ABN Half-year Financial Report 31 December 2014

Transcription

1 ABN Half-year Financial Report 31 December 2014

2 CONTENTS PAGE Directors Report 1 Auditor s Independence Declaration 5 Condensed Consolidated Statement of Comprehensive Income 6 Condensed Consolidated Statement of Financial Position 7 Condensed Consolidated Statement of Changes in Equity 8 Condensed Consolidated Statement of Cash Flows 9 Notes to the Condensed Financial Statements 10 Directors Declaration 14 Independent Auditor s Review Report 15 CORPORATE DIRECTORY Directors Mr. Derek Carter (Non-Executive Chairman) Mr. Anthony Hall (Managing Director) Mr. Pedro Rodriguez (Executive Director) Mr. Owen Hegarty (Non-Executive Director) Mr. Richard Crookes (Non-Executive Director) Company Secretary Mr. Donald Stephens Registered Office 169 Fullarton Road DULWICH, SA 5065 Telephone: Facsimile: Website: Share Registry Advanced Share Registry Pty Ltd 150 Stirling Highway NEDLANDS WA 6009 Telephone: Facsimile: Auditors HLB Mann Judd Level 4, 130 Stirling Street PERTH WA 6000 Telephone: Facsimile: Stock Exchange Australian Securities Exchange (Home Exchange: Perth, Western Australia) ASX Code: HFR

3 DIRECTORS REPORT The Directors of submit the financial report of the entity for the half-year ended 31 December In order to comply with the provisions of the Corporations Act 2001, the Directors report as follows: Directors The names of Directors who held office during or since the end of the half-year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated. Mr. Derek Carter Mr. Anthony Hall Mr. Pedro Rodriguez Mr. Richard Crookes Mr. Owen Hegarty Non-Executive Chairman Managing Director Executive Director Non-Executive Director Non-Executive Director Results The loss after tax for the half-year ended 31 December 2014 was 5,140,552 (31 December 2013: net loss of 2,866,029). REVIEW OF OPERATIONS Highfield Resources is a Spanish potash development company listed on the Australian Securities Exchange with four 100% owned advanced potash projects located in Spain s potash producing Ebro Basin. The Company continues to focus on advancing its 100% owned, flagship Muga Potash Project ( Muga or the Project ), which is located in northern Spain, within close proximity to the city of Pamplona and the Atlantic coast of Spain and France. MUGA POTASH PROJECT The Company s Muga Potash Project is targeting the relatively shallow PAB potash (sylvinite) beds in the combined Muga-Vipasca Project which covers an area of more than 110km 2. Mineralisation in the PAB potash beds commences at depths to surface of less than 200m and appears ideal for a relatively low-cost conventional room and pillar underground mine accessed via a decline. Highfield has completed an infill drill program designed to further enhance confidence in the Resource that will be the subject of the Company s first mine target. A total of 32 drill holes have been completed into the Project area, and an upgraded JORC Mineral Resource Estimate (MRE) was released on 24 February Highlights included A total MRE for Muga-Vipasca of 302 million tonnes (Mt) with an average grade of 11.5% K 2O, an increase in both tonnes and grade (previous MRE: 268Mt at 11.2% K 2O, 16 May 2014) Measured and Indicated categories increased by 52% to 239Mt at an average grade of 11.3% K 2O, now accounting for nearly 80% of the total MRE Higher grade subset of the MRE: 232Mt at an average grade of 13.5% K 2O (including 178Mt of Measured and Indicated categories at an average grade of 13.4%); or 256Mt at 12.3% K 2O inclusive of dilution prepared for likely final Definitive Feasibility Study (DFS) mine design Significant potential resource upside remains, to be evaluated by ongoing exploration work Mining Concession Application Lodged During the period, the Company lodged its mining concession application for its Muga Potash mine. The application is for the simultaneous construction of two declines / ramps to an underground conventional sylvinite mine accessed at depths from surface of less than 300m. The mine will commence with two underground operational fronts, together delivering the equivalent of 400 tonnes per hour of ore to the processing plant. Approximately nineteen months later, the size of the operation will be increased to an equivalent of 800 tonnes per hour of ore. In full operation, the mine will be able to produce over 1m tonnes of K60 product per annum. The initial mine life is estimated at 19 years, with likely upside represented by recent drilling success and substantial unexplored permit areas. The mining concession application required extensive documentation and included an Environmental Impact Assessment ( EIA ) and Mineral Extraction Plan. The environmental approval process was initiated in May 2014 when the Company lodged its Memoria Resumen (EIA statement of intent) with the provinces of Aragón and Navarra and Spain s Central Government in Madrid Half-year Financial Report

4 Memorandum of Understanding Agreed with two Atlantic Port Operators The Company has spent considerable time and effort reviewing options for the transportation of product from its Muga mine to its key addressable markets. During the period, the Company announced it had signed Memorandum of Understanding s ( MOUs ) for port capacity with the Port Authority of Pasajes ( Pasajes ) and with the Port Authority of Bilbao ( Bilbao ). Pasajes is located approximately 150km north of Muga, by multilane national highway, and is one of the largest commercial ports in the region. The Port of Bilbao is located 220km by road from the Muga Project. The MOUs gives a non-binding commitment of port capacity for the entire product that is expected to be produced and exported from Muga and confirms the availability of significant port capacity. Definitive Feasibility Study The Company is at an advanced stage in the preparation of the Definitive Feasibility Study ( DFS ) for the Muga mine. The DFS will outline dual-decline access to the mining horizon and an expanded processing capacity which should allow the Project to produce in excess of one million tonnes of potash per annum once in full production. The Company expects the DFS to be completed in March Detailed Mine Design Work on the detailed mine design for construction purposes was progressed during the period. This work is ongoing and is pending completion of the block model which will accompany the updated MRE. By-Product Strategy (salt sales and marketing) The Company continues to progress its strategy for the sale of by-products from the Muga Project. This will include a detailed business case outlining the key considerations required to participate in the existing 70m tonne per annum European salt market. The Company will consider all available options for the sale of salt by-products, including the potential to target the large east coast North American markets from the Company s two main Atlantic port options of Pasajes and Bilbao. SIERRA DEL PERDÓN POTASH PROJECT Highfield s 100% owned Sierra del Perdón Project ( Sierra del Perdón or SdP ) covers an area approximately 149km 2 in Northern Spain. It is located within 40km of the Muga-Vipasca Project and was the site of two former operating mines that produced more than 10 million tonnes of K60 potash product between 1963 and 1996 (Annual Ministerio de Industria lodgements by Minas de Potasas de Navarra and Subiza). Both mines were underground conventional mines where mineralisation was accessed via a decline to a room and pillar mine, with a conveyor belt system hoisting mineralisation to the surface via the decline. JORC Mineral Resource Estimate Independent geology and mining consultant, Agapito Associates Inc, is preparing a JORC compliant MRE for Sierra del Perdón. The Company expects this will be released during the March 2015 quarter. Scoping Study Process engineering consultant Hatch has completed a second study on potential processing plant options that the Company is currently considering. As stated, Muga has been prioritised over SdP. However, the Company believes that the substantial amount of work completed to date on the Muga Pre-Feasibility Study ( PFS ) and DFS will be directly transferrable to Sierra del Perdón. PINTANO POTASH PROJECT Highfield s 100%-owned Pintano Project abuts the Muga-Vipasca Project and covers an area of 125km 2. Mineralisation commences at depths from surface of approximately 500m. The Company is building on substantial historical potash exploration information that includes seven drill holes and 10 seismic profiles completed in the late 1980s. Drill hole P13-02 was completed during the period and revealed two main potash intersections. The Company expects to drill holes P13-06 and P13-04 in the first half of the 2015 Calendar Year. As noted above, the Company s current priority is the Muga Project, on which work completed is expected to be transferrable to other projects. VIPASCA POTASH PROJECT Vipasca Investigation Permit Granted During the period, the province of Navarra awarded the Vipasca Investigation Permit to Highfield. permit opens the Project area a further 10km to the west along strike. The award of this The Vipasca Project area includes the entire Vipasca permit and the deeper areas within the Goyo permit area, including new extensions. The exploration focus is on deeper higher-grade potash mineralisation that occurs in the P2 potash bed in the deeper sections of the combined Muga-Vipasca Project area. As noted above, the Company s priority is the Muga Project with work completed expected to be transferrable to other projects. The Company expects to complete two drill holes in the Vipasca permit area in the second half of Half-year Financial Report

5 Corporate Responsibility Program As part of the Company s Community Engagement Program, it established a non-profit Foundation called the Geoalcali Foundation, to develop and manage local social and community projects. The Foundation was constituted during the period and has commenced its activities with OrganiK, a collaboration project with Josenea, a local, non-profit association that provides employment opportunities for the long-term unemployed, through the organic farming, processing, distribution and sale of organic herbs, infusions and other similar products. As well as providing work for marginalised workers, Josenea fosters various educational programs. It will use the collaboration with the Company to develop a nursery area for trees and shrubs that will later be used as part of the landscaping for the future mine installations. In addition, the nursery program will test different levels of potash application on speciality regional crops. The Foundation is working on an additional seven community projects that are designed to reinforce the Company s commitment to the community in which it will operate. CORPORATE Human Resources The Company continues to hire in key positions for its project delivery team in anticipation of the commencement of construction in the later part of CY2015. As at 31 December 2014, the Company had a total of 30 professionals in its operations based in Spain. Spanish project appointments include: Alfredo L. Menéndez Diaz as Executive General Manager Construction Michael X. Schlumpberger as Executive General Manager Operations Luis Haro as Mining Engineer Jose Maria Ballester as Electrical Engineer Pedro Gómez who is responsible for delivering the transport and logistics solutions, and David Begué, who is responsible for buildings and facilities. Spanish corporate appointments include: Hayden Locke as Head of Corporate Development Jose Angel Torres as Financial Controller Kien Huynh as General Manager, Finance, to manage the project finance process; Ricardo Peréz as Head of Strategy, Salt to progress the salt business case; Susana Bieberach as in country Communications and Marketing Manager; and Philip Cleggett as Senior Corporate Analyst. The Company anticipates completing the recruitment process for the balance of its senior executive team for the construction and operation of the mines during the first half of the 2015 Calendar Year. Institutional Equity Placement On 12 September 2014, the Company received shareholder approval to complete an institutional equity placement (Placement) of 65m new fully paid ordinary shares to raise 31.95m. Funds for the second tranche of 44,675,000 shares were received during the period. Subsequent Events On 24 February 2015, the Company advised that the Class A Performance Shares had been converted to Ordinary Shares. Under the terms of the Company s acquisition of its four Spanish potash projects 50m Class A Performance Shares were issued to shareholders of the vendor entity, KCL Resources Limited. These Class A Performance Shares were to automatically convert to ordinary shares upon delineation of a JORC Code (or equivalent) Compliant Indicated Mineral Resource of: (i) 150 million tonnes of potash at or above 13% K2O by content; or (ii) 125 million tonnes of potash at or above 14% K2O by content; or (iii) 100 million tonnes of potash at or above 15% K2O by content; or (iv) 75 million tonnes of potash at or above 17% K2O by content; or (v) 50 million tonnes of potash at or above 20% K2O by content. On 24 February 2015, the Company reported an updated MRE for its 100% owned Muga Vipasca Potash Project completed by independent mining and geology consultants, Agapito Associates, Inc. ( Agapito ). This MRE included a high grade subset of the Resource of 178 million tonnes at an average grade of 13.4% K2O. This high grade subset was calculated by Agapito and satisfies the milestone for automatic conversion of the Class A Performance Shares to Ordinary Shares in the Company. In addition to the conversion of the Class A Performance Shares, the Company also allotted 1.5 million Ordinary Shares under the terms of a corporate advisory agreement relating to the acquisition by the Company of the four Spanish potash projects Half-year Financial Report

6 There have been no other significant events subsequent to the half-year to the date of this report. Auditor s Independence Declaration Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the Directors of the company with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is set out on page 5 and forms part of this Directors report for the half-year ended 31 December This report is signed in accordance with a resolution of the Board of Directors made pursuant to s.306(3) of the Corporations Act Anthony Hall Managing Director Adelaide, South Australia 6 March 2015 Competent Persons Statement This ASX release was prepared by Mr. Anthony Hall, Managing Director of Highfield Resources. The information in this release that relates to Mineral Resources and Exploration Results is based on information prepared by Mr. Leo J. Gilbride, P.E. and Ms. Vanessa Santos, P.Geo. of Agapito Associates, inc. (AAI) of Colorado, United States of America (USA). Mr. Gilbride is a licensed professional engineer in the State of Colorado, USA and is a registered member of the Society of Mining, Metallurgy and Exploration, Inc. (SME). Ms. Santos is a licensed professional geologist in South Carolina and Georgia, USA, and is a registered member of the SME. SME is a Joint Ore Reserves Committee (JORC) Code Recognized Professional Organization (RPO). An RPO is an accredited organisation to which the Competent Person (CP) under JORC Code Reporting Standards must belong in order to report Exploration Results, Mineral Resources, or Ore Reserves through the ASX. Mr. Gilbride is a Principal and Ms. Santos is the Chief Geologist with AAI and both have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a CP as defined in the 2012 edition of the JORC Australasian Code for Reporting of Exploration Results, mineral Resources and Ore Reserves. Mr. Gilbride and Ms. Santos consent to the inclusion in the release of the matters based on their information in the form and context in which it appears Half-year Financial Report

7 AUDITOR S INDEPENDENCE DECLARATION As lead auditor for the review of the consolidated financial report of for the half-year ended 31 December 2014, I declare that to the best of my knowledge and belief, there have been no contraventions of: a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and b) any applicable code of professional conduct in relation to the review. Perth, Western Australia 6 March 2015 W M Clark Partner HLB Mann Judd (WA Partnership) ABN Level 4, 130 Stirling Street Perth WA PO Box 8124 Perth BC 6849 Telephone +61 (08) Fax +61 (08) hlb@hlbwa.com.au. Website: Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. 5

8 Condensed Consolidated Statement of Comprehensive Income for the half-year ended 31 December 2014 Note 31 December December 2013 Continuing Operations Interest received 275, ,343 Other income - - Listing and share registry expenses (73,928) (34,548) Professional and consultants fees (859,819) (747,155) Service administration fees - (60,000) Employee costs (411,460) (518,256) Donations (213,523) - Other expenses (431,189) (78,678) Share based payments expense 6 (3,166,076) (467,692) Travel and accommodation expenses (339,694) (458,996) Occupancy expense (85,784) (57,125) Depreciation (10,028) (9,701) Impairment of exploration expenditure - (685,682) Gain on foreign exchange 175, ,461 Loss from continuing operations before income tax (5,140,552) (2,866,029) Income tax expense - - Loss from continuing operations after income tax (5,140,552) (2,866,029) Net loss for the period (5,140,552) (2,866,029) Other comprehensive income Items that may be reclassified to profit and loss Exchange differences on translation of foreign operations 391, ,996 Other comprehensive income for the period net of tax 391, ,996 Total comprehensive result for the period (4,748,814) (2,693,033) Loss per share Basic loss per share (cents) (2.85) (2.17) The above Condensed Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes Half-year Financial Report

9 Condensed Consolidated Statement of Financial Position as at 31 December 2014 Current Assets Note 31 December June 2014 Cash and cash equivalents 25,083,594 11,565,261 Other receivables 2,486,708 1,449,777 Total Current Assets 27,570,302 13,015,038 Non-Current Assets Other receivables 31,626 30,230 Property, plant and equipment 90,002 74,333 Deferred exploration & evaluation expenditure 3 44,743,288 39,726,633 Total Non-Current Assets 44,864,916 39,831,196 Total Assets 72,435,218 52,846,234 Current Liabilities Trade and other payables 945,818 1,952,250 Total Current Liabilities 945,818 1,952,250 Total Liabilities 945,818 1,952,250 Net Assets 71,489,400 50,893,984 Equity Issued capital 4 56,374,842 34,797,688 Reserves 5 29,658,650 25,499,836 Accumulated losses (14,544,092) (9,403,540) Total Equity 71,489,400 50,893,984 The above Condensed Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes Half-year Financial Report

10 Condensed Consolidated Statement of Changes in Equity for the half-year ended 31 December 2014 Accumulated losses Share based payments reserve Foreign exchange translation reserve Issued capital Total Balance at 1 July ,972,569 (3,877,502) 1,734,327 66,470-11,500,000 30,395,864 Total comprehensive income for the half-year Option reserve Performance share reserve Loss for the half-year - (2,866,029) (2,866,029) Other comprehensive income , ,996 Total comprehensive result for the half-year - (2,866,029) - 172, (2,693,033) Transactions with owners in their capacity as owners Shares issued during the half-year 4,873, ,873,312 Cost of issue (11,861) (11,861) Share based payment (note 5 and 6) , ,692 Balance at 31 December ,834,020 (6,743,531) 2,202, ,466-11,500,000 33,031,974 Balance at 1 July ,797,688 (9,403,540) 2,722,227 (222,391) - 23,000,000 50,893,984 Total comprehensive income for the half-year Loss for the half-year - (5,140,552) (5,140,552) Other comprehensive income , ,738 Total comprehensive result for the half-year - (5,140,552) - 391, (4,748,814) Transactions with owners in their capacity as owners Shares issued during the half-year 22,194, ,194,000 Options issued during the half-year ,000-1,000 Cost of issue (616,846) (616,846) Share based payment (note 5 and 6) - - 3,766, ,766,076 Balance at 31 December ,374,842 (14,544,092) 6,488, ,347 1,000 23,000,000 71,489,400 The above Condensed Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes Half-year Financial Report

11 Condensed Consolidated Statement of Cash Flows for the half-year ended 31 December 2014 Cash flows from operating activities 31 December December 2013 Payments to suppliers and employees (3,460,789) (1,172,457) Interest received 100, ,156 Net cash flows used in operating activities (3,359,918) (1,061,301) Cash flows from investing activities Purchase of plant and equipment (22,234) (39,972) Payments for exploration expenditure and project acquisition (4,956,651) (2,492,265) Net cash used in investing activities (4,978,885) (2,532,237) Cash flows from financing activities Proceeds from issue of shares 22,194,000 4,873,312 Proceeds from issue of options 1,000 - Payments for share issue costs (514,922) (11,861) Net cash provided by financing activities 21,680,078 4,861,451 Net increase in cash and cash equivalents 13,341,275 1,267,913 Cash and cash equivalents at beginning of period 11,565,261 6,188,720 Effect of exchange rate fluctuations on cash 177,058 - Cash and cash equivalents at the end of the period 25,083,594 7,456,633 The above Condensed Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes Half-year Financial Report

12 Notes to the Condensed Financial Statements for the half-year ended 31 December Corporate Information The financial report of ( Highfield or the Company ) for the half-year ended 31 December 2014 was authorised for issue in accordance with a resolution of the Directors on 6 March Highfield is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and the principal activities of the Company are described in the Directors Report. 2. Summary of Significant Accounting Policies (a) Basis of Preparation These general purpose financial statements for the half-year reporting period ended 31 December 2014 have been prepared in accordance with Australian Accounting Standard 134 Interim Financial Reporting and the Corporations Act These half-year financial statements do not include all the notes of the type normally included in annual financial statements and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial statements. Accordingly, these half-year financial statements are to be read in conjunction with the annual financial statements for the year ended 30 June 2014 and any public announcements made by during the half-year reporting period in accordance with the continuous disclosure requirements of the Corporations Act The half-year report has been prepared on an accruals basis and is based on historical costs. (b) Basis of Consolidation The consolidated financial statements comprise the financial statements of ( the Company ) and its subsidiaries as at 31 December each half-year ( the Group ). Subsidiaries are those entities over which the Company has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a Company controls another entity. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-company transactions have been eliminated in full. Unrealised losses are also eliminated unless costs cannot be recovered. Non-controlling interests in the results and equity of subsidiaries are shown separately in the Condensed Consolidated Statement of Comprehensive Income and Condensed Consolidated Statement of Financial Position respectively. (c) Accounting policies and methods of computation The accounting policies and methods of computation adopted are consistent with those of the previous financial year and corresponding interim reporting period. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards. (d) Foreign Currency Translation (i) Functional and presentation currency Items included in the financial statements of each of the Company s entities are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The functional and presentation currency of is Australian dollars. The functional currency of the Spanish subsidiary is the Euro. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. (iii) Group entities The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and all resulting exchange differences are recognised as a separate component of equity. On consolidation, exchange differences arising from the translation of any net investment in foreign entities are taken to shareholders equity. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences are recognised in the statement of comprehensive income, as part of the gain or loss on sale where applicable Half-year Financial Report

13 Notes to the Condensed Financial Statements for the half-year ended 31 December 2014 (e) Segment Reporting For management purposes, the Group is organised into one main operating segment, which involves development of potash mines in Spain. All of the Group s activities are interrelated, and discrete financial information is reported to the Managing Director (Chief Operating Decision Maker) as a single segment. Accordingly, all significant operating decisions are based upon analysis of the Group as one segment. The financial results from this segment are equivalent to the financial statements of the Group as a whole. 3. Deferred Exploration and Evaluation Expenditure 1 Fair value at grant date of an equity benefit issued to Taylor Collison Limited pursuant to a corporate and financial services agreement relating to the acquisition by the Company of the four Spanish potash projects. The ultimate recoupment of costs carried forward for exploration and evaluation expenditure is dependent on the successful development and commercial exploitation or sale of the respective mining areas. 4. Issued Capital (a) Issued and paid up capital Six Months Ended 31 December 2014 Year Ended 30 June 2014 Opening balance 39,726,633 24,231,973 Acquisition of exploration tenements 600, ,500,000 Exploration and evaluation expenditure incurred during the period 4,182,759 4,825,070 Impairment of exploration expenditure - (685,682) Net exchange differences on translation 233,896 (144,728) Closing balance 44,743,288 39,726,633 Issued and fully paid 56,374,842 34,797, December 2014 No. (b) Movements in ordinary shares on issue Opening balance 155,825,003 34,797,688 Shares issued by investment offering 1 25,000,000 12,750,000 Shares issued by Placement 2 19,675,000 9,444,000 Transaction costs on share issue - (616,846) Closing balance 200,500,003 56,374,842 1 On 22 September 2014, 25,000,000 shares were issued to EMR Capital Pty Ltd for funds of 12,750,000 at 0.51 per share. 2 On 22 September 2014 the Company issued 19,675,000 Tranche 2 shares to Australian and Overseas investors at 0.48 per share to raise 9,444, Reserves Share based payments reserve 1 6,488,303 2,722,227 Foreign currency translation reserve 2 169,347 (222,391) Performance share reserve 3 23,000,000 23,000,000 Option premium reserve 4 1,000-29,658,650 25,499,836 1 The share based payment reserve is used to record the value of equity benefits provided to Directors, executives and employees as part of their remuneration and non-employees for their goods and services. Refer to note 6 for further details of the options issued during the half-year ended 31 December The share based payments reserve includes the fair value at grant date of an equity benefit issued to Taylor Collison Limited pursuant to a corporate and financial services agreement relating to the acquisition by the Company of the four Spanish potash projects. 2 The foreign exchange differences arising on translation of foreign controlled entities are taken to the foreign currency translation reserve. 31 December June The performance share reserve is used to record the value of 100,000,000 performance shares issued to KCL Shareholders for the acquisition of a 100% interest in the Navarra and Aragon Potash Projects at 0.23 per share based on the Directors assessment of the likelihood of the performance shares being converted to ordinary shares. Performance shares are to be converted to ordinary shares upon the successful completion of the following Project related milestones Half-year Financial Report

14 Notes to the Condensed Financial Statements for the half-year ended 31 December ,000,000 Performance Shares will automatically convert upon delineation of a JORC Code (or equivalent) compliant Indicated Mineral Resource of: i. 150 million tonnes of potash at or above 13% K 2O by content; or ii. 125 million tonnes of potash at or above 14% K 2O by content; or iii. 100 million tonnes of potash at or above 15% K 2O by content; or iv. 75 million tonnes of potash at or above 17% K 2O by content; or v. 50 million tonnes of potash at or above 20% K 2O by content ,000,000 Performance Shares will automatically convert upon the receipt, to the reasonable satisfaction of Highfield of all referral approvals required to construct and operation a 500,000 tonne per annum potash mine on the Project (including all required Government approvals, water and energy contracts necessary to operate the mine). 4 The option premium reserve is used to record the amount received on the issue of options. 6. Share Based Payments (a) Employee share based payments The Company has established an employee share option plan (ESOP). The objective of the ESOP was to assist in the recruitment, reward, retention and motivation of employees of. An individual may receive the options or nominate a relative or associate to receive the options. The plan is open to executive officers and employees of. The fair value at grant date of options granted during the reporting half-year was determined using the Black Scholes option pricing model that takes into account the exercise price, the term of the option, 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. The table below summarises options granted during the half-year ended 31 December 2014: Exercise price per option Exercised during the halfyear Expired during the half-year Balance at start of Granted during Balance at end Exercisable at end of Grant Date Expiry date the half-year the half-year of the half-year the half-year Number Number Number Number Number Number 15/07/ /06/ ,500, ,500, , /09/ /09/ ,000, ,000,000 8,000, /10/ /06/ ,750, ,750, ,250,000 17,250,000 8,300,000 1 Employees were granted 2,500,000 options exercisable at 0.75 each on or before 30 June 2018 in three tranches: ,000 options are exercisable immediately; 2. 1,300,000 vest and are exercisable on 1 July ,000 options vest and are exercisable on approval of mining concession licence (concesion de expliotacion) by the provinces of Aragón and Navarra (if required) for the proposed Javier potash mine on or before 30 June Directors were granted 13,000,000 options exercisable at 0.75 each on or before 11 September 2018 in two tranches: 1. 8,000,000 options are exercisable immediately; and 2. 5,000,000 options vest and are exercisable on approval of mining concession licence (concesion de expliotacion) by the provinces of Aragón and Navarra (if required) for the proposed Javier potash mine on or before 30 June Employees were granted 1,750,000 options exercisable at 0.75 each on or before 30 June 2018 in four tranches: ,000 options vest and are exercisable on 1 September 2015; 2. 1,250,000 options vest and are exercisable on 30 September 2015; ,000 options vest and are exercisable on approval of mining concession licence (concesion de expliotacion) by the provinces of Aragón and Navarra (if required) for the proposed Javier potash mine on or before 30 June 2015; and ,000 options vest and are exercisable completion of the first phase of construction works (issue of Final Certificate). The expense recognised in respect of the above options granted during the half-year was 3,071,238. The expense recognised during the half-year on options granted in prior periods was 45,728. The model inputs, not included in the table above, for options granted during the half-year ended 31 December 2014 included: a) options are granted for no consideration; b) expected life of the options ranges from 3.7 to 4 years; c) share price at grant date ranged from to 0.655; d) expected volatility of 55%; e) expected dividend yield of Nil; and f) a risk free interest rate of 3.00% Half-year Financial Report

15 Notes to the Condensed Financial Statements for the half-year ended 31 December 2014 (b) Share-based payment to suppliers During the half-year ended 31 December 2014 the Company issued 1,000,000 options to Foster Stockbroking for corporate and financial services rendered to date and over the coming 12 months. These options have been valued using the Black-Scholes option pricing model. Grant Date Expiry date Exercise price Balance at start of the year Granted during the year Exercised during the year Expired during the year Balance at end of the year Exercisable at end of the year Number Number Number Number Number Number 30/10/ /06/ ,000, ,000, Options granted vest and are exercisable on 30 September The expense recognised in respect of the above options granted during the half-year was 49,110. The model inputs, not included in the table above, for options granted during the half-year ended 31 December 2014 included: a) options were granted for consideration of per option; b) expected life of options is 3.7 years; c) share price at grant date of d) expected volatility of 55%; e) expected dividend yield of Nil; and f) a risk free interest rate from 3.00%. 7. Dividends No dividends have been paid or provided for during the half-year. 8. Contingent Assets and Liabilities There are no known contingent assets or liabilities. 9. Subsequent Events On 24 February 2015, the Company advised that the Class A Performance Shares had been converted to Ordinary Shares. Under the terms of the Company s acquisition of its four Spanish potash projects 50m Class A Performance Shares were issued to shareholders of the vendor entity, KCL Resources Limited. These Class A Performance Shares were to automatically convert to ordinary shares upon delineation of a JORC Code (or equivalent) Compliant Indicated Mineral Resource of: (i) 150 million tonnes of potash at or above 13% K2O by content; or (ii) 125 million tonnes of potash at or above 14% K2O by content; or (iii) 100 million tonnes of potash at or above 15% K2O by content; or (iv) 75 million tonnes of potash at or above 17% K2O by content; or (v) 50 million tonnes of potash at or above 20% K2O by content. On 24 February 2015, the Company reported an updated MRE for its 100% owned Muga Vipasca Potash Project completed by independent mining and geology consultants, Agapito Associates, Inc. ( Agapito ). This MRE included a high grade subset of the Resource of 178 million tonnes at an average grade of 13.4% K 2O. This high grade subset was calculated by Agapito and satisfies the milestone for automatic conversion of the Class A Performance Shares to Ordinary Shares in the Company. In addition to the conversion of the Class A Performance Shares, the Company also allotted 1.5 million Ordinary Shares under the terms of a corporate advisory agreement relating to the acquisition by the Company of the four Spanish potash projects. There have been no other significant events subsequent to the half-year to the date of this report Half-year Financial Report

16 Directors Declaration In the opinion of the Directors of ( the Company ): 1. The financial statements and notes thereto, as set out on pages 6 to 13, are in accordance with the Corporations Act 2001 including: a. complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations; and b. giving a true and fair view of the Group s financial position as at 31 December 2014 and of its performance for the half-year then ended. 2. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is signed in accordance with a resolution of the Board of Directors made pursuant to s.295a of the Corporations Act Anthony Hall Managing Director Adelaide, South Australia 6 March Half-year Financial Report

17 INDEPENDENT AUDITOR S REVIEW REPORT To the members of Report on the Condensed Half-Year Financial Report We have reviewed the accompanying half-year financial report of ( the company ) which comprises the condensed statement of financial position as at 31 December 2014, the condensed statement of comprehensive income, condensed statement of changes in equity and condensed statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory notes and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year. Directors responsibility for the half-year financial report The directors of the company are responsible for the preparation of the half-year 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 half year financial report that is free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity s financial position as at 31 December 2014 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of the company, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act HLB Mann Judd (WA Partnership) ABN Level 4, 130 Stirling Street Perth WA PO Box 8124 Perth BC 6849 Telephone +61 (08) Fax +61 (08) hlb@hlbwa.com.au. Website: Liability limited by a scheme approved under Professional Standards Legislation HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers. 15

18 Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of is not in accordance with the Corporations Act 2001 including: a) giving a true and fair view of the consolidated entity s financial position as at 31 December 2014 and of its performance for the half-year ended on that date; and b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations HLB Mann Judd Chartered Accountants W M Clark Partner Perth, Western Australia 6 March