has engaged with local community
representatives to ensure they remain aware of our Project from its onset and have ample
opportunity to use dedicated channels to communicate any concerns. The Company has been and
remains eager to work with the people in these communities to ensure the Company´s performance
is aligned with ethical principles of integrity, transparency and honesty to gain, retain and maintain
its Social License to Operate (SLTO).
Geoalcali has undertaken numerous explanatory meetings with the residents of the towns and
villages located in Navarra and Aragón which sought to address any concerns raised by the people
in the region in a collaborative manner. The Company has also made numerous presentations to
community leaders’ meetings and to locals to provide status updates about Muga. In total, the
Company has organised more than 30 informative events. In 2021, the Company organised five
different events with the aim of continuing its open relationship with the communities.
Town
Type of Engagement
Month
Year
Participants
Sos del Rey Católico
Informative Event – Local Suppliers
Informative Event – Local Suppliers
Informative Event – Local Suppliers
Informative Event
Informative Event
Breakfast with Mayors
Breakfast with Mayors
Open Doors
Breakfast with Mayors
Open Doors
Informative Event
Deliberation Sessions
Deliberation Sessions
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
Informative Event
11
11
11
9
6
3
7
9
8
10
2
6
6
2
7
7
9
10
7
7
2
5
11
2
6
9
11
5
5
8
6
3
6
7
10
7
10
5
2021
2021
2021
2021
2021
2021
2019
2019
2018
2017
2016
2016
2016
2015
2015
2015
2015
2015
2015
2015
2015
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2013
2013
2013
2013
2013
70
75
50
16
70
8
40
400
40
200
30
100
20
20
200
100
5
15
unknown
unknown
unknown
50
20
unknown
unknown
unknown
unknown
unknown
unknown
unknown
unknown
unknown
unknown
200
10
unknown
unknown
unknown
Table 3: Public participation and communication events held by Geoalcali with local communities
Sangüesa
Ejea de los Caballeros
Ejea de los Caballeros
Sangüesa
Javier
Javier
Sangüesa
Javier
Sangüesa
Cinco Villas
Sangüesa
Sos del Rey Católico
Javier
Sangüesa
Sos del Rey Católico
Lumbier
Urriés
Liédena
Yesa
Sangüesa
Pintanos
Undués de Lerda
SDP
SDP
Sangüesa
Sangüesa
Sangüesa
Javier
Javier
Javier
Javier
Liédena
Sangüesa
Undués de Lerda
Galar
SDP
SDP
30
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS The Company monitors continuously all available channels seeking to
listen to, and take into account, all expectations from local stakeholders
in order to enhance its CSR strategy continuously.
With this long-term view in mind, the Company started planning how
best to assess the current socio-economic situation of the Muga
communities of interest (COI). In informal discussions with local leaders
and regional government there was a consensus on the need to assess
this type of data.
The Government of Navarra, namely the Observatorio de la Realidad
Social, decided to undertake a Social Baseline Study (GNSBS) to
diagnose the current socio-economic situation of Muga Mine´s COI prior
to construction works commencing. This type of information is also
valuable for two main reasons. In first place, the collected information
could guide the Company in its CSR strategy. The data collected in the
study helps the Company understand the potential positive and negative
impacts of the Project and consider, based on that information, the
implementation of mitigation strategies for negative impacts and
strategies to maximise the positive impacts, working with the impacted
communities in a strategic manner. Secondly, the data collected and
the intention to undertake follow-up studies at specific intervals after
Project commencement would help the Company measure changes that
impact positively and negatively and be able to attribute these to the
mine or other externals activities.
The Company will work with local communities and authorities to address
the eight area of action identified in the GNSBS. More importantly, it
suggests forming thematic working groups (depending on the impact)
with Government, local authorities, and
the Company to work together in all the
Project phases.
In response to these action area,
the Company is working on a formal
response and commitment to the areas
suggested in the study. These actions
areas have also considered interna-
tional sustainability frameworks such
as the SDGs.
The eight action areas are:
Population
Initiatives to influence demographic rebalancing in terms
of population rejuvenation and improvement of population
replacement rates.
Occupational preparedness
Maximise local supplier engagement throughout the phases
of the Project (construction and production).
Demographic equilibrium
Initiatives to promote female employment to minimise any
gender imbalance arising from transitioning to urban areas
due to the lack of opportunities.
Diversity and adequate distribution
A preference to distribute housing and other services
throughout the COI, minimising the effect of newcomers to
the area only focusing on Sangüesa and Pamplona.
Redefine new services needed
Monitor the situation and expect an increase in general
services.
A new housing plan
There is a need to increase housing availability.
Social integration
Work on initiatives to integrate newcomers to the area
throughout the communities.
Government of Navarra presented the Social Baseline Study of Muga Mine
in Sangüesa Town Hall
Work in parallel with alternative work opportunities
Boost entrepreneurship and limit dependency on the mine.
31
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 31
Communication
channels and
grievance
mechanism
As well as regular communication through such events, the Company constantly monitors all its
communication channels and circulates surveys to key representatives of local communities to better
understand if its efforts are being reaching audiences and being communicated in the right way.
The Company has not received any formal grievances during 2021. The following table summarises
comments and grievances received from all communications via website channels, direct contact, phone,
suggestion boxes in eleven community locations, and online/offline feedback forms during engagement
events.
2016
2017
2018
2019
2020
2021
H1
4
0
0
H1
4
4
H2
0
0
0
H2
0
0
H1
16
1
3
H1
5
5
H2
54
4
25
H2
17
17
H1
73
1
4
Queries
H1
8
8
H2
31
2
5
H2
5
5
H1
17
0
0
H1
0
0
H2
97
1
7
H2
3
3
H1
8
0
0
H1
0
0
H2
11
0
0
H2
0
0
H1
1
0
0
H1
0
0
H2
15
0
0
H2
0
0
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
H1
0
0
H2
0
0
H1
0
0
Grievances
H1
0
0
H2
0
0
H2
0
0
H1
0
0
H2
0
0
H1
2
2
H2
0
0
H1
0
0
H2
0
0
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
In Favour
Unfavourable
Neutral
Received
Managed
100%
Received
Managed
100%
Table 4: Feedback received from local communities.
32
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Local suppliers
events
Geoalcali organised three local supplier information sessions in Ejea de los Caballeros, Sangüesa
and Sos del Rey Católico attended by more than 200 business people from the area. The Mayoress
of Sangüesa, Lucía Echegoyen, as well as Sos del Rey Católico Mayoress, Maria José Navarro, and
institutional representatives from neighboring towns such as Yesa, Rocaforte, Cáseda, Eslava,
among others, also attended the event.
Following the granting of the mining concession, Geoalcali is moving towards the construction of
the Project, thus entering a new phase. The Company has a Buy Local Policy in place and considers
that the support and engagement of local suppliers an important contributor to the success of the
Project.
The Geoalcali
Foundation
Local Supplier Event in Sangüesa
The Geoalcali Foundation has sponsored the E-Learning programme of the Commonwealth of
Cinco Villas since 2015. This educational initiative reaches local residents of Undués de Lerda,
Urriés, Lobera, Longás, Navardún, Pintanos, Bagüés with the purpose of raising IT literacy and
thus improving the employability of the active population which in turn, contributes to equal
opportunities between rural and urban areas. This initiative promotes the integration of people
who arrive in the region and do not know the language or have a lack of IT skills.
During the Covid-19 pandemic the Geoalcali Foundation also contributed with its purchase of
school materials to adapt the Sos del Rey Católico School, Isidoro Gil de Jaz, centre for online
classes. The Foundation also contributed with the purchase of masks, gels, disinfection mats,
protective screens and toy disinfectant.
The Geoalcali Foundation, together with the Liédena Town Council organised the event “Penultimate
journey of the Irati train”. This is a tourism initiative to raise awareness on the cultural heritage of
the town by using a train that is no longer in use but is part of the town’s history.
33
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Our people, the
Company’s main
ambassadors
The Company staff is a very important stakeholder. A healthy relationship with this stakeholder
group can bring direct benefits in generating a strong commitment to the organisation. We are
facing a paradigm of change, driven by Covid. This has pushed people to question intangible
aspects and to ask themselves whether the Company they work for is aligned with their values. In
other words, what we understand today as “corporate purpose” must resonate and move employees.
The Company has struggled during the pandemic and employees have directly suffered as a result
of the delays from the permitting process. Despite their pay being reduced and additional work
pressures, the team remained united and understanding of the common purpose of building the
Muga project together. This signifies that the people working for the Project are committed and
understand the great opportunity it will provide to them and the region.
Health and safety
The Company continued monitoring the Covid pandemic through its Covid Committee which
assessed risks and implemented protocols to protect the staff. The Company did not report any
significant infection spread from any staff member.
Accidents: The Company registered a minor accident involving an operator travelling to work.
No lost time was reported. After being medically assessed at a nearly by hospital the driver was
discharged a short time later with no physical injuries sustained.
34
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Training
During this year, training efforts have focused on Health and Safety with the aim of guaranteeing
that all personnel forming part of the Project have the appropriate training and preventative
knowledge for the work they are going to carry out.
The Company has also carried out training on Labour Legislation with the aim of implementing a
Labour Compliance Plan.
H&S Training
Coordination of Business Activities
— Fire Prevention and Emergency Measures: Prevention,
Extinguishing and Evacuation: Total 9 hours (3 hours per
person).
— Information, consultation and participation of workers in the
prevention of occupational hazards: Total 33 hours (1 hour per
person).
— Covid protocol in the office: Total 33 hours (1 hour per person).
— Covid risks and preventive measures: Total 15 hours (3 hours
per person).
— Warehouses: risks and preventive measures: Total 3 hours
(3 hours per person).
— Data visualisation screens: Risks and preventive measures:
Total 12 hours (3 hours per person).
— Investigation of accidents and incidents in the workplace: Total
15 hours (3 hours per person).
— First Aid: Total 12 hours (3 hours per person).
— Basic Principles, General Risks and Preventive Measures: Total
9 hours (3 hours per person).
— Protection of particularly sensitive workers: Pregnancy,
Maternity and Breastfeeding: Total 9 hours (3 hours per person).
— Road Safety at Work: Total 12 hours (3 hours per person).
— Noise: risks and preventive measures: total 3 hours (3 hours per
person).
— Electrical Risk: Risks and preventive measures: Total 3 hours (3
hours per person).
— Prevention of stress at work: Total 3 hours (3 hours per person).
— Offices and offices: Risks and Preventive Measures: Total 12
hours (3 hours per person).
Diversity and
work-life balance
enhanced protocols
Regarding specific grievance procedures and in accordance with our Whistleblower Policy, a
Harassment Prevention Protocol has been implemented to assist in the event of any sexual and/or
gender-based harassment.
In terms of flexible working hours, paid leave has been included, which includes measures for
work-life balance and accompaniment of family members, and requests for flexibility measures
other than those included in the Company’s work calendar.
In accordance with our Diversity Policy, a system for assessing candidates has been included in
the personnel selection procedure, so that the gender variable is independent throughout the
selection process. In addition, the remuneration policy is reviewed annually, where salaries are
studied and analysed in order to correct any inequalities in accordance with the remuneration
register established by the Equality Act of the Spanish law.
35
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 36
36HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2020 ANNUAL REPORT TO SHAREHOLDERS
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
36
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Directors’ Report
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 2021.
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 the Company
Corporate Governance
Auditor Independence and Non-Audit Services
Audited Remuneration Report
End of Audited Remuneration Report
37
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 37
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Directors
Mr. Richard Crookes
Mr. Ignacio Salazar
38
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.
Independent Non-Executive Chairman, BSc (Geology), Grad Dip Applied Finance
Mr. Crookes has over 30 years’ experience in the resources and investments industries. He is
a geologist by training having worked in the industry most recently as the Chief Geologist and
Mining Manager of Ernest Henry Mining in Australia (now Glencore). Mr. Crookes is currently
Managing Partner of Lionhead Resources, having previously spent six years with EMR Capital as an
Investment Director and prior to that, 12 years as an Executive Director in Macquarie Bank’s Metals
Energy Capital (MEC). Mr. Crookes has extensive experience in Funds Management, deal origination,
evaluation, structuring, and execution of investment entry and exits for both private and public
resources companies in Australia and overseas. In the three years immediately before the end of
the financial year, Mr. Crookes held three other directorships of listed companies (Chairman Black
Rock Mining Ltd BKT:ASX, since October 2017; Non-executive Director Lithium Power International
Ltd LPI:ASX, since October 2018; Non-executive Director of Barton Gold Holdings Ltd BGD:ASX,
since February 2021).
Managing Director and Chief Executive Officer
Mr. Salazar is an international executive with more than 30 years of experience in the natural
resources industry. He has lived and worked in various countries in Europe and South America.
Ignacio assumed the position of CEO of Highfield in July 2020, after coming from Orosur Mining,
a Canadian gold mining company with operations in Colombia, Uruguay and Chile, which is listed
in the London and Toronto stock markets, and in which he worked as CEO and CFO for 12 years.
Salazar had previously pursued an 18-year international career in oil and gas exploration and
production with Royal Dutch Shell.
Educated at the University of Deusto (Bilbao) where he completed his master’s degrees in Economics
and Business and Law, Ignacio has extensive experience in the exploration, development,
construction and operation of open pit and underground mines, as well as in the development of
local relations with communities and governments, and international relations within the industry
and in the capital markets from London, Europe and North America, both raising capital and in
mergers and acquisitions. In the three years immediately before the end of the financial year, Mr.
Salazar held no other directorships of any Australian listed company.
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Ms. Pauline Carr
Mr. Roger Davey
Independent Non-Executive Director, BEcon, MBA, FAICD, FGIA, FCG (CS CGP)
Ms. Carr has over 30 years’ commercial experience in management, corporate governance
and compliance, mergers and acquisitions, investor and stakeholder relations and company
reorganisations. She is a professional non-executive director and also provides business
improvement, compliance, risk management, project management and corporate governance
solutions to executive management teams. Prior to this, Ms. Carr held senior positions with
Newmont Asia Pacific and ASX listed Normandy Mining Limited and worked for a number of years
in the oil and gas sector with Exxon Mobil. She sits on several Boards and is Chancellor of the
University of South Australia. She is also Chairman of the South Australian Minerals and Energy
Advisory Council and National Pharmacies. Ms. Carr joined the Board of ASX listed Australian Rare
Earths Limited in 2021 and in the three years immediately before the end of the financial year, Ms.
Carr did not hold any other listed company directorships.
Independent Non-Executive Director, ACSM, MSc., C.Eng., Eur.Ing., MIMMM
Mr. Davey is currently a Non-Executive Director of London Listed Atalaya Mining, Central Asia
Metals and Tharisa plc.
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 Engineer at
N M Rothschild (London) in the Mining and Metals project finance 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 management
and Director level in South America, Africa and the United Kingdom. He is fluent in Spanish.
His previous positions include Director, Vice president and General Manager of Minorco (AngloGold)
subsidiaries in Argentina (1994 - 1997), where he had responsibility 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 Australia; Production
Manager for Blue Circle 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 Camborne School of Mines, England and holds a Master of Science
degree in Mineral Production Management from Imperial College, London University. He is a
Chartered Engineer (C.Eng.), a European Engineer (Eur. Ing.) and a Member of the Institute of
Materials, Minerals and Mining (MIMMM). Mr. Davey also holds a Master of Science degree in Water
Resource Management from Bournemouth University. In the three years immediately before the
end of the financial year, Mr. Davey held no other directorships of any Australian listed companies.
39
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Non-Executive Director, FCA, FAICD
Mr. Jamieson has over 40 years’ experience in the advisory, manufacturing, resources and
technology industries in Australia and offshore.
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
large prívate companies. He is also a Fellow of the lnstitute of Chartered Accountants in Australia
and New Zealand and a Fellow of the Australian lnstitute of Company Directors.
Mr. Jamieson is currently Non-Executive Chairman of the Audit and Risk Committee of IODM Limited
and is currently a Non-Executive Director of Energy Technologies Limited (EGY.ASX appointed 24
December 2020) and Highfield Resources Limited. Mr. Jamieson was formerly Non-Executive
Chairman of Sigma Healthcare Limited (resigned 13 May 2020), Non-Executive Chairman of Mesoblast
Limited (resigned 31 March 2019), Non Executive Director of Oxiana/OZ Minerals Limited from 2005
to 2015 and served as Chairman of Audit Risk and Compliance, Nomination and Remuneration, and
Due Diligence Committees. 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
Diligence Committee and member of the Remuneration Committee. He was also a Non Executive
Director of ASX listed Tigers Realm Goal from 2010 to 2015 and chaired various committees.
He has not held any other listed directorships in addition to those set out above in the past three
years.
Independent Non-Executive Director, BA (Administration) BA (Law)
Mr. Querub, was an advisor to both the Company and its wholly owned Spanish subsidiary, Geoalcali,
from September 2017 until joining the Board on 5 April 2018.
He is one of Spain’s most senior commodities professionals and has a successful track record as a
global mining executive and over 35 years’ experience in the sector. He was Chief Executive Officer
of Glencore in Spain for over 14 years representing Glencore in negotiations which resulted in
important transactions and acquisitions over more than 20 years. He led Glencore in transactions
throughout Africa and Spain as well as representing the Company on the Board of Asturiana del
Zinc, a major Spanish zinc producer. More recently he was Chief Executive Officer of EMED, now
Atalaya, which operates the former Rio Tinto copper mine located in southern Spain.
Mr. Querub has a degree in Business Administration and a degree in Law, both from ICADE -
Universidad Pontificia de Comillas, Madrid. He is currently active on a number of not-for-profit
Boards as well as having extensive experience in the international marketing of mineral, crude and
oil products.
Independent Non-Executive Director, B.Eng (Chem), M.Eng (Chem)
Mr. Dietz has over 42 years’ experience in the fertiliser, chemical and petroleum industries,
primarily in senior operational roles. From 2000 until 2010, he was Chief Operating Officer of
Potash Corporation of Saskatchewan (“PotashCorp”), the world’s largest fertiliser company. Prior
to that position, Mr. Dietz held a variety of other senior management roles, including President of
Nitrogen, during his 17 year career with PotashCorp. During that time, Mr. Dietz was responsible for
global operations as well as Safety, Health, and Environment performance and Procurement. Mr.
Dietz also represented PotashCorp on the Board of Directors of Arab Potash Company. Mr. Dietz
is a Chemical Engineer and holds both a Masters and Bachelors designation from the Ohio State
University. In the three years immediately before the end of the financial year, Mr. Dietz held no
other directorships of any listed companies.
Mr. Brian Jamieson
Mr. Isaac Querub
(retired 27 September 2021)
Mr. Jim Dietz
(retired 18 February 2021)
40
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS B.COM (Acc/Fin), CA (Appointed 8 February 2021)
Ms. Adams is a partner of HLB Mann Judd, with over 15 years of accounting and corporate advisory
experience, servicing predominantly ASX listed companies. She has extensive knowledge in
corporate governance, ASX Listing Rule requirements, IPO and capital raising processes, as well as
a strong technical accounting knowledge.
Ms. Adams is presently a non-executive director of Clean Seas Seafood Limited, as well as the
Company Secretary of Petratherm Limited, Duxton Water Limited and Duxton Broadacre Farms
Limited.
BA (Acc), CA (retired 8 February 2021)
Mr. Stephens has over 25 years’ experience in the accounting, mining and services industries,
including 14 years as a partner of HLB Mann Judd (SA), a firm of Chartered Accountants. He is a
Chartered Accountant and corporate adviser specialising in small cap ASX listed entities.
Mr. Stephens is a director of Petratherm Limited. Additionally, he is Company Secretary of
Petratherm Limited and various other unlisted public companies. Mr. Stephens is a former director
of Odin Metals Limited (formerly Lawson Gold Limited) (resigned February 2018), Mithril Resources
Ltd (resigned May 2019) and Gooroo Ventures Limited (resigned January 2020).
Independent Non-Executive Chairman, B Comm, M Eng. (Mining) GAICD
As recently announced to the ASX, Mr. Harris will join the Board of Highfield Resources Limited
as an independent non-executive Director and Chairman on 25 March 2022. Mr. Harris has
over 25 years’ experience in financial markets and investment banking, including roles
with Citibank, Bankers Trust and Merrill Lynch advising mining organisations on strategy,
mergers and acquisitions, and capital markets. He is well known by the Australian investment
community and was also Managing Director – Head of Metals and Mining at Citi for several
years.
Most recently Mr. Harris has been working with mining company boards as a non-executive
director as well as providing advisory services on strategy and finance. He is currently the
non-executive Chairman of ASX-listed Aeon Metals Limited (ASX: AML) and a non-executive
Director of ASX listed Aurelia Metals Ltd (ASX:AMI). In the three years immediately prior to the
end of the financial year Mr. Harris did not hold any other ASX listed company directorships.
Mr. Harris has a Masters of Engineering (Mining) and a Bachelor of Commerce (Finance) from
the University of New South Wales and is a graduate of the Australian Institute of Company
Directors.
41
COMPANY SECRETARY
Ms. Katelyn Adams
Mr. Donald Stephens
Mr. Paul Harris
(Appointed effective 25
March 2022)
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 Board in fulfilling its governance and
oversight responsibilities in relation to remuneration practices so that they:
— Link rewards to the creation of value for shareholders;
— Facilitate operational excellence by attracting and retaining talent;
— Fairly and responsibly reward individuals having regard to individual and Highfield targets
and performance as well as industry remuneration conditions; and
— Comply with applicable regulatory obligations.
In addition, the Committee oversees selected nomination activities so that boards within the
Highfield Group comprise individuals who are best able to discharge the responsibilities of
directors having regard to the law and excellence in governance standards.
The members of the Remuneration and Nomination Committee are Ms. Pauline Carr (Chairman), Mr.
Richard Crookes and Mr. Roger Davey.
The principal purpose of the Committee is to assist the Board in fulfilling its governance and
oversight responsibilities relating to:
— The integrity of financial accounting practices and reporting;
— Risk management;
— Internal control framework and internal audit;
— External audit function; and
— Compliance with the Corporations Act, ASX Listing Rules and the ASX Corporate Governance
and Principles.
The members of the Audit, Business Risk and Compliance Committee are Ms. Pauline Carr
(Chairman), Mr. Brian Jamieson and Mr. Roger Davey.
42
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Interests in the Securities of the Company
As at the date of this report, the interests of the Directors in the securities of Highfield Resources Limited are:
Director
Ordinary
Shares
Options –
exercisable at
$0.83 each on
or before 30
Jun 2022
Options –
exercisable
at $0.81 each
on or before
30 Jun 2023
Options –
exercisable
at $0.47 each
on or before
31 Dec 2023
Options –
exercisable
at $0.47 each
on or before
31 Dec 2024
Options –
exercisable
at $0.47 each
on or before
31 Dec 2025
Options –
exercisable at
$0.865 each
on or before
31 Dec 2024
Options –
exercisable at
$0.865 each
on or before
31 Dec 2025
Options –
exercisable at
$0.865 each
on or before
31 Dec 2026
Richard Crookes
74,987
1,000,000
1,000,000
-
-
-
-
-
-
Ignacio Salazar
126,700
Pauline Carr
Roger Davey
Brian Jamieson
62,101
9,251
66,943
-
-
-
-
-
333,333
333,333
333,334
591,803
509,961
459,971
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 2021 was
$6,699,579 (year ended 31 December 2020: $24,390,718).
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-Vipasca Project.
43
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Review of Operations
Muga-Vipasca
Project
Highfield’s flagship Muga Project (“Muga” or “the Project”) is targeting the relatively shallow sylvinite
beds in the Muga Project area that covers about 46km2 located in the Provinces of Navarra and
Aragón. Mining is planned to commence at a depth of approximately 350 metres from surface and
is therefore ideal for a relatively low-cost conventional mine accessed via a dual decline.
During Q1 2022, Highfield relinquished the Goyo Sur and Muga P.I. areas within the Muga project due
to their lack of geological interest.
Given Vipasca’s location adjacent to Muga and its geological characteristics, it has always been
considered as a natural continuation of the Muga deposit. The interpretation of the geological
information obtained in recent years at Vipasca has shown that the potash unit is too deep
in the central and western areas of the permit, situated at least more than 1100 meters depth.
Consequently, the Company has relinquished these areas in 2021, preserving the more economical
eastern sector, and resulting in the current area covering approximately 14km2. The eastern part of
the Vipasca permit, previously categorised as an Exploration Target, is currently defined as Mineral
Resource and is considered an extension to the Muga Mining Concession.
44
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Permitting process
As reported on 6 June 2019, the Company obtained a positive Declaración de Impacto Ambiental
(“DIA”) in respect for the Muga Project, thus accomplishing a key permitting milestone to move
its Muga Project forward. The granting of the environmental permit was published in the official
Spanish public bulletin on 21 June 2019.
Following the DIA award, Highfield focused on securing the Mining Concession (“MC”) and
the construction permits necessary to take the Project into the construction phase. The MC
documentation was submitted on 13 March 2020, after which the Company maintained constant
dialogue with the relevant authorities in order to expedite the MC process.
The authorities split the MC documentation into five sections. During the sections review, the
Company replied to all questions from the authorities in Madrid, Aragón, and Navarra. Following the
completion of the review and the reception of the last report required in the final section of the MC
from the environmental department of Aragón, the Mining Authorities of the three administrations
involved submitted the final MC text to the Government’s lawyer for a final legal review. Shortly
after, on 1 July 2021, the MC was granted for three areas that comprise the Muga Project, namely
Fronterizo, Muga and Goyo.
On 4 March 2021 the Social Baseline Study, an independent study commissioned by the Government
of Navarra was published (refer ASX release 5 March 2021 “Government of Navarra releases Social
Baseline Study”). This study had very positive conclusions for the Muga Mine highlighting the upside
of the Project and its favorable effect on the communities around the mine. It is acknowledged
that the Project will boost the economies of the rural communities around the mine by generating
employment and indirect business opportunities. Moreover, it points out that the Muga mine has
the potential to significantly reverse the severe depopulation and unemployment affecting the
surrounding communities. The Study also demonstrates the strong support to the Project from the
Government of Navarra.
As reported in the ASX release 19 July 2021, “Muga Mine Site Event”, following the MC award the
Company held an official event at the mine site that was attended by distinguished representatives
from the authorities in Navarra and Aragón, as well as representatives from the local communities,
town halls in the Muga area, and representatives of political parties in the region. At the event, the
President of Navarra, Ms. María Chivite, highlighted the strategic importance of the Muga Mine for
the economic recovery of the region.
Regarding other permits, the Company continues to progress towards the construction licenses for
the processing plant and the mine gate, of which the town halls of Sangüesa (Navarra) and Undués
de Lerda (Aragón) are responsible respectively. The Company has been in discussions with the
Navarra administration to split the license for electricity works from the main construction license
of the processing plant and a decision on its award is expected in the next few weeks. Although
not essential for the Project, an early electricity works license would allow the construction of the
electricity line ahead of the main construction of the Project thereby allowing the use of electricity
from the grid rather than from generators with significant savings in costs and CO2 emissions.
45
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Technical and
economical update
In line with the plan, the engineering consultancy firms released to Highfield the detailed design
for the Project at the end of December 2020. During the first half of 2021, the Company’s technical
team analysed and reviewed the documentation to ensure the design met the objectives of the
Project and to identify any potential improvements.
During the second half of 2021, with the MC already in place, Highfield continued to advance Muga to
construction readiness with a focus on finalising the purchase of some long lead time equipment.
As announced, Highfield signed a purchase contract with Weir Minerals for the acquisition of
Screens and Cyclones (refer ASX release 21 September 2021, “Purchase Contract Signed for Process
Plant Equipment”). During the fourth quarter of the year, a contract with Eriez Flotation Division
Canada Inc (“Eriez”) for the purchase of the column cells for the secondary flotation was signed
and in February 2022 the Company announced that after signing contracts with Metso Outotec
Finland to provide the thickeners and with TEMA Process BV to provide both the potash and salt
dryers, as well as the dedusting systems and the wet scrubber of the crushing area, all the key
components of the process plant had been signed with the suppliers (refer ASX release 15 February
2022, “Remaining Purchase Contract Signed”).
In parallel, the Company has shared the information with its construction partner, Acciona, to
progress with the negotiation of the construction agreement and the project implementation.
The Company carried out a Feasibility Study to provide an update to the Muga-Vipasca Potash
Project which reconfirmed the compelling economics of the Project (refer ASX release 8 December
2021, “Muga Feasibility Study - Updated”). The Study is underpinned by the advanced engineering
and procurement where 86% of the capex estimate is based on signed contracts, firm offers and
updated prices.
The updated project economics resulted in an NPV8 of €1.89 billion and an IRR of 25% over a 30-
year mine life, while the sensitivity analysis using December 2021 flat real spot prices for the whole
life of mine resulted in a post-tax NPV8 of €2.8 billion and an IRR of 42%. The updated capex for
Phase 1 is €398 million, and €209 million for Phase 2.
46
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Sales and
marketing update
In previous years, Highfield has signed non-binding MOUs representing more than its full Phase 1
production capacity for potash and salt.
During most of 2021, the potash market has experienced supply constraints which, together with
high farmer affordability and the implementation of governmental policies to ensure food safety
due to Covid-19, have boosted prices. This environment has encouraged discussions with traders,
potential offtake partners and logistics partners interested in a strategic participation in the
Project.
The Company has kept developing and formalizing its sales, marketing, and logistics strategy by
signing agreements with the Port of Pasajes (refer ASX release 2 August 2021, “Updated MOU Signed
with Port of Pasajes”) and with the Port of Bilbao (refer ASX release 30 August 2021, “MOU Signed
with Port of Bilbao”).
Project financing
Since its appointment in November 2020, the Company has worked closely with Endeavour
Financial, a leading independent advisor, to secure appropriate financing for Phase 1. Based upon
its assessment of the Muga Project and following positive feedback on a draft term sheet by a
potential syndicate of lenders, the Company is targeting debt sizing of around €300 million to start
construction of Phase 1. The due diligence is progressing well, and the plan is to have an update on
the term sheet with the banks in the first quarter of 2022.
A comprehensive due diligence process was undertaken during the last quarter of the year and
included a site visit by consultants covering technical, environmental, and social assessments of
the Muga Project. The corresponding due diligence reports have now been finalised.
During the third quarter of 2021, Highfield raised A$15 million via a single-tranche Placement
that was oversubscribed and had a strong support from existing and new institutional investors.
Following the Placement, the Company also successfully raised A$3 million through a Share
Purchase Plan (“SPP”) that was offered to all eligible retail shareholders.
47
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Pintanos Project
Adjacent to the Muga Project, the Pintanos tenement area comprises the three permits of Molineras
1, Molineras 2 and Puntarrón and covers an area of 65km2. The drilling permit at Molineras 1 was
extended for three years in 2020. The Company re-initiated the application process for the drilling
permits at Molineras 2 and Puntarrón in 2019 and currently continues to await the award of the
permit.
The current priority for the Company remains the development of the Muga Mine.
48
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Sierra del Perdón
Project
Located southeast of Pamplona, the Sierra del Perdón tenement area (“SdP”) covers approximately
120km2 and comprises the three permits of Quiñones, Adiós and Ampliación de Adiós. SdP is a
brownfield target which previously hosted two potash mines operating from the 1960s until the late
1990s, producing nearly 500,000 tonnes of potash per annum. The Company believes that there is
potential for potash in new, unmined areas in the SdP area.
The Company was advised in the fourth quarter of 2018 that the second three-year extension
application for the Adiós and Quiñones permits had been rejected by the mining department of
the Government of Navarra. Highfield appealed this decision in 2019 and to date has not obtained
a resolution. In the fourth quarter of 2020, the second three-year extension application for the
Ampliación de Adiós permit had been rejected by the mining department of the Government of
Navarra, a decision that was appealed by the Company in the same quarter. Based on local Spanish
legal advice, the continued lack of a resolution to these appeals does not represent a significant
change with an adverse effect on the entity.
No drilling took place at SdP during 2021.
49
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Geoalcali Foundation
Projects
The Geoalcali Foundation is a not-for-profit Spanish foundation, funded exclusively by Geoalcali.
It was established to support projects in the communities in which the Company will operate its
mines.
Since its establishment in September 2014 the Geoalcali foundation has provided support to over
170 community projects in close collaboration with town halls, social associations, foundations
and other local organisations. The wide range of initiatives supported by the Company are well
known and appreciated by the local community, with a number of them having received awards and
recognition as sustainable initiatives.
During 2021 and despite the reduction of the number of initiatives due to the adverse effects of the
Covid-19 pandemic, the Foundation resumed its activities with the aim of fostering the development
of the local community by supporting projects which focus on enhancing the educational quality
and boosting sustainability measures in the surrounding communities.
Corporate
Directors
On 28 July 2021, the Company announced that its CEO, Mr. Ignacio Salazar, would join the Board of
Highfield Resources Limited as Managing Director with effect from the announcement date.
Non- executive Director, Mr. Isaac Querub, retired and stepped down from the Board on 27
September 2021 after three and a half years of fruitful service to the Company.
Non-executive Director, Mr. Jim Dietz also retired and stepped down from the Board on 18 February
2021 after five years of service during which he helped to consolidate the Company’s sales and
marketing strategy. He was also a member of the Remuneration Committee.
Incoming Chairman
As reported in the ASX release 16 March 2022, “Chairman Transition”, Mr. Paul Harris will join the
Board of Highfield Resources Limited as an independent non-executive Director and Chairman
with effect from 25 March 2022.
50
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Annual Review of Ore Reserves and Mineral
Resources
Muga-Vipasca
Project
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 2021. Rounding differences may
occur.
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 2019. The data in this study was considered to be accurate for the years
ended 31 December 2019 and 31 December 2020.
On 23 November 2021 the Company released to the ASX an updated Ore Reserve which included
both the Muga and Vipasca projects. The updated Ore Reserve was audited by SRK Consulting UK
Ltd as at 31 October 2021. The Company considers this Ore Reserve, presented in terms of plant
feed, to be accurate as at 31 December 2021.
Table 1: Muga-Vipasca Ore Reserves Summary
31 December 2021
31 December 2020
31 December 2019
Tonnes In Place
(Mt)
45.3
59.0
104.3
Grade
K2O (%)
10.5%
10.0%
10.2%
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
42.9
65.8
108.7
10.2%
10.2%
10.2%
42.9
65.8
108.7
Grade
K2O (%)
10.2%
10.2%
10.2%
Proved
Probable
Total Proved & Probable
Additional notes to consider for the purposes of the Ore Reserves statement are as follows:
1. All figures are rounded to reflect the relative accuracy of the estimate and have been used to derive sub-totals, totals and weighted averages.
Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, SRK does not
consider them to be material. The Concession is wholly owned by and exploration is operated by Geoalcali S.L.U., the wholly owned Spanish
subsidiary of Highfield Resources.
2. The standard adopted in respect of the reporting of Ore Reserves for the Project, following the completion of required technical studies, is
the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.
3. SRK reasonably expects the Muga deposit to be amenable to a variety of underground mining methods for the shallow and inclined potash
seams. Ore Reserves are reported at an 8% K2O cut-off which is based on potash price assumptions, metallurgical recovery assumptions
from initial testwork, mining costs, processing costs, general and administrative (G&A) costs, and other factors.
4. SRK notes that the Reserve Tonnes are reported as wet tonnes with a low moisture content of 0.8%.
51
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Highfield released an updated JORC-compliant Mineral Resource Estimate (“MRE”) to the ASX on 10
October 2018 that was deemed valid for the year ended 31 December 2019.
On 30 March 2021, an updated Mineral Resource Estimate (“MRE”) for the Muga-Vipasca potash
Project valid as at 31 August 2020 was released to the ASX. This MRE, which is inclusive of all Ore
Reserves shown above in Table 1, is presented below in Table 2 and was also audited by SRK. The
Company believes it is accurate and remains valid as at 31 December 2021.
Table 2: Muga-Vipasca Mineral Resources Summary
31 December 2021
31 December 2020
31 December 2019
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Measured
Indicated
Total Measured & Indicated
Inferred
Total
103.2
134.1
237.3
44.9
282.2
12.3%
11.7%
12.0%
10.8%
11.8%
103.2
134.1
237.3
44.9
282.2
12.3%
11.7%
12.0%
10.8%
11.8%
91.8
143.0
234.8
32.6
267.4
Grade
K2O (%)
12.4%
12.1%
12.3%
12.9%
12.4%
Additional notes to consider for the purposes of the Mineral Resources statement are as follows:
1. Reported above a cut-off grade of 8% K2O and a minimum mining thickness (where horizons will be mined separately) of 1.5m.
Sierra del Perdón
Project
Highfield released a maiden MRE for the Sierra del Perdón Project to the ASX on 7 April 2015. The
Company considers this MRE to remain accurate as at 31 December 2021.
Table 3: Sierra del Perdón Mineral Resources Summary
31 December 2021
31 December 2020
31 December 2019
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%
52
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 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 MRE 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 2017, 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 remains accurate as at 31 December 2021.
Table 4: Pintanos Mineral Resources Summary
31 December 2021
31 December 2020
31 December 2019
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%
53
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 2021
31 December 2020
31 December 2019
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Grade
K2O (%)
Tonnes In Place
(Mt)
Proved
Probable
Total Proved & Probable
45.3
59.0
104.3
10.5%
10.0%
10.2%
42.9
65.8
108.7
10.2%
10.2%
10.2%
42.9
65.8
108.7
Grade
K2O (%)
10.2%
10.2%
10.2%
Additional notes to consider for the purposes of the Ore Reserves statement are as follows:
1. All figures are rounded to reflect the relative accuracy of the estimate and have been used to derive sub-totals, totals and weighted averages.
Such calculations inherently involve a degree of rounding and consequently introduce a margin of error. Where these occur, SRK does not
consider them to be material. The Concession is wholly owned by and exploration is operated by Geoalcali S.L.U., the wholly owned Spanish
subsidiary of Highfield Resources.
2. The standard adopted in respect of the reporting of Ore Reserves for the Project, following the completion of required technical studies, is
the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.
3. SRK reasonably expects the Muga deposit to be amenable to a variety of underground mining methods for the shallow and inclined potash
seams. Ore Reserves are reported at an 8% K20 cut-off which is based on potash price assumptions, metallurgical recovery assumptions
from initial testwork, mining costs, processing costs, general and administrative (G&A) costs, and other factors.
4. SRK notes that the Reserve Tonnes are reported as wet tonnes with a low moisture content of 0.8%.
Table 6: Highfield Total Mineral Resources Summary (all projects)
The MRE includes all Ore Reserves shown above in Table 5.
31 December 2021
31 December 2020
31 December 2019
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
103.2
175.9
279.1
155.9
435.0
12.3%
11.5%
11.8%
11.2%
11.6%
103.2
175.9
279.1
155.9
435.0
12.3%
11.5%
11.8%
11.2%
11.6%
91.8
184.8
276.6
143.6
420.2
12.4%
11.9%
12.0%
11.7%
11.9%
Corporate Governance – Resources and
Reserve Calculations
Due to the nature, stage and size of the Company’s existing operations, the Company has historically concluded that there would be insufficient
efficiencies or additional governance benefits gained by establishing a separate mineral resources and ore reserves committee responsible for
reviewing and monitoring the Company’s processes for calculating mineral resources and ore reserves and for ensuring that the appropriate internal
controls are applied to such calculations. However, the establishment of such a committee, at an appropriate time, remains under consideration. In the
interim, the Company continues to ensure that all drill results and Mineral Resource calculations are validated by a competent, senior geologist and are
reviewed and verified independently by a qualified person. During the 2021 financial year the composition of the Highfield Board of Directors included
a qualified geologist.
54
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Significant Changes in the State of Affairs
There have been no significant changes in the state of affairs of the Group during the financial year, other than as set out in this report.
Significant Events After the Reporting Date
There have been no significant events after the reporting date requiring disclosure in this report.
Likely Developments and Expected Results
of Operations
The Directors have excluded from this report any further information on the likely developments in the operations of the Company and the expected
results of those operations in future financial periods, as the Directors believe that it would be speculative and prejudicial to the interests of the
Company.
Environmental Regulations and Performance
The operations of the Company are presently subject to Environmental Regulation under the laws of the Commonwealth of Australia and of Spain. The
Company has been at all times in full environmental compliance with the conditions of its licences.
Share Options
As at the date of this report there were 24,962,030 unissued ordinary shares under options. Refer to note 18 to the consolidated financial statements
below for details.
55
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Indemnification and Insurance of Directors
and Officers
The Company has made an agreement indemnifying all the Directors and officers of the Company against all losses or liabilities incurred by each Director
or officer in their capacity as Directors or officers of entities in the Group to the extent permitted by the Corporations Act 2001. The indemnification
specifically excludes willful acts of negligence.
The Company entered into insurance policies in respect of Directors’ and Officers’ Liability Insurance contracts for current Directors and officers of
the Company and of the Company’s controlled entities. The liabilities insured are damages and legal costs that may be incurred in defending civil or
criminal proceedings that may be brought against the officers in their capacity as officers of entities in the Group. The total amount of insurance
premiums paid has not been disclosed due to confidentiality reasons.
Directors’ Meetings
The numbers of meetings of Directors and Committees held during the year ended 31 December 2021 and the number of meetings attended by each
Director were as follows:
Director
Directors’ Meetings
Remuneration and Nomination Committee
Audit, Business Risk and Compliance
Committee
Richard Crookes
Ignacio Salazar
Pauline Carr
Roger Davey
Brian Jamieson
Isaac Querub (retired 27 September 2021)
Jim Dietz (retired 18 February 2021)
A
9
4
9
9
9
6
2
B
9
9#
9
9
9
6
2
A
5
2
5
5
5
-
2
B
5
5#*
5
4
3*
-
2
A
4
3
4
4
4
-
-
B
3*
4#*
4
4
4
-
-
A = number of meetings held during the time the Director held office as a Director or a Committee member.
B = number of meetings attended during the financial year. Note that Directors may attend Committee Meetings without being a member of that Committee.
* Attendance at meeting by invitation.
# Additional meetings attended in the capacity of CEO.
Proceedings on Behalf of the 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.
56
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Corporate Governance
In recognising the need for robust standards of corporate behaviour and accountability, the Directors of Highfield support and adhere to the principles
of sound corporate governance. The Board recognises the recommendations of the Australian Securities Exchange Corporate Governance Council
and considers that Highfield is in compliance with those recommendations which add value at its present stage as 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.
Auditor Independence and Non-Audit Services
Section 307C of the Corporations Act 2001 requires the Company’s auditors to provide the Directors of Highfield with an Independence Declaration in
relation to the audit of the financial report. A copy of that declaration is included at page 102 of the annual report. No non-audit services were provided
by the Company’s auditor.
Audited Remuneration Report
This report, which forms part of the Directors’ report, outlines the remuneration arrangements in place for the key management personnel (“KMP”) of
Highfield Resources Limited for the year ended 31 December 2021. The information provided in this remuneration report has been audited as required
by Section 308(3C) of the Corporations Act 2001.
The remuneration report details the remuneration arrangements for KMP who are defined as those persons having authority and responsibility for
planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of
the Group.
Details of Directors
and other key
management
personnel
Non-executive Directors
Richard Crookes
Independent Non-Executive Chairman
Pauline Carr
Roger Davey
Independent Non-Executive Director
Independent Non-Executive Director
Brian Jamieson
Non-Executive Director
Isaac Querub
Independent Non-Executive Director (retired 27 September 2021)
Jim Dietz
Executives
Independent Non-Executive Director (retired 18 February 2021)
Ignacio Salazar
CEO and Managing Director
Mike Norris
Chief Financial Officer (resigned 10 December 2021)
57
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 CEO. The broad policy is to ensure that
remuneration properly reflects the individuals’ duties and responsibilities, and that remuneration
is fair and competitive in attracting, retaining and motivating quality people with appropriate skills
and experience. The policy is set out in a transparent manner and communications and engagement
with stakeholders provide clarity around all elements of the policy. At the time of determining
remuneration, consideration is given by the Board to the Group’s financial circumstances and
performance.
As part of its suite of corporate governance policies and procedures, the Board has an independent
Remuneration and Nomination Committee Charter to oversee the Group’s remuneration
and nomination responsibilities and related governance as well as formulate the Company’s
remuneration framework and Remuneration Policy.
The Committee and Board have established the following parameters as part of the remuneration
framework for executives:
Level
CEO
Short Term Incentive
Long Term Incentive1
Up to 75% of fixed remuneration
(up to 75% Corporate KPIs and the remainder Personal KPIs)
Up to 85% of fixed remuneration in the form of options subject
to vesting conditions
Senior executives
Up to 60% of fixed remuneration
(up to 60% Corporate KPIs and the remainder Personal KPIs)
Up to 75% of fixed remuneration in the form of options subject
to 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 employed 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 remuneration
paid to employees will be competitive relative to the relevant market. The Remuneration and
Nomination Committee generally undertakes a market benchmarking review of executive
positions at least once every three years to ensure that the Company’s remuneration offerings
remain competitive with its contemporary peer group.
The Board and the Remuneration and Nomination Committee seek and consider advice from
independent remuneration consultants to ensure that they have relevant information to the
determination of all facets of remuneration relating to the KMP and senior executives. The
engagement of remuneration consultants is governed by the Remuneration and Nomination
Committee Charter which sets the protocols and restrictions around the interaction between
management and the consultants with a view to minimising the risk of any undue influence
occurring and ensuring compliance with the Corporations Act 2001 requirements.
The advice and recommendations of consultants are used by the Board and Committee as a guide in
formulating remuneration and policy. Decisions are made by the Board after its own consideration
of the issues but having regard to the recommendations from the Committee and consultants.
Use of
Remuneration
Consultants
58
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Review of KMP
remuneration
To ensure that the KMP remuneration remains consistent with the Company’s remuneration policy,
KMP and senior executive remuneration is reviewed annually by the Board with the assistance of
the Remuneration and Nomination Committee and, as required, external remuneration consultants.
When performing the remuneration review, the Board considers:
Components of
remuneration of
other KMP and
senior executives
— 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.
Total Fixed
Remuneration (“TFR”)
At-risk remuneration
Short Term Incentive (“STI”)
Long Term Incentive (“LTI”)
Base remuneration that
Variable, performance
The equity component
reflects the job size,
based, annual cash incentive
of the at-risk reward
role, responsibilities and
plan designed to reward
opportunity, linked to the
professional competence
high performance against
creation of shareholder
of each executive,
challenging, clearly defined,
value and foster employee
according to their
realistic and measurable
retention.
knowledge, experience
objectives that are based
and accountabilities and
on a mix of Corporate and
considering external
Personal KPI targets that are
market relativities.
set to encourage 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 circumstances at
different junctures in time.
The mix of fixed and at-risk remuneration varies depending on the role and level of executive, and
also depends on the performance of the Company and individual. Compared with other employees,
senior positions have a greater proportion of at-risk remuneration and have a higher proportion of
their at-risk remuneration assessed on Company performance KPIs.
In addition to fixed and at-risk remuneration, share options may be issued to KMPs at the
commencement of their employment, when the Board determines this to be appropriate.
59
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Non-Executive
Director (“NED”)
remuneration
NED remuneration is reviewed periodically by the Remuneration and Nomination Committee. With
the exception of the Chairman NEDs receive a fixed fee remuneration consisting of an annual
base Board fee with additional fees for any committee positions they hold. The Chairman received
a fixed annual fee with no additional amounts payable for Committee memberships. 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.
In addition to fixed fee remuneration, the Board may propose that shareholder approval be sought
for the issue of share options to Directors when it determines this to be appropriate.
The aggregate remuneration for NEDs was 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.
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
With effect from the start of October 2020, the Directors of the Board implemented a reduction
in their total remuneration of 25% until the Mining Concession was awarded. In March 2021 this
reduction in Directors’ fees was further increased to a 50% reduction to align with the temporary
reduction of 50% of all Highfield’s management and staff’s working time and salaries until the
Mining Concession was granted. The implementation of such a measure was lifted in July 2021 and
the Company opted pay the June 2021 fees in full to recognize the efforts made by the Directors
and the staff as a whole that led to the Mining Concession award.
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.
60
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Key performance
indicators for short
term incentives
Summary corporate
and strategic KPI
performance
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 CEO 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,
environment, social responsibility, permitting, finance and project delivery. In addition, the senior
executives also have personal KPIs appropriate to their specific areas of responsibility.
The KPIs for the year ended 31 December 2021 were assessed in accordance with the parameters
set out in the Remuneration Policy section above. The STI for the CEO was based on 75% of his
fixed cash salary for corporate and strategic KPIs. The STIs for other senior executives were based
on a weighting of up to 60% of their fixed cash salary for corporate and strategic KPIs and the
remaining percentage for personal KPIs.
Unlike previous years in which the level of achievement of KPIs was assessed as Threshold, Target
or Stretch, whereby the KPI weighting was multiplied by 85%, 100% or 115% respectively, KPIs
defined for the year ended 31 December 2021 were only assessed as Target.
For the year ended 31 December 2021 the STI corporate and strategic KPI performance outcomes
for KMPs were assessed as follows:
KPI Category
Objective for the year
Safety, Health,
Environmental
and Community
Safety, Health, Environmental and Community
Permits
Mining Concession and construction licenses awarded
Financing
Successful debt and equity financing
Engineering
Design and Engineering readiness
Construction
Agreement with proposed Major Construction Partner and
tendering
Construction
Construction at project site commenced
Total
Weighting
for 2021
%
2021
Outcome
%
10
20
30
10
15
15
100
10
10
10
10
10
-
50
Short term
incentive award
The remuneration of the CEO, Ignacio Salazar for the financial year included cash performance
pay in respect of the attainment of corporate and personal STI KPIs set by the Board. The STI
awards relate to the achievement of KPIs for the year ended 31 December 2021. The bonus cost
was approved by the Board in March 2022 for payment in cash later in 2022, at a date when
financing to fund the construction of the Muga Project has been satisfactorily obtained. The cost
of the achievements of KPIs for the year ended 31 December 2021 is included as an expense in the
financial statements for the year ended 31 December 2021.
61
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS LTI performance
and outcomes for
2021
Awards granted under the Highfield Resources Limited LTI Plan consist of share options which
are granted for no consideration and carry no dividend or voting rights. Following vesting and
subsequent exercise of the options one ordinary share in the Company will be allocated per option.
The 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.
Feature
Description
Opportunity/allocation
options granted is determined by dividing the total value by the fair value per option determined by using
The total value of options granted is based on a percentage of fixed remuneration. This percentage is
approximately 75% for the CEO, 50% for senior executives and 20% for other employees. The number of
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).
Performance hurdle
Exercise price
The performance hurdle is represented by the premium that must be achieved before options are in the
money.
In order to provide an incentive linked to the longer term performance of the Company, the exercise price
of options is set at a premium to the share price at the start of the year, as represented by the volume
weighted average price (VWAP) of the preceding month of December. Due to changes in the share price
between this VWAP and the grant date, the actual premium may be greater or less than 25%.
Forfeiture and termination
Options lapse if vesting conditions are not met. Options are forfeited on cessation of employment prior to
the vesting date unless the Board determines otherwise.
62
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Details of
remuneration
Details of the nature and amount of each element of the remuneration of each Director and other
key management personnel of the Group for the year ended 31 December 2021 are as below:
Year ended 31 December 2021
Base Salary $
Fees
$
STI
Awards1
$
Other
Benefits
$
Share-based
Payments4
$
Super-
annuation
$
Performance
related5
%
Total
$
Short term
Options and
shares
Post-
employment
Non-executive Directors
Richard Crookes
Pauline Carr
Roger Davey
Brian Jamieson
Isaac Querub (retired 27 September 2021)
Jim Dietz (retired 18 February 2021)
Executives
-
100,000
-
-
-
-
-
80,000
64,101
52,368
35,000
6,901
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Ignacio Salazar (CEO and MD)
518,356
Mike Norris (CFO resigned 10 December 2021)
361,042
-
-
161,545
110,6282
86,239
30,990
373,2253
41,778
-
-
-
5,145
-
-
-
-
100,000
80,000
64,101
57,513
35,000
6,901
876,768
807,035
879,398
338,370
192,535
483,853
128,017
5,145
2,027,318
-
-
-
-
-
-
28%
9%
16%
1 The STI awards relate to the achievement of KPIs for the previous year ended 31 December 2020.
With regard to the 2021 STI the bonus cost for Mr. Salazar was approved by the Board in March 2022 for payment in cash later in 2022, at a date when the financing to
fund the construction of Muga has been satisfactorily obtained. The cost of the STI award is included as an expense in the financial statements for the year ended
31 December 2021.
2 Benefits relate to paid private accommodation and in-country residency allowance.
3 Benefits relate to paid private accommodation and in-country residency allowance while employed and payment of statutory entitlements on cessation of employment.
4 Share Based Payments of the Directors include 2.3 million share options granted to Messrs. Salazar and Norris during the year.
5 Percentage performance related is the sum of STI awards and Share-based Payments divided by total remuneration, reflecting the actual percentage of remuneration
at-risk for the year.
63
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Details of remuneration for the year ended 31 December 2020 are shown below:
Year ended 31 December 2020
Base Salary $
Non-executive Directors
Short term
Options and
shares
Post-employment
Fees
$
STI
Awards1
$
Other
Benefits2
$
Share-based
Payments3
$
Super-
annuation
$
Performance
related
%
Total
$
Peter Albert (resigned 31 January 2020)
60,871
-
Richard Crookes (acting CEO from 1 February
to 20 July 2020)
Pauline Carr
Roger Davey
Brian Jamieson
Isaac Querub
Jim Dietz
Executives
-
-
-
-
-
-
Ignacio Salazar (CEO commenced 20 July 2020)
275,488
Mike Norris
449,087
304,355
84,000
60,378
55,137
52,500
60,378
-
-
785,446
616,748
-
-
-
-
-
-
-
-
-
-
92,242
0%
31,371
-
-
-
-
-
-
-
71,100
69,600
67,911
67,912
67,350
67,911
66,343
226,733
176,453
107,294
-
-
-
-
375,455
153,600
128,289
5,238
128,287
-
-
-
-
119,850
128,289
568,564
732,834
19%
45%
53%
53%
56%
53%
31%
14%
274,167
745,811
5,238
2,427,410
28%
1 The Directors determined that no STI performance pay for 2020 would be awarded until later in 2021, at a date when the Mining Concession has been satisfactorily
obtained.
2 Benefits relate to paid private accommodation and in-country residency allowance.
3 Share Based Payments of the Directors include 1 million share options granted to each Director during the year. Share Based Payments also include 25% of each
Director’s fees for July to September 2020 for which the Director elected to subscribe for shares in lieu of cash.
64
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Shareholdings of
Directors and other
key management
personnel
Year ended 31 December 2021
Non-executive Directors
Richard Crookes
Pauline Carr
Roger Davey
Brian Jamieson
Isaac Querub (retired 27 September 2021)
Jim Dietz (retired 18 February 2021)
Executives
Ignacio Salazar (CEO and MD)
Mike Norris (CFO resigned 10 December 2021)
The number of shares in the Company held by Directors and other key management personnel of
the Group, including their personally related parties, is set out below. Directors acquired 134,614
shares following the Share Purchase Plan (SPP) offered to eligible retail shareholders during the
year ended 31 December 2021.
Balance at the start of
the period
Share Purchase Plan
acquisition
On-market
acquisition
Other changes
during the period1
Balance at the end
of the period
17,295
42,871
9,251
9,251
8,044
59,251
-
-
57,692
19,230
-
57,962
-
-
-
-
-
-
-
-
-
-
126,700
-
-
-
-
-
(8,044)
(59,251)
-
-
74,987
62,101
9,251
66,943
-
-
126,700
-
1 The other change during the period represents an adjustment to exclude shares held by Messrs. Querub and Dietz as they were not Directors at the end of the period.
All equity transactions with Directors and other key management personnel other than those
arising from the grant of remuneration options have been entered into under terms and conditions
no more favourable than those the Company would have adopted if dealing at arm’s length.
65
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Option holdings of
Directors and other
key management
personnel
Year ended 31 December 2021
Non-executive Directors
Richard Crookes
Pauline Carr
Roger Davey
Brian Jamieson
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
Expired during
the period1
Other changes
during the
period2
Balance at the
end of the
period
Exercisable Not exercisable
2,000,000
1,000,000
2,000,000
2,000,000
-
-
-
-
-
-
-
-
(1,000,000)
(1,000,000)
-
-
-
-
2,000,000
2,000,000
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)
-
-
-
-
-
-
-
-
-
-
Isaac Querub (retired 27 September 2021)
2,000,000
Jim Dietz (retired 18 February 2021)
1,000,000
Executives
Ignacio Salazar (CEO and MD)
1,000,000
1,561,735
Mike Norris (CFO resigned 10 December 2021)
2,372,564
756,565
-
-
-
2,561,735
1,258,469
1,303,266
(3,129,129)
-
-
-
1 Options expired during the year were granted in June 2018 with an exercise price of $1.29.
2 Other changes during the period represent an adjustment to exclude options held by Messrs. Querub and Dietz as they were not Directors at the end of the period and
Mr. Norris as he was not an executive as at the end of the period.
No option holder has any right under the options to participate in any other share issue of the
Company or any other entity.
Options granted as part of remuneration have been valued using the binomial method (which
is derived from the Black-Scholes option pricing model but is considered more suitable for
companies which do not pay dividends) taking into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and expected price volatility of the
underlying share and the risk free interest rate for the term of the option.
Options granted under the Company’s employee share option plan carry no dividend or voting
rights.
Transactions with Directors and other 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 2021 other than those disclosed above.
Transactions with
Directors and other
key management
personnel
66
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Options affecting
remuneration
The terms and conditions of options granted during the year ended 31 December 2021 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
Value
vested
Max value
yet to vest
Executives
Ignacio Salazar (CEO and MD)
20/09/21
591,803
31/12/24
$0.026
$0.865
$15,564
591,803
$15,564
-
20/09/21
509.961
31/12/25
$0.052
$0.865
$26,518
20/09/21
459,971
31/12/26
$0.096
$0.865
$44,157
-
-
-
-
$26,518
$44,157
Mike Norris (CFO resigned 10 December 2021)2
20/09/21
286,692
31/12/24
$0.026
$0.865
$7,540
286,692
$7,540
20/09/21
247,045
31/12/25
$0.052
$0.865
$12,846
247,045
$12,846
20/09/21
222,828
31/12/26
$0.096
$0.865
$21,392
222,828
$21,392
-
-
-
2,318,300
$128,017
1,348,368
$57,342
$70,675
1 The value at grant date has been calculated in accordance with the models and assumptions as disclosed in note 18.
2 Options granted to Mr. Norris will continue to vest in accordance with their scheduled vesting assessment date providing conditions are met to the Board’s satisfaction.
KMP employment
arrangements
The remuneration arrangements for KMP are formalised in employment agreements. These
agreements provide for the payment of commencement options, fixed remuneration, performance
related STI remuneration, other short term benefits, and participation, where eligible, in the
Company’s Long Term Incentive Plan.
Non-Executive
Directors
On appointment to the Board, each Non-Executive Director enters into a service agreement with the
Group in the form of a letter of appointment. The letter summarises the Board policies and terms,
including compensation, relevant to the Director. The 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.
Chief Executive
Officer and
Managing Director
Mr. Salazar 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. Salazar
may be entitled to severance benefits of up to nine months’ fixed cash remuneration (based on an
average of his previous annual fixed remuneration), or other minimum severance benefits set by
Spanish law, as applicable. Mr. Salazar’s employment may also be terminated at any time without
notice in circumstances of his misconduct or illness.
During the year ended 31 December 2021 Mr. Salazar’s total fixed remuneration was €327,604
(A$518,356).
67
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Mr. Norris left the Company as CFO on 10 December 2021. Until his departure his total fixed
emoluments were €228,108 (A$361,042). Following a subsequent internal re-structure the CFO role
was revisited and the Company’s Financial Manager, Mr. Javier Aguado, a Spanish born professional,
was promoted to the CFO position. The increased numbers of Spanish born members in the
management team reflects the local focus and content of the Muga project. Following the internal
reorganisation, a review of KMP was undertaken and in view of AASB 124 and the recent changes
to the senior management team it was determined that currently only the Directors of Highfield
Resources Limited are considered to be KMP. This position will be subject to re-assessment as the
CFO role evolves over time.
There were no loans to Directors or other key management personnel during the year ended 31
December 2021 (year ended 31 December 2020: nil).
Highfield Resources Limited received more than 99.79% of “yes” votes on its remuneration report
for the financial year ended 31 December 2020. The Company did not receive any specific feedback
at the AGM or during the current period on its remuneration practices.
The table below shows the performance of the Company measured by loss per share:
Chief Financial
Officer
Loans to Directors
and other key
management
personnel
Voting and
comments made at
the Company’s may
2021 annual general
meeting
Performance
measured by loss
per share and share
price
Year ended
31 December 2021
Year ended
31 December 2020
Year ended
31 December 2019
Year ended
31 December 2018
Six months ended
31 December 2017
Loss per share (cents)
Share price (at period end)
Share price High for the reporting period
Share price Low for the reporting period
(1.96)
$0.90
$0.91
$0.44
(7.40)
$0.69
$0.79
$0.26
(2.28)
$0.68
$1.01
$0.57
(1.28)
$0.64
$1.13
$0.48
(0.14)
$1.03
$1.20
$0.82
68
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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
Independent Non-Executive Chairman
Adelaide, Australia
23 March 2022
69
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 70 HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
70
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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
71
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 71
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Consolidated Statement of Profit or Loss and
Other Comprehensive Income
for the year ended 31 December 2021
Continuing operations
Gain/(Loss) 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 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 for the period net of tax
Total comprehensive loss for the period
Loss per share
Basic and diluted loss per share (cents)
Note
31 December 2021 $
31 December 2020 $
(275,670)
568,899
3
18
9
10
19
20
5
(175,772)
(990,191)
(3,277,015)
(696,315)
(1,139)
(24,269)
(28,070)
-
(1,188,206)
(42,932)
(69,028)
(501,834)
(2,668,872)
(1,875,964)
(39,321)
(134,000)
(37,313)
(18,721,810)
(898,622)
(12,853)
(6,699,579)
(24,390,718)
-
-
(6,699,579)
(24,390,718)
(1,674,105)
(1,674,105)
(8,373,684)
(1,641,824)
(1,641,824)
(26,032,542)
6
(1.96)
(7.40)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
72
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Consolidated Statement of Financial Position
as at 31 December 2021
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 2021 $
31 December 2020 $
7
8
8
9
10
11
12
13
14
22,241,425
256,384
22,497,809
553,700
60,499
118,384,403
118,998,602
141,496,411
2,955,681
2,955,681
2,955,681
20,202,057
292,116
20,494,173
490,692
89,857
112,296,472
112,877,021
133,371,194
4,514,595
4,514,595
4,514,595
138,540,730
128,856,599
190,014,905
28,386,571
(79,860,746)
138,540,730
172,653,405
29,364,361
(73,161,167)
128,856,599
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
73
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Consolidated Statement of Changes in Equity
for the year ended 31 December 2021
Year ended 31 December 2020
Balance at 1 January 2020
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
Issued capital
$
Accumulated
losses
$
Share-based
payments
reserve
$
Foreign
exchange
translation
reserve
$
Option
premium
reserve
$
Total
$
172,618,930
(48,770,449)
23,345,124
5,784,097
1,000
152,978,702
-
-
-
-
-
34,475
(24,390,718)
-
(24,390,718)
-
-
-
-
-
-
-
-
1,875,964
-
(1,641,824)
(1,641,824)
-
-
-
-
-
-
-
-
-
(24,390,718)
(1,641,824)
(26,032,542)
-
-
1,910,439
Balance at 31 December 2020
172,653,405
(73,161,167)
25,221,088
4,142,273
1,000
128,856,599
Year ended 31 December 2021
Balance at 1 January 2021
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
Issue of securities
Cost of issue
Share-based payment
172,653,405
(73,161,167)
25,221,088
4,142,273
1,000
128,856,599
-
-
-
-
18,111,500
(750,000)
-
(6,699,579)
-
(6,699,579)
-
-
-
-
-
-
-
-
-
-
696,315
-
(1,674,105)
(1,674,105)
-
-
-
-
-
-
-
-
-
-
-
(6,699,579)
(1,674,105)
(8,373,684)
-
18,111,500
(750,000)
696,315
Balance at 31 December 2021
190,014,905
(79,860,746)
25,917,403
2,468,168
1,000
138,540,730
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
74
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Consolidated Statement of Cash Flows
for the year ended 31 December 2021
Note
31 December 2021 $
31 December 2020 $
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 issue of securities
Payments for share issue costs
Net cash provided by financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of exchange rate fluctuations on cash
(5,411,685)
(35,703)
1,103,774
7
(4,343,614)
(2,226)
(10,699,099)
(10,701,325)
18,111,500
(825,000)
17,286,500
2,241,561
20,202,057
(202,193)
22,241,425
Cash and cash equivalents at the end of the period
7
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
(5,438,297)
(12,859)
2,266,039
(3,185,117)
(12,722)
(17,156,788)
(17,169,510)
-
-
-
(20,354,627)
39,980,018
576,666
20,202,057
75
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Notes to the Consolidated Financial
Statements
for the year ended 31 December 2021
1. Corporate
information
The financial report of Highfield Resources Limited (“Highfield Resources”, “Highfield” or “the
Company”) for the year ended 31 December 2021 was authorised for issue in accordance with a
resolution of the Directors on 22 March 2022.
Highfield is a company limited by shares domiciled and incorporated in Australia whose shares
are publicly traded on the Australian Securities Exchange. The nature of the operations and the
principal activities of the Company are described in the Directors’ Report.
76
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 been prepared on a historical cost basis. The presentation
currency is Australian dollars.
The consolidated financial statements have been prepared on a going concern basis which
assumes the continuity of normal business activity and the realisation of assets and the
settlement of liabilities in the ordinary course of business.
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 2021 and at 31 December 2020 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 inter-company
transactions have been eliminated in full. Unrealised losses are also eliminated 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 primary 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 valuation where items
are re-measured. Monetary assets and liabilities denominated in foreign currency are
retranslated at year end exchange rates.
77
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at period end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Consolidated Statement of Profit
or Loss and Other Comprehensive Income.
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 functional currency
into Australian dollars at average rates of exchange where the average is a reasonable
approximation of rates prevailing on the transaction date. The Consolidated Statement of
Financial Position items are translated into Australian dollars at period end exchange rates.
e) Segment Reporting
Operating segments are reported in a manner consistent 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 Chief Executive Officer. The Group has identified a single segment focused
on development of potash mines in Spain. All of the Group’s activities are interrelated and
financial information is reported to the Chief Executive Officer in this manner.
f) Exploration and Evaluation Expenditure
Exploration and evaluation expenditures in relation to each separate area of interest are
recognised as an exploration and evaluation asset in the period in which they are incurred
where the following conditions are satisfied:
i) the rights to tenure of the area of interest are current; and
ii) at least one of the following conditions is also met:
a) the exploration and evaluation expenditures are expected to be recouped through
successful development and exploitation of the area of interest, or alternatively, by its
sale; or
b) 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 recoverable reserves, and active and significant operations in, or in
relation to, the area of interest are continuing.
Exploration and evaluation assets are initially measured at cost and include acquisition
of rights to explore, studies, exploratory drilling, trenching and sampling and associated
activities and an allocation of depreciation and amortisation of assets used in exploration and
evaluation activities. General and administrative costs are only included in the measurement
of exploration and evaluation costs where they are related directly to operational activities in
a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts and circumstances
suggest that the carrying amount of an exploration and evaluation asset may exceed its
recoverable amount. The recoverable amount of the exploration and evaluation asset (for the
cash generating unit(s) to which it has been allocated being no larger than the relevant area of
interest) is estimated to determine the extent of the impairment loss (if any).
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased
to the revised estimate of its recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that would have been determined had
no impairment loss been recognised for the asset in previous periods.
78
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Where a decision has been made to proceed with development in respect of a particular area
of interest, the relevant exploration and evaluation asset is tested for impairment and the
balance is then reclassified to development.
Where an area of interest is abandoned, any expenditure carried forward in respect of that
area is written off.
g) Income Tax
The income tax expense or benefit for the period is the tax payable or receivable on the current
period’s taxable income or loss based on the applicable income tax rate for each jurisdiction
adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of assets and liabilities and their carrying amounts in the financial
statements, and to unused tax losses.
The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of the reporting period. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is
subject to interpretation. It establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amount are those that are enacted or substantively enacted by the
balance date.
Deferred income tax is provided on all temporary differences at the balance date between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except
when:
— the deferred income tax liability arises from the initial recognition of goodwill or of an
asset or liability in a transaction that is not a business combination and that, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss; or
— the taxable temporary difference is associated with investments in subsidiaries,
associates or interests in joint ventures, and the timing of the reversal of the temporary
difference can be controlled and it is probable that the temporary difference will not
reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences and the
carry-forward of unused tax assets and unused tax losses, to the extent that it is probable
that taxable profit will be available against which the deductible temporary differences and
the carry-forward of unused tax credits and unused tax losses can be utilised, except when:
— the deferred income tax asset relating to the deductible temporary difference arises
from the initial recognition of an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; or
— the deductible temporary difference is associated with investments in subsidiaries,
associates or interests in joint ventures, in which case a deferred tax asset is only
recognised to the extent that it is probable that the temporary difference will reverse in
the foreseeable future and taxable profit will be available against which the temporary
difference can be recognised. The carrying amount of deferred income tax assets is
reviewed at each balance date and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of the deferred income tax
asset to be recognised.
79
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Unrecognised deferred income tax assets are reassessed at each balance date and are
recognised to the extent that it has become probable that future taxable profit will allow the
deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to
apply to the period when the asset is recognised or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the balance date.
Income taxes relating to items recognised directly in equity are recognised in equity and not
in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right
exists to set off current tax assets against current tax liabilities and the deferred tax assets
and liabilities relate to the same taxable entity and the same taxation authority.
h) Other Taxes
Revenues, expenses and assets are recognised net of the amount of GST/VAT, except where
the amount of GST/VAT incurred is not recoverable from the taxation authority. In these
circumstances the GST/VAT is recognised as part of the cost of acquisition of the asset or as
part of an item of the expense. Receivables and payables in the statement of financial position
are shown inclusive of GST/VAT.
The net amount of GST/VAT recoverable from, or payable to, the government is included as part
of receivables or payables in the statement of financial position. Cash flows are presented in
the statement of cash flows on a gross basis, except that the GST/VAT component of investing
and financing activities, which is receivable from or payable to the government, is disclosed
as operating cash flows.
i) Impairment of Assets
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
whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs of disposal and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are separately identifiable cash inflows
which are largely independent of the cash inflows from other assets or groups of assets (cash-
generating units). Non-financial 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
Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid
investments that are readily convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value. Bank overdrafts are shown within borrowings in current
liabilities in the statement of financial position.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash
and cash equivalents as defined above, net of outstanding bank overdrafts.
80
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS k) Trade and Other Payables
Trade payables and other payables are carried at amortised cost and represent liabilities for
goods and services provided to the Group prior to the end of the period that are unpaid and
arise when the Group becomes obliged to make future payments in respect of the purchase of
these goods and services.
Trade and other payables are presented as current liabilities 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 embodying economic benefits
will be required to settle the obligation and a reliable estimate can be made of the amount of
the obligation. Provisions are not recognised for future operating losses.
When the Group expects some or all of a provision to be reimbursed, for example under an
insurance contract, the reimbursement is recognised as a separate asset but only when the
reimbursement is virtually certain. The expense relating to any provision is presented in the
statement of comprehensive income net of any reimbursement.
Provisions are measured at the present value or management’s best estimate of the
expenditure required to settle the present obligation at the end of the reporting period.
If the effect of the time value of money is material, provisions are discounted using a current
pre-tax rate that reflects the risks specific to the liability. When discounting is used, the
increase in the provision due to the passage of time is recognised as an interest expense.
m) Issued Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new shares or options for the acquisition
of a new business are not included in the cost of acquisition as part of the purchase
consideration.
n) Revenue
The Company 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 preference share dividends,
divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit/loss attributable to members, adjusted
for:
— costs of servicing equity (other than dividends) and preference share dividends;
— the after tax effect of dividends and interest associated with dilutive potential ordinary
shares that have been recognised as expenses; and
— other non-discretionary changes in revenues or expenses during the period that would
result from the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary
shares, adjusted for any bonus element.
81
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 (including Directors) of the Company in the form of share-based payment
transactions, whereby individuals render services in exchange for shares or rights over
shares (“equity settled transactions”).
There is currently an Employee Share Option Plan (ESOP) in place, which provides benefits to
employees (including Directors) and individuals providing services similar to those provided
by an employee. The cost of these equity settled transactions is measured by reference to
the fair value at the date at which they are granted. The fair value is determined by using
the binomial method (which is derived from the Black-Scholes option pricing model but is
considered more suitable for companies which do not pay dividends) taking into account
the terms and conditions upon which the instruments were granted, as discussed in note
18. The expected price volatility is based on the historic volatility of the Company’s share
price on the ASX.
The cost of equity settled transactions provided to employees (including Directors) by issue
of shares is measured by reference to the fair value of services received unless this cannot
be measured reliably, in which case the cost is measured by reference to the fair value of
the shares issued.
The cost of equity-settled transactions with non-employees is measured by reference to
the fair value of goods and services received unless this cannot be measured reliably, in
which case the cost is measured by reference to the fair value of the equity instruments
granted. The dilutive effect, if any, of outstanding options is reflected in the computation
of earnings/loss per share (refer to note 6).
In valuing equity settled transactions, no account is taken of any performance conditions,
other than conditions linked to the price of the shares of Highfield Resources Limited
(“market conditions”).
The cost of the equity settled transactions is recognised, together with a corresponding
increase in equity, over the period in which the performance conditions are fulfilled, ending
on the date on which the relevant employees become fully entitled to the award (“vesting
date”).
The cumulative expense recognised for equity settled transactions at each reporting date
until vesting date reflects (i) the extent to which the vesting period has expired and (ii)
the number of awards that, in the opinion of the Directors of the Company, will ultimately
vest. This opinion is formed based on the best available information at balance date. No
adjustment is made for the likelihood of the market performance conditions being met as
the effect of these conditions is included in the determination of fair value at grant date.
The charge or credit to profit or loss for a period represents the movement in cumulative
expense recognised at the beginning and end of the period.
No expense is recognised for awards that do not ultimately vest, except for awards where
vesting is conditional upon a market condition. Where the terms of an equity settled award
are modified, as a minimum an expense is recognised as if the terms had not been modified.
In addition, an expense is recognised for any increase in the value of the transaction as a
result of the modification, as measured at the date of the modification.
Where an equity settled award is cancelled, it is treated as if it had vested on the date of the
cancellation, and any expense not yet recognised for the award is recognised immediately.
82
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 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.
ii) Cash-settled transactions:
The Company may also provide benefits to employees in the form of cash-settled share-
based payments, whereby employees render services in exchange for cash, the amounts of
which are determined by reference to movements in the price of the shares of the Company.
The cost of cash-settled transactions is measured initially at fair value at the grant date
using the binomial method taking into account the terms and conditions upon which the
instruments were granted. This fair value is expensed over the period until vesting with
recognition of a corresponding liability. The liability is remeasured to fair value at each
balance date up to and including the settlement date with changes in fair value recognised
in profit or loss.
q) Critical Accounting Estimates and Judgements
The application of accounting policies requires the use of judgements, estimates and
assumptions about carrying values of assets and liabilities that are not readily apparent from
other sources. The estimates and associated assumptions are based on historical experience
and other factors that are considered to be relevant. Actual results may differ from these
estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are
recognised in the period in which the estimate is revised if it affects only that financial period,
or in the period of the revision and future periods if the revision affects both current and future
periods.
Exploration and evaluation expenditure
The application of the Group’s accounting policy for exploration and evaluation expenditure
requires judgement in determining whether future economic benefits are likely either from
future development or sale or where activities have not reached a stage which permits a
reasonable assessment of the existence of reserves. The determination of a Joint Ore Reserves
Committee (JORC) resource is itself an estimation process that requires varying degrees of
uncertainty depending on sub-classification and these estimates directly impact the point of
deferral of exploration and evaluation expenditure. The deferral policy requires management
to make certain estimates and assumptions about future events or circumstances, in
particular whether an economically viable extraction operation can be established. Estimates
and assumptions made may change if new information becomes available.
r) New and Amended Standards Adopted by the Group
New standards and amendments applied for the first time for the annual reporting period
commencing 1 January 2021 did not have any impact on the amounts recognised in the current
or prior periods and are not expected to significantly affect future periods.
s) New Standards and Interpretations Not Yet Adopted
Certain new accounting standards and interpretations have been published that are not
mandatory for 31 December 2021 reporting periods and have not been early adopted by the
Group. These standards are not expected to have a material impact on the entity in the current
or future reporting periods and on foreseeable future transactions.
83
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 3. Expenses
Professional and consultants’ fees
Corporate advisory fees
Legal fees
Due diligence fees
Other
31 December 2021 $
31 December 2020 $
(206,517)
(24,033)
(680,303)
(79,338)
(990,191)
(363,567)
(43,760)
-
(94,507)
(501,834)
4. Auditor’s 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
53,550
58,386
31 December 2021 $
31 December 2020 $
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
29,028
82,578
29,446
87,832
84
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 2021 $
31 December 2020 $
-
-
-
-
-
-
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
Tax calculated at domestic tax rates applicable to profit/(losses) in the respective countries
(Spain 28.0%, Australia 30.0%)
Non-deductible expenses
Net income tax benefit not brought to account
Income tax expense
31 December 2021 $
31 December 2020 $
(6,699,579)
(1,927,176)
7,475
1,919,701
-
(24,390,718)
(7,264,637)
179,915
7,084,722
-
c) Deferred tax
The following deferred tax balances have not been brought to account:
Net deferred tax asset not recognised
16,125,105
14,207,701
31 December 2021 $
31 December 2020 $
d) Unused tax losses
Unused tax losses
The benefit for tax losses will only be obtained if:
31 December 2021 $
31 December 2020 $
38,592,124
30,734,747
i)
the Company delivers 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 there are
iii) no changes in tax legislation which adversely affect the Company in realising the benefit from the deductions for the losses.
85
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
6. Loss per share
Loss used in calculating basic and diluted EPS
(6,699,579)
(24,390,718)
31 December 2021 $
31 December 2020 $
Weighted average number of ordinary shares used in calculating basic loss per share
342,533,288
329,539,585
Number of Shares
Effect of dilution:
Share options
-
-
Adjusted weighted average number of ordinary shares used in calculating diluted loss per share
342,533,288
329,539,585
Basic and diluted loss per share (cents)
(1.96)
(7.40)
The 24,962,030 options outstanding at 31 December 2021 (31 December 2020: 22,820,330) are deemed non-dilutive in accordance with AASB
2 as they reduce the loss per share. 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 2020 and the date of completion of these financial statements.
7. Cash and cash equivalents
Reconciliation of cash
Cash at bank
31 December 2021 $
31 December 2020 $
22,241,425
20,202,057
Reconciliation of operating loss after tax to net cash flow from operations
Loss after tax
(6,699,579)
(24,390,718)
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
Accrued interests not paid
Change in assets and liabilities
(Increase)/Decrease in trade and other receivables
(Decrease)/Increase in trade and other payables
Net cash used in operating activities
696,315
275,670
-
28,070
7,229
358,999
989,682
(4,343,614)
1,875,964
(568,899)
18,721,810
37,313
-
1,509,534
(370,121)
(3,185,117)
86
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
8. Other receivables
Current
GST receivable
VAT receivable
Deposits
Non-current
Guarantees
31 December 2021 $
31 December 2020 $
72,758
159,806
23,820
256,384
553,700
553,700
41,642
210,237
40,237
292,116
490,692
490,692
GST/VAT receivable and other receivables are non-interest bearing and generally receivable on terms between 30 and 45 days. They are nei-
ther 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.
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
31 December 2021 $
31 December 2020 $
651,578
(591,079)
60,499
89,857
-
(1,288)
(28,070)
60,499
663,294
(573,437)
89,857
116,726
10,273
171
(37,313)
89,857
87
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
10. Deferred exploration and evaluation expenditure
Exploration and Evaluation expenditure - at cost
Opening balance
Exploration and evaluation expenditure incurred during the period
Net exchange differences on translation
Impairments
Closing balance
31 December 2021 $
31 December 2020 $
112,296,472
8,018,643
(1,930,712)
-
118,384,403
116,966,324
15,480,973
(1,429,015)
(18,721,810)
112,296,472
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
appealed this decision in 2019 and to date has not obtained a resolution. In the fourth quarter of 2020, the Company was advised that the
second three year extension application for the Ampliación de Adiós permit, the other permit within the Sierra del Perdón tenement area,
had also been rejected by the mining department of the Government of Navarra. The Company appealed this decision in the same quarter,
in line with the ongoing process of the other two Sierra del Perdón permits. Based on local Spanish legal advice, the continued lack of a
resolution to these appeals is not seen as a reflection on the merits of the appeals, nor does it represent a significant change with an adverse
effect on the entity.
With regard to the Pintanos tenement area, although a three year extension to the drilling permit at Molineras 1 was granted in June 2020,
the award of the permits at Molineras 2 and Puntarrón remains outstanding, more than seven years since the original applications were
submitted.
The Company believes the outstanding permits will be awarded for both projects in due course. Nonetheless, an impairment expense of
$18,721,810 was recorded at the 2020 half year in relation to the Sierra del Perdón and Pintanos areas of interest, representing 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
31 December 2021 $
31 December 2020 $
1,440,357
27,152
1,488,172
2,955,681
1,129,613
26,919
3,358,063
4,514,595
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.
88
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
12. Issued capital
a) Issued and paid up capital
Issued and fully paid
31 December 2021 $
31 December 2020 $
190,014,905
172,653,405
b) Movements in ordinary shares on issue
Opening balance
Shares issued1
Transaction costs on share issue
1 December 2021
31 December 2021
31 December 2020
Number of shares
$
Number of shares
$
329,600,171
172,653,405
329,525,003
172,618,930
34,829,716
-
18,111,500
(750,000)
75,168
-
34,475
-
364,429,887
190,014,905
329,600,171
172,653,405
— 34,829,716 ordinary shares were issued during the year ended 31 December 2021 via a single-tranche placement (A$15m) carried out in August 2021 and
a subsequent Share Purchase Plan in September (A$3m) that was offered to all eligible retail shareholders.
December 2020
— 75,168 ordinary shares were issued during the year ended 31 December 2020 as consideration for Directors’ services in accordance with the Directors’
Share Plan, as set out in the Remuneration Report accompanying this financial report.
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 $138,540,730 at 31
December 2021. 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.
89
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
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 2021 $
31 December 2020 $
25,917,403
2,468,168
1,000
28,386,571
25,221,088
696,315
25,917,403
25,221,088
4,142,273
1,000
29,364,361
23,345,124
1,875,964
25,221,088
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 2021.
Foreign exchange translation reserve
Opening balance
Foreign exchange translation difference
Closing balance
4,142,273
(1,674,105)
2,468,168
5,784,097
(1,641,824)
4,142,273
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.
14. Accumulated losses
Movements in accumulated losses were as follows
Opening balance
Loss for the period
Closing balance
90
31 December 2021 $
31 December 2020 $
(73,161,167)
(6,699,579)
(79,860,746)
(48,770,449)
(24,390,718)
(73,161,167)
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
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
Total
31 December 2021 $
31 December 2020 $
1,894,156
128,017
5,145
2,027,318
1,676,361
745,811
5,238
2,427,410
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 2021
31 December 2020
Australia
Spain
100%
100%
100%
100%
91
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 not be able to meet its financial obligations as they fall due. 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. At 31 December 2021, the Company has sufficient liquid assets to meet its financial obligations. 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
The Group’s exposure to the risk of changes in market interest rates relates primarily to cash and cash equivalents with a floating interest
rate.
These financial assets with variable rates expose the Group to cash flow interest rate risk. All other financial assets and liabilities, in the form
of receivables, security deposits and payables are non-interest bearing.
At 31 December 2021, the variable interest rate exposure of the Group was:
Interest bearing financial instrument
Cash at bank or at hand
31 December 2021
31 December 2020
22,241,425
20,202,057
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 2021 no interest was earned and $42,932 was charged
on Euro balances, reflecting the fact that interest rates on Euro balances are negative. Similarly, in 2020 no interest was earnt and interest
charged on Euro balances was $12,853.
The Group currently does not engage in any hedging or derivative transactions to manage interest rate risk.
92
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Interest rate sensitivity
The Company’s interest rate sensitivity is determined by the amount of cash it holds in Euros and the Euro interest rate which is currently
negative 0.45%.
A sensitivity of 75 basis points has been selected as this is considered reasonable given the current level of both short term and long term
interest rates. A 0.75% movement in interest rates at the reporting date would have increased (decreased) profit and loss by the amounts
shown below based on the average amount of interest bearing financial instruments held. This analysis assumes that all other variables, in
particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2020.
Effect on Post Tax Loss ($)
(Increase)/decrease
Effect on Equity incl. accumulated losses ($)
Increase/(decrease)
31 December 2021
31 December 2020
31 December 2021
31 December 2020
Increase 75 basis points
Decrease 75 basis points
166,811
(166,811)
151,515
(151,515)
166,811
(166,811)
151,515
(151,515)
c) Credit Risk Exposures
Credit risk represents the risk that the counterparty to the financial instrument will fail to discharge an obligation and cause the Company to
incur a financial loss. The Company’s maximum credit exposure is the carrying amounts in the statement of financial position. The Company
holds financial instruments with credit worthy third parties. At 31 December 2021, 99.9% of the Company’s cash and cash equivalents were
held in financial institutions with a rating from Standard & Poors of A - or above (long term). The Company had no past due or impaired debtors
as at 31 December 2021.
d) Foreign Currency Risk
The Company undertakes certain transactions denominated in currencies other than the functional currency of the Company, hence
exposures to exchange rate fluctuations arise. Exchange rate exposures may be managed within approved policy parameters utilising
forward foreign exchange contracts. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary
liabilities at the balance date expressed in Australian dollars were as follows:
Euro
US dollars
GB pounds
Total
Liabilities ($)
Assets ($)
31 December 2021
31 December 2020
31 December 2021
31 December 2020
2,667,090
4,377,015
-
65,219
-
17,449
5,277,780
13,448
-
20,047,095
12,697
-
2,732,309
4,394,464
5,291,228
20,059,792
The monetary assets and liabilities in the table above for the current period include the balances of the Company’s Spanish subsidiary as well
as of the Company itself.
93
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Foreign currency sensitivity analysis
The Company is exposed to Euro currency fluctuations. The following table details the Group’s sensitivity to a 10% increase and decrease in
the Euro against the Australian dollar on the above foreign currency denominated monetary assets and liabilities, expressed in Australian
dollars.
31 December 2021
Profit or loss
Other equity
31 December 2020
Profit or loss
Other equity
e) Fair Value
Euro Movement
Increase ($)
Decrease ($)
284,323
284,323
1,740,593
1,740,593
(232,630)
(232,630)
(1,424,120)
(1,424,120)
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 2021 or 31 December 2020.
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 2021 $
31 December 2020 $
117,199
579,116
696,315
767,961
1,108,003
1,875,964
The Company operates an equity incentive plan known as ‘Highfield Resources Limited Employee Long Term Incentive Plan’ (“ELTIP”). Subject
to the attainment of 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 employee. The fair value at grant date of options granted during the period was determined using the
binomial method, 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.
94
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
The table below summarises options granted during the year ended 31 December 2021:
Grant Date
Expiry date
Exercise price
20/09/2021
31/12/2024
20/09/2021
31/12/2024
20/09/2021
31/12/2025
20/09/2021
31/12/2025
20/09/2021
31/12/2026
20/09/2021
31/12/2026
$0.865
$0.865
$0.865
$0.865
$0.865
$0.865
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
-
-
-
-
-
-
1,356,5881
591,8032
1,168,9843
509,9614
1,054,3935
459,9716
5,141,700
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,356,588
1,356,588
591,803
591,803
1,168,984
509,961
1,054,393
459,971
-
-
-
-
5,141,700
1,948,391
1 Options granted to the former Chief Financial Officer and other employees. The options vested on satisfaction of the recipients’ continued employment
vesting condition at 31 December 2021 or meeting the good leaver requirement as determined by the Board.
2 Options granted to the Chief Executive Officer. The options vested on satisfaction of the recipients’ continued employment vesting condition at 31
December 2021.
3 Options granted to the former Chief Financial Officer and other employees. The options will vest on satisfaction of the recipients’ continued employment
vesting condition at 31 December 2022 or meeting the good leaver requirement as determined by the Board.
4 Options granted to the Chief Executive Officer. The options will vest on satisfaction of the recipients’ continued employment vesting condition at 31
December 2022.
5 Options granted to the former Chief Financial Officer and other employees. The options will vest on satisfaction of the recipients’ continued employment
vesting condition at 31 December 2023 or meeting the good leaver requirement as determined by the Board.
6 Options granted to the Chief Executive Officer. The options will vest on satisfaction of the recipients’ continued employment vesting condition at 31
December 2023.
The model inputs for options granted during the year ended 31 December 2021 included:
a) options were granted for no consideration;
b) expected lives of the options range from 3.2 to 5.2 years;
c) share price at grant date of $0.49;
d) expected volatility at 62.0%;
e) expected dividend yield of Nil; and
f) a risk free interest rate at 0.19%.
95
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
The table below summarises options granted during the year ended 31 December 2020:
Grant Date
Expiry date
Exercise price
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
27/05/2020
30/06/2023
25/06/2020
30/06/2023
25/06/2020
31/12/2023
15/09/2020
31/12/2023
25/06/2020
31/12/2024
15/09/2020
31/12/2024
25/06/2020
31/12/2025
15/09/2020
31/12/2025
$0.81
$0.81
$0.81
$0.47
$0.81
$0.47
$0.81
$0.47
-
-
-
-
-
-
-
-
6,000,0001
1,000,0002
1,546,8553
333,3334
1,368,7575
333,3336
1,243,1867
333,3348
12,158,798
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,000,000
6,000,000
1,000,000
1,000,000
1,546,855
1,546,855
333,333
333,333
1,368,757
333,333
1,243,186
333,334
-
-
-
-
-
12,158,798
8,880,188
1 Options granted to Non-Executive Directors at the Company’s AGM on 27 May 2020. There are no service vesting or performance vesting conditions in respect of
these options.
2 Options granted to an external consultant and Non-Executive Director of Geoalcali SLU. There are no service vesting or performance vesting conditions in
respect of these options.
3 Options granted to the then Chief Financial Officer and other employees. The options vested on satisfaction of the recipients’ continued employment vesting
condition at 31 December 2020.
4 Options granted to the Chief Executive Officer. The options vested on satisfaction of the recipients’ continued employment vesting condition at 31 December
2020.
5 Options granted to the then Chief Financial Officer and other employees. The options will vest on satisfaction of the recipients’ continued employment vesting
condition at 31 December 2021 or meeting the good leaver requirement as determined by the Board.
6 Options granted to the Chief Executive Officer. The options will vest on satisfaction of the recipients’ continued employment vesting condition at 31 December
2021.
7 Options granted to the then Chief Financial Officer and other employees. The options will vest on satisfaction of the recipients’ continued employment vesting
condition at 31 December 2022 or meeting the good leaver requirement as determined by the Board.
8 Options granted to the Chief Executive Officer. The options will vest on satisfaction of the recipients’ continued employment vesting condition at 31 December
2022.
The model inputs for options granted during the year ended 31 December 2020 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 of $0.420 (27 May 2020), $0.450 (25 June 2020) and $0.525 (15 September 2020);
d) expected volatility from 49.15% to 49.63%;
e) expected dividend yield of Nil; and
f) a risk free interest rate from 0.23% to 0.26%.
96
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
As at the date of this report there were 24,962,030 unissued ordinary shares under options. The details of the options are as follows:
Number
1,000,000
7,000,000
3,221,170
1,818,171
1,546,855
333,333
1,622,191
1,368,757
333,333
1,948,391
1,243,186
333,334
1,678,945
1,514,364
24,962,030
Exercise Price $
$0.83
$0.81
$0.83
$0.83
$0.81
$0.47
$0.83
$0.81
$0.47
$0.865
$0.81
$0.47
$0.865
$0.865
Expiry Date
30 June 2022
30 June 2023
31 December 2022
31 December 2023
31 December 2023
31 December 2023
31 December 2024
31 December 2024
31 December 2024
31 December 2024
31 December 2025
31 December 2025
31 December 2025
31 December 2026
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:
— 1,948,391 options with an exercise price of $0.865, expiring on 31 December 2024
— 1,678,945 options with an exercise price of $0.865, expiring on 31 December 2025
— 1,514,364 options with an exercise price of $0.865, expiring on 31 December 2026
The following options lapsed during the financial year:
— 3,000,000 options with an exercise price of $1.29, expiring on 30 June 2021
No options were cancelled during the financial year.
The movement of the options during the year was as follows:
Opening balance
Granted
Exercised
Cancelled
Lapsed
31 December 2021
31 December 2020
Average exercise price
per share option
Number of options
Average exercise price
per share option
Number of options
$0.91
$0.865
-
-
$1.29
$0.855
22,820,330
5,141,700
-
-
(3,000,000)
24,962,030
$1.19
$0.78
-
-
$1.31
$0.91
22,836,150
12,158,798
-
-
(12,174,618)
22,820,330
Vested and exercisable at year end
$0.81
20,192,201
$0.81
17,919,529
97
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
19. Other expenses
Advertising and Promotion
Computer and Software Expenses
Subscriptions and Memberships
Investor Relations
Projects costs
Insurances
Rents
Other administration expenses
20. Geographic segment analysis
a) Net interest (paid)/received
Australia
Spain
b) Non-current Assets
Australia
Spain
31 December 2021 $
31 December 2020 $
68,810
59,156
59,271
145,646
9,012
650,473
179,851
15,987
1,188,206
69,263
62,785
62,770
51,849
53,981
377,085
157,291
63,598
898,622
31 December 2021 $
31 December 2020 $
-
(42,932)
(42,932)
-
(12,853)
(12,853)
31 December 2021 $
31 December 2020 $
-
118,998,602
118,998,602
-
112,877,021
112,877,021
21. Significant events after the reporting period
There have been no significant events after the reporting period requiring disclosure in this report.
22.Contingent assets and liabilities
There are no known contingent assets or liabilities as at 31 December 2021 (December 2020: Nil).
98
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
23. Dividends
No dividend was paid or declared by the Company in the year ended 31 December 2021 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 2021.
24. Geoalcali Foundation
As part of its Community Engagement Program, the Company established a not-for-profit Spanish foundation called the Geoalcali Foundation
(“Foundation”). The Foundation is supported exclusively by Geoalcali and since its inauguration in September 2014 has been involved in over 170
community projects.
25. Commitments
At 31 December 2021, the Group had entered into a number of contracts as part of the development of the Muga Potash Project located in Spain.
The expected payments in relation to these contracts which were not required to be recognised as liabilities at 31 December 2021 amounted to
approximately $92.8m. Of this amount approximately $85.1m will only become commitments once Notices to Proceed are issued to equipment
suppliers, which will only occur once sufficient permitting and financing has been achieved. In the meantime, the contracts are able to be
terminated by the Company at any point in time. The amount payable following termination would be approximately $2.2m.
26. Parent entity information
The following information relates to the parent entity, Highfield Resources Limited, at 31 December 2021 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
31 December 2021 $
31 December 2020 $
21,853,406
138,651,058
(223,371)
(223,371)
138,427,687
190,014,906
25,918,403
(77,505,622)
138,427,687
19,642,972
128,358,389
(120,131)
(120,131)
128,238,258
172,653,405
25,222,089
(69,637,236)
128,238,258
Loss of the parent entity
Other comprehensive income for the period
Total comprehensive loss of the parent entity
(7,868,386)
-
(26,416,041)
-
(7,868,386)
(26,416,041)
99
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 2021 are in accordance 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 2021 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 Chief Executive Officer and the Chief Financial Officer required to be made in
accordance with sections of 295A of the Corporations Act 2001 for the year ended 31 December 2021.
On behalf of the Board
Richard Crookes
Independent Non-Executive Chairman
Adelaide, Australia
23 March 2022
100
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 101
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 101
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Highfield Resources Limited for the year ended 31 December 2021, I
declare that to the best of my knowledge and belief, there have been:
(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Highfield Resources Limited and the entities it controlled during the
period.
Julian McCarthy
Partner
PricewaterhouseCoopers
Adelaide
23 March 2022
PricewaterhouseCoopers, ABN 52 780 433 757
Level 11, 70 Franklin Street, ADELAIDE SA 5000, GPO Box 418, ADELAIDE SA 5001
T: +61 8 8218 7000, F: +61 8 8218 7999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
102
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Independent Auditor’s Report
Independent auditor’s report
To the members of Highfield Resources Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Highfield Resources Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the Group's financial position as at 31 December 2021 and of its
financial performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 31 December 2021
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the notes to the consolidated financial statements, which include significant accounting policies
and other explanatory information
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional & Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence
Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
Level 11, 70 Franklin Street, ADELAIDE SA 5000, GPO Box 418, ADELAIDE SA 5001
T: +61 8 8218 7000, F: +61 8 8218 7999
Liability limited by a scheme approved under Professional Standards Legislation.
103
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
•
For the purpose of our audit we used overall
Group materiality of $1.3 million, which
represents approximately 1% of the Group’s total
assets
• Our audit focused on where the Group made
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
• We applied this threshold, together with
•
qualitative considerations, to determine the scope
of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
• We chose Group total assets because, in our view,
it is the metric against which the performance of
the Group is most commonly measured given it is
in the exploration and evaluation phase and has
no production or sales.
• We utilised a 1% threshold based on our
professional judgement, noting it is within the
range of commonly acceptable thresholds.
The Group audit is planned and led by our Group
audit team in Australia. Given the Group’s
principal operating entity Geoalcali SLU and its
management and financial reporting function are
based in Pamplona in Spain, we engaged
component auditors in Spain to perform audit
procedures over the financial information of that
entity. Audit procedures were performed by the
Group audit team over the consolidation process
and balances recorded at a Group level. The audit
work carried out in Spain, together with the
additional procedures performed at Group level,
in our view provided sufficient evidence to
express an opinion on the Group financial report
as a whole.
• We ensured the audit teams, both in Australia
and Spain, had the appropriate skills and
competencies.
104
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
How our audit addressed the key audit
matter
Carrying value of exploration and evaluation
assets
(Refer to note 10) $118,384,403
The Group accounts for exploration and evaluation
activities in accordance with the policy in note 2(f) of
the financial report
Judgement is required by the Group to determine
whether there were indicators of impairment of the
exploration and evaluation assets, due to the need to
make estimates about future events and
circumstances, such as whether the resources may be
economically viable to develop in the future.
The carrying value of exploration and evaluation
assets was considered a key audit matter given the
financial significance of the balance and the
significant judgements required by the Group in
determining the carrying amount as outlined above.
We performed the following procedures amongst
others :
• Evaluated the Group’s assessment that there
had been no indicators of impairment on
areas capitalised at 31 December 2021 during
the period with reference to the
requirements of Australian Accounting
Standards.
• Considered the latest available information
regarding the projects through inquiries of
management and the directors, and
inspection of press releases.
•
•
Inquired of management and the directors as
to whether there had been any changes to,
and obtained evidence to support, the
Group’s right of tenure to the projects. This
included considering the status of licences, to
assess whether the Group retained right of
tenure. Where a licence was pending, we
assessed the Group’s expectation of renewal
of the licence.
Tested a sample of current year capitalised
expenditure to source documents and
considered whether they had been accounted
for in accordance with the Group’s
accounting policy and Australian Accounting
Standards.
105
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
Key audit matter
How our audit addressed the key audit
matter
We also evaluated the reasonableness of the
disclosures against the requirements of Australian
Accounting Standards.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 31 December 2021, but does not include
the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
106
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of
our auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 57 to 69 of the directors’ report for the
year ended 31 December 2021.
In our opinion, the remuneration report of Highfield Resources Limited for the year ended 31
December 2021 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Julian McCarthy
Partner
Adelaide
23 March 2022
107
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
108
108HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2020 ANNUAL REPORT TO SHAREHOLDERS
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS
108
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS ASX Additional
Information
109
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS 109
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 10 March 2022.
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
280
653
512
1,048
284
2,777
133,997
1,885,189
4,179,830
37,662,681
320,568,190
364,429,887
There were 136 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
BNP PARIBAS NOMINEES PTY LTD
BCI MINERALS LTD
WWB INVESTMENTS PTY LTD
MR. WARREN WILLIAM BROWN + MRS. MARILYN HELENA BROWN
DEREK CARTER + CARLSA CARTER
CITICORP NOMINEES PTY LTD
MR. DANIEL EDDINGTON + MRS. JULIE EDDINGTON
MR. CRAIG PETER BALL
BRING ON RETIREMENT LTD
CELTIC CAPITAL PTE LTD
MR. BENJAMIN JOHN HAAN
MR. MICHAEL ANDREW WHITING + MRS. TRACEY ANNE WHITING
JONERIC PTY LTD
MR. PETER DAVID FERGUSON PTY LTD
DARRELL JAMES HOLDINGS PTY LTD
MR. ANDREW BYRNES DOBLE
WOOTOONA INVESTMENTS PTY
CARINYA INVESTMENTS (QLD)
CRX INVESTMENTS PTY LTD
KANBAH PTY LTD
110
Number of shares
120,911,299
26,349,498
20,170,740
14,869,260
7,721,504
3,903,052
3,870,000
3,292,384
3,170,000
3,000,000
2,900,231
2,715,718
2,701,076
2,674,692
2,500,000
2,350,000
2,150,538
2,127,692
2,000,000
2,000,000
%
33.18
7.23
5.53
4.08
2.12
1.07
1.06
0.90
0.87
0.82
0.80
0.75
0.74
0.73
0.69
0.64
0.59
0.58
0.55
0.55
231,377,684
63.49
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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 10 March 2022.
Tittle of class
Registered holder of securities
Identity of person or Group
Date of last
notice
Number
owned
Percentage
of total voting
rights2
Ordinary Shares
BNP Paribas Nominees Pty. Limited
EMR Capital Investment (No. 2) Pte Ltd1
15/05/2015
104,038,875
28.55%
Ordinary Shares
Various holders
WWB Investments Pty Ltd1
08/11/2017
35,040,000
Ordinary Shares
BCI Minerals Ltd
Seven Group Holdings (SGH) Ltd1
18/11/2021
26,349,498
9.62%
7.23%
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 10 March 2022 of 364,429,887.
Substantial unlisted options
Class
Number
Holders with more than 20%
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 $0.47 on or before 31 December 2023
Options over ordinary shares exercisable at $0.47 on or before 31 December 2024
Options over ordinary shares exercisable at $0.47 on or before 31 December 2025
333,333
333,333
333,334
Ignacio Salazar 333,333 options;
Ignacio Salazar 333,333 options;
Ignacio Salazar 333,334 options;
Options over ordinary shares exercisable at $0.865 on or before 31 December 2024
1,948,391
Ignacio Salazar 591,803 options;
Options over ordinary shares exercisable at $0.865 on or before 31 December 2025
1,678,945
Ignacio Salazar 509,961 options;
Options over ordinary shares exercisable at $0.865 on or before 31 December 2026
1,514,364
Ignacio Salazar 459,971 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 2021.
111
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 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
Sierra del Perdón
Navarra
Ampliación de Adiós
Investigation
26/10/2012
Application in
process
35760
Application in
process
35770
Application in
process
35880
22.88
Geoalcali SLU 100%
59.40
Geoalcali SLU 100%
40.90
Geoalcali SLU 100%
123.18
Vipasca
Navarra
Vipasca
Investigation
06/11/2013
11/12/2014
35900
14.10
Geoalcali SLU 100%
Muga
Muga
Muga
Muga
Navarra
Aragón
Aragón
Goyo (area under
concession progress)
Fronterizo (area under
concession process)
Muga (area under
concession progress)
Investigation
19/07/2011
24/12/2012
35780
15.30
Geoalcali SLU 100%
Investigation
21/06/2012
05/02/2014
Z-3502/N-3585
9.00
Geoalcali SLU 100%
Investigation
29/05/2013
07/04/2014
3500
14.40
Geoalcali SLU 100%
Aragón
Muga Sur
Investigation
25/09/2014
30/06/2020
3524
7.28
Geoalcali SLU 100%
14.10
Pintanos
Aragón
Molineras 1
Investigation
20/11/2012
06/03/2014
3495/10
18.20
Geoalcali SLU 100%
Pintanos
Aragón
Molineras 2
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%
45.98
Total
65.24
248.50
112
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Project locations are shown in the following map*.
*The potential quantity and grade of the Exploration Target is conceptual in nature and there has been insufficient exploration to estimate a Mineral Resource and it is
uncertain if further exploration will result in the estimation of a Mineral Resource.
113
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Important Information and Disclaimers
Forward looking
statements
This report includes certain ‘forward looking statements’. All statements, other than statements of
historical fact, are forward looking statements that involve various risks and uncertainties. There
can be no assurances that such statements will prove accurate, and actual results and future
events could differ materially from those anticipated in such statements.
Such information contained herein represents management’s best judgement as of the date hereof
based on information currently available. The Company does not assume any obligation to update
any forward looking statement.
Competent person
statement for
Muga-Vipasca
Potash Project
114
The Review of Operations contained within this annual report was prepared by Mr. Ignacio Salazar,
CEO and Managing Director of Highfield Resources. The information in this report that relates to Ore
Reserves is based on information prepared by Dr. Mike Armitage, the Chairman of SRK Consulting
(UK) Limited. Dr. Mike Armitage is the Competent Person who assumes overall professional
responsibility for the Compliance Opinion. Mr. Chris Bray BEng, Mining Principal Consultant at SRK
Consulting (UK), is taking responsibility for the review of the Life of Mine (LOM) plan, as reported by
the Company. The information in this report 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.
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 promulgated by the Australian Securities Exchange (“ASX”) from time to time. Dr.
Mike Armitage 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 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 context in which it appears.
Mr. Chris Bray is a member of and a Chartered Professional in the Australasian Institute of Mining
and Metallurgy. He is a Mining Engineer with 24 years’ experience in the mining and metals industry,
including operational experience in underground mines as well as mine planning and review
experience on underground potash, salt, lithium and borate projects, and as such qualifies as a
Competent Person as defined in the JORC Code. He has also been involved in the reporting of Ore
Reserves on various properties internationally for over 10 years. Mr. Chris Bray consents to the
inclusion in this report of the matters based on this information in the form and context in which
it appears.
Ms. Anna Fardell is a Resource Geologist employed by SRK Consulting (UK) Limited. Ms. Fardell is a
member of the Australian Institute for Geoscientists and has 14 years’ experience in the mining and
metals industry and has sufficient experience which is relevant to the style of mineralisation and
type of deposit under consideration to qualify as a Competent Person as defined in the JORC Code.
Ms. Anna Fardell consents to the inclusion in this report of the matters based on her information in
the form and context in which it appears.
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS Competent person
statement for
mineral resources
and exploration
targets other than
the Muga-Vipasca
Potash Project
The Review of Operations contained within this annual report was prepared by Mr. Ignacio Salazar,
CEO and Managing Director of Highfield Resources. The information in this report 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 professional geologist in Spain and is a registered
member of the European Federation of Geologists, an accredited organisation 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 Roldán consent to the inclusion in
this report of the matters based on their information in the form and context in which it appears.
115
HIGHFIELD RESOURCES LIMITED 31 DECEMBER 2021 ANNUAL REPORT TO SHAREHOLDERS highfieldresources.com.au