More annual reports from Highfield Resources Ltd:
2023 ReportPeers and competitors of Highfield Resources Ltd:
Highfield Resources LtdAnnual Report 31 December 2023 HIGHFIELD RESOURCES LIMITED www.highfieldresources.com.au ABN 51 153 918 257 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 1 Contents Page Corporate Directory ..........................................................................................................................3 Chairman’s Letter ...............................................................................................................................4 Chief Executive Officer’s Letter ........................................................................................6 Sustainability Report .......................................................................................................................8 CEO Message ........................................................................................................................................... 10 Our Enduring Commitment to Sustainability ...........................................................................12 Performance: Muga´s ESG Highlights ......................................................................................... 18 About this Report ...................................................................................................................................36 Directors’ Report ..............................................................................................................................38 Directors ....................................................................................................................................................... 40 Board Committees .................................................................................................................................44 Interests in the Securities of the Company ..............................................................................45 Results of Operations and Finance Review ...............................................................................45 Dividends ......................................................................................................................................................46 Risk Management ....................................................................................................................................46 Corporate Structure ...............................................................................................................................49 Nature of Operations and Principal Activities .........................................................................49 Review of Operations ........................................................................................................................... 50 Geoalcali Foundation ............................................................................................................................. 56 Corporate .................................................................................................................................................... 56 Annual Review of Ore Reserves and Mineral Resources....................................................57 Corporate Governance – Resource and Reserve Estimation and Reporting .................................................................................................................................................... 60 Significant Changes in the State of Affairs .............................................................................. 60 Significant Events After the Reporting Date ........................................................................... 60 Likely Developments and Expected Results of Operations ........................................... 60 Environmental Regulations and Performance ....................................................................... 60 Share Options ............................................................................................................................................ 61 Indemnification and Insurance of Directors and Officers .................................................. 61 Directors’ Meetings ................................................................................................................................ 61 Proceedings on Behalf of the Company .....................................................................................62 Corporate Governance .........................................................................................................................62 Auditor Independence and Non-Audit Services ....................................................................62 Audited Remuneration Report .........................................................................................................63 End of Audited Remuneration Report .........................................................................................75 Financial Report ...............................................................................................................................76 Consolidated Statement of Profit or Loss and Other Comprehensive Income ....78 Consolidated Statement of Financial Position .........................................................................79 Consolidated Statement of Changes in Equity ....................................................................... 80 Consolidated Statement of Cash Flows ...................................................................................... 81 Notes to the Consolidated Financial Statements .................................................................82 Directors’ Declaration ..........................................................................................................................110 Auditor’s Independence Declaration ........................................................................................... 112 Independent Auditor’s Report ......................................................................................................... 113 ASX Additional Information ...............................................................................................118 2 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 3 Corporate Directory Share Registry Automic Pty Ltd Level 5, 126 Phillip Street SYDNEY, NSW 2000 Website automicgroup.com.au Auditor Pricewaterhouse Coopers Level 11/70 Franklin Street ADELAIDE, SA 5000 Telephone +61 8 8218 7000 Facsimile +61 8 8218 7999 Stock Exchange Australian Securities Exchange (Home Exchange: Perth, Western Australia) ASX Code HFR Directors Mr. Paul Harris 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. Luke Anderson Non-Executive Director Company Secretary Ms. Katelyn Adams 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 4 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Chairman’s Letter Dear Shareholders, I am pleased to present the 2024 Chairman’s Letter for Highfield Resources Limited. This year has been a significant one for Highfield, with substantial progress made on our flagship Muga Potash Mine project and changes to our Board of Directors. Project Updates In addition to amazing effort of securing all the key Muga Project permits in 2023, the Company updated the Muga feasibility study, reconfirming the outstanding project metrics over a 30-year Life of Mine. The Project economics are robust, with an NPV8 of €1.82 billion and a 24% IRR (post-tax). The EBITDA is projected to be €340 million per annum in full production. The pre-production capital requirement for Phase 1 is €449 million. We are strategically located in the middle of the western European market, with excellent access to ports, transport, and renewable grid power. Our mine access is straightforward with shallow mineralization and low technical risk with conventional mining and processing methods. Funding and Partnerships We continue to work diligently to secure the remaining financing required for phase 1 operations. We are in negotiations with a range of parties encompassing strategic partnerships, non-dilutive royalties, equity, and offtake agreements. We are delighted to have signed a binding offtake agreement with Maxisalt, a global Spanish chemical and salt producer and trader, to supply 75,000tpa of by-product salt. Board Changes We welcomed Mr. Luke Anderson to the Board this year. A qualified chartered accountant, Mr. Anderson brings over 25 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 5 years of experience in executive management, corporate development, corporate treasury, financial management, and financial services roles in major international resource and transport companies across Australia and the United States. We also mourn the loss of our esteemed Board member, Mr. Brian Jamieson. His wisdom, passion, and intellect will “We are very excited about the start of construction and look forward to keeping you updated on our progress.” be greatly missed. Looking Ahead With the recent signing of our key Construction contract with EPOS-Tunelan construction start of the declines and underground facilities is now planned to start in 2024. We are very excited about the start of construction and look forward to keeping you updated on our progress. Thank you I would like to also take the opportunity to thank my fellow Board members, the management team led by Ignacio Salazar, and our dedicated employees for all their efforts over the year. I would very much like to thank all our shareholders for their loyalty and continued support over this past challenging year. We are now at the junction of a very exciting stage in Highfields’s development, and I look forward to Highfield continuing its positive trajectory towards becoming a successful and sustainable long-life producer of potash. Best regards, Paul Harris Independent Non-Executive Chairman 27 March 2024 6 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Chief Executive Officer’s Letter Dear shareholders, In 2023, we closed a long and significant chapter for Highfield, achieving all key permits for Muga. The construction licence in Navarra for the process plant, granted at the end of March 2023, finally allows for the full- scale construction of the Project to commence. This critical milestone was the last step of a process which involved more than 180 administrations, with more than 1,000 submissions analyzed, more than 13 public information sessions were held and 31 permits and authorisations were successfully granted during almost a decade. Many other mining projects have failed at this stage. With Muga, we have delivered, and this phase is now behind us. The team has been actively working in advancing the Project, re-tendering key construction activities and updating the Muga feasibility study with a much higher level of confidence in the Capex estimate. With this update, following a significant inflationary environment, we were able to successfully re-confirm a value for Muga of €1.8 billion and a 24% IRR. The mine location provides exposure to significantly lower potash delivery costs to the European market, positioning Muga as a top quartile margin performer in the industry. Our team has been working with contractors to ensure alignment of costs with the updated Feasibility Study published in November 2023. In March 2024, we announced the signing of the key contract for the construction of the two declines and underground mining infrastructure with EPOS - TUNELAN. In parallel, the Company continued its focus on the financing strategy, successfully achieving a €320.6 million senior secured project financing package with a syndicate of six highly reputable entities in the sector. We also obtained credit approval from the Macquarie Group for an equipment operating lease facility of up to €25 million. We were fortunate during the year to have a number of existing Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 7 “We feel the Company is well prepared to start construction of Muga and to conclude the strategic process.” strategic shareholders who continue to demonstrate strong support for the Company with interim funding to allow the completion of the strategic investment process. We feel the Company is well prepared to start construction of Muga and to conclude the strategic financing process. The difficult global geopolitical backdrop following the wars in Ukraine and Gaza reinforces the importance of Muga. In the first quarter of 2024 this has become more apparent with farmers across western Europe bringing Governments’ attention to the increasing cost burden they face. More than ever, it is becoming more strategically important to ensure a sustainable global potash supply. I am confident that with our talented team, together with the support of the local communities and administrations where we operate and strategic partnerships, we will deliver a leading potash Project in Spain. Thank you for your continued support and trust in our Company. We look forward to a long and sustainable future filled with growth and success. Ignacio Salazar CEO and Managing Director 27 March 2024 8 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 8 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Sustainability Report CEO Message Our Enduring Commitment to Sustainability Performance: Muga’s ESG Highlights About this Report Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 9 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 9 10 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 CEO Message Muga is strategically important in achieving food security through a new global and sustainable supply of European potash. Dear Readers, Access to strategically important raw materials has been a key driver for economic wealth and development throughout history. The stakes are getting higher in the current geopolitical environment, with Europe continuing to depend on imported minerals for fertilizers to grow its crops. Before the Ukraine war, Russia and Belarus together supplied more than half of European potash demand. In this context, the strategic relevance of Muga is now evident and more important than ever. As the next Spanish potash producer, Muga is crucial in securing Europe’s food supply. This year’s Sustainability Report summarizes all of our ESG oriented activities that contribute to the robustness of this sustainable potash Project. The Company has led by example with respect to its social licence to operate within the region and local communities. We are pleased that in 2023, the “Muga Community initiative” was nominated by the United Nations Global Compact as a “best practice” example in social management. “Muga Community” is an initiative led by the local government which coordinates, with the Company and our communities, strategies for a successful implementation of this Project in the region. The Company received the last critical construction licence from the Sangüesa Townhall early in the year. This licence followed a strong support from local stakeholders who expressed to the administrators the urgent need to complete the permitting process. As a result, the Company was successful in acquiring the remaining land necessary for the Project following a legal process that guaranteed landowners’ rights. The required land purchase was successfully achieved with a high level of acceptance by those impacted and amicable agreements reached. We expect to start the main construction works in calendar year 2024, and as we move closer, the increased level of interest during these last few months from hundreds of potential local suppliers demonstrate the positive benefits that this Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 11 “Potash is an absolutely essential input for fertilizers that are used to grow strong healthy crops against a backdrop of a growing global population and decreasing arable land. We have a unique opportunity here to make a positive contribution toward food security.” Highfield Resources CEO, Mr Salazar Project may bring to the economy of the region. Muga will pioneer a high level of environmental standards. The mine is designed to leave no visible disturbance or footprint at surface, given its conventional low emission underground operations. The mine will also be progressively rehabilitated with all material extracted to be sold or backfilled into the mine. European demand is currently supplied by importing fertilizers produced with a much higher carbon footprint1 than Muga – up to 60% higher in some cases than European production. The planned production from Muga therefore has the potential to significantly reduce the carbon footprint associated with European potash demand. Several mining companies around the globe have already identified the opportunity to expand into fertilizer production, anticipating that the world’s increasing population and reduction in arable land will increase pressure for food demand and ultimately fertilizers. Muga is a shovel-ready Project in Europe ready to address this challenge. Sustainability is at the centre of how we will operate as a multi generational potash producer, underpinned by renewable power, a low emission operation, in a strategic location. Ignacio Salazar CEO and Managing Director Highfield Resources and Geoalcali 27 March 2024 1 https://www.ft.com/content/638d6913-fec9-490f-90b0-5e6d3269d093 12 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Our Enduring Commitment to Sustainability The Company is acutely aware that managing our ESG sustainable performance throughout the evolution of the obligations appropriately can contribute to long-term Project, ahead of regulations in Spain. The executive team value creation for our organization and stakeholders. Since the Company’s inception, stakeholder engagement has been a critical component used to inform our strategies as an ongoing tool to ensure the Company is aligned with impacted communities and to identify and address material topics the Project developes. is responsible for the ongoing monitoring and development of the Company’s ESG strategy which incorporates safety, environmental stewardship, health and safety, climate change-related risks and opportunities and cybersecurity. The Board and committees oversee that the Company’s ESG focus remains as a cornerstone of the Company’s The Group’s committees review policies and ethical performance. compliance annually. During the 2023 review, no substantial changes were required to our Code of Business Ethics and Conduct. Information about the Company’s corporate governance can be found in the Company’s website: The Group actively seeks the implementation and refine- https://www.highfieldresources.com.au/ ment of existing protocols to manage risk and improve corporate-governance/ Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 13 ESG Roadmap 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 Commitment, Excellence Respect and Attitude (CREA), which form the basis of the eight principles of our Sustainable Roadmap outlined below: 1. 2. 3. 4. Integrate ethical Adopt best practices Focus on achieving Encourage the management that in health and safety the best takes into account with the aim of environmental participation and communication of risk analysis to deliver the best results for our stakeholders. providing protection results, optimising our communities for our employees and communities. energy use and the responsible management of resources. to ensure that their expectations and needs are met. 5. Uphold the principles of 6. 7. 8. Look for continuous Always act with Adopt an approach improvement integrity, honesty that is consistent diversity and ensure through and equanimity with with our vision and that equality is part measurement all our stakeholders. corporate values of our corporate mechanisms with culture. the aim of achieving excellence in all our activities. in our decision- making processes as the main driver to generate value and a sustainable outcome. 14 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Our Commitment to the Sustainable Development Agenda No Poverty Zero Hunger Gender Equality Muga Mine will generate wealth for several decades at a time of great social transformation in labour matters, especially in times when economies have been hit by pandemic or military events. Muga will generate direct and indirect jobs in a highly depopulated region. The worldwide shortage of arable land is a real problem, driven by rapid population growth and increasing demand for food. Our Project will contribute with potash for fertilsers, key for agriculture and food production for generations to come . Clean Water and Sanitation At Muga, all of the water from the production process will be reused in the production process itself or eliminated by evaporation. Reduced Inequalities We are committed to initiatives that promote quality education and actions that have an impact on reducing social inequality. This is one of the cornerstones of our social work through our Foundation. Climate Action Environmental protection and the monitoring and management of the environmental impacts of our activities are fundamental to the Company, which strives to position itself as a sustainable producer, including environmental protection measures in all aspects at each stage of the Project’s life cycle. Affordable and Clean Energy In relation to energy efficiency and minimising the impact of energy consumption, we are committed to prioritising the consumption of electricity from renewable sources. Sustainable Cities and Communities We strive for greater sustainability and high performance mining by promoting innovation, research and investment in technology in both extraction and product development. Life on Land From the outset, the Company has put in place the necessary preventive measures to protect habitats and biodiversity, carrying out several flora and fauna studies to choose the most suitable location. The Group is conscious of the importance of fighting for fundamental rights, dignity and the value of the human person as well as the equal rights of women and men. It also takes work-life balance measures to help achieve equality. Decent Work and Economic Growth Muga will be one of the main economic engines generating employment in the area and will provide an important socio-economic boost, creating quality jobs and opening up future opportunities for the population. Responsible Consumption and Production Muga’s entire production process is based on sustainable and optimised criteria. In addition, the Group promotes awareness campaigns on responsible consumption both externally and internally. For the Company, social awareness begins with the Company itself. Partnerships for the Goals Throughout the life of the Project, we will strive to deliver on the key commitments we have made to all our stakeholders. In addition, we will continue to seek partnerships to raise awareness and contribute to the Sustainable Development Goals (SDG). Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 15 Muga´s ESG Credentials Zero Residue Mine Muga Mine is the only room and pillar potash mine in the world that targets zero residue on surface at the time of mine closure. Muga’s waste management strategy has been carefully designed to fulfil the Circular Economy objectives. Optimised Energy Consumption Measures implemented have reduced our energy consumption by ~ 15%. Protecting Biodiversity Protection programme in partnership with reputable NGO to monitor and preserve biodiversity in the area. Optimised Water Circuit Reuse of salt water for the process plant. Environmental Surveillance Plan All environmental factors will be closely monitored and controls put in place during the construction and operation of the mine. Social Value is at the centre of our business. Muga Community, a pioneer CSR initiative. Governance is the foundation of ethical behaviour and overall ESG strategy development. 16 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Listening to Our Surroundings The Company proactively and regularly engages with key stakeholders to identify concerns and communicate opportunities for long-term value creation associated with the Project. The aim of this open dialogue is to incorporate stakeholder opinions, whilst considering global trends that may affect Muga. The purpose is to develop strategies to control risk and maximise positive impacts. The Group has in place several methods to communicate with its stakeholders and will continue to do so throughout the life of the Project. Similarly, the Company monitors and responds to environmental and social trends in many jurisdictions. This is a key consideration in our risk management process and necessary to achieve our long-term vision. All this information results in the definition of material topics which are factored in the Company´s stakeholder engagement plan outlined below. Communication Channels Stakeholder Type How Frequency Material Topics Local Communities Physical suggestion boxes located in the communities involved in the project Monthly 5 7 8 Local Communities Online access through the “We want to listen to you” tab for suggestions, consultations and questions from citizens and residents of the area Daily 2 4 8 Local Communities Muga Community (local liaison group), events and forums Twice a year 2 3 4 5 6 7 8 11 Local Communities Monitoring Press Town Councils Official application process Town Councils Regular meetings Daily Weekly Monthly Monthly 2 1 1 7 2 2 4 6 6 7 8 9 10 7 9 10 4 5 8 11 7 11 Physical suggestion boxes located in the communities involved in the project Directly related with relevant department Daily Official application process and regulatory affairs Weekly Online access through the “We want to listen to you” tab for suggestions, consultations and questions from citizens and residents of the area Daily 3 7 Informative events 2 3 5 7 8 Monitoring press Investor Relations Department HR Department Daily Daily Daily Daily 2 3 5 7 8 13 2 1 5 2 8 7 12 Trends and media Business Associations, organisations, press monitorin Town Councils Suppliers Government Organisations Non-Governmental Organisations and Local Organisations Non-Governmental Organisations and Local Organisations Non-Governmental Organisations and Local Organisations Investors Employees Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 17 Material Topics Business Development Environmental Topics Safety issues Sustainable approach 2 4 5 8 3 Receipt of necessary Permits 9 Water Management 10 13 Waste Management Restoration of the area Supplier Engagement* Wealth Creation Generation of Quality Employment Project Feasibility 1 6 Ensure employee Health and Safety 11 Community Involvement Prioritise Health and Safety in the Community 12 Climate Change 7 Sustainable Development *Supplier Engagement has replaced previous material topic Anti – Corruption as this has gained relevance during 2023, whilst Anti Corruption is no longer a key issue of concern or relevant trend to the Project. RELE VA N C E T O O U R S T A K E H O L D E R S Ensure employee Health and Safety Receipt of necessary Permits Project Feasibility Supplier Engagement Wealth Creation Prioritise Health and Safety in the Community Sustainable Development Generation of Quality Employment Water Management Waste Management Community Involvement Climate Change Restoration of the area SIG NIFICANT IMPACTS TO T H E B U S I N E S S 18 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Performance: Muga´s ESG Highlights This report is structured in accordance to Material Topics previously explained. Business Development Receipt of Necessary Permits The Company announced on 29 March 2023 that amendment was to exclude a small parcel of public land that the Townhall of Sangüesa issued the licence for the required a more extended licencing process. This does not construction of the process plant. This milestone was one impact the construction of the Muga process plant and has of the Company’s highlight achievements of 2023 as this was the last construction licence required to begin the full- limited impact relative to the southern ponds. scale construction of Muga, comprising the civil works, the In parallel, and with a similar vision to accelerate the process process plant and the ramps. To expedite the process, the the Company received strong local support summarized in Company requested an amendment to the licence; this the following chart: Name Rol Summary Publication or link Javier del Castillo Former Mayor of In an open letter published by Sangüesa Diario de Navarra, he asked the authorities “to contribute to the prosperity and development of our city, to create wealth, development, the future... in short: grant the licence”. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 19 Name Rol Summary Publication or link Javier Solozábal Current Mayor of The former leader of the Sangüesa since June opposition and spokesman 2023 of Agrupación San Sebastián political party wrote an article in the local magazine Al Revés calling for support for Muga Mine. José Antonio Ex Mayor of He published a letter to the Martínez Cortés Castiliscar and editor in the Heraldo de Aragón, Ex President of urging the Sangüesa town Aragón´s Rural council to grant the license or Development Agency “hundreds of jobs will be put at risk”. Anonymous Neighbour of An anonymous Sangüesa Sangüesa resident wrote an opinion article in the local magazine Al revés in which he stated that “many of us are committed to and believe in the future of the area, which is why we support and look forward to the Muga project becoming a reality”. 20 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Name Rol Summary Publication or link General Workers’ UGT Union Industry The Union Federation (FICA) and Union (UGT) Federation General Workers’ Union (UGT) issued a press release calling on the Sangüesa to “speed up the process of granting the necessary permits.” Company’s workers Company’s workers The local press picked up a letter from Company’s workers expressing their ‘great concern at the delay and lack of response to the Mina Muga licence application’. Ainhoa Unzu PSN (Socialist Party Ms. Unzu assured journalists of Navarra) Economic at the Parliament of Navarra Development Spokesperson that Navarra is an attractive region for the creation of new companies, highlighting “major projects” such as Muga in Sangüesa. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 21 Name Rol Summary Publication or link Joakin Tellería Chairman of the In an-interview with Diario Vasco, Pasaia Port Authority the Chairman of the Pasaia Port Authority in Gipuzkoa mentioned the future opportunities that the Muga project will bring to the port. Miguel Iriberri President of The press statement expressed Industrial Foundation that a final effort was required of Navarra to speed up the process to resolve the pending reports and formalities with urgency for such a relevant Project as Muga is for Navarra. Another important milestone achieved in 2023 (June) was Government of Navarra, met with those affected by the the process to secure access to all the land necessary to expropriation process to specify the areas affected and build the Muga Mine. The Company had previously either manage a valuation process between them. This process ran purchased land or obtained commitments to buy it from successfully, and the Company reached an agreement with the landowners. The remaining areas, where no private the majority of landowners (88.5%). For the small minority agreement had been previously reached, were subject to the of landowners where no price agreement was reached, an normal legal expropriation process in Navarra for projects of official process will be run by the Government to determine public interest. To ensure access to the remaining land required for the construction of Muga (including the above ground facilities, a fair market price. This process does not impact Highfield’s right to access and use the areas immediately. To allow the Company to access the land, the final requirement was to make a deposit payment of €1.1 million as an advance power lines and road access), the Company initiated an payment of the final purchase price. The deposit amount is as extensive expropriation process on 27 September 2021 per the requirement set out in the Government’s guidelines. with the Government of Navarra. In December 2022, Highfield made the deposit, and the Company has been the Government of Navarra approved and declared the officially notified that it has fulfilled all the requirements urgent need to occupy these remaining areas by Highfield. under the Navarran Compulsory Expropriation Law for Following this declaration, the Company, together with the immediate access and use of the lands. 22 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Supplier Engagement Wealth Creation Procurement typically represents the largest expendi- Of the historical investment, more than 70% has been ture in local communities - usually more than taxes, allocated to the acquisition of products and services wages, and community investment combined. Local from local suppliers. In addition, the Project is expected procurement opens new economic opportunities for to have an annual supplier spend of more than €64 members of local communities, including jobs, training, million over the mine life. The Project will generate hundreds of quality jobs for decades contributing to the local economy via taxes. and business development linked to the mine. Local suppliers have been strong supporters of the Project and the involvement of this stakeholder group has gained relevance particularly since the beginning of the preliminary construction works. On 16 March 2023, local suppliers organised an event to express their sup- port with the aim of accelerating the construction of the Project when it was pending of Sangüesa’s Construction license. Local suppliers were concerned for the level of investment that will be required to seize the economic and social benefits that the mine will have in the region. A local supplier event to support the Project had a high level of attendance with more than 70 participants The Company had previously organised several forums to explain the potential benefits of the mine. These events were organised in 2021 and 2022 in the local towns of Ejea de los Caballeros, Sos del Rey Católico, Sangüesa and Zaragoza. Despite Covid challenges, these events had a high level of attendance with more than 250 local companies involved. The Company has in place a Buy Local Policy, and to date, more than 90% of the Project´s local suppliers are Spanish. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 23 Generation of Quality Employment The Company is aware that generating quality employ- ment is a key part of its journey in becoming an employer of choice. The Company works closely with staff to develop a meaningful career path, a supportive environment, and a culture that values employee well-being. 2 Healthy Living Program The following activities highlight the Company’s effort Company promotes healthy habits such as providing towards achieving this goal: fruit for staff and sport activities. In their aim to guarantee staff well-being, the 1 Flexible Work Schedules During 2023, the Company implemented a new holiday, leave and flexibility procedure with the aim of strengthening the work-life balance measures already in place. Padel Teambuilding activity – December 2023 Geoalcali wins the BKT Tires’ Giveaway Contest The Company entered the competition promoting sustainable practices promoted by BKT Tires. The Company was informed that BKT Tires had chosen the Company’s project as the winner of the BKT Tires BKT Bikes Giveaway competition, and Geoalcali was awarded 10 bicycles that were received during the month of November. A volunteer day was organised to assemble and set up the bicycles, which will be used to further promote sport and sustainable mobility among the Company’s workforce. As part of the Healthy Living Program, two bicycles are now for common use by staff for short journeys around the city of Pamplona. 24 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 3 Team building and staff recognition 4 Employment Forums As part of Company’s Corporate Social Responsibility We participated in the conference on “Employment policy, on 16 and 17 January 2023 a group of and Entrepreneurship” organised by the Public volunteers from the Company staff refurbished an University of Navarra (UPNA) in the Navarra Arena exhibit room in Javier. This room was provided by pavilion in Pamplona. the Department of Tourism of the Government of Navarra for educational purposes, which will host the Company’s mineral exhibit, and which can be visited by appointment by schoolchildren, neighbours and any group that requests it. The Director of Human Resources, Javier Olloqui, took part in the round table organised by Navarra Talent together with the heads of the same area from companies such as 3P Biopharmaceuticals and Veridas to explain the great professional opportunities mining – and Muga, can provide to the younger generations. New space for the Mineral Exhibition The Company launched a communication campaign to boost employee engagement by highlighting every member of staff who had the opportunity to express their views and contribution the Muga Project. Geoalcali’s Javier Olloqui at Pamplona’s Job Fair Current employment figures Workforce Female Male 2023 10 17 Training 10 thematics with a total of 1,147 hours. Turnover 4 people left the Company (two females and two males) and 3 people joined the Company (one female and two males). Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 25 Project Feasibility The Company’s updated 2023 Feasibility Study confirms the outstanding project metrics over 30-year Life of Mine. The parameters are based on advanced engineering and firm contracts which provide a high level of confidence in the Project assumptions with 93% of the capex based on contracts plus firm offers and results in an NPV8 of €1.82 billion and an IRR of 23%. 26 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Environmental Topics We continued working on the implementation of the best environmental outcomes for Muga. In 2022, the Environmental Surveillance Plan for Muga (PVA- Acronym for Programa de Vigilancia Ambiental) was submitted to the mining and environmental authorities of Navarra and Aragon. This update included all the measures and controls required by the Administration in the process of obtaining the Mining Concession and the positive Environmental Permit (DIA). With the start of the preliminary construction works in June 2022, the PVA was implemented and the carrying out of the controls corresponding to the construction phase commenced. Quarterly reports with the results of all the controls in place started in 2022 and in 2023 were shared with the Administrations of Navarra and Aragón. During 2023, the Muga Mine Project was in the Works phase that included: • Preliminary works on the mine opening. Polygon 6, plot 73 Espilengas, Undués de Lerda (Zaragoza); and • Initial earthworks for the temporary deposit of saline waste. Polygon 8, plots 660 and 654, Sangüesa (Navarra). Water Management and Waste Management The activities carried out in 2023, likely to generate Additionally, in August 2023, 6 new control piezometers environmental impact and therefore subject to were included in the network, to increase the monitoring monitoring and control, are: • Earthworks from the collection of soil at the mine site; network (levels 2 and 3) of the PVA. Data from these new piezometers has been recorded since their installation and included in quarterly reports from Q3 2023. This is being monitored from the moment of their execution • Earthworks for the execution of the temporary with a periodicity analogous to the point already deposit of saline waste; executed at the mine entrance. • Extraction and storage of topsoil from the saline deposit; and • Revegetation of topsoil. So far, the preliminary works carried out were small scale activities and which could not cause damage to the water environment. Nonetheless, taking into account that the mining operation phase is expected to commence in a few years, the Company considered it prudent to maintain the frequency of the monitoring campaigns in the pre-operational phase. This monitoring is based on quarterly in-situ measurements and semi-annual laboratory analyses to assess the current state of the water reserves, prior to beginning the main construction of the Muga mine. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 27 Restoration of the Area The Company complies with strict regulations for the restoration of all land affected during the Company´s activities. No substantial drilling activities occurred during 2023. Muga´s PVA controls and monitors the following: No environmental incidents occurred during 2023. Atmosphere and Air Quality Waste Monitoring • Control of dust and particle emissions • Control of plant emissions • Control of inmission • Monitoring of waste management • • Control of mining waste storage Monitoring of chemical storage areas Hydrology, Hydrogeology and Water Quality Socio-Economic, Archaeological and Cultural Monitoring • Surface water quality Groundwater quality • • • • Monitoring of discharges Monitoring of drainage and channelling works Monitoring of decanting and dewatering equipment Monitoring of archaeological and cultural resources • Monitoring of exclusion areas • • • Control of Noise Control of Bardenas Chanel, Undués de Lerda and Javier. Geology, Soils and Orography Subsidence and Seismicity Monitoring • Monitoring of erosion levels Monitoring of efflorescence • • Monitoring of vibration Environmental Restoration and Landscape Integration • Effectiveness of restoration measures • • Control of topsoil extension Hydroseeding, plantations. Fauna, Protected Area, Natura 2000 Network and Landscape • Monitoring of subsidence monitoring devices Monitoring of seismicity monitoring devices • Monitoring of Mining Waste Facilities • Meteorological station • Bottom drainage inspection chambers (leakage and seepage control) • • • • Water level sensors in ponds and monitoring of the storage of the deposit Dike and slope inspection Inspection of ditches Inspection of accesses Control of permeability • Monitoring of animal communities • • • Monitoring of revegetated areas Control of protection measurements 28 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Safety Issues Ensure Employee Health and Safety Prioritise Health and Safety in the Community The Company and its Project Management coordinator The Company is committed to safeguarding the safety of (Bovis) closely monitored the execution of the Muga Mine community members and therefore, has already in place a pre-construction works, including the coordination of the Social Management Plan that contributes to ensuring the works from the preventive angle in compliance with the community wellbeing. Within the Social Management Plan, required legislation (RD1627/1997 and RD 171/2004). The the Company monitors potential impacts such as traffic objective was to ensure that the contractors executed management, dust and noise controls, among others. In the works according to the Project as designed by the addition, the Company is working in collaboration with the engineering company, complying with both national and the governments to ensure that community services identified Group’s own rules and regulations, thus creating the right in the Muga Community Initiative (such as health systems) conditions for a safe and accident-free workplace. are of the requisite standard. Training is key for a strong and shared safety culture. During 2023, the Prevention of Risks at Work training was completed by a 100% of active staff. An additional training for two staff members for Construction Preventive Action and an elevation platforms machinery training for one operator was completed. A total of 478 hours of training were completed. The Company provides its workers with periodic health monitoring, in accordance with the terms regulated in Law 31/1995 on Occupational Risk Prevention and in Royal Decree 39/1997. During the year, refresher sessions were also completed by all personnel. No Safety incidents or accidents occurred during 2023. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 29 Muga Community has been recognized as best practice in social management according to the UN’s Global Compact initiative COMparte. COMParte is a Spanish Global Compact Network’s platform of good practices in sustainability. Sustainable Approach Community Involvement From the beginning, the Company has maintained a continuous dialogue with local community, however, it was in 2022 when the local liason group was formalised under the initiative: Comunidad Muga – Muga Community, holding several coordination meetings in the same year. In 2023, the first meeting of Muga Community was held at the Commonwealth Services of Sangüesa Region in February. The Director of Depopulation and Local Administration of the Government of Navarra explained that the purpose of the meeting was to focus on the development of the activities of Muga Community until the end of the legislature (elections held in May). The municipalities attending the meeting expressed their interest in the training initiatives carried out by the Construction Labour Foundation in collaboration with Geoalcali and the Navarra Employment Service, the study of local suppliers carried out by the Navarra Chamber of Commerce and the forthcoming drafting of the Muga Community Strategic Plan. During the second and third quarters of the year, no meetings were held, due to the reconfiguration of local and regional governments following the May 2023 elections. In the last quarter of the year, a meeting was held in Aragon to promote training in the Aragonese part of the region. This meeting was attended by the new town Mayors formed after the May elections. In this case, representatives from the municipalities of Undués de Lerda, Sos del Rey Católico and Mancomunidad Altas Cinco Villas, Longás and Urriés attended. A representative of the Construction Labour Foundation was also present at this meeting to explain how training courses related to the mine could be promoted in the area. The Company has received a high level of interest from residents of the area who are currently employed. This demonstrates that the residents consider Muga as an employer of choice which will benefit the Company when it comes time to consider drawing on local communities for its workforce. 30 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Among the social engagement activities planned for 2023, the Company highlights the following: 2 Open Doors to the Company’s Exhibit: Essential Minerals for a Sustainable Future In March 2023, the Company hosted several Open Doors of the mineral exhibit, Essential Minerals for a Sustainable Future, that the Company has in the locality of Javier. Around 200 pilgrims during the Javieradas pilgrimage visited the exhibit. Moreover, in June, residents of Javier also had the opportunity to visit the exhibit to learn more about geology in the area, the importance of minerals in our daily lives. The exhibit receives school visits and is included in the official Navarra Government websites (mines department and tourism). 1 200 New Trees Next to the Castillo de Javier Neighbours and workers of the Company joined forces in the planting of 200 new trees next to the historic Castillo de Javier. Specifically, 75 gall oaks (Quercus Faginea), 75 holm oaks (Quercus Ilex) and 50 rowan trees (Sorbus), all native species donated by the Geoalcali Foundation, have been planted in an area of 3,000 m2. The new trees and their rooting will serve to strengthen a slope located next to the cemetery in the town of Navarra and will help to offset the CO2 emissions produced in the area. With this action, the Company and the municipality strengthen their alliance in tackling common objectives, while at the same time strengthening their commitment to the environment. This is not the first initiative of this type that the Company has carried out in the Sangüesa region. These 200 new trees are in addition to the 150 trees that the Company has contributed to planting in the area of influence of its Muga mining project, in towns such as Sangüesa, Liédena and Rocaforte. In total, thanks to the support of Geoalcali, and through its Foundation, nearly 50,000 m2 of land has been replanted. For Geoalcali, this is not only an activity that is committed to the reforestation of the area, but also a further lever for the promotion of corporate volunteering among its workforce. The initiative has further positive effects: improving the landscape near one of the most visited tourist spots in Navarra, increasing biodiversity, helping to renew the air and contributing to the European Green Deal´s objective of reforestation. Geoalcali staff and neighbors from Javier participated in the tree planting Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 31 Climate Change In order to implement mitigation measures to tackle climate change risks, the Group will carry out a cost/benefit analysis to help the senior management team identify which risk mitigation measures be applied. External consultants will be engaged if necessary when addressing climate change risks. A formal tendering proposal is planned in due course. 3 The Geoalcali Foundation Since its creation in September 2014, the Geoalcali Foundation has supported more than 190 community projects in close collaboration with local councils, social associations, foundations and other local organisations. The commitment to education and local development in the area continues to be one of the pillars of the Foundation’s work. Hence the collaboration with several schools in the area for the acquisition of school materials and to promote quality education, complementary training with yoga classes for school children or the maintenance of an essential service such as transport for school children and residents in Undués de Lerda. Another important factor in the coexistence of any community is leisure. For this reason, we collaborated in the organisation of the first rural festival in the area, bringing magic, music and theatre to the local residents in the Txokarrera Fest in Liédena. This year we also celebrated with the former potash miners of Navarra the Santa Bárbara festivity, patron saint of miners. 32 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Sustainable Development Sustainability partnerships consists of teaming up for a supply of all vital commodities is gaining relevance. Muga mutual benefits related to sustainability goals. The Company encourages increased domestic production, lowers fertilizer is continuously seeking alliances with the aim to drive the costs for European farmers, and secures food supply in a transformation of the mining industry into a more ESG more sustainable manner. This is relevant for our society in orientated business approachable to society, particularly in Navarra, Aragón, Spain, and Europe. the context where Europe´s strategic autonomy in securing 1 Meeting with Lithuanian authorities The CEO of Highfield-Geoalcali held a meeting with the Lithuanian Embassy in Spain given the new geopolitical context with the Ukranian war and the resultant global potash supply challenges which are in turn placing the focus on local European sources of supply such as Muga. 2 Exhibition at the Museum of Natural Sciences of the University of Zaragoza The University of Zaragoza invited us to participate in the permanent exhibition on Minerals of Aragon at the Museum of Natural Sciences. One of its objectives is to disseminate the richness and diversity of the geological and mining heritage of the region through this exhibition located in the University Museum of Natural Sciences. 3 Minerals of the future, Women of reference Conference The Company’s Director of Public Affairs, Susana Bieberach, took part in the symposium organised by Women In Mining on the importance of minerals for sustainable development. The forum took place in Seville to coincide with the celebration of International Women’s Day. Atlantic Copper’s CEO, Javier Targhetta and General Manager, Macarena Gutiérrez, the Industry Minister of Seville, Jorge Paradela and the Mines Director of Asturias, María Belarmina Díaz Aguado participated in the event. Display of potash samples extracted from the research drillholes of Muga Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 33 6 Collaboration with Alboan´s Mobiles for the Earth” initiative As part of its commitment to sustainability, the Company joined the “Mobiles for the Earth” initiative for the collection of old mobile phones. The useful life of mobile devices, such as smartphones, is around two years on average. As a result, hundreds of thousands of phones are discarded every year that could be reused or recycled appropriately to make more efficient use of non-renewable resources. Materials such as gold, tin, coltan and copper could be extracted from these devices for reuse, promoting the circular economy and reducing the impacts of mining these minerals in other countries. By collaborating with the “Mobiles for the Earth” initiative, the the Company contributes objective of the Alboan Foundation’s Conflict-Free Technology Campaign, which is to raise public awareness of the need to promote responsible consumption of electronic devices and reduce the social and environmental impacts of mining. to The funds raised through this initiative will go towards financing humanitarian action projects carried out with the Jesuit Refugee Service in Colombia and eastern Democratic Republic of Congo. 4 Geoalcali joined Navarra Zirkular The Company joined this public-private collaboration initiative promoted by the Department of Economic and Business Development, the Department of Rural Development and the Environment, the Department of Citizen Relations of the Government of Navarra, the public companies Sodena and GAN- NIK for the adoption of circular economy practices in the Company’s strategies. 5 RSA Seal: Official Government of Aragón Corporate Responsibility initiative This is our eighth consecutive year implementing sustainable management in accordance with this program. The renewal of this seal is recognition of the efforts made by the Company in promoting work life; the promotion of equality, giving priority to equal opportunities and the principle of non- discrimination as well as volunteering and the different actions developed from solidarity and respect for the environment. 34 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 In addition to this event, the Company has actively participated in the workshops on the use of minerals and potash for children in 4th Grade Primary School at Liceo Monjardín, together with AEMINA and AFARIME, both mining associations of Navarra, under the coordination of the Navarra Government Mines Department. Employee Teresa Frauca explains the importance of potash to the class 7 MINERÉTICA Activities MINERETICA is an official mining communication program of the Government of Navarra in which Geoalcali actively participates among other members of the mining industry in Navarra. In April, as part of the annual Vegetable Festival held in Tudela, MINERËTICA organised a mineral fertilizer thematic event. Geoalcali was responsible for setting up a dedicated educational tent at the Bardenas Reales headquarters, where visitors were able to enjoy geology workshops and children’s games about the minerals that surround us, learn about nutrients and minerals with a Healthy Kit provided by Geoalcali; and the exhibition “Essential Minerals for a Sustainable Future”. Prior to the conference a presentation on “The role of mineral fertilizers in the vegetable garden” was given by José María García-Mina, Professor of Agricultural Chemistry and Soil Science at the University of Navarra, followed by a discussion panel between José María García-Mina, David Navarro, member of the Farmers and Stockbreeders Union of Navarra and Alberto Josa, Mining Engineer and Director of Mining at Magnesitas Navarras S.A. Minerética voulunteers in the educational tent Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 35 8 Memberships The Company continues to be a member of the following organisations: The business association of Cinco Villas The logistics cluster of Aragón The executive managers association of Aragón The Spanish mining confederation An association of mining businessmen of Aragón An association of mining companies of Navarra The business association of Australia in Spain International Fertilizer Association An association of Navarra companies A Spanish mining association A Navarra mining association A non-profit organisation created by the Official College of Industrial Engineers of Navarra and the Association of Industrial Engineers of Navarra. 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. 36 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 36 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 About this Report This report highlights all ESG activities carried out during 2023 by Highfield Resources Limited (the “Company” or “Highfield”) and its Spanish subsidiary Geoalcali SLU (“Geoalcali”), together “the Group”. The Group is committed to adopting 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. For further information visit: https://www.highfieldresources.com.au/ sustainability-reports/ Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 37 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 37 38 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 38 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 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 2023. Directors Board Committees Interests in the Securities of the Company Results of Operations and Finance Review Dividends Risk Management Corporate Structure Nature of Operations and Principal Activities Review of Operations Geoalcali Foundation Corporate Annual Review of Ore Reserves and Mineral Resources Corporate Governance – Resource and Reserve Estimation and Reporting 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 38 Highfield Resources Limited 31 December 2022 | Annual Report to Shareholders Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 39 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 39 40 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Directors The names, qualifications, and experience of the Company’s Directors in office during the year and up to the date of this report are as follows. Directors were in office for the entire period unless otherwise stated. Mr. Paul Harris Independent Non-Executive Chairman, B Comm, M Eng. (Mining) GAICD 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 Koonenberry Gold (ASX:KNB) and was a non-executive Director of Aurelia Metals Limited (ASX: AMI) until 31 January 2024. 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. Mr. Ignacio Salazar 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. Mr. 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 in Law, Ignacio has extensive experience in the exploration, development, construction and operation of open pit and underground mines, as well as in local relations with communities and governments, in international relations within the industry and the capital markets of Europe, North America and Australia, through 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 | Annual Report to Shareholders. 31 December 2023 41 Ms. Pauline Carr Mr. Roger Davey Independent Non-Executive Director, BEcon, MBA, FAICD, FGIA, FCG (CS CGP) Independent Non-Executive Director, ACSM, MSc., C.Eng., Eur.Ing., MIMMM Originally an accountant, Pauline Carr is a professional non-executive director and has over 35 years’ commercial and executive experience with Australian and international listed companies spanning management, corporate governance and compliance, risk, investor and stakeholder relations and business improvement. Her professional and directorial career has encompassed a range of sectors including resources and energy, property and construction, financial services, pharmaceutical, community healthcare, retail and higher education. In addition to her oil and gas experience Pauline’s resources sector experience has been gained over 35 years and covers a range of mineral commodities – gold, base metals, industrial minerals, iron ore, tungsten, potash and more recently rare earths. She has held in a variety of roles over the years starting in the accounting, financial analysis, auditing areas before moving into government and community relations, business improvement, HR, compliance, risk management and corporate governance and then into executive roles which included being an integral part of growth and international expansions through mergers and acquisitions. Her current Board roles include Chancellor of the University of South Australia, Chair of National Pharmacies, and a non-executive director of ASX listed Australian Rare Earths Limited (appointed 2021). In the three years immediately before the end of the financial year, Ms. Carr did not hold any other listed company directorships. 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, and a Master of Science degree in Water Resource Management from Bournemouth 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). In the three years immediately before the end of the financial year, Mr. Davey held no other directorships of any Australian listed companies. 42 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Mr. Luke Anderson Mr. Brian Jamieson (commenced 13 September 2023) (ceased 7 August 2023) Non-Executive Director, BA (Accy), MAICD Non-Executive Director, FCA, FAICD Mr. Anderson is a qualified chartered accountant with The Board of Highfield Resources Limited was deeply over 25 years of experience in executive management, saddened by the passing of Mr. Brian Jamieson on 7 corporate development, corporate treasury, financial August 2023. Upon his passing, Chairman of the Board, Mr. management and financial services roles in major Paul Harris, extended the Company’s deepest sympathy international resource and transport companies across to Mr. Jamieson’s family and conveyed the great privilege Australia and the United States. He also has extensive of working with Mr. Jamieson and acknowledged his experience in business development in the resources exceptional talents, wisdom, passion and intellect. sector. Over his working career Mr. Jamieson procured over Most recently Mr. Anderson was the CEO of One Rail 40 years’ experience in the advisory, manufacturing, Australia (previously Genesee & Wyoming Australia), the resources and technology industries in Australia and third largest rail freight operator in Australia which owned offshore. and operated more than 3,200 km of rail track across Australia. Mr. Jamieson was a chartered accountant and at the time of his passing chaired the Audit and Risk Committee of Mr. Anderson was also President and CEO of Unimin IODM Limited and was the Non-Executive Chairman of Corporation, the largest industrial minerals mining Energy Technologies Limited (ASX:EGY appointed 24 company in North America, generating revenues in excess December 2020). of US$1.3 billion from its 42 operations in the US, Canada and Mexico. At the time of his passing, he did not hold any other listed directorships in addition to those set out above in the past Mr. Anderson has a range of project development three years. experiences which include being the CFO of Oz Minerals while it was developing its Carrapateena Project in South Australia. In the three years immediately before the end of the financial year, Mr. Anderson did not hold any other listed company directorships. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 43 COMPANY SECRETARY Ms. Katelyn Adams, B.COM (Acc/Fin), CA 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, 1414 Degrees Limited, PNX Metals Limited, Mighty Kingdom, Duxton Water Limited and Duxton Farms Limited. 44 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Board Committees Remuneration and Nomination Committee Audit, Business Risk and Compliance Committee The principal purpose of the Committee is to assist the The principal purpose of the Committee is to assist the Board fulfil its governance and oversight responsibilities in Board fulfil its governance and oversight responsibilities relation to the Group’s remuneration practices so that they: relating to: • Link rewards to the creation of value for shareholders; • The integrity of financial accounting practices and • Facilitate operational excellence by attracting and retaining talent; • Fairly and responsibly reward individuals having regard to individual and the Group’s targets and performance as well as industry remuneration conditions; 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 • Comply with applicable regulatory obligations. Principles. 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 appointed by the Board and are currently Ms. Pauline Carr (Chairman), Mr. Paul Harris, Mr. Roger Davey and Mr. Luke Anderson. Mr. Luke Anderson joined Each member of the Committee must be appropriately financially literate and accordingly have working familiarity with basic finance and accounting practices and have an understanding of risk management strategies. The members of the Audit, Business Risk and Compliance Committee are appointed by the Board and are currently Ms. Pauline Carr (Chairman), Mr. Roger Davey and Mr. Luke Anderson. Mr. Luke Anderson joined the Committee effective 13 September 2023 upon his appointment as the Committee effective 13 September 2023 upon his Director. appointment as Director. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 45 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 as follows: Director Paul Harris Ignacio Salazar Pauline Carr Roger Davey Luke Anderson Ordinary Shares Options over ordinary shares - 126,700 62,101 9,251 495,837 1,000,000 5,604,138 - - 40,322 The table below provides a further breakdown of the options held by Directors: Director Paul Harris Ignacio Salazar Luke Anderson Options by price and expiry $1.07 $0.47 $0.79 $0.865 $0.94 16 June 2024 31 December 2024 30 June 2025 31 December 2025 31 December 2026 31 December 2027 31 December 2028 - - 1,000,000 - - - - - 333,333 - 333,334 - - - 879,766 879,765 879,765 - 591,803 - 509,961 459,971 - - - - - 736,440 - - - $0.93 40,322 - - - - - - Results of Operations and Finance Review The Company’s net loss after taxation attributable to the members of Highfield Resources Limited for the financial year ended 31 December 2023 was $12,115,323 (year ended 31 December 2022: $5,789,353). As the Group is still classified as an exploration company under Australian Accounting Standards, revenue obtained related to interests earned from the cash positions held by the Group both in Spanish and Australian institutions. Total consolidated cash on hand at the end of the financial year was $14,083,844 (31 December 2022: $19,446,084). Net cash outflow from operating activities utilised $9,909,116 (31 December 2022: $4,000,869) primarily to fund General and Administrative costs. Net cash outflow from investing activities of $9,562,059 (31 December 2022: $12,145,643) was mainly to advance the Muga- Vipasca Project in relation to: 46 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 • Preliminary works at the mine site; management principles all of which are aligned with ISO • Mining and processing plant equipment engineering fees; • Payment of deposits to secure access to the lands following the culmination of the expropriation process; and 31000-2018 Risk Management. • Empowering managers and risk owners; • Developing risk management as a cultural discipline; and • Supporting managers with the assistance they need • Consultant fees and other charges related to the to manage risks. Project’s funding. Net cash inflow from financing activities of $14,349,544 during the year ended 31 December 2023 was attributable to net proceeds from the issue of convertible notes partially offset by the payment of financing fees to the Project Finance banks partners (31 December 2022: $13,473,000). The management of risk within the Group is guided by a pyramid structure with policies at the apex which set high level strategic objectives. These policies are further developed by standards which set specific requirements and outline the Group’s policies. The base of the pyramid encompasses procedures, manuals, and handbooks to define the necessary steps to carry out certain required The attached financial report for the year ended 31 tasks. This structure and its robust application establish December 2023 contains an independent auditor’s report a sound framework of risk oversight, risk management which highlights the existence of a material uncertainty and internal controls which underpin the Company’s that may cast significant doubt about the Group’s ability to commitment towards a good corporate governance. continue as a going concern. For further information, refer to Note 2 in the financial report, together with the auditor’s report. Dividends No dividend was paid or declared by the Company during the financial year ended 31 December 2023 or up to the date of this report. No recommendation for payment of dividends have been made. Risk Management The RMF requires that the CEO and CFO report to the Board at least annually as to the effectiveness of the Group’s management of its key business risks. In addition, the RMF is subject to annual review by the Audit, Business Risk and Compliance Committee. The risk context in which Highfield operates is characterized by its position as an exploration company on the cusp of moving into the development phase as well as the strict and substantial regulatory regime within which it operates, and the intent to deliver shareholder returns in an increasingly competitive environment. The Group does not generally have an appetite for high exposure risks but recognises that delivering upon its project delivery vision will involve a degree of risk-taking and uncertainty. A Risk Appetite Statement provides guidance to management on the amount and type of risk The Group has developed a Risk Management Framework the Company seeks to take in pursuing its objectives has (“RMF”) that serves as a roadmap of the operating been set up and different levels of risk have been defined strategies guiding the Group from the risk management for each operating area at the strategic, tactical, and perspective and it is fully aligned with the Group’s vision and operational levels. The Risk Appetite Statement has been Commitment, Respect, Excellence and Attitude (“CREA”) considered by the Audit, Business Risk and Compliance corporate values. This framework defines how risks are Committee and formally adopted by the Highfield Board of to be managed at the Group level and it also addresses Directors. the interconnectivity of the different tools to achieve the Group’s objectives in this respect. The Directors have assessed the Group’s current and future situation and have concluded that business risks are at this Highfield’s RMF embeds robust practices into the Group’s stage well managed and are being regularly monitored. risk culture and is a key foundation of the Group’s financial Management has classified the key risks facing the Group future. The Group’s RMF is based on three overriding risk into the following categories, namely: Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 47 Risk Category Risk Description Mitigation Strategy Financial Risks – Cash availability In the event that the equity financing for the Project is delayed the Group’s cash could potentially deteriorate. Cash requirements for the Muga project are obviously a lot higher than those at pre-construction however, until final Muga funding is in place, the Company needs to keep a minimum cash balance. As at 31 December 2023 the Group’s cash position is A$14.1m (€8.7m). Management has liquidity as its main focus and measures to preserve cash while moving the Project ahead have been implemented. In this respect non-essential cash outflows are very much limited to avoid cash depletion. Robust financial management is applied to ensure the Group continues operating as a going concern. Monthly current cash burn excluding financing costs is less than A$1m. In addition, banks are charging A$0.8m per month for their commitment towards the Project Finance loan. In any case, tougher measures to cut expenditure could potentially be applied to limit cash outflow further. The recent issue of convertible notes to key shareholders indicates their support to the Company. Financial Risks – Project Funding Inability to secure the last piece of funding on relative acceptable terms over the coming months might potentially lead to seek more onerous funding alternatives, this resulting in weaker cash flow generation over the life of the Project this leading to a fall in the Company’s share price and a reduction in the Company’s market capitalization. While the senior debt portion of the capital stack is secured with a €320.6 million senior Project Financing facility and an additional €25 million equipment operating lease, an active funding plan is being developed to fully fund the Project and enable the full-scale construction. Options under review include strategic investors, royalty providers, offtakers, and other alternatives. The Group is managing a number of potential parties in each of these areas with the help of its financing advisors, Macquarie Capital, Clarksons and Endeavour Financial. Financial Risks – Project Costs During construction a number of adverse events could occur that would require additional funding to ensure continuing compliance with bank covenants and avoid cost overruns. Operational Risks – Health & Safety (H&S) Hazards and incidents require early identification, root cause analysis and a response strategy. The recently published Feasibility Study (November 2023) confirmed Muga’s capex and opex estimates and provided a stronger level of confidence as contracts and firm offers representing 93% of the updated capex have been recently obtained. Most of these contracts and offers were obtained in Q4 2023 and factor in inflationary pressure and are still regarded as current. Contingencies have been reassessed to reach 10% of the direct and indirect construction costs (€40.0 million), in line with similar projects and market practices. Additionally, a Cost Overrun Debt Facility of €20.6 million was approved by the banks and an additional €36.7 million was requested as a Condition Precedent for first Project Finance drawdown. The Project is assuming (and financing) a combined buffer of circa €100 million to face potential cost increases. Safety KPIs have been defined and are assessed on a monthly basis as part of the H&S strategy. These performance variables have been embedded in the Group’s remuneration practices and hence, employees’ variable at risk remuneration is party determined by the Group’s H&S performance. A bespoke Crisis Management Manual has been enacted and is reviewed yearly to ensure it remains up to date and fits the purpose. This manual aims to manage a crisis (whatever its nature) within the business and strives to minimize harm and restore operations as soon as practicably possible. The manual is led by five unwavering priorities: • Safety and welfare of all staff and public; • Protect the environment; • Protect the reputation of the Company; • Protect the Company’s assets and facilities; and • Achieve operational continuity. Crisis simulations exercises are periodically conducted to test the procedures included in the manual and a lesson learnt document is duly drafted. 48 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Risk Category Risk Description Mitigation Strategy Operational Risks – Key personnel and talented staff availability The Group is reliant on a number of key personnel. The loss of one or more of its key personnel could have an adverse impact on the business of the Group. Staff retention programs are in place to retain talent. A competitive remuneration package is offered to the Group’s employees and when recruiting special attention is given to identifying applicants’ career motivations and expectations. Shortage of talented employees in the Project location might also be a risk. Construction Risks – Construction execution Construction costs could exceed those contemplated in the latest Feasibility Study. Technical Risks Although the Muga plant will be based on established technology, its performance will depend on a number of factors, namely: • • • • a successful detailed engineering; quality construction that meets deadlines and avoids cost overruns; swift plant commissioning; processing of ore that delivers the expected grade. Marketing & Logistics Risks – Offtake agreements (potash and salt) As a new entrant in the market, the Group expects to achieve offtake agreements with standard market reference prices. Competitive pressure in the market may result in poorer agreements for the company. Aggressive pricing policies applied by existing producers might have an impact on the level of prices. Moreover, final customers’ expectations around discounts might also contribute to a lower potash price achieved. In addition, there is regular monitoring of the status of the labour market and reviews of the project’s future staffing needs. Programs are in place with the Regional Employment Offices of Navarra and Aragón to build a pool of potential candidates to allow the Group to recruit experienced and skillful personnel for the construction and operational phases. The Group is working with the Regional Employment Offices of Navarra and Aragón to build a talent pool of potential local candidates. In addition, talent and development management initiatives have been implemented in the Group to ensure development and training of staff. External consultants are engaged to provide specialist expertise to supplement the in-house team when required. The detailed engineering has been undertaken by an experienced and reputable consultant. The Plant construction will be carried out by a reputable and experienced contractor which also has the appropriate expertise. The Group is working to ensure the same consultant is involved as the Owner’s Engineer throughout the installation and commissioning phases. Plant commissioning is currently being negotiated with a company which has the proven experience, expertise, and capability. Operations and maintenance teams carefully designed to tackle commissioning issues. MOUs have been signed with fertiliser traders with deep potash market experience and contacts to help mitigate these risks. Muga´s favourable location close to major potash consumers is expected to allow it to achieve local premiums including logistics benefits in the current market where European suppliers are being supplied from Canada. A binding take-or-pay offtake with Padira Premium S.L.U./ Maxisalt was signed in November 2023 for up to 75kt per annum, of high-grade vacuum salt per annum. Marketing & Logistics Risks – Port facilities Delays in finalising the sale mix and shipping destinations will mean that a dedicated port facility may not be available in time, or at all. MOUs have been signed with three nearby ports (Pasajes, Bilbao and Bayonne) and a regular dialogue is maintained with them with a view to building the future partnership. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 49 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 Group during the financial year was advancing its flagship Muga-Vipasca Project in the north of Spain. There was no significant change in the nature of the Group’s activities during the financial year ended 31 December 2023. 50 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Review of Operations Highfield Resources Limited is a potash company listed on the Australian Securities Exchange (ASX) with three 100% owned potash projects located in Spain´s potash producing Ebro Basin. Muga-Vipasca Project Highfield’s flagship Muga Project (“Muga” or “the Project”) The Vipasca permit extends over 14km2 adjacent to the is targeting the relatively shallow sylvinite beds in the Muga Project. Its geological characteristics make Vipasca’s Muga Project area that covers about 40km2 located in the potash unit a natural continuation of the Muga deposit. Provinces of Navarra and Aragón. Mining is planned to However, the geological data obtained in recent years show commence at a depth of approximately 350 metres from that only the section located at the east of the permit is surface and is, therefore, ideal for a relatively low-cost economically viable at the present time, while the potash conventional mine accessed via a dual decline. in the central and western sectors is too deep, situated at Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 51 more than 1,100 metres depth. Accordingly, the Company the declines and underground mining infrastructure to be relinquished these areas in 2021 and focused its efforts on undertaken by a Mining Specialist Contractor and the Civil the eastern sector, that has upgraded its categorisation Works and Urbanisation by a General Contractor. from Exploration Target to Mineral Resource and is considered an extension to the Muga Mining Concession. Consequently, the Company requested the Government of Navarra to transfer the Vipasca investigation permit into a mining concession during the first quarter of 2022, thus taking the first step in the process to add Vipasca into the operations of the Company. This process will be run in parallel with the construction of the Muga mine. During the financial year, HFR continued to progress its Muga-Vipasca Project. The focus has been on completing the cost and design review, with the announcement of the updated feasibility study on November 2023, and progressing funding and offtake negotiations on the back of the privileged situation of the Project which is fully permitted and shovel ready. Permitting and Construction Update The Project has been significantly de-risked from the permitting angle with all the relevant licenses, authorizations, and permits having been obtained. Also, access to the lands was finally gained after the completion of the expropriation process for the areas where no private agreement was signed. Agreement was reached with the majority of landowners and a deposit of €1.1 million was paid in accordance with the Government’s guidelines. For the remaining small number of landowners where no price agreement was reached, an official process will be run by the Government to determine a fair market price (refer ASX release 27 June 2023, “Highfield Resources secures all land for the Muga Project”). Following the successful expropriation process in Navarra, and with land access secured for the Project, some preliminary works, which need to be carried out prior to the main construction have been progressed during During the last quarter of the year, the Company progressed negotiations with the two relevant contractors responsible for each of the two packages set out above. Technical Update As announced in the first quarter of 2022, all key process plant equipment purchase contracts had been signed with its suppliers (refer ASX release 15 February 2022, “Remaining Purchase Contract Signed”). Following the signing of these contracts Highfield received equipment engineering drawings that allowed for the further finetuning and optimization of the detailed engineering of the processing plant. The Company is now ready to begin construction once the financing process comes to completion. Apart from some minor updates that the 2023 Updated Feasibility Study incorporated following comments received during the due diligence process with the financing banks (refer ASX release 7 November 2023, “Updated Muga Feasibility Study”), the processing plant design and the mine plan are the same as presented in the December 2021 Muga Feasibility Study Update. Sales, Marketing and Logistic Update Trade sanctions affecting Russia and Belarus since 2022 have worsened the supply constraints the potash market had been experiencing since 2021. In 2022, prices hit all-time record-highs and demand dramatically fell as affordability eroded. Market constraints eased and global demand begun to recover in 2023, however a shift in market dynamics has settled a new global trade map with former soviet producers being unable to access most the year. Some of these works relate to earthmoving in western economies. preparation for the areas for the saline water deposit and the environmental protection barriers around the footprint of the Project. In addition, minor preliminary works in the power line were also undertaken. The contracting strategy for the Muga-Vipasca Potash Project has been streamlined to an owner-managed The ongoing conflicts involving Russia and Ukraine in eastern Europe as well as and in Israel and Palestine in the Middle East, continue to encourage buyers to find alternative sources of potash from more stable regions. This has stimulated discussions with traders and other potential offtake and logistics partners interested in a project delivery model that envisages the construction of strategic participation in the Project. 52 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 During 2023, Highfield continued to develop its transport In May 2023, the Company received credit approval from and logistics strategy in line with the newest developments Macquarie for an equipment operating lease facility with introduced in the marketing plan. With the deferral of the a total value of €27 million, with a peak exposure not compacting and glazing unit construction, the mine will expected to exceed €25 million (refer ASX release 12 May now produce standard grade muriate of potash (“SMOP”) 2023, “Highfield secures credit approval for up to €25m in phase 1 and add granular grade muriate of potash equipment operating lease financing”). This key milestone (“GMOP”) to the product portfolio in phase 2. Given that was the culmination of the non-binding indicative term there is a marked preference for each product in different sheet signed with Macquarie a year before. geographical markets, the sales strategy has been re- defined based on the specific product demand in each area. In Europe the market demand is 60% GMOP and 40% SMOP. The Company’s sales plan assumes that the majority of SMOP is to be sold in Europe in both phases, while 50% of the total phase 2 GMOP production is to be sold into local and regional markets with a further 25% sold into north European markets and the remaining 25% to other export markets. The salt sales and marketing plan has also progressed significantly in 2023 with an offtake agreement signed with Maxisalt for the sale of a minimum 50,000 tonnes per annum with the option to sell up to 75,000 tonnes per annum of vacuum salt for the first 5 years of production (refer ASX release 1 November 2023, “Highfield signs 75ktpa vacuum salt offtake agreement with Maxisalt”). This amount represents 20-30% of the expected high- grade salt production in phase 1 of the Project. Highfield continues to engage with the three nearby ports it has previously signed MOUs with – Pasajes and Bilbao (North of Spain) and Bayonne (South of France) – with a view to effectively build the Company’s transport and The Company secured a key strategic investment of approximately A$25 million from EMR Capital and Tectonic and related parties under a convertible note deed, between the Company and the Lenders (refer ASX release 23 May 2023, “Highfield secures a key strategic investment of A$25m from EMR Capital and Tectonic Investment Management”). The convertible notes which have a maturity of a 24 months will mandatorily convert into shares of HFR before the first draw down under the senior debt facility for the Project. Further to the investment set out above, Highfield secured an additional US$6 million investment from existing key shareholders in the form of convertible notes issued on similar contractual terms to the issuance of convertible notes announced by the Company in May 2023 (refer ASX release 22 December 2023, “Highfield secures US$6 million to advance Muga potash mine toward construction”). The Company continues working with its external consultants, Macquarie bank, Clarksons Securities and Endeavour Financial to fully fund the Project and a wide range of alternatives encompassing strategic partnerships, non-dilutive royalties, equity, and offtake agreements are logistics strategy, as it is a key input in the development being analysed. and implementation of the Company’s sales and marketing plan. Financing Update After the signature of the principal facility with four European major banks acting as Mandated Lead Arrangers (“MLA”), (BNP Paribas S.A., ING Bank N.V., Natixis CIB and Societe Generale (London Branch) for €320.6 million Senior Secured Project Financing for Muga, the Company Updated Feasibility Study The Company completed the update of its Feasibility Study for the Project and released the results to the ASX on 7 November 2023 (refer ASX release, “Muga potash mine updated 2023 Feasibility Study”). The current Project contains several differences compared with the 2022 Feasibility Study and reflects a more refined announced in April 2023 that HSBC Continental Europe approach to certain mining and processing technical and Caja Rural de Navarra had joined the Senior Facilities aspects as a result of the thorough review carried out as Lenders (refer ASX release 17 April 2023, “Highfield by the independent technical engineers appointed by welcomes additional lenders to its Senior Secured Project the senior debt lenders. One of the main changes is that Financing for Muga Project development”). This milestone the Project will produce SMOP only during phase 1 given is seen as a significant endorsement to the Muga financing that the commissioning of GMOP takes extra time would stack. require additional investment (a compaction and glazing Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 53 unit) to upgrade the product. These facilities have been and firm offers represent 93% of the updated capex deferred to phase 2. In terms of duration, the total construction works including the plant commissioning for phase 1 will extend for 30 months. The envisaged ramp-up period to achieve the plant nameplate capacity is 8 months. Phase 2 will be developed in 24 months reflecting the learning curve provided by phase 1 and the fact that some of the big infrastructures will estimate. Average C1 costs are slightly higher at €108 per tonne, including the salt by-product credit because of the change in global prices. However, the potash price deck provided by independent consultant, CRU, that supports the study shows higher potash prices in the first years of production, which positively impacts the overall economics of the Project, in terms of IRR and NPV. be in place. Phase 2 will be a replication of phase 1 without The updated Project economics resulted in an NPV8 of the same requirement for access roads, site preparation, €1.82 billion and an IRR of 23% over a 30-year mine life. power lines, ponds, etc. which only occur in phase 1. The updated capex for phase 1 is €449 million, and €286 From the economic standpoint the new model capex accounts for the global cost inflation on raw materials and is supported by a stronger level of confidence as contracts million for phase 2. At full production, the EBITDA will be approximately €340 million per annum. 54 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Pintanos Project Adjacent to the Muga Project, the Pintanos tenement area process for the drilling permits at Molineras 2 and Puntarrón comprises the three permits of Molineras 1, Molineras 2 and in 2019 and continues to await the award of the permit from Puntarrón and covers an area of 65km2. The drilling permit the authorities. at Molineras 1 was extended for three years in 2020 and an additional one-year extension was requested in 2023 to complete the works in the area. The extension was granted in early 2024. The Company re-initiated the application The current priority for the Company remains the development of the Muga Mine. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 55 Sierra del Perdón Project Located southeast of Pamplona, the Sierra del Perdón mining department of the Government of Navarra. Highfield tenement area (“SdP”) covers approximately 120km2 appealed this decision in 2019 and to date has not obtained and comprises the three permits of Quiñones, Adiós and a resolution. In the fourth quarter of 2020, the second three- Ampliación de Adiós. SdP is a brownfield target which year extension application for the Ampliación de Adiós previously hosted two potash mines operating from the permit had been rejected by the mining department of the 1960s until the late 1990s and which produced nearly Government of Navarra, a decision that was appealed by the 500,000 tonnes of potash per annum. The Company Company in the same quarter. Based on local Spanish legal believes that there is potential for potash in new, unmined advice, the continued lack of a resolution to these appeals areas in the SdP area. does not represent a significant change with an adverse The Company was advised in the fourth quarter of 2018 effect on the entity. that the second three-year extension application for the No drilling took place at SdP during 2023. Adiós and Quiñones permits had been rejected by the 56 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Geoalcali Foundation Corporate Directors 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. Projects Since its establishment in September 2014 the Geoalcali foundation has provided support to over 190 community projects in close collaboration with town halls, social associations, foundations, and other local organisations. The commitment to education and local development in the area continues to be one of the pillars of the Foundation’s work. Hence, the collaboration with several schools in the area for the acquisition of school supplies and promoting quality education, yoga classes for schoolchildren, and the funding of an essential service such as transportation for Mr. Brian Jamieson was a Non-Executive Director of the Company until his passing in early August 2023. The Company would like to acknowledge Mr. Brian Jamieson’s contribution during his tenure as a member of the Board and once again express its condolences to his family and friends. Mr. Luke Anderson was appointed to the Board on 13 September 2023 as a Non-Executive Director. Mr. Anderson has over 25 years of experience in executive management, corporate development, corporate treasury, financial management and business development in the resources sector and has been nominated by EMR to replace Mr. Jamieson following his passing. Executives schoolchildren and residents in Undués de Lerda. On 10 May 2023, the Company announced that Mr. Carles Alemán had been appointed as Head of Plant Construction & Health, Safety and Environment (HSE). Mr. Aleman has over 30 years’ experience, with extensive experience in potash mining in Spain. Prior to joining Highfield Mr. Alemán was President of ICL Iberia and Managing Director of Iberpotash. Mr. Alemán’s appointment strengthens the construction team and will ensure the integration of the Company’s health, safety, and environmental activities before moving into the construction phase. Another important factor in the coexistence with community is leisure. For this reason, the Foundation collaborated in the organization of the first rural festival in the area, bringing magic, music, and theatre to its neighbours. The Foundation also remembers former miners in Navarra and celebrated with them Saint Barbara’s Day, patron saint of miners, with them. During 2023, the Foundation worked with the Company’s Public Affairs team and with the Muga Community to maximise the socioeconomic benefits of the Muga mine in the local area. In this respect students embarked in different training programmes organised jointly by Geoalcali, the Navarran Employment Office and the Labour Construction Foundation of Aragón visited the mining museum that Geoalcali set up in Javier. 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. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 57 Annual Review of Ore Reserves and Mineral Resources In accordance with ASX Listing Rule 5, the Company has performed an annual review of all JORC-compliant Ore Reserves and Mineral Resources as at 31 December 2023. Rounding differences may occur. Muga-Vipasca Project A maiden Ore Reserve for the Muga Project was derived 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 derived as at December 2018 and released to the ASX on 22 January 2019. The data in this study was considered by the Company to remain valid as at 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 (“SRK”) with an effective date 31 October 2021 and was used as the basis for the updated Feasibility Study released on 8 December 2021. The Company considers this Ore Reserve, which is presented below in terms of future plant feed, to remain valid as at 31 December 2023. Table 1: Muga-Vipasca Ore Reserves Summary Proved Probable Total Proved & Probable 31 December 2023 31 December 2022 31 December 2021 Tonnes (Mt) 45.3 59.0 104.3 Grade K2O (%) 10.5% 10.0% 10.2% Tonnes (Mt) 45.3 59.0 104.3 Grade K2O (%) 10.5% 10.0% 10.2% Tonnes (Mt) 45.3 59.0 104.3 Grade K2O (%) 10.5% 10.0% 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. 2. The Concession is wholly owned by and exploration is operated by Geoalcali S.L.U., the wholly owned Spanish subsidiary of Highfield Resources. 3. The standard adopted in respect of the reporting of the Ore Reserve 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 (the JORC Code). 4. SRK and the Company reasonably expect the Muga deposit to be amenable to a variety of underground mining methods for the shallow and inclined potash seams. The Ore Reserve is 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. 5. The Ore Reserve is reported in wet tonnes with a low moisture content of 0.8%. 58 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Highfield released an updated JORC-compliant Mineral Resource Estimate (“MRE”) for the Muga Project to the ASX on 10 October 2018 that was deemed valid for the year ended 31 December 2019. On 30 March 2021, an updated MRE for the combined Muga-Vipasca 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 this remains valid as at 31 December 2023. Table 2: Muga-Vipasca Mineral Resources Summary 31 December 2023 31 December 2022 31 December 2021 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 103.2 134.1 237.3 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% 103.2 134.1 237.3 44.9 282.2 12.3% 11.7% 12.0% 10.8% 11.8% 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 2023. Table 3: Sierra del Perdón Mineral Resources Summary 31 December 2023 31 December 2022 31 December 2021 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% Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 59 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 former 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 2023. Table 4: Pintanos Mineral Resources Summary 31 December 2023 31 December 2022 31 December 2021 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% 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 2023 31 December 2022 31 December 2021 Tonnes In Place (Mt) Grade K2O (%) Tonnes In Place (Mt) Grade K2O (%) Tonnes In Place (Mt) Grade K2O (%) Proved Probable Total Proved & Probable 45.3 59.0 104.3 10.5% 10.0% 10.2% 45.3 59.0 104.3 10.5% 10.0% 10.2% 45.3 59.0 104.3 10.5% 10.0% 10.2% Table 6: Highfield Total Mineral Resources Summary (all projects) The MRE includes all Ore Reserves shown above in Table 5. 31 December 2023 31 December 2022 31 December 2021 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% 103.2 175.9 279.1 155.9 435.0 12.3% 11.5% 11.8% 11.2% 11.6% 60 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Corporate Governance – Resource and Reserve Estimation and Reporting 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 deriving and reporting mineral resource and ore reserve estimates and for ensuring that the appropriate internal controls are applied to such estimates. 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. 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 The Extraordinary General Meeting held on 9 February 2024 approved the issue of convertible notes to EMR. As reported on 11 March 2024 (refer ASX release 11 March 2024, “Highfield signs contract for the construction of the declines at Muga potash project”), the Company signed the agreement to construct the declines and underground mining infrastructure with the Portuguese/Spanish joint venture, EPOS-TUNELAN for a total cost of €48 million, in line with the recent feasibility study. Works will commence in H1, 2024 upon completion of funding and Final Investment Decision. 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. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 61 Share Options Refer to note 20 to the consolidated financial statements below for details. Indemnification and Insurance of Directors and Officers The Company has agreed to indemnify all the current 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 2023 and the number of meetings attended by each Director were as follows: Director Board Meetings Remuneration and Nomination Committee Audit, Business Risk and Compliance Committee Paul Harris Ignacio Salazar Pauline Carr Roger Davey Brian Jamieson1 Luke Anderson2 Held Attended Held Attended Held Attended 22 22 22 22 5 16 22 22 22 20 5 15 4 4 4 4 2 1 4 4# 4 4 2# 1 5 5 5 5 3 1 5# 5# 5 5 3 1 1 Mr. Jamieson ceased directorship on 7 August 2023. 2 Mr. Anderson was appointed as a Non-executive Director on 13 September 2023. # Attendance at meeting by invitation. 62 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Proceedings on Behalf of the Company No person has applied to the Court under section 237 of the Corporations Act for leave 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 part of those proceedings. 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 The Company was not a party to any such proceedings at page 112 of the annual report. No non-audit services were provided by the Company’s auditor. during the financial year. Corporate Governance The Board of Directors is responsible for the operational and financial performance of the Consolidated Entity, including its corporate governance. The Company believes that the adoption of good corporate governance adds value for stakeholders and enhances investor confidence. 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. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 63 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 2023. For the purposes of this report the KMP are defined as those persons having authority and responsibility for planning, directing, and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. The information provided in this remuneration report has been audited as required by Section 308(3C) of the Corporations Act 2001. Details of Directors and Other Key Management Personnel Remuneration Policy The Group has a general remuneration policy aimed at ensuring that emoluments properly reflect 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 which is embedded in the Group’s Code of Business Conduct and Ethics, 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. The Board is responsible for determining and reviewing compensation arrangements for the Directors and senior executives reporting to the CEO. 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 The following individuals have held their positions and were and nomination responsibilities and related governance as KMP for the whole year, unless stated otherwise: well as formulate the Group’s Remuneration Framework and Remuneration Policy. Non-executive Directors Paul Harris Independent Non-Executive Director Pauline Carr Independent Non-Executive Director Roger Davey Independent Non-Executive Director Brian Jamieson Non-Executive Director (ceased 7 August 2023)1 Luke Anderson Non-Executive Director (appointed 13 September 2023) Executives Ignacio Salazar CEO and Managing Director Javier Aguado Chief Financial Officer 1 Mr. Jamieson was a Non-Executive Director of the Company until his passing in early August 2023. 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 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 Groups’ remuneration offerings remain in line with its industry peer group. 64 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Use of Remuneration Consultants Review of KMP Remuneration The Board and the Remuneration and Nomination A review of the KMP remuneration is undertaken by the Committee at times receives advice from independent Board each year with the assistance of the Remuneration remuneration consultants to ensure that KMP and senior and Nomination Committee and as required, external executives’ fees and payments are appropriate and in line remuneration consultants to ensure that: with the market. 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 potential conflict of interest and/or undue influence occurring and ensuring compliance with the Corporations Act 2001 requirements. • • • reward levels are fair and responsible in accordance with the market; the Group’s rewards are competitive, performance- based that properly attract, retain, and motivate; and incentives provide fair reward in line with the Company and individual performance to deliver on the long-term strategic objectives. The advice and recommendations of consultants are used When performing the remuneration review, the Board by the Board and Committee as a guide in formulating considers: 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. During the year the Company engaged remuneration consultant Juno Partners for a fee of $14,350 to obtain comparable market data on remuneration policies and practices. • • • • 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. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 65 Remuneration of Non-Executive Directors (“NED”) Fees are paid to all NEDs. 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 receives 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 to non-executive Directors where it determines such payments are warranted. Details of NED remuneration is shown below. Fees Board of Directors Remuneration and Nomination Committee Audit, Business Risk and Compliance Committee Board Chair per annum $ Committee Chair per annum $ Member per annum $ 120,000 - - - 18,000 18,000 60,000 9,000 9,000 All NEDs (including the Chairman) are entitled to be reimbursed for travelling and other expenses properly incurred by them in attending any meeting or otherwise in connection with the business or affairs of the Company. 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. NED remuneration is reviewed periodically by the Remuneration and Nomination Committee so as to gauge its fairness and competitiveness. The aggregate remuneration for NEDs was set at an amount not to exceed $1,000,000 per annum after the Shareholders’ approval at the annual general meeting held on 24 May 2018. This amount may only be increased with the approval of Shareholders at a general meeting. 66 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Remuneration of other KMP and Senior Executives The Company’s Remuneration Framework relating to other KMP and Senior Executives is set out in the table below. Fixed Remuneration At-risk Remuneration Short Term Incentive (“STI”) Long Term Incentive (“LTI”) Base remuneration that reflects the job size, role, responsibilities, and professional competence of each executive, according to their knowledge, experience and accountabilities and considering external market relativities. The pay of executives is reviewed on promotion. There is no guaranteed pay increase included in any executive’s contract. Variable, performance based, annual cash incentive plan designed to reward high performance against challenging, clearly defined, realistic and measurable objectives that are based on Group KPI targets that are 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 STI opportunity is up to 75% of fixed remuneration for the CEO and up to 50% for other KMP and senior executives. The equity component of the at-risk reward opportunity, linked to the creation of shareholder value and foster employee retention. The LTI opportunity for executives is up to 85% of fixed remuneration for the CEO and up to 50% for other KMP and senior executives. 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 an employee’s individual plan. 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, where the Board determines this to be appropriate. Key Performance Indicators (“KPI”) for Short Term Incentives KPIs are quantifiable measures that gauge the Group’s performance against a set of corporate targets and strategic objectives. The Group’s KPIs are reviewed by the Remuneration and Nomination Committee, and approved by the Board. They typically cover targets in respect of safety and wellbeing, key project milestones for Muga including (but not limited to) permitting, funding, engineering, construction, and project delivery. The aggregate score against the Group’s KPIs determines the total size of the STI bonus pool to be awarded to participants. A personalized plan related to the level of responsibility of each of the senior executives helps assess the performance of each executive and is the base for their individual STI. The Board exercises its discretion to award STI payments to executive KMP. As in the previous years, the level of achievement of KPIs is only assessed as Target. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 67 Summary Group KPI Performance The STI corporate and strategic KPI performance outcomes for KMPs for the year ended 31 December 2023 were as follows. As at the date of this report the KPI assessment had not been finalised. KPI Category Corporate Objective for the year Weighting for 2023 % 2023 Outcome % Safety, Health, Environmental and Community No injuries or environmental incidents and appropriate responses to social grievances. Permits Construction licences from Sangüesa, and Confederación Hidrográfica del Ebro (“CHE”) permits granted. Financing Successful debt and equity financing in place to allow construction commencement. Engineering Design and Engineering readiness, procurement, and preparation for construction. Construction Agreement with proposed Major Construction Partner and tendering. Construction Construction at project site commenced and team, capital, and project ready for next phase. 10 20 20 15 15 20 10 20 TBD TBD TBD TBD Total 100 TBD1 1 Assessment % not yet finalised and is scheduled to be completed by the end of Q2, 2024. Short Term Incentive Award The remuneration of the CEO and CFO for the financial year included cash performance pay in respect of the attainment of Group and individual STI KPIs set by the Board. As at the date of this report the 2023 STI is in the process of being finalised. The Board is of the view that any payment of the 2023 STI be deferred until after the full capital funding of Muga is completed. An accrual equivalent to a 70% payout for the cost of the achievements of the STI KPIs for the year ended 31 December 2023 has been included in the financial statements for the year ended 31 December 2023. 68 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Long Term Incentive Award 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. Vesting of options is subject to employees achieving certain conditions. In this respect all the outstanding options (except for those granted to the Chairman upon his appointment) will vest on satisfaction of the recipients’ continued employment set for the last day of each vesting period. The options are assessed for vesting in equal instalments over three years. Employee retention has been identified as one of the key success factors for the Project and hence its use as a vesting condition. Feature Description Structure The total value of options granted is based on a percentage of fixed remuneration. This percentage is up to 85% for the CEO, up to 50% for other KMP and senior executives and up to 20% for other employees. The number of options granted is obtained by dividing the total value by the fair value per option 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). The final allocation for recipents other than the CEO is then assessed by the CEO and put forward to the Remuneration Committee for their review and then Board approval. The allocation to the CEO is determined by the Remuneration Committee and the Baord. Option type American options that can be exercised anytime between vesting and expiry. Vesting conditions Vesting conditions are primarily linked to the recipient’s continuity as an employee of the Company at the time each tranche is assessed for vesting. Performance hurdle The performance hurdle is represented by the premium that must be achieved before options are in the money. Exercise price In order to provide an incentive linked to the longer term performance of the Company relative to the market, 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. In line with previous years, the premium for options granted during the year was 25%. However, due to changes in the share price between this VWAP and that at the grant date, the actual premium may be greater or less than 25%. Forfeiture and Termination Options lapse if not exercised during its option’s life. Options are forfeited if a vesting condition is not met. Options are cancelled if the employee forgoes the option. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 69 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 2023 are as below: Short term Post- employment Base Salary $ Fees $ STI Awards1 $ Other Benefits2 $ Super annuation $ Total $ Long term Share- Based Payments3 $ Perfor- mance related % Year ended 31 December 2023 Non-executive Directors Paul Harris Pauline Carr Roger Davey Brian Jamieson (ceased 7 August 2023) Luke Anderson (appointed 13 September 2023) - - - - - 116,000 92,800 75,400 38,973 23,400 - - - - - - - - - - - - - 116,000 92,800 75,400 4,122 43,095 - 23,400 - - - - - Executives Ignacio Salazar (CEO and MD) Javier Aguado (CFO) 740,305 130,869 - - 403,4691 38,0241 4,683 5,853 - - 1,148,457 63,0754 174,746 18,813 871,174 346,573 441,493 10,536 4,122 1,673,898 81,888 - - - - - 41% 33% 40% 1 The employees’ STI relates to the accrued performance pay for services provided during 2023 which are normally paid at the beginning of 2024. However, Management has proposed that the 2023 STI award will be paid only after the funds to fully fund the construction of Muga are obtained. 2 Benefits relate to health insurance allowances. 3 Share based payments are non-cash remuneration. The value is an estimate based on statistical calculations of the probability that the share price increases above the exercise price (which was calculated at a 25% premium at the grant date). In order to realise the potential value of any options awarded which are in the money, the option holder must first exercise the options by paying the exercise price in cash and can only realise any potential financial gain by selling the resultant shares. The sale of any shares must be in accordance with the Company’s share trading policy. 4 In addition to that disclosed above, on 13 December 2023, Mr. Salazar renounced on a voluntary basis 1,472,878 options corresponding to tranche 2 and 3 of the LTI 2022 plan. These are treated as a cancellation of options and require an acceleration of remaining expense through the income statement and included as part of total remuneration. At the time of cancellation, the options had a remaining expense of $202,253. Note: Management and staff of the company assumed a partial furlough scheme for two months in 2023 prior to obtaining the last significant construction permit for Muga. The Directors’ fees were also reduced during this time to align with the temporary reductions to management’s salaries. 70 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Details of remuneration for the year ended 31 December 2022 are shown below: Short term Post- employment Base Salary $ Fees $ STI Awards1 $ Other Benefits2 $ Super annuation $ Total $ Long term Share- Based Payments4 $ Perfor- mance related % Year ended 31 December 2022 Non-executive Directors Richard Crookes (resigned 24 March 2022) - 30,000 Paul Harris (appointed 25 March 2022) Pauline Carr Roger Davey Brian Jamieson Executives - 92,258 - 96,000 - 78,000 - 67,500 - - - - - - - - - - 30,000 - - 92,258 120,900 57% - - - - 96,000 78,000 6,927 74,427 - - - Ignacio Salazar (CEO and MD) 677,532 - 338,805 4,143 - 1,020,480 168,987 Javier Aguado (CFO)3 102,291 - 46,061 4,731 - 153,083 11,214 779,823 363,758 384,866 8,874 6,927 1,544,248 301,101 - - - 43% 35% 37% 1 The employees’ STI relates to the accrued performance pay for services provided during 2022 which are normally paid at the beginning of the following year. However, management proposed that the 2022 STI award be paid after interim funding in June 2023. Mr. Salazar personally also offered the Company to postpone payment of his 2021 STI award as well until June 2023. 2 Benefits relate to health insurance allowances. 3 Starting 1 January 2022 Mr. Aguado was deemed to be a Key Management Personnel in accordance with AASB 124. 4 Share based payments are non-cash remuneration. The value is an estimate based on statistical calculations of the probability that the share price increases above the exercise price (which was calculated at a 25% premium at the grant date). In order to realise the potential value of any options awarded which are in the money, the option holder must first exercise the options by paying the exercise price in cash and can only realise any potential financial gain by selling the resultant shares. The sale of any shares must be in accordance with the Company’s share trading policy. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 71 Shareholdings of Directors and Other Key Management Personnel No shares were granted as remuneration during the year ended 31 December 2023. 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. 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 Year ended 31 December 2023 Non-executive Directors Paul Harris (appointed 25 March 2022) Pauline Carr Roger Davey Brian Jamieson (ceased 7 August 2023) - 62,101 9,251 66,943 Luke Anderson (appointed 13 September 2023) 495,837 Executives Ignacio Salazar (CEO and MD) Javier Aguado (CFO) 126,700 - - - - - - - - - - - - - - - - - - (66,943) - - - - 62,101 9,251 - 495,837 126,700 - 1 The other change during the period represents an adjustment to exclude shares held by Mr. Jamieson as he was not a Director at the end of the period. All equity transactions with Directors and other key management personnel other than those arising from the 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. 72 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Option holdings of Directors and Other Key Management Personnel The number of options over ordinary shares in the Company held by each Director and other key management personnel of the Group, including their personally related parties, is set out below: Balance at the start of the period Granted as compensation during the period Expired during the period1 Exercised during the period Other changes during the period2 Balance at the end of the period Exercisable Not exercisable Year ended 31 December 2023 Non-executive Directors Paul Harris Pauline Carr Roger Davey Brian Jamieson 1,000,000 1,000,000 1,000,000 1,000,000 Luke Anderson (appointed 13 September 2023) - Executives Ignacio Salazar (CEO and MD) 4,771,053 2,639,296 (333,333) Javier Aguado (CFO) 300,174 270,000 (39,030) 1 Options expired during the year were granted in: May 2020 with an exercise price of $0.81; June 2019 with an exercise price of $0.83; June 2020 with an exercise price of $0.81; and September 2020 with an exercise price of $0.47. - - - - - - (1,000,000) (1,000,000) (1,000,000) - - - - - - - - - - - - 1,000,000 1,000,000 - - - - - - 40,322 40,322 40,322 - - - - - (1,472,878) 5,604,138 3,844,608 1,759,530 - 531,144 298,782 232,362 2 Other changes during the period represent an adjustment to exclude options held by Mr. Salazar pursuant to his voluntary renouncement of the options and the inclusion of Mr. Anderson’s options upon his appointment as Director. No option holder has any right under the options to participate in any other share issue of the Company or any other entity. Options granted as part of remuneration have been valued using the binomial method (which is derived from the Black- Scholes option pricing model but is considered more suitable for companies which do not pay dividends) taking into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share and the risk-free interest rate for the term of the option. Options granted under the Company’s employee share option plan carry no dividend or voting rights. For details on the valuation of options, including models and assumptions used, please refer to note 20. Transactions with Directors and Other Key Management Personnel 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 2023 other than those disclosed above. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 73 Options Affecting Remuneration The terms and conditions of options granted during the year ended 31 December 2023 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) 30/06/23 879,766 31/12/26 $0.0210 $0.79 $18,475 879,766 $18,475 - Javier Aguado (CFO) 30/06/23 90,000 31/12/26 $0.0210 $0.79 $1,890 90,000 $1,890 - 30/06/23 879,765 31/12/27 $0.0770 $0.79 $67,742 30/06/23 879,765 31/12/28 $0.1240 $0.79 $109,091 - - $22,663 $45,079 $21,937 $87,154 30/06/23 90,000 31/12/27 $0.0770 $0.79 $6,930 30/06/23 90,000 31/12/28 $0.1240 $0.79 $11,160 - - $2,318 $4,612 $2,244 $8,916 2,909,296 $215,288 969,766 $69,527 $145,761 1 The value at grant date has been calculated in accordance with the models and assumptions as disclosed in note 20. If the unlisted options granted this year to the KMP are fully exercised, it would have the following cash effect to the Company: Ignacio Salazar (CEO and MD) Javier Aguado (CFO) Options issued Accounting Fair Value of Options 2,639,296 270,000 2,909,296 195,308 19,980 215,288 Cash received by Company if fully exercised 2,085,043 213,300 2,298,343 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. 74 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 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). 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 2023 Mr. Salazar’s total fixed remuneration was €453,732 (A$740,305). Chief Financial Officer Mr. Aguado is employed under an employment agreement which has no fixed term. The notice period is two months. Depending on the reason for a termination of his employment, Mr. Aguado is entitled to the severance benefits set by Spanish law, as applicable. During the year ended 31 December 2023 Mr. Aguado’s total fixed remuneration was €80,161 (A$130,869). Loans to Directors and Other Key Management Personnel There were no loans to Directors or other key management personnel during the year ended 31 December 2023 (year ended 31 December 2022: nil). Voting and Comments Made at the Company’s Last Annual General Meeting The Company received 96.96% of votes in favour of its Remuneration Report for the financial year ended 31 December 2022 and received no specific feedback on its remuneration practices at the Annual General Meeting or throughout the period. The Company’s Annual General Meeting was held on 30 May 2023. Performance Measured by Loss per Share and Share Price The table below shows the performance of the Company measured by loss per share: Year ended 31 December 2023 Year ended 31 December 2022 Year ended 31 December 2021 Year ended 31 December 2020 Year ended 31 December 2019 Loss per share (cents) Share price (at period end) Share price High for the reporting period Share price Low for the reporting period (3.11) $0.33 $0.69 $0.29 (1.58) $0.58 $1.28 $0.57 (1.96) $0.90 $0.91 $0.44 (7.40) $0.69 $0.79 $0.26 (2.28) $0.68 $1.01 $0.57 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 75 End of Audited Remuneration Report Signed on behalf of the Board in accordance with a resolution of the Directors. Paul Harris Independent Non-Executive Chairman Adelaide, Australia 27 March 2024 76 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 76 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 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 76 Highfield Resources Limited 31 December 2022 | Annual Report to Shareholders Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 77 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 77 78 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2023 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 Other expenses Fair value on convertible note Interest expense on convertible note Interest (paid)/received Loss before income tax Note 31 December 2023 $ 31 December 2022 $ (34,600) (135,727) (1,928,608) (3,274,134) (319,469) (130,452) (81,862) (26,274) (1,462,633) (1,210,184) (3,682,237) 170,857 3 20 9 21 22 (136,452) (153,953) (947,856) (2,391,652) (605,551) (171,743) (21,379) (18,507) (1,375,327) - - 33,067 (12,115,323) (5,789,353) Income tax expense 5 - - Net loss for the period (12,115,323) (5,789,353) Other comprehensive income Items that may be reclassified to profit and loss Exchange differences on translation of foreign operations 4,241,079 Other comprehensive income/(loss) for the period net of tax 4,241,079 830,372 830,372 Total comprehensive loss for the period (7,874,244) (4,958,981) Loss per share Basic and diluted loss per share (cents) 6 (3.11) (1.58) The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 79 Consolidated Statement of Financial Position as at 31 December 2023 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 Short term bank debt Total Current Liabilities Non-Current Liabilities Loans and borrowings Derivative financial liability Other non-current liabilities Total Non-Current Liabilities Total Liabilities Net Assets Equity Issued capital Reserves Accumulated losses Total Equity Note 31 December 2023 $ 31 December 2022 $ 7 8 8 9 10 11 12 13 14 15 16 14,083,844 28,181,863 42,265,707 1,208,422 13,127,954 147,313,513 161,649,889 203,915,596 16,896,675 9,889,127 26,785,802 22,790,641 8,017,843 3,026,635 33,835,119 60,620,921 19,446,084 15,932,428 35,378,512 1,224,574 4,783,362 126,574,416 132,582,352 167,960,864 8,715,405 11,323,884 20,039,289 - - 198,843 198,843 20,238,132 143,294,675 147,722,732 206,740,655 34,319,442 (97,765,422) 143,294,675 203,613,937 29,758,894 (85,650,099) 147,722,732 The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes. 80 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Consolidated Statement of Changes in Equity for the year ended 31 December 2023 Year ended 31 December 2022 Issued capital $ Accumulated losses $ Share-based payments reserve $ Foreign exchange translation reserve $ Other reserves $ Total $ Balance at 1 January 2022 190,014,905 (79,860,746) 25,917,403 2,468,168 1,000 138,540,730 Total comprehensive loss for the period Loss for the period Other comprehensive gain - foreign currency translation Total comprehensive loss for the period Transactions with owners in their capacity as owners - - - (5,789,353) - (5,789,353) Conversion of options Issue of securities 810,000 13,400,000 Exercised shares from share-based payment reserve 63,600 Cost of issue Share-based payment (674,568) - - - - - - - - - - - (63,600) - 605,551 - 830,372 830,372 - - - - - - - - - - - - - (5,789,353) 830,372 (4,958,981) 810,000 13,400,000 - (674,568) 605,551 Balance at 31 December 2022 203,613,937 (85,650,099) 26,459,354 3,298,540 1,000 147,722,732 Year ended 31 December 2023 Issued capital $ Accumulated losses $ Share-based payments reserve $ Foreign exchange translation reserve $ Other reserves $ Total $ Balance at 1 January 2023 203,613,937 (85,650,099) 26,459,354 3,298,540 1,000 147,722,732 Total comprehensive loss for the period Loss for the period Other comprehensive gain - foreign currency translation Total comprehensive loss for the period Transactions with owners in their capacity as owners Conversion of options Issue of securities 3,140,629 Exercised shares from share-based payment reserve - Cost of issue Share-based payment (13,911) - - - - - (12,115,323) - (12,115,323) - - - - - - - - - - - - 319,469 - 4,241,079 4,241,079 - - - - - - - - - - - - - (12,115,323) 4,241,079 (7,874,244) - 3,140,629 - (13,911) 319,469 Balance at 31 December 2023 206,740,655 (97,765,422) 26,778,823 7,539,619 1,000 143,294,675 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 81 Consolidated Statement of Cash Flows for the year ended 31 December 2023 Cash flows from operating activities Payments to suppliers and employees Interest (paid)/received 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 Proceeds from conversion of options Payments for share issue costs Payments of project finance fees Proceeds from convertible note Payments for convertible note Net cash provided by financing activities Note 31 December 2023 $ 31 December 2022 $ (10,872,634) (5,930,779) 152,816 810,702 25,689 1,904,221 7 (9,909,116) (4,000,869) (951,307) (8,610,752) (9,562,059) - - - (11,566,518) 26,070,098 (154,036) 14,349,544 (5,121,631) 19,446,084 (240,609) 14,083,844 (2,889,597) (9,256,046) (12,145,643) 13,400,000 810,000 (737,000) - - - 13,473,000 (2,673,512) 22,241,425 (121,829) 19,446,084 Net (decrease)/ increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effect of exchange rate fluctuations on cash Cash and cash equivalents at the end of the period 7 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 82 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Notes to the Consolidated Financial Statements for the year ended 31 December 2023 1. Corporate Information The financial report also complies with International Financial Reporting Standards (“IFRS”) adopted by the International Accounting Standards Board (“IASB”). The financial report of Highfield Resources Limited (“Highfield Resources”, “Highfield” or “the Company”) for the year ended 31 December 2023 was authorised for b) Going Concern issue in accordance with a resolution of the Directors on The consolidated financial statements have been prepared 26 March 2024. 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 on a going concern basis which contemplates continuity of normal business activities including the realisation of assets and settlement of liabilities in the ordinary course of business. operations and the principal activities of the Company are As at 31 December 2023, the Group had net assets of $143.3 described in the Directors’ Report. 2. Summary of Material Accounting Policies million and cash and cash equivalents of $14.1 million, with a further cash injection of $7.6 million received in early 2024 from the proceeds of the convertible note issued in December 2023. The Group has no cash generating assets in operation. Funds are nevertheless required to progress the Muga Project (“Muga”) in Spain to ensure the continuing viability of a) Basis of Preparation and Compliance the Group. While the funding of Muga was partially secured Statement The principal accounting policies adopted in the preparation of the financial statements are set out in the notes to the accounts. These policies have been consistently applied to all the financial years presented unless otherwise stated. Accounting policies that are determined to be immaterial are not included in the financial statements. with the Project Finance facility (€320.6 million) and the equipment lease financing (€25 million), management is working with a number of strategic partners to secure the remaining funding for Muga. At the date of signing the financial report, the remaining funding for Muga has not been confirmed although there are negotiations in progress at different stages of development. The Directors are of the view that these These general-purpose financial statements have been negotiations will keep progressing while at the same time prepared in accordance with Australian Accounting other sources of funding might be obtained, such as further Standards and Interpretations issued by the Australian extensions of the convertible notes or raising additional Accounting Standards Board (“AASB”) and the Corporations funding through a Share Purchase Plan, to cover the cash Act 2001. Highfield Resources Limited is a for-profit entity flow requirements for the 12-month period from the date for the purpose of preparing the financial statements. of approval of the financial statements. The financial statements have been prepared on a historical These conditions indicate that there is a material cost basis except for, where applicable, the revaluation of uncertainty related to events or conditions that may cast financial liabilities at fair value through profit and loss and significant doubt on the Group’s ability to continue as a derivative financial instruments. going concern and, therefore, that it may be unable to Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 83 realise its assets and discharge its liabilities in the normal d) Foreign Currency Translation course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the Group not continue as a going concern. c) Basis of Consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries (“the Group”) at 31 December 2023 and at 31 December 2022 in the comparative period. Subsidiaries are 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 intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. i) Functional and presentational currency These Group’s consolidated financial statements are presented in Australian dollars. 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. 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. 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. Monetary assets and liabilities denominated in foreign currency are retranslated at year end exchange rates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are generally recognized in Consolidated Statement of Profit or Loss and Other Comprehensive Income. 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: 84 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 i) the rights to tenure of the area of interest are current; g) Property, Plant & Equipment 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. Plant and equipment, including mechanical, electrical and computer equipment as well as furniture, fixtures, and fittings, is stated at historical cost less accumulated depreciation and accumulated impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the items and bring them to the location and condition necessary for operation. Depreciation is calculated over the depreciable amount, which is the cost of the asset, on a straight-line basis so as to write off the net cost of each asset over either its expected useful life of 3 to 10 years for furniture, computers and equipment, or the life of the mine for plant and equipment. Depreciation and amortisation methods, useful lives and residual values are reviewed at each reporting date and 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 adjusted if appropriate. h) Income Tax of assets used in exploration and evaluation activities. The income tax expense or revenue for the period is the General and administrative costs are only included in the tax payable or receivable on the current period’s taxable measurement of exploration and evaluation costs where income or loss based on the applicable income tax rate they are related directly to operational activities in a for each jurisdiction adjusted by changes in deferred tax particular area of interest. Exploration and evaluation assets are assessed for 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 impairment when facts and circumstances suggest that unused tax losses. 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). 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 in the tax jurisdictions where the Group’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable Where an impairment loss subsequently reverses, the tax regulation is subject to interpretation. It establishes carrying amount of the asset is increased to the revised provisions where appropriate on the basis of amounts estimate of its recoverable amount, but only to the extent expected to be paid to the tax authorities. 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. 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 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 for impairment and the balance is then reclassified to differences arising between the tax base of assets and development. liabilities and their carrying amounts at the balance. Where an area of interest is abandoned, any expenditure Deferred income tax liabilities are recognised for all taxable carried forward in respect of that area is written off. temporary differences except when: Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 85 • • the deferred income tax liability arises from the initial other comprehensive income or directly in equity. In this recognition of goodwill or of an asset or liability in a case, the tax is also recognized in other comprehensive transaction that is not a business combination and income or directly in equity, respectively. that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current the taxable temporary difference is associated with tax assets against current tax liabilities and the deferred investments in subsidiaries, associates or interests tax assets and liabilities relate to the same taxable entity in joint ventures, and the timing of the reversal of and the same taxation authority. the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. i) Other Taxes Revenues, expenses and assets are recognised net of the amount of GST/VAT, unless 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 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 taxation authority is included as part of receivables or payables in the Consolidated Statement of Financial Position. Cash flows are presented on a gross basis in the Consolidated Statement of Cash Flows, except for the GST/ VAT component of investing and financing activities, which is receivable from or payable to the taxation authority, that is disclosed as operating cash flows. 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. 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. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in 86 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 j) Impairment of Assets l) Trade and Other Payables Assets that have an indefinite useful life are not subject to Trade payables and other payables represent liabilities amortisation are reviewed for impairment at least annually for goods and services provided to the Group prior to the to determine if events or changes in circumstances end of the financial year which are unpaid and arise when indicate that the carrying amount may not be recoverable. the Group becomes obliged to make future payments in Other assets are tested for impairment whenever events respect of the purchase of these goods and services. or changes in circumstances indicate that the carrying amount may not be recoverable. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after An impairment loss is recognised for the amount by which the reporting period. They are recognised initially at their the asset’s carrying amount exceeds its recoverable fair value and subsequently measured at amortised cost amount. The recoverable amount is the higher of an asset’s using the effective interest method. fair value less costs to sell 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. m) 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 k) Cash and Cash Equivalents operating losses. 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. The carrying value of cash and cash equivalents is considered to approximate fair value. 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. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is For the purposes of the statement of cash flows, cash and virtually certain that reimbursement will be received, and cash equivalents consist of cash and cash equivalents as the amount of the receivable can be measured reliably. defined above, net of outstanding bank overdrafts. 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 a finance cost. Restoration provision The Company has a legal obligation to dismantle and remove certain items of property, plant, and equipment and to restore and rehabilitate the land on which they are situated. A restoration provision is recognised and updated at different stages of the development and construction of a facility and then reviewed on an annual basis. When the liability is initially recorded, the present value of the estimated future cost of settling the rehabilitation and restoration obligations is capitalised by increasing Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 87 the carrying amount of the related property plant and equipment. Over time, the liability is re-measured to account for any new disturbance, updated cost estimates, changes to the estimated lives of operations, new regulatory requirements, and revisions to discount rates. Changes to the rehabilitation liability are accounted for prospectively from the date of the change and added to or deducted from the related rehabilitation asset, subject to recoverability. The unwinding of the discount is recorded as an accretion charge within finance costs. The carrying amount is capitalised unless the costs incurred relate to an operation that does not have a future economic benefit, in which case the costs are expensed. n) 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. o) Revenue The Company currently has no contracts with customers. Interest income is recorded using the effective interest method. p) 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: q) 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 • costs of servicing equity (other than dividends) and binomial method (which is derived from the Black- 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 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 20. The expected price volatility is based on the historic volatility of the Company’s share price on the expenses during the period that would result from ASX. the dilution of potential ordinary shares; The cost of equity settled transactions provided to divided by the weighted average number of ordinary employees (including Directors) by issue of shares is shares and dilutive potential ordinary shares, adjusted for measured by reference to the fair value of services any bonus element. received unless this cannot be measured reliably, in 88 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 which case the cost is measured by reference to the fair a replacement award on the date that it is granted, the value of the shares issued. The cost of equity-settled transactions with non- employees is measured by reference to the fair value cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph. of goods and services received unless this cannot be ii) Cash-settled transactions 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). 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 In valuing equity settled transactions, no account the Company. 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 cash-settled transactions is measured initially at fair value at the grant date using the binomial method taking into account the terms and conditions The cost of the equity settled transactions is upon which the instruments were granted. This fair recognised, together with a corresponding increase value is expensed over the period until vesting with in equity, over the period in which the performance recognition of a corresponding liability. The liability is conditions are fulfilled, ending on the date on which the remeasured to fair value at each balance date up to and relevant employees become fully entitled to the award including the settlement date with changes in fair value (“vesting date”). recognised in profit or loss. The cumulative expense recognised for equity settled transactions at each reporting date until vesting date r) Convertible Notes reflects (i) the extent to which the vesting period Convertible notes are classified as a financial liability on has expired and (ii) the number of awards that, in the the grounds they represent a contractual obligation that opinion of the Directors of the Company, will ultimately will be settled in the Company’s own equity instruments. vest. This opinion is formed based on the best available The notes are determined to contain a host debt and a information at balance date. No adjustment is made for conversion option. Conversion options that are assessed the likelihood of the market performance conditions as derivatives are to be accounted for as liabilities but being met as the effect of these conditions is included separately from the host instruments because the fair in the determination of fair value at grant date. The value of the conversion feature is affected by changes in charge or credit to profit or loss for a period represents the fair value of the underlying shares. the movement in cumulative expense recognised at the beginning and end of the period. The initial carrying amount of the host debt instrument is the residual amount after separating the embedded No expense is recognised for awards that do not derivative on the date the contract is entered into. The ultimately vest, except for awards where vesting is embedded derivative is measured at fair value at initial conditional upon a market condition. Where the terms recognition, and the remaining residual amount is allocated of an equity settled award are modified, as a minimum to the debt host. For subsequent measurement, the host an expense is recognised as if the terms had not been debt is measured at amortised cost using the effective modified. In addition, an expense is recognised for interest method whereas the embedded derivative is any increase in the value of the transaction as a result subsequently measured at fair value through profit or loss of the modification, as measured at the date of the at each reporting period. modification. Upon conversion of the convertible notes to ordinary Where an equity settled award is cancelled, it is treated shares, the carrying amount of the host liability (at amortised as if it had vested on the date of the cancellation, cost, updated to the date of conversion) together with the and any expense not yet recognised for the award is updated carrying amount of the derivative liability, is de- recognised immediately. However, if a new award is recognised and transferred to equity such that no gain or substituted for the cancelled award, and designated as loss is recognised on settlement. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 89 s) Critical Accounting Estimates and Judgements The preparation of these financial statements and the application of accounting policies require 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. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are material to the financial statements are: Exploration and evaluation expenditure in the current developing phase and transition to development impairment if facts and circumstances suggest that the carrying amount exceeds the recoverable amount. To test this the Company performed an analysis of its Muga related capitalised assets in accordance with paragraph 20 of AASB 6 to determine if there is any indication of impairment. The Group also takes account of AASB 136 “Impairment of Assets”, whereby an impairment loss will be considered if a number of circumstances concur. t) New and Amended Standards Adopted by the Group The Group has applied the following standards and amendments for the first time for its annual reporting period commencing 1 January 2023: • AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies Definition of Accounting Estimates. u) New Standards and Interpretations Not Yet Adopted Certain new accounting standards and interpretations have been published that are not mandatory for 31 December The application of the Group’s accounting policy 2023 reporting periods and have not been early adopted for exploration and evaluation expenditure requires by the Group. These standards are not expected to have judgement in determining whether future economic a material impact on the entity in the current or future benefits are likely either from future development or sale reporting periods and on foreseeable future transactions. 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. Whilst technical feasibility of the Muga Mine Project has been duly proved and certified by the different consultants that have thoroughly reviewed the Project, commercial feasibility is subject to the Company raising sufficient equity funding, which as at the date of this report has not been yet achieved. Asset impairment The Group’s key assets (Exploration and evaluation and Property, Plant and Equipment) are assessed for 90 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 3. Expenses Professional and consultants’ fees Corporate advisory fees Legal fees Financial advisory fees Other 31 December 2023 $ 31 December 2022 $ (396,076) (370,424) (1,017,843) (144,265) (1,928,608) (391,144) (76,865) (373,568) (106,279) (947,856) 4. Auditors’ Remuneration The auditor of Highfield Resources Limited is PricewaterhouseCoopers Australia “PwC” Amounts received or due and receivable by the parent auditor for: - an audit or review of the financial report - other services Remuneration of other related entities of “PwC” Amounts received or due and receivable by the subsidiary auditor for: - an audit or review of the financial report 5. Income Tax a) Income tax expense Major component of tax expense for the period: Current tax Deferred tax 31 December 2023 $ 31 December 2022 $ 82,558 - 54,754 - 35,448 118,006 27,324 82,078 31 December 2023 $ 31 December 2022 $ - - - - - - Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 91 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 (12,115,323) (5,789,353) Tax calculated at domestic tax rates applicable to profit/(losses) in the respective countries (Spain 28.0%, Australia 30.0%) (3,514,690) (1,671,969) Non-deductible expenses Net income tax (loss)/benefit not brought to account Income tax expense 25,116 3,489,574 - 37,171 1,634,798 - 31 December 2023 $ 31 December 2022 $ c) Deferred tax The following deferred tax balances have not been brought to account: Net deferred tax asset not recognised d) Unused tax losses The following deferred tax balances have not been brought to account: Unused tax losses The benefit for tax losses will only be obtained if: 31 December 2023 $ 31 December 2022 $ 19,737,331 17,737,983 31 December 2023 $ 31 December 2022 $ 53,955,667 43,504,420 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. 92 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 6. Loss per Share Loss used in calculating basic and diluted EPS (12,115,323) (5,789,353) 31 December 2023 $ 31 December 2022 $ Weighted average number of ordinary shares used in calculating basic loss per share 389,982,788 365,436,339 Number of Shares Number of Shares Effect of dilution: Share options - - Adjusted weighted average number of ordinary shares used in calculating diluted loss per share 389,982,788 365,436,339 Basic and diluted loss per share (cents) (3.11) (1.58) The 29,737,486 options outstanding at 31 December 2023 (18,931,052 owned by KMP and employees), (31 December 2022: 35,820,051 options, 25,013,617 owned by KMP and employees) 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 materially change the number of ordinary shares or potential ordinary shares outstanding between 31 December 2023 and the date of completion of these financial statements. 7. Cash and Cash Equivalents Reconciliation of cash Cash at bank 31 December 2023 $ 31 December 2022 $ 14,083,844 19,446,084 Reconciliation of operating loss after tax to net cash flow from operations Loss after tax (12,115,323) (5,789,353) Non-cash and non-operating items in operating loss after tax: Share-based payments Net loss/(gain) on foreign exchange Depreciation Accrued interests not paid Finance expense on convertible note 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 319,469 34,600 26,274 (18,041) 4,892,421 59,191 (3,107,707) (9,909,116) 605,551 136,452 18,507 (7,378) - 490,382 544,970 (4,000,869) Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 93 8. Other Receivables Current GST receivable VAT receivable Deposits Prepaid expenses Non-current Guarantees 31 December 2023 $ 31 December 2022 $ 76,415 206,691 651 27,898,106 28,181,863 106,588 151,730 1,025 15,673,085 15,932,428 1,208,422 1,208,422 1,224,574 1,224,574 GST/VAT receivable are non-interest bearing and generally receivable on terms between 30 and 45 days. They are neither past due nor impaired. The amount is fully collectible. Due to the short-term nature of these receivables, their carrying value is assumed to approximate their fair value. Guarantees and deposits represent amounts provided to third parties, mainly the restoration deposit handed over to the relevant Administrations to ensure the cost of dismantling and removing the mine gate construction and rehabilitate the land on which they are situated. Prepaid expenses reflect the transaction costs directly attributable to the formalisation of the Project financing for Muga, to be included as part of amortised cost of debt facility when drawn down. The breakdown of these prepaid expenses is as follows: Prepaid expenses Banks’ upfront fees Banks’ commitment fees1 Agent fees Legal fees Financial advisor success fees Due diligence costs 1 This amount has not yet been paid. Refer to the note 12. 31 December 2023 $ 31 December 2022 $ 11,731,176 9,889,127 637,372 826,772 3,001,366 1,812,293 11,320,266 - - 915,893 2,896,237 540,689 27,898,106 15,673,085 94 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 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 2023 $ 31 December 2022 $ 13,779,758 (651,804) 13,127,954 4,783,362 8,199,165 171,701 (26,274) 13,127,954 5,396,519 (613,157) 4,783,362 60,499 4,768,403 (27,033) (18,507) 4,783,362 Additions to Property, Plant and Equipment represent the amount of the Construction Tax payable to the townhall of Sangüesa. 10. Deferred Exploration and Evaluation Expenditure Exploration and Evaluation phase - at cost Opening balance Exploration and evaluation expenditure incurred during the period Net exchange differences on translation Closing balance 31 December 2023 $ 31 December 2022 $ 126,574,416 16,397,459 4,341,638 147,313,513 118,384,403 7,679,672 510,341 126,574,416 Capitalised Exploration and Evaluation Expenditure exclusively refers to the Muga-Vipasca Project. The Company has capitalised these costs on the basis that it is expected to be recouped through future successful development (or alternatively sale) of the respective mining areas. Exploration and evaluation assets are assessed for impairment if sufficient data and circumstances suggest that the carrying amount exceeds the recoverable amount. Any impairment loss is recognised through the Profit and Loss account. No impairment on these capitalised assets was recorded as the Company has concluded that there are no indications of impairment and that the Project’s combined carrying value is appropriately covered by the current estimated NPV of the Project. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 95 11. Trade and Other Payables Trade payables Other payables Accruals 31 December 2023 $ 31 December 2022 $ 9,149,545 - 7,747,130 16,896,675 2,519,996 11,976 6,183,433 8,715,405 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. 12. Financing Liabilities Commitment fees Upfront fees 31 December 2023 $ 31 December 2022 $ 9,889,127 - 9,889,127 - 11,323,883 11,323,883 Financing liabilities refer to the fees payable to the banks that participate in the Project financing for Muga. Commitment fees are accrued since execution of the Financial Agreement on 22 December 2022 and are calculated applying a certain rate on the lenders’ available commitment to date. Upfront fees accrued at 31 December 2022 amounting up to 2.25% on the total amount of the Facility were due within 90 days of signing the Financial Agreement on 22 December 2022. These fees were paid during the year ended 31 December 2023. Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value. 13. Non-Current Liabilities Host debt component – Convertible Note Derivative financial liability – Conversion Option Restoration provision Other non-current liabilities 31 December 2023 $ 31 December 2022 $ 22,790,641 8,017,843 215,468 2,811,167 33,835,119 - - 198,843 - 198,843 96 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 On 22 May 2023 the Group entered into a Convertible Note agreement with EMR and Tectonic Investment Management. The agreement with a maturity date of 24 months consisted of the issuance of 1,938 notes (arrangement fee at 2% added to the original 1,900 notes instead of being paid in cash at conversion date) bearing an interest rate of 14% annually. The interest will be paid in kind via an addition to the convertible notes amount and will mandatorily be converted into fully paid ordinary shares in the Company before the first drawdown of the €320.6 million senior loan facility secured with a group of European banks to fund the Muga Project. A further US$6 million (A$8.9 million) investment was secured in December 2023 in the form of convertible notes issued on similar contractual terms to the previous issuance in May 2023. The same strategic investors plus another institutional investor were the lenders. As of 31 December 2023, proceeds from the notes owned by the institutional investor had been received and hence, 102 notes were issued. Proceeds from the remaining 612 notes were received in early 2024. The Convertible Note has been determined to contain a host debt and a conversion option. Where borrowings include a conversion option, the portion of the proceeds that relate to the fair value of the conversion option are recognised as an embedded derivative. For determining the initial fair value of the conversion option, a Black-Scholes option pricing method was used with the following assumptions: Options issued in May 2023: a) conversion option price of $0.515; b) share price at inception of $0.560; c) expected volatility of 45%; d) convertible note term of 2 years; and e) a risk free interest rate of 3.33%. Options issued in December 2023: a) conversion option price of $0.315; b) share price at inception of $0.330; c) expected volatility of 50%; d) convertible note term of 2 years; and e) a risk free interest rate of 3.90%. The initial carrying amount of the host instrument is the residual amount after separating the embedded derivative on the date the contract is entered into. The embedded derivative is measured at fair value at initial recognition, and the remaining residual amount is allocated to the debt host. For subsequent measurement, the host debt is measured at amortised cost using the effective interest method; and the embedded derivative is subsequently measured at fair value through profit or loss at each reporting period. The Company has a legal obligation to dismantle and remove all the installations it constructs on the mining area and to restore and rehabilitate the land on which they are situated. A provision has been raised which reflects the estimated rehabilitation and restoration costs existing at the reporting date, discounted to present value using an appropriate discount rate. When provisions for rehabilitation are initially recognised, the corresponding cost is capitalised as an asset and amortised accordingly. At each reporting date the rehabilitation liability is to be reviewed and adjusted to reflect the current best estimate. Changes to the rehabilitation liability are added to or deducted from the related rehabilitation asset and amortised in a consistent way. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 97 14. Issued Capital a) Issued and paid-up capital Issued and fully paid b) Movements in ordinary shares on issue 31 December 2023 $ 31 December 2022 $ 206,740,655 203,613,937 Opening balance Shares issued1 Shares issued upon conversion of unlisted options1 Employee share options exercised Transaction costs on share issue 1 December 2023 31 December 2023 31 December 2022 Number of shares $ Number of shares $ 387,042,791 203,613,937 364,429,887 190,014,905 5,140,942 3,140,629 21,612,904 13,400,000 - - - - - (13,911) 1,000,000 - - 810,000 63,600 (674,568) 392,183,733 206,740,655 387,042,791 203,613,937 • 5,140,942 ordinary shares were issued during the year ended 31 December 2023 to settle the success fees charged by the Company’s financial advisor following the execution of the Senior Debt Facility Agreement. 1 December 2022 • 21,612,904 ordinary shares were issued during the year ended 31 December 2022 via an institutional placement (A$13.4m) carried out in December 2022. The issuance of shares included the issue of 10,806,434 unlisted free options to investors exercisable at $0.93 per option. Each option entitles the holder to one ordinary share in the Company. These options are exercisable in whole or in part at any time during the period commencing on the date of grant (19 December 2022) and expiring on 16 June 2024. • 1,000,000 shares were issued upon conversion of unlisted options exercisable at $0.81, expiring on 30 June 2023. 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 $142,999,637 at 31 December 2023. 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 19 for further information on the Company’s financial risk management policies. 98 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 15. Reserves Share-based payments reserve Foreign exchange translation reserve Other reserves Movements in reserves Share-based payments reserve Opening balance Share-based payments expense Options exercised Closing balance 31 December 2023 $ 31 December 2022 $ 26,778,823 7,539,619 1,000 26,459,354 3,298,540 1,000 34,319,442 29,758,894 26,459,354 319,469 - 25,917,403 605,551 (63,600) 26,778,823 26,459,354 The share-based payment reserve is used to record the fair value of options provided to Directors and executives as part of their remuneration and non-employees for their goods and services. Refer to note 20 for further details of the securities issued during the year ended 31 December 2023. Foreign exchange translation reserve Opening balance Foreign exchange translation difference Closing balance 3,298,540 4,241,079 7,539,619 2,468,168 830,372 3,298,540 The foreign exchange differences arising on translation of foreign controlled entities are taken to the foreign exchange translation reserve. Other reserves Opening balance Issue of unlisted options Closing balance 1,000 - 1,000 1,000 - 1,000 Other reserves are used to record the amount received on the issue of unlisted options. 16. Accumulated Losses Movements in accumulated losses were as follows Opening balance Loss for the period Closing balance 31 December 2023 $ 31 December 2022 $ (85,650,099) (12,115,323) (79,860,746) (5,789,353) (97,765,422) (85,650,099) Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 99 17. 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 2023 $ 31 December 2022 $ 1,669,776 284,141 4,122 1,958,039 1,537,321 303,101 6,927 1,845,349 Key management personnel are defined as those persons having authority and responsibility for planning, directing, and controlling the activities of the Group, directly or indirectly, including any Director (whether executive or otherwise) of the Group. 18. Related Party Disclosures a) Key management personnel Please refer to note 17 Remuneration of Directors and Other Key Management Personnel. 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 2023 31 December 2022 Australia Spain 100% 100% 100% 100% 100 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 19. Financial Risk Management are evaluated to determine the optimal mix of capital resources for capital needs. The Group aims to maintain sufficient cash facilities to meet the operating requirements of the business and Exposure to foreign currency risk, credit risk, liquidity risk where appropriate investing excess funds in highly liquid and interest rate risk arises in the normal course of the short-term investments. 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 At 31 December 2023, the Company has sufficient liquid assets to meet its financial obligations. The responsibility for liquidity risk management rests with the Board of Directors. Maturity analysis for financial liabilities Financial liabilities of the Group comprise trade and other payables. The contractual maturities of all trade and other Liquidity risk is the risk that the Group will encounter payables are less than 6 months. difficulty in meeting the obligations associated with its financial liabilities as they fall due. The Group’s approach b) Interest Rate Risk to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to settle its liabilities when they are due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group also manages liquidity risk by producing regular cash flow forecasts to ensure that there is a clear and up-to-date view of the short to medium term funding requirements and the sources of those funds. Alternatives Interest rate risk arises from the Group’s cash and cash equivalents earning interest at variable rates. The Group manages this risk by investing in short term deposits where appropriate. 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. for sourcing future capital needs include the issue of equity At 31 December 2023, the variable interest rate exposure instruments, as well as debt financing. These alternatives of the Group was: Interest bearing financial instrument Cash at bank or at hand 31 December 2023 $ 31 December 2022 $ 14,083,844 19,446,084 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 101 The Company holds substantially all of its cash and cash equivalents in Euros and Australian dollars. In the year ended 31 December 2023 interest earned on Euros balances totaled €11,000 whereas interest earned on Australian dollar balances were $152,815. In the year ended 31 December 2022, $33,067 was earned due to the positive impact of the interest rate values. The Group currently does not engage in any hedging or derivative transactions to manage interest rate risk. Interest rate sensitivity The Company’s interest rate sensitivity is determined by the amount of cash it holds in both Euros and Australian Dollars. The Australian dollar interest rate is currently positive at 1.35% whereas the Euro interest rate is at 1.75%. Based on the Group’s interest-bearing financial instruments held as at 31 December 2023, if interest rates had increased or decreased by 75 basis points from the year end rates, with all other variables held constant, profit and loss and equity for the year would have increased (decreased) by the amount shown below. The analysis was performed on the same basis for 2022. Effect on Post Tax Loss ($) (Increase)/decrease Effect on Equity incl. accumulated losses ($) Increase/(decrease) 31 December 2023 31 December 2022 31 December 2023 31 December 2022 Increase 75 basis points Decrease 75 basis points 105,629 (105,629) 145,846 (145,846) 105,629 (105,629) 145,846 (145,846) c) Credit Risk Exposures Credit risk represents the risk that the counterparty to the financial instrument will fail to discharge an obligation and cause the Company to incur a financial loss. The Company’s maximum credit exposure is the carrying amounts in the Consolidated Statement of Financial Position. The Company holds financial instruments with credit worthy third parties. At 31 December 2023, 99.9% of the Company’s cash and cash equivalents were held in financial institutions with a rating from Standard & Poors of A - or above (long term). The Company had no past due or impaired debtors as at 31 December 2023. d) Foreign Currency Risk The Group undertakes certain transactions denominated in currencies other than the functional currency of the Group, hence exposures to exchange rate fluctuations arise. Exchange rate exposures may be managed within approved policy parameters utilising forward foreign exchange contracts. The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the balance date expressed in Australian dollars were as follows: Euro US dollars GB pounds Total Liabilities ($) Assets ($) 31 December 2023 31 December 2022 31 December 2023 31 December 2022 26,493,812 19,871,361 1,105,777 2,910,931 - - - - 15 - - - 26,493,812 19,871,361 1,105,792 2,910,931 102 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 The monetary assets and liabilities in the table above for the current period include the balances of the Company’s Spanish subsidiary as well as of the Company itself. Foreign currency sensitivity analysis The Company is exposed to Euro currency fluctuations. The following table details the Group’s sensitivity to a 10% increase and decrease in the Euro against the Australian dollar on the above foreign currency denominated monetary assets and liabilities, expressed in Australian dollars. 31 December 2023 Profit or loss Translation Reserve 31 December 2022 Profit or loss Translation Reserve e) Fair Value Euro Movement Increase ($) Decrease ($) - - (2,820,891) 2,308,002 - - (1,884,493) 1,553,526 The carrying amounts of current receivables and current payables are considered to be a reasonable approximation of their fair value. i) Fair value hierarchy This section explains the judgements and estimates made in determining the fair values of the financial instruments that are recognised and measured at fair value in the financial statements. To provide an indication about the reliability of the inputs used in determining fair value, the group has classified its financial instruments into the three levels prescribed under the accounting standards. An explanation of each level follows underneath the table. Recurring fair value measurements Note Level 1 Level 2 Level 3 Total At 31 December 2023 Financial liabilities Derivative – Conversion option Total financial liabilities 13 - - - 8,017,843 8,017,843 - - - - 8,017,843 8,017,843 Recurring fair value measurements Note Level 1 Level 2 Level 3 Total At 31 December 2022 Financial liabilities Derivative – Conversion option Total financial liabilities 13 - - - - - - - - - - - Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 103 There were no transfers between levels 1 and 2 for recurring fair value measurements during the year. Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques that maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. ii) Valuation techniques used to determine fair values Specific valuation techniques used to value financial instruments include: • for Derivative - Conversion options – option pricing models (e.g. Black-Scholes model) 20. 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 issued during the period Options issued in prior periods 31 December 2023 $ 31 December 2022 $ 127,003 192,466 319,469 409,286 196,265 605,551 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 employees. The fair value at grant date of options granted during the period was determined using the binomial method, as described in note 2(q), taking into account the exercise price, the term of the option, the share price at grant date, the expected price volatility of the underlying share and the risk-free interest rate for the term of the option. The table below summarises options granted during the year ended 31 December 2023: Exercise price Number at start of the period Granted during the period Exercised during the period Cancelled or forfeited during the period Grant Date Expiry date 30/06/2023 31/12/2026 30/06/2023 31/12/2027 30/06/2023 31/12/2028 30/06/2023 31/12/2026 30/06/2023 31/12/2027 30/06/2023 31/12/2027 30/06/2023 31/12/2026 30/06/2023 31/12/2027 30/06/2023 31/12/2028 $0.79 $0.79 $0.79 $0.79 $0.79 $0.79 $0.79 $0.79 $0.79 - - - - - - - - - 879,7661 879,7652 879,7653 90,0004 90,0005 90,0006 801,6687 801,6668 801,6669 5,314,296 - - - - - - - - - - Number at end of the period Exercisable at end of the period 879,766 879,766 879,765 879,765 90,000 90,000 90,000 - - 90,000 - - - - - - - - (15,000) 786,668 786,668 - - 801,666 801,666 - - (15,000) 5,299,296 1,756,434 104 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 1 Options granted to the Chief Executive Officer. The options vested on satisfaction of the recipient’s continued employment vesting condition at 31 December 2023. 2 Options granted to the Chief Executive Officer. The options will vest on satisfaction of the recipient’s continued employment vesting condition at 31 December 2024. 3 Options granted to the Chief Executive Officer. The options will vest on satisfaction of the recipient’s continued employment vesting condition at 31 December 2025. 4 Options granted to the Chief Financial Officer. The options vested on satisfaction of the recipient’s continued employment vesting condition at 31 December 2023. 5 Options granted to the Chief Financial Officer. The options will vest on satisfaction of the recipient’s continued employment vesting condition at 31 December 2024. 6 Options granted to the Chief Financial Officer. The options will vest on satisfaction of the recipient’s continued employment vesting condition at 31 December 2025. 7 Options granted to other employees. The options vested on satisfaction of the recipients’ continued employment vesting condition at 31 December 2023. 8 Options granted to other employees. The options will vest on satisfaction of the recipients’ continued employment vesting condition at 31 December 2024. 9 Options granted to other employees. The options will vest on satisfaction of the recipients’ continued employment vesting condition at 31 December 2025. The model inputs for options granted during the year ended 31 December 2023 included: a) options were granted for no consideration; b) expected lives of the options range from 3.5 to 5.5 years; c) share price at grant date of $0.545 (30 Jun 2023); d) expected volatility at 50%; e) expected dividend yield of Nil; and f) a risk free interest rate from 3.98%. The table below summarises options granted during the year ended 31 December 2022: Grant Date Expiry date 26/05/2022 30/06/2025 26/05/2022 31/12/2025 26/05/2022 31/12/2026 26/05/2022 31/12/2027 15/08/2022 31/12/2025 15/08/2022 31/12/2026 15/08/2022 31/12/2027 Exercise price Number at start of the period $1.07 $0.94 $0.94 $0.94 $0.94 $0.94 $0.94 - - - - - - - Granted during the period 1,000,0001 736,4402 736,4393 736,4394 815,3345 815,3326 815,3237 5,655,307 Exercised during the period Cancelled or forfeited during the period - - - - - - - - - - - - - - - - Number at end of the period Exercisable at end of the period 1,000,000 1,000,000 736,440 736,440 736,439 736,439 - 815,334 815,334 815,332 815,323 - 5,655,307 2,551,774 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 105 1 Options granted to the new Non-Executive Chairman appointed at the Company’s AGM on 25 March 2022. There are no service vesting or performance vesting conditions in respect of these options. 2 Options granted to the Chief Executive Officer. The options vested on satisfaction of the recipient’s continued employment vesting condition at 31 December 2022. 3 Options granted to the Chief Executive Officer. The options will vest on satisfaction of the recipient’s continued employment vesting condition at 31 December 2023. 4 Options granted to the Chief Executive Officer. The options will vest on satisfaction of the recipient’s continued employment vesting condition at 31 December 2024. 5 Options granted to the Chief Financial Officer and other employees. The options will vest on satisfaction of the recipients’ continued employment vesting condition at 31 December 2022. 6 Options granted to the Chief Financial Officer and other employees. The options will vest on satisfaction of the recipients’ continued employment vesting condition at 31 December 2023. 7 Options granted to the Chief Financial Officer and other employees. The options will vest on satisfaction of the recipients’ continued employment vesting condition at 31 December 2024. The model inputs for options granted during the year ended 31 December 2022 included: a) options were granted for no consideration; b) expected lives of the options range from 3.6 to 5.6 years; c) share price at grant date of $0.90 (26 May 2022) and $0.95 (15 August 2022); d) expected volatility at 45%; e) expected dividend yield of Nil; and f) a risk free interest rate from 2.89% to 3.08%. As at the date of this report there were 18,931,052 unissued ordinary shares under options owned by Group NEDs and employees. The details of the options are as follows: Number 1,622,191 1,272,056 333,333 1,819,812 1,000,000 1,155,357 333,334 1,568,148 780,667 736,440 1,414,430 780,665 1,756,434 815,323 1,771,431 1,771,431 18,931,052 Exercise Price $ $0.83 $0.81 $0.47 $0.865 $1.07 $0.81 $0.47 $0.865 $0.94 $0.94 $0.865 $0.94 $0.79 $0.94 $0.79 $0.79 Expiry Date 31 December 2024 31 December 2024 31 December 2024 31 December 2024 30 June 2025 31 December 2025 31 December 2025 31 December 2025 31 December 2025 31 December 2025 31 December 2026 31 December 2026 31 December 2026 31 December 2027 31 December 2027 31 December 2028 106 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 No option holder has any right under the options to participate in any other share issue of the Company or any other entity. Other than this, there are 10,806,434 additional vested options available for the investors that participated in the equity raise carried out in December 2022 exercisable at A$0.93 and expiring on 16 June 2024. The following options were issued during the financial year: • • • 1,771,434 options with an exercise price of $0.79, expiring on 31 December 2026. 1,771,431 options with an exercise price of $0.79, expiring on 31 December 2027. 1,771,431 options with an exercise price of $0.79, expiring on 31 December 2028. The following options forfeited during the financial year: • • • 99,934 options with an exercise price of $0.865, expiring on 31 December 2026. 34,667 options with an exercise price of $0.94, expiring on 31 December 2026. 15,000 options with an exercise price of $0.79, expiring on 31 December 2026. The following options were cancelled during the financial year: • • 736,439 options with an exercise price of $0.94, expiring on 31 December 2026. 736,439 options with an exercise price of $0.94, expiring on 31 December 2027. The following options lapsed during the financial year: • • • • • • • • • 6,000,000 options with an exercise price of $0.81, expiring on 30 June 2023. 1,818,171 options with an exercise price of $0.83, expiring on 31 December 2023. 1,470,965 options with an exercise price of $0.81, expiring on 31 December 2023. 333,333 options with an exercise price of $0.47, expiring on 31 December 2023. 29,548 options with an exercise price of $0.81, expiring on 31 December 2024. 26,837 options with an exercise price of $0.81, expiring on 31 December 2025. 39,674 options with an exercise price of $0.865, expiring on 31 December 2024. 34,187 options with an exercise price of $0.865, expiring on 31 December 2025. 21,667 options with an exercise price of $0.94, expiring on 31 December 2025. The movement of the options during the year was as follows: Opening balance Granted Exercised Forfeited Cancelled Lapsed Vested and exercisable at year end 31 December 2023 31 December 2022 Average exercise price per share option Number of options Average exercise price per share option Number of options $0.886 $0.790 - $0.875 $0.940 $0.803 $0.898 $0.850 25,013,617 5,314,296 - (149,601) (1,472,878) (9,774,382) 18,931,052 14,572,867 $0.855 $0.963 $0.81 - $0.84 $0.83 $0.886 $0.83 24,962,030 5,655,307 (1,000,000) - (382,550) (4,221,170) 25,013,617 20,395,720 The weighted average remaining contractual life of options outstanding at end of period is 2.47 years. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 107 21. Other Expenses Advertising and Promotion Computer and Software Expenses Subscriptions and Memberships Investor Relations Projects costs Insurances Rents Other administration expenses 22. Geographic Segment Analysis a) Net interest (paid)/received Australia Spain b) Non-current Assets Australia Spain 31 December 2023 $ 31 December 2022 $ 86,697 121,120 77,486 132,781 1,797 667,510 249,755 125,487 74,363 152,823 66,160 114,046 37,715 655,781 205,465 68,974 1,462,633 1,375,327 31 December 2023 $ 31 December 2022 $ 152,815 18,042 170,857 33,067 - 33,067 31 December 2023 $ 31 December 2022 $ - 161,649,889 161,649,889 - 132,582,352 132,582,352 108 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 23. Events after the Reporting Period The Extraordinary General Meeting held on 9 February 2024 approved the issue of convertible notes to EMR. As reported on 11 March 2024 (refer ASX release 11 March 2024, “Highfield signs contract for the construction of the declines at Muga potash project”), the Company signed the agreement to construct the declines and underground mining infrastructure with the Portuguese/Spanish joint venture, EPOS-TUNELAN for a total cost of €48 million, in line with the recent feasibility study. Works will commence in H1, 2024 upon completion of funding and Final Investment Decision. 27. Commitments At 31 December 2023, 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 2023 amounted to approximately $89.0m. Of this amount approximately $87.2m will only become commitments once Notices to Proceed are issued to equipment suppliers, which will only occur once both permitting and financing have advanced to the appropriate stage. 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 $0.3m. 24. Contingent Assets and Liabilities There are no known contingent assets or liabilities as at 31 December 2023 (December 2022: Nil). 25. Dividends No dividend was paid or declared by the Company in the year ended 31 December 2023 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 2023. 26. 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 190 community projects. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 109 28. Parent Entity Information The following information relates to the parent entity, Highfield Resources Limited, at 31 December 2023 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 Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Issued capital Reserves Accumulated losses Total Equity Loss of the parent entity Other comprehensive income for the period Total comprehensive loss of the parent entity 31 December 2023 $ 31 December 2022 $ 13,580,627 160,519,485 174,100,112 (291,991) (30,808,484) (31,100,475) 142,999,637 206,740,655 26,779,823 (90,520,841) 142,999,637 19,321,819 128,370,659 147,692,478 (167,927) - (167,927) 147,524,551 203,613,937 26,460,354 (82,549,740) 147,524,551 31 December 2023 $ 31 December 2022 $ (7,971,101) (5,044,119) - - (7,971,101) (5,044,119) 110 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 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 2023 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 2023 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 2023. On behalf of the Board Paul Harris Independent Non-Executive Chairman Adelaide, Australia 27 March 2024 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 111 112 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Auditor’s Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Highfield Resources Limited for the year ended 31 December 2023, 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 27 March 2024 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. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 113 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 2023 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 2023 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, including material accounting policy information 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. 114 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Independent auditor’s report - Highfield Resources Limited (continued) Material uncertainty related to going concern We draw attention to Note 2 in the financial report, which indicates that the continuing viability of the Group is dependent on further funds to progress the Muga project. This condition, along with other matters set forth in Note 2, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. 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. Audit scope Key audit matters • Amongst other relevant topics, we communicated the following key audit matters to the Audit and Risk Committee: −− Carrying value of deferred exploration and evaluation expense These are further described in the Key audit matters section of our report, except for the matter which is described in the material uncertainty related to going concern section. • Our audit included assessing the financial statements for risks of material misstatement based on quantitative and qualitative assessment of Highfield’s operations and activities. • Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. • • 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. 2 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 115 Independent auditor’s report - Highfield Resources Limited (continued) 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. Key audit matter How our audit addressed the key audit matter Carrying value of deferred exploration and evaluation expense (Refer to note 10) $147,313,513 We have performed the following procedures amongst others: 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. • Evaluated the Group’s assessment that there had been no indicators of impairment on areas capitalised at 31 December 2023 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. • Evaluated the reasonableness of the disclosures against the requirements of Australian Accounting Standards. In addition to the matter described in the Material uncertainty related to going concern section, we have determined the matter(s) described below to be the key audit matters to be communicated in our report. 3 116 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 Independent auditor’s report - Highfield Resources Limited (continued) 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 2023, 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 through our opinion on the financial report. We have issued a separate opinion on the remuneration report. 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. 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. 4 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 117 Independent auditor’s report - Highfield Resources Limited (continued) Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in the directors’ report for the year ended 31 December 2023. In our opinion, the remuneration report of Highfield Resources Limited for the year ended 31 December 2023 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 27 March 2024 5 118 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 118 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 ASX Additional Information Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows. The information is current at 5 March 2024. 118 Highfield Resources Limited 31 December 2022 | Annual Report to Shareholders Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 119 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 119 120 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 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 315 765 584 1,118 331 3,113 152,230 2,258,610 4,739,479 40,653,200 344,380,214 392,183,733 There were 369 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 EMR CAPITAL INVESTMENTS PTE LTD WWB INVESTMENTS PTY LTD BNP PARIBAS NOMINEES PTY LTD HSBC CUSTODY NOMINEES BCI MINERALS LIMITED DEREK CARTER & CARLSA CARTER ELEMENT AU SMSF PTY LTD EDDINGTON, DANIEL & JULIE CITICORP NOMINEES PTY LIMITED PETER DAVID FERGURSON PTY LTD BALL, CRAIG & SUSANNE CELTIC CAPITAL PTE LTD JONERIC PTY LTD WHITING, MICHAEL ANDREW & TRACEY ANNE MR. ANDREW BYRNES DOBLE CARINYA INVESTMENTS (QLD) PTY LTD WOOTOONA INVESTMENTS PTY LTD CRX INVESTMENTS PTY LTD DORICA NOMINEES PTY LTD KANBAH PTY LTD Number of shares 104,038,875 34,620,000 27,524,851 20,864,746 10,000,090 7,721,504 6,102,095 3,782,000 3,655,313 3,432,023 3,100,000 3,000,000 2,701,076 2,645,425 2,550,000 2,327,692 2,150,538 2,000,000 2,000,000 2,000,000 % 26.5 8.8 7.0 5.3 2.5 2.0 1.6 1.0 0.9 0.9 0.8 0.8 0.7 0.7 0.7 0.6 0.5 0.5 0.5 0.5 246,216,228 62.8 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 121 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 5 March 2024. Title of class Registered holder of securities Identity of person or Group Date of last notice Number owned Percentage of total voting rights2 Ordinary Shares EMR Capital Investment Pte Ltd EMR Capital Investment Pte Ltd1 15/05/2015 104,038,875 26.53% Ordinary Shares Various holders WWB Investments Pty Ltd1 08/11/2017 34,620,000 Ordinary Shares BCI Minerals Ltd Seven Group Holdings (SGH) Ltd1 18/11/2021 10,000,090 8.83% 2.55% 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 5 March 2024 of 392,183,733. Substantial Unlisted Options Class Number Holders with more than 20% Options over ordinary shares exercisable at $0.47 on or before 31 December 2024 333,333 Ignacio Salazar 333,333 options; Options over ordinary shares exercisable at $0.47 on or before 31 December 2025 333,334 Ignacio Salazar 333,334 options; Options over ordinary shares exercisable at $0.865 on or before 31 December 2024 1,819,812 Ignacio Salazar 591,803 options; Options over ordinary shares exercisable at $0.865 on or before 31 December 2025 1,568,148 Ignacio Salazar 509,961 options; Options over ordinary shares exercisable at $0.865 on or before 31 December 2026 1,414,430 Ignacio Salazar 459,971 options; Options over ordinary shares exercisable at $1.07 on or before 30 June 2025 1,000,000 Paul Harris 1,000,000 options; Options over ordinary shares exercisable at $0.94 on or before 31 December 2025 1,517,107 Ignacio Salazar 736,440 options; Options over ordinary shares exercisable at $0.79 on or before 31 December 2026 1,756,434 Ignacio Salazar 879,766 options; Options over ordinary shares exercisable at $0.79 on or before 31 December 2027 1,771,431 Ignacio Salazar 879,765 options; Options over ordinary shares exercisable at $0.79 on or before 31 December 2028 1,771,431 Ignacio Salazar 879,765 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 2023. 122 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 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 Investigation 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 Application in process Application in process 35760 22.88 Geoalcali SLU 100% 35770 59.40 Geoalcali SLU 100% 35880 40.90 Geoalcali SLU 100% 123.18 Muga-Vipasca Navarra Muga Sur Investigation 25/09/2014 30/06/2020 3524 7.28 Geoalcali SLU 100% Muga-Vipasca Navarra Vipasca (area under concession progress) Investigation 06/11/2013 11/12/2014 35900 14.10 Geoalcali SLU 100% 21.38 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 Application in process 3495/20 16.80 Geoalcali SLU 100% 3510 30.24 Geoalcali SLU 100% 65.24 Total 209.80 Concession Muga Navarra Goyo Concession 19/07/2011 01/07/2021 35780 15.30 Geoalcali SLU 100% Muga Aragón Fronterizo Concession 21/06/2012 01/07/2021 3502 9.00 Geoalcali SLU 100% Muga Aragón Muga Concession 29/05/2013 01/07/2021 3500 14.40 Geoalcali SLU 100% Total 38.70 38.70 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 123 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. 124 Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 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. Dr Mike Armitage is a Member the Institute of Materials, Minerals and Mining (“IMMM”) which is a ‘Recognised Overseas Professional Organisation’ (“ROPO”) included in a list promulgated by the Australian Stock 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 update of the matters based on the information Such information contained herein represents upon which the October 2021 Ore Reserve is based in the management’s best judgement as of the date hereof based form and context in which it appears. 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 The Review of Operations contained within this annual report was prepared by Mr. Ignacio Salazar, CEO and Managing Director of Highfield Resources. The information Mr. Chris Bray BEng, MAusIMM (CP) takes responsibility for the review of the LOM plan that underpins the October 2021 Ore Reserve. Mr. Bray is a full-time employee and Principal Consultant (Mining) at SRK. He is a member of and Chartered Professional in the Australasian Institute of Mining and Metallurgy. He is a Mining Engineer with 25 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 CP 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. in this report that relates to the Ore Reserve reported with Ms. Anna Fardell was a Senior Resource Geologist an effective date 31 October 2021, is based on information employed by SRK as of the effective date for the December prepared by Dr. Mike Armitage. Dr. Mike Armitage is 2020 Mineral Resource estimate, and at that time had over the Competent Person (“CP”) who assumed overall five years’ experience in estimating and reporting Mineral professional responsibility for the Ore Reserve reported Resources relevant to the style of mineralisation and type at that time. The information related with the review of of deposit described herein. Ms. Fardell is a registered the Life of Mine (“LOM”) that underpins the October 2021 member of the Australian Institute of Geoscientists Ore Reserve was prepared by Mr. Chris Bray, who was, and (6555) and considered a Competent Person (CP) under remains, a full-time employee of and Principal Consultant the definitions and standards described in the JORC (Mining) at SRK. The information in this update that relates Code 2012. Ms. Fardell takes responsibility for the Mineral to the Mineral Resources with the effective date of 31 Resource Statement and Exploration Target presented December 2020 is based on information prepared by Ms. here and consents to the inclusion in this update of the Anna Fardell, a Senior Consultant at SRK Consulting (UK) matters based on their information in the form and context Limited at that time. in which it appears. Highfield Resources Limited | Annual Report to Shareholders. 31 December 2023 125 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. highfieldresources.com.au
Continue reading text version or see original annual report in PDF format above