Highfield Resources Limited (HFR) Earnings Call Transcript

Thank you for standing by, and welcome to the Highfield Resources Limited shareholder call. I would now like to hand the conference over to Mr. Paul Harris, Chairman. Please go ahead.

Thanks very much, Kylie. Good afternoon to everyone in the Southern Hemisphere, and good morning to those in the Northern Hemisphere. My name is Paul Harris, I'm the Chair of Highfield. On the line with me also this afternoon is Carles Aleman, our CEO based in Pamplona; along with Olivier Vadillo, who is Head of our Business Development and Marketing. So thanks for joining this afternoon's call at short notice. We certainly appreciate all of our shareholders' continued support and interest in Highfield and our progress. I'm obviously speaking today to provide a brief update following the announcement released to the ASX regarding the decision by China Minmetals Corporation, otherwise known in this release as CMC, and its subsidiary Qinghai Salt, not to proceed the proposed transaction outlined in our May announcement on the nonbinding letter of intent. Now today's call will be fairly short because there's not an inordinate amount of information that can be released in relation to that decision because everything else in relation to our project and our transaction that's on foot remains intact. So it will be a fairly brief conversation, and I do ask shareholders to contact the executive, myself as appropriate. So we do understand that this raises important questions for investors, and we want to be as transparent as possible, both legally and commercially and what this means and what we're doing now. So as outlined in the release, following the conclusion of CMC's exclusive due diligence process, CMC and Qinghai Salt advised the company of their decision not to proceed with the proposed transaction, which was obviously nonbinding. The decision was made internally by CMC. And whilst we're not in a position to comment on CMC-specific reasoning, it's really important to note that this does not reflect any new information or any change in the fundamentals of Muga or Highfield. It's their internal decision process. The company, the Board, the executive, we continue to have very high conviction in relation to the Muga potash project, both technically and commercially. The fundamentals of the project remain intact and the strategic rationale behind our efforts to develop Muga into a long-life, low-cost European potash operation have not changed.

So there's a couple of questions that we've had that I'll try to address proactively. On the funding side, the company continues to actively manage its company needs and remain flexible in its approach. We've done a lot of internal cost cutting over a period of time and worked on different alternatives in relation to our funding proactively and for some period of time. And as a result of Qinghai's withdrawal, the convertible notes that we have on issue to EMR and others have now matured. It's important to note that EMR continues to engage with us very constructively. And they're trying to work through that. And at the same time, they reserve their rights under the terms of those convertible notes. But I will reiterate that EMR [ are ] working very closely with us and are working constructively with us in regard to the maturity of those convertible notes. As we noted in the announcement, implementation agreement with Yankuang, which is associated with the proposed transaction, has not been terminated. It remains [ on foot. ] So that's important for investors to understand. It is important to note that under that implementation agreement, either party retains the right to terminate at any time. So that includes ourselves and their selves if there's a change in direction for either party. So that remains on foot, and we'll update you in relation to that should anything change. We're actually now valuing next steps, and we remain committed to the strategic objectives that underpin the recent transaction discussions with a focus on delivering long-term value for shareholders. And it's important that the Board wants to stress that we remain committed to the same strategic objectives that underpin the transaction discussions. We're actively evaluating strategic options that can deliver value to shareholders and enable us to advance the Muga Project. We're maintaining a very disciplined approach to capital management, as I said earlier, project development and also stakeholder engagement across Spain and internationally. And on that note, in relation to stakeholder engagement, I would note that on Monday morning, Carlos and the Spanish team met with the government of Navarra in Pamplona to explain CMC's actions and to discuss possible next steps with the government. The government has reiterated to us its support for Highfield and the Muga Project, and we're now actively working with them in relation to our next steps. There's obviously been questions around the Goyo permit. And we've also done an inordinate amount of work legally and are really confident in our alternatives in relation to the Goyo plant and our discussions with government in that regard. Nothing's changed in that regard over the period of time that CMC has done their diligence, and we remain confident around the permit and our ability to proceed. So to summarize, the proposed transaction with CMC and QSL is no longer progressing. But what's important is the Yankuang implementation agreement remains on foot. The Muga Project remains strong, and our commitment to delivering it has not changed. So we thank you all for your continued support with Highfield. And to reiterate, we will continue and inform the market for any material development. Obviously, this is disappointing. But we do have alternatives that we're working through. And when we have a material update for shareholders, then we'll come back to market and let you know for those questions. So thank you all for your support. And please certainly contact the team should you have any further questions. Thanks very much, Kylie.

That does conclude our conference for today. Thank you for participating. You may now disconnect.