On September 15, Yankuang Energy issued an announcement officially terminating its acquisition of Australian listed company Highfield Resources Limited. In the announcement, Yankuang Energy stated that since the preconditions stipulated in the Implementation Agreement and Share Subscription Agreement were not fully satisfied or waived before the final deadline, the company had issued written notice to Highfield Resources to terminate the relevant agreements signed between both parties on September 23, 2024.
According to the originally signed agreement terms, Yankuang Energy would acquire newly issued shares of Highfield Resources through asset injection and cash subscription. The asset injection primarily referred to Yankuang Energy transferring its 100% equity in Yankuang Canada to Highfield Resources, with Highfield Resources issuing ordinary shares at an issue price of AUD 0.5 per share as transaction consideration.
At the time, Yankuang Energy mentioned that upon completion of the transaction, the company would hold the Muga project, Sossi project, and several other development reserve projects through Highfield Resources. After completion of construction of the Muga and Sossi projects, Yankuang Energy would possess an annual potash production capacity of 3.8 million tons through its controlling stake in Highfield Resources, transforming from single coal mining to multi-mineral development, and significantly enhancing the company's potash mining capacity and revenue levels in the potash business segment.
According to available information, Highfield Resources was listed on the Australian Securities Exchange in February 2012, with its main business being potash project development. Its core asset is the Muga project in northern Spain. According to JORC (Joint Ore Reserves Committee) standards, the project has proven and indicated in-situ ore reserves of 104 million tons with a potassium chloride grade of 16.1%. Both Phase I and Phase II are designed with production capacity of 500,000 tons per year each, totaling 1 million tons per year.
Yankuang Canada is an overseas wholly-owned subsidiary established by Yankuang Energy in 2011, located in Saskatchewan Province, Canada, primarily engaged in potash exploration and development. Its core asset is the Southey potash project and four other potash mining rights. According to NI43-101 (regulations established by Canadian Securities Administrators) standards, the Southey potash project has proven and indicated potassium chloride reserves of 173 million tons, with Phase I and Phase II designed production capacities of 2 million tons per year and 800,000 tons per year respectively, totaling 2.8 million tons per year.
Looking back, Yankuang Energy's acquisition case experienced various twists and turns. During Yankuang Energy's collaboration with Highfield Resources, domestic potash leader Qinghai Yanhu Industry Co.,Ltd. briefly entered the picture. On May 12 this year, Yankuang Energy announced that Highfield Resources had signed a non-binding cooperation letter of intent with Qinghai Yanhu Industry and other relevant parties. Qinghai Yanhu planned to subscribe for ordinary shares issued by Highfield Resources with approximately USD 300 million in cash, becoming its largest shareholder and obtaining control upon closing. If Qinghai Yanhu's subscription transaction were ultimately completed, Yankuang Energy would no longer become Highfield Resources' largest shareholder according to the original transaction arrangement, and related closing conditions would no longer be met. However, Yankuang Energy also expressed support for Qinghai Yanhu Industry's subscription transaction and would negotiate with relevant parties to advance the matter while protecting its own and shareholders' interests.
At that time, market interpretations suggested that with Qinghai Yanhu Industry's participation, the combination of resource advantages from two domestic giants would accelerate the development of high-quality overseas potash mines. However, on August 18 this year, Qinghai Yanhu Industry announced that after a specialized working group conducted overseas on-site due diligence on resources, technology, legal aspects, and the company's comprehensive evaluation, they believed that conditions for advancing this project cooperation were not yet mature at the current stage. To protect the company's and all shareholders' interests, they prudently decided to terminate this project cooperation.
Yankuang Energy stated that the termination of this transaction will not affect the company's existing production and operations, nor will it have an adverse impact on the company's development, and will not harm the interests of the company and all shareholders. The company expressed that it will continue to advance follow-up work on the Canadian potash development project and will update investors on related progress through announcements.