highfield - asx · highfield is an australian based company with the primary objective of...

For the offer of 20,000,000 shares at an issue price of 20 cents each to raise $4,000,000

Highfield Resources Limited — ABN 51 153 918 257

Highfieldresources

Lead Manager and Broker to the Offer CPS Securities

Corporate Adviser to the Company Garrison Capital Pty Ltd

Prospectus

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Highfield Resources – Prospectus 1

This Prospectus is dated 5 December 2011 and was lodged

with the ASIC on that date. The ASIC and its officers take no

responsibility for the contents of this Prospectus or the merits

of the investment to which this Prospectus relates.

No Shares may be issued on the basis of this Prospectus later

than 13 months after the date of this Prospectus.

No person is authorised to give information or to make any

representation in connection with this Prospectus, which is not

contained in the Prospectus. Any information or representation

not so contained may not be relied on as having been

authorised by the Company in connection with this Prospectus.

It is important that you read this Prospectus in its entirety

and seek professional advice where necessary. The Shares,

the subject of this Prospectus should be considered highly

speculative.

1.1 Exposureperiod

This Prospectus will be circulated during the Exposure

Period. The purpose of the Exposure Period is to enable

this Prospectus to be examined by market participants

prior to the raising of funds. You should be aware

that this examination may result in the identification

of deficiencies in this Prospectus and, in those

circumstances, any application that has been received

may need to be dealt with in accordance with Section

724 of the Corporations Act. Applications for Shares

under this Prospectus will not be processed by the

Company until after the expiry of the Exposure Period.

No preference will be conferred on applications lodged

prior to the expiry of the Exposure Period.

1.2 WebSite–electronicprospectus

A copy of this Prospectus can be downloaded from the

website of the Company at www.highfieldresources.com.

au. If you are accessing the electronic version of this

Prospectus for the purpose of making an investment in

the Company, you must be an Australian resident and

must only access this Prospectus from within Australia.

The Corporations Act prohibits any person passing

onto another person an Application Form unless it

is attached to a hard copy of this Prospectus or it

accompanies the complete and unaltered version of

this Prospectus. You may obtain a hard copy of this

Prospectus free of charge by contacting the Company.

The Company reserves the right not to accept an

Application Form from a person if it has reason to

believe that when that person was given access to

the electronic Application Form, it was not provided

together with the electronic Prospectus and any

relevant supplementary or replacement prospectus or

any of those documents were incomplete or altered.

1.3 Website

No document or information included on the Company’s

website is incorporated by reference into this

Prospectus.

1.4 Forwardlookingstatements

This Prospectus contains forward looking statements

which are identified by words such as ‘may’, ‘could’,

‘believes’, ‘estimates’, ‘targets’, ‘expects’, or ‘intends’

and other similar words that involve risks and

uncertainties.

These statements are based on an assessment of

present economic and operating conditions, and on a

number of assumptions regarding future events and

actions that, as at the date of this Prospectus, are

expected to take place.

Such forward looking statements are not guarantees of

future performance and involve known and unknown

risks, uncertainties, assumptions and other important

factors, many of which are beyond the control of the

Company, the Directors and our management.

The Company cannot and does not give any assurance

that the results, performance or achievements

expressed or implied by the forward looking statements

contained in this Prospectus will actually occur and

investors are cautioned not to place undue reliance on

these forward-looking statements.

The Company has no intention to update or revise

forward looking statements, or to publish prospective

financial information in the future, regardless of

whether new information, future events or any other

factors affect the information contained in this

Prospectus, except where required by law.

These forward looking statements are subject to various

risk factors that could cause our actual results to differ

materially from the results expressed or anticipated

in these statements. These risk factors are set out in

Section 7 of this Prospectus.

1.5 Photographsanddiagrams

Photographs used in this Prospectus which do not have

descriptions are for illustration only and should not be

interpreted to mean that any person should endorse the

Prospectus or its contents or that the assets shown in

them are owned by the Company. Diagrams used in this

Prospectus are illustrative only and may not be drawn

to scale.

1 ImportantNoticeContents

1. Important Notice 1

2. Corporate Directory 3

3. Chairman’s Letter 5

4. Investment Overview 7

5. Details of the Offer 17

6. Company and Project Overview 19

7. Risk Factors 21

8. Independent Geologist’s Report 27

9. Investigating Accountant’s Report 61

10. Solicitor’s Report on Tenements 77

11. Corporate Governance 91

12. Material Contracts 93

13. Additional Information 95

14. Directors’ Authorisation 103

15. Glossary 104

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2 Highfield Resources – Prospectus Highfield Resources – Prospectus 3

1.6 CompetentPerson

The information in Section 4.3 (Key investment

highlights) and Section 6 (Company and project

overview) that relates to Exploration Results, Minerals

Resources or Ore Reserves is based on information

reviewed and compiled by Mr Mark Arundell, who is a

Member of the Australian Institute of Geoscientists.

Mr Arundell is an Executive Director of the Company.

Mr Arundell has sufficient experience which is relevant

to the style of mineralisation and the type of deposit

under consideration and to the activity which he is

undertaking to qualify as a Competent Person as

defined in the 2004 edition of the Australasian Code for

Reporting of Exploration Results, Minerals Resources

and Ore Reserves. Mr Arundell consents to the

inclusion in the Prospectus of the matters based on his

information, in the form and context in which it appears.

1.7 Definedtermsandothermatters

Certain terms and abbreviations used in this Prospectus

have defined meanings which are explained in Section

15 (Glossary).

Unless otherwise stated, all other references to “$”,

dollars and cents are to Australian currency.

Any discrepancies between totals and sums and

components in tables contained in this Prospectus are

due to rounding.

1.8 ASXListingandQuotation

Application will be made to the ASX within seven days

after the date of this Prospectus for admission of the

Company to the ASX and for Official Quotation of the

Shares, the subject of this Prospectus. The ASX and its

officers take no responsibility for the contents of this

Prospectus or the merits of the investment to which

this Prospectus relates.

1.9 Notetoapplicants

The information in this Prospectus is not financial

product advice and does not take into account your

investment objectives, financial situation or particular

needs.

It is important that you read this Prospectus carefully

in its entirety before deciding whether to invest in the

Company. In particular, you should consider the risk

factors that could affect the performance of Highfield.

You should carefully consider these risks in light of

your personal circumstances (including financial

and tax issues) and seek professional guidance from

your stockbroker, solicitor, accountant and/or other

independent professional adviser before deciding

whether to invest in the Shares. Some of the key risk

factors that should be considered by prospective

investors are set out in Section 4 (Investment Overview)

and Section 7 (Risk Factors). There may be risk factors

in addition to these that should be considered in light of

your personal circumstances.

No person named in this Prospectus, nor any other

person, guarantees the performance of Highfield or the

repayment of capital or any return on investment made

pursuant to this Prospectus.

1.10 Foreignjurisdictions

This Prospectus does not constitute an offer in any

place in which, or to any person to whom, it would not

be lawful to make such an offer or invitation. No action

has been taken to register or qualify the Shares or the

Offer or to otherwise permit a public offering of the

Shares in any jurisdiction outside Australia.

The distribution of this Prospectus outside Australia

may be restricted by law and persons who come into

possession of this Prospectus outside Australia should

seek advice on and observe any such restrictions. Any

failure to comply with such restrictions may constitute

a violation of applicable securities laws. Applicants

who are resident in countries other than Australia

should consult their professional advisers as to whether

any governmental or other consents are required or

whether any other formalities need to be considered

and followed.

1.11 Disclaimer

No person is authorised to give any information or to

make any representation in connection with the Offer

described in this Prospectus which is not contained

in this Prospectus. Any information not so contained

may not be relied upon as having been authorised by

the Company or any other person in connection with

the Offer. You should rely only on information in this

Prospectus.

Directors

Mr Jonathan Murray – Non Executive Chairman

Mr Anthony Hall – Managing Director

Mr Mark Arundell – Executive Director

JointCompanySecretaries

Mr Scott Funston

Mr Aaron Bertolatti

registeredOffice

Level 1, 33 Richardson Street

WEST PERTH WA 6005

Telephone +61 8 9200 4426

Facsimile: +61 8 9200 4469

ProposedASXCode

HFR

Website

www.highfieldresources.com.au

SolicitorstotheCompany

SteinepreisPaganin

Lawyers and Consultants

Level 4, The Read Buildings

16 Milligan Street

PERTH WA 6000

LeadManagerandBrokertotheOffer

CunninghamPetersonSharbanee

SecuritiesPtyLtd

Level 34, Exchange Plaza

2 The Esplanade

PERTH WA 6000

Telephone: +61 8 9223 2222

Facsimile: +61 8 9223 2211

CorporateAdvisertotheCompany

GarrisonCapitalPtyLtd


WEST PERTH WA 6005

Telephone: +61 8 9200 4468

Facsimile: +61 8 9200 4469

Shareregistry*

AdvancedShareregistryPtyLtd

150 Stirling Highway

NEDLANDS WA 6009

Telephone: +61 8 9389 8033

Facsimile: +61 8 9389 7871

AuditorandInvestigatingAccountant

HLBMannJudd

Level 4, 130 Stirling Street

PERTH WA 6000

Telephone: +61 8 9227 7500

Facsimile: +61 8 9227 7533

IndependentGeologist

CSAGlobalPtyLtd

Level 2, 3 Ord Street

WEST PERTH WA 6005

Telephone: +61 8 9355 1677

Facsimile: +61 9 9355 1977

* This entity is included for information purposes only.

It has not been involved in the preparation of this Prospectus.

2 CorporateDirectory1 Important Notice (cont)F

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DearInvestor,

On behalf of the Board, I invite you to participate in this opportunity to share in the ownership and future growth of Highfield Resources Limited (theCompanyorHighfield).

The Company is seeking to raise $4,000,000 by the issue of 20,000,000 Shares at an issue price of $0.20 each.

Highfield is an Australian based company with the primary objective of establishing itself as a premium potash exploration and discovery company.

Potash is a widely used fertiliser that improves plant growth, yield, taste, nutrient value and water retention, amongst other things. With an increasing global population and pressures to increase crop yields, potash will increasingly become a significant global commodity.

The Company has secured an agreement to explore three Western Australian tenements for potash, with potash already having been identified in a petroleum well drilled within the tenement package. Importantly, exploration licenses have been granted for these tenements and two compelling drill targets have been identified. Drilling is planned to commence mid 2012.

Our Board boasts individuals who have a solid blend of technical and commercial expertise with skills in mining exploration and production, strategy, venture capital, acquisitions and corporate finance.

The Company is seeking to raise funds through this Prospectus to drill its identified targets in Western Australian tenements. Funds will also be allocated to reviewing additional project opportunities if and when those opportunities arise.

By its very nature, exploration involves high risk. I suggest you carefully consider the risks and the contents of the Prospectus generally, prior to investing.

The Directors join me in offering you this opportunity and look forward to welcoming you as a Shareholder of our Company.

Yours sincerely,

Jonathan Murray

Chairman

Potashwillincreasinglybecomeasignificantglobalcommodity.

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This section is a summary only and is not intended to provide full information for investors intending to apply for Shares offered

pursuant to this Prospectus. This Prospectus should be read and considered in its entirety.

4.1 TheCompany

Highfield is a potash exploration company that has been established to pursue potash interests in the north of

Western Australia.

The Company has entered into an agreement to acquire the exclusive right to earn up to an 80% interest in the mineral

rights within three granted tenements (together the Tenements) (BroadwayAgreement) through:

(a) the sole funding, subject to spending a minimum $500,000, of drilling an initial target hole within two years of the

date of the Company being admitted to the Official List of the ASX; and

(b) by spending an additional $1,000,000 and completing and outlining an inferred JORC compliant resource of 100Mt

at least 20% potassium oxide (K2O).

A summary of the Broadway Agreement is set out in Section 12.1 of this Prospectus.

A detailed description of the Tenements and the Company’s proposed exploration programmes is included in the

Independent Geologist’s Report in Section 8 of this Prospectus.

4.2 Theobjectives

The Company’s main objectives on completion of the Offer are:

(a) to conduct exploration activities on the Company’s interests in the Tenements; and

(b) to review additional project opportunities if and when they arise.

On completion of the Offer, the Board believes the Company will have sufficient capital to achieve the objectives stated in

this Prospectus for at least 2 years. However, an investment in the Company is speculative and investors are encouraged to

read and consider the risk factors outlined in Section 7 of this Prospectus.

4.3 Keyinvestmenthighlights

PROSPECTIVE POTASH BASIN AND UNDEREXPLORED PROJECTS

— Highfield has secured rights to explore three tenements in northern Western Australia for potash.

— The Tenements are located in the Canning Basin of Western Australia.

— Potash has been identified in a petroleum well completed within the area covered by the Tenements.

IMMEDIATE DRILL TARGETS

— Exploration licenses have been granted and the Company has identified two drill targets for testing.

MANAGEMENT AND PROJECT DEVELOPMENT STRATEGY

— The Company’s management team has proven global experience in the resources sector, in particular the

potash market, having consulted to potash explorers across six continents.

— The Company is initially targeting the Canning Basin located in northern Western Australia.

— Other potash opportunities will be considered if and when they arise to add to the Company’s

exploration portfolio.

POTASH FOCUSED EXPLORER

— Potash is one of three essential plant nutrients and is without known substitute.

— Global potash trend consumption is increasing.

— Potash increases crop yields and improves the quality of agricultural produce.

4 InvestmentOverviewF

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4.4 Keyrisks

The business, assets and operations of the Company are subject to certain risk factors that have the potential to influence

the operating and financial performance of the Company in the future. These risks can impact on the value of an

investment in the securities of the Company.

The Board aims to manage these risks by carefully planning its activities and implementing risk control measures. Some of

the risks are, however, highly unpredictable and the extent to which they can effectively manage them is limited.

Set out below are specific risks that the Company is exposed to. Further risks associated with an investment in the

Company are outlined in Section 7 of this Prospectus.

(a) Limitedhistory

The Company was only recently incorporated and has no operating history and limited historical financial

performance. Minimal exploration has been conducted on the Tenements and the Company is yet to conduct its

own exploration activities. Under the terms of the Broadway Agreement the Company will not commence these

activities until the Company has been admitted to the Official List. No assurance can be given that the Company

will achieve commercial viability through the successful exploration and/or mining of the Project. Until the

Company is able to realise value from its projects, it is likely to incur ongoing operating losses.

(b) Explorationsuccess

The Tenements are at various stages of exploration, and potential investors should understand that mineral

exploration and development are high risk undertakings.

There can be no assurance that exploration of the Tenements, or any other tenements that may be acquired in the

future, will result in the discovery of an economic ore deposit. Even if an apparently viable deposit is identified,

there is no guarantee that it can be economically exploited.

The future exploration activities of the Company may be affected by a range of factors including geological

conditions, limitations on activities due to seasonal weather patterns, unanticipated operational and technical

difficulties, industrial and environmental accidents, native title process, changing government regulations and

many other factors beyond the control of the Company.

The success of the Company will also depend upon the Company having access to sufficient capital, being able to

maintain title to its Tenements and obtaining all required approvals for its activities. In the event that exploration

programmes prove to be unsuccessful this could lead to a diminution in the value of the Tenements, a reduction in

the cash reserves of the Company and possible relinquishment of the Tenements.

The exploration costs of the Company described in the Independent Geologist’s Report in Section 8 of this

Prospectus, are based on certain assumptions with respect to the method and timing of exploration. By their

nature, these estimates and assumptions are subject to significant uncertainties and, accordingly, the actual costs

may materially differ from these estimates and assumptions. Accordingly, no assurance can be given that the cost

estimates and the underlying assumptions will be realised in practice, which may materially and adversely affect

the Company’s viability.

(c) Contractualrisk

In order for the Company to be able to achieve its objectives the Company is reliant on Broadway Resources

complying with its contractual obligations under the Broadway Agreement with respect to maintaining the

Tenements in full force and effect, free from any liability to forfeiture or non-renewal.

Interests in tenements in Australia are governed by the respective State legislation and are evidenced by the

granting of licences or leases. Each licence or lease is for a specific term and carries with it annual expenditure and

reporting commitments, as well as other conditions requiring compliance.

In the event that Broadway Resources fails to comply with conditions of the Tenements which results in loss of

title to the Tenements, the Company would lose its interest in the mineral rights being acquired pursuant to the

Broadway Agreement. It may then be necessary for the Company to approach a court to seek a legal remedy.

Legal action can be costly and there can be no guarantee that a legal remedy will be ultimately granted on the

appropriate terms. The Company has no current reason to believe that Broadway Resources will not meet and

satisfy its obligations under the Broadway Agreement.

(d) Overlappingpetroleumexplorationpermits

Each of the Tenements are overlapped, to various extents, by petroleum exploration permits (PEP) granted under the

Petroleum and Geothermal Energy Resources Act 1967 (WA). Specifically:

(i) PEP 429 overlaps E04/1934 by less than 1% and E45/3546 by 52.8%;

(ii) PEP 476 overlaps E04/1934 by 9.6%, E04/1974 by 87.6% and E45/3546 by 13%;

(iii) PEP 456 overlaps E45/3546 by 100%.

The PEP’s are all held by unrelated third parties.

The Mining Act 1978 (WA) (MiningAct) provides that in the event that a dispute arises between the holder of the

relevant PEP (PEPHolder) and the Company concerning any operations carried out or proposed to be carried out

by the Company or the PEP Holder, the disputed matter will be referred to a warden of the mines as appointed under

the Mining Act (Warden). The Warden, as soon as practicable after such reference, shall inquire into the dispute and

provide a report to the Minister responsible for the Mining Act (Minister).

Upon receipt of the Warden’s report, the Minister may make such order and give such directions to the Company or

PEP Holder or to both of them as in the public interest and in the circumstances of the case may seem to him to be just

and equitable.

There can be no guarantee that there will be no conflicting interests or disputes between the PEP Holders and the

Company. However, the Company is currently in discussions with the PEP Holders as to the carrying out of activities

on the relevant overlapping areas of the Tenements. The Company has no reason to believe that it cannot and will not

carry out its activities in conjunction with the activities of the PEP Holders harmoniously.

(e) Explorationcosts

The exploration costs of the Company are based on certain assumptions with respect to the method and timing of

exploration. By their nature, these estimates and assumptions are subject to significant uncertainties and, accordingly,

the actual costs may materially differ from these estimates and assumptions. Accordingly, no assurance can be given

that the cost estimates and the underlying assumptions will be realised in practice, which may materially and adversely

affect the Company’s viability.

(f) Jointventurerisk

The Company is subject to the risk that changes in the status of any of the Company’s joint ventures (including

changes caused by financial failure or default by a participant in the joint venture) may adversely affect the operations

and performance of the Company.

(g) relianceonkeypersonnel

The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends

substantially on its senior management and its key personnel. There can be no assurance given that there will be no

detrimental impact on the Company if one or more of these employees cease their employment.

The above list of risk factors ought not to be taken as exhaustive of the risks faced by our Company and you should refer

to the additional risk factors in Section 7 of this Prospectus before deciding whether to apply for Shares pursuant to this

Prospectus.

4.5 TheOffer

The Company invites applications for up to 20,000,000 Shares at an issue price of $0.20 per Share to raise up to $4,000,000.

The key information relating to the Offer and references to further details are set out below.

Indicativetimetable*

Lodgement of Prospectus with the ASIC 5 December 2011

Opening Date 13 December 2011

Closing Date 23 December 2011

Despatch of holding statements 6 January 2012

Expected date for quotation on ASX 17 January 2012

* The above dates are indicative only and may change without notice.

The Company reserves the right to extend the Closing Date or close the Offer early without notice.

4 Investment Overview (cont)F

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4.6 PurposeoftheOffer

The purpose of the Offer is to facilitate an application by the Company for admission of the Company to the official list of

ASX and position the Company to seek to achieve the objectives set out above in Section 4.2 of this Prospectus.

4.7 Useoffunds

The Company intends to apply funds raised from the Offer, together with existing cash reserves, over the first two years

following admission of the Company to the official list of ASX as follows:

AUD

FundsAvailable FullSubscription Percentageof

($4million) Funds(%)

Existing cash reserves 1 400,125 9%

Funds raised from the Offer 4,000,000 91%

Total 4,400,125 100%

AllocationofFunds

Acquisition costs 2 125,000 3%

Exploration costs 3 3,000,000 68%

Expenses of issue 4 390,808 9%

Administrationcostsandworkingcapital 884,317 20%

Total 4,400,125 100%

1 Refer to the Investigating Accountant’s Report set out in Section 9 of this Prospectus for further details.

2 The agreement with Broadway Resources provides for cost reimbursement up to $150,000. The Directors expect this

amount to be $125,000.

3 Refer to the Independent Geologist’s Report in Section 8 of this Prospectus for further information on the planned

exploration activities and expenditure budget for the Project.

4 Refer to Section 13.8 of this Prospectus for further details.

The above table is a statement of current intentions as of the date of this Prospectus. As with any budget, intervening

events (including exploration success or failure) and new circumstances have the potential to affect the manner in which

the funds are ultimately applied. The Board reserves the right to alter the way funds are applied on this basis.

4.8 CapitalStructure

The capital structure of the Company following completion of the Offer (assuming full subscription) is summarised below1:

Shares2 Number

Shares currently on issue for cash consideration 3 21,000,003

Shares currently on issue pursuant to the Broadway Agreement 3,000,000

Shares to be issued pursuant to the Offer 20,000,000

TotalSharesoncompletionoftheOffer 44,000,003

Options Number

Options currently on issue 4 6,000,000

Options to be issued pursuant to the Offer Nil

TotalOptionsoncompletionoftheOffer 6,000,000

1 Refer to the Investigating Accountant’s Report set out in Section 9 of this Prospectus for further details.

2 The rights attaching to the Shares are summarised in Section 13.2 of this Prospectus.

3 The Shares currently on issue were issued on 1 November 2011 at an average issue price of $0.02 each to promoter and

seed capital investors to fund acquisition costs, the listing costs and initial working capital requirements of the Company.

These Shares were issued at a discount to the issue price of the Shares offered pursuant to the Offer to reflect the risk

and uncertainty associated with the Company and its then strategic objective.

4 Each Option will be unquoted and is exercisable at $0.20 on or before 1 November 2016.

4.9 SubstantialShareholders

Those Shareholders holding 5% or more of the Shares on issue both as at the date of this Prospectus and on completion

of the Offer (assuming full subscription and no existing substantial Shareholder subscribes and receives additional Shares

pursuant to the Offer) are set out in the respective tables below.

AsatthedateoftheProspectus

Shareholder Shares Options %(undiluted) %(fullydiluted)

JP Morgan Nominees Australia Limited 5,900,000 Nil 24.58% 19.67%

Broadway Resources Pty Ltd 3,000,000 Nil 12.50% 10.00%.

Mr Timothy James Flavel

<The Flavel Investment A/C> 2,300,000 Nil 9.58% 7.67%

Vega Funds Pty Ltd 2,300,000 Nil 9.58% 7.67%

Jodama Pty Ltd 1 2,100,001 Nil 8.75% 7.00%

Taycol Nominees Pty Ltd 1,800,000 Nil 7.50% 6.00%

NEFCO Nominees Pty Ltd 1,200,000 2,000,000 5.00% 10.67%

Francis Scott Funston and

Victoria Alexis Suzanne Funston

<Funston Investment A/C> 1,200,000 Nil 5.00% 4.00%

Anthony Hall 2 500,001 4,000,000 2.10% 15.00%

1 Mr Mark Arundell is a Director of this entity.

2 500,000 shares are held through a related trust.

OncompletionoftheOffer

Shareholder Shares Options %(undiluted) %(fullydiluted)

JP Morgan Nominees Australia Limited 5,900,000 Nil 13.41% 11.80%

Broadway Resources Pty Ltd 3,000,000 Nil 6.82% 6.00%

Mr Timothy James Flavel

<The Flavel Investment A/C> 2,300,000 Nil 5.23% 4.60%

Vega Funds Pty Ltd 2,300,000 Nil 5.23% 4.60%

NEFCO Nominees Pty Ltd 1,200,000 2,000,000 2.73% 6.40%

Anthony Hall 1 500,001 4,000,000 1.14% 9.00%

1500,000 Shares are held through a related trust.

The Company will announce to the ASX details of its top-20 Shareholders (following completion of the Offer) prior to the

Shares commencing trading on ASX.


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4.10 restrictedsecurities

Subject to the Company being admitted to the Official List, certain Shares and Options on issue prior to the Offer and

certain Shares issued on the exercise of Options on issue prior to the Offer, are likely to be classified by the ASX as

restricted securities and will be required to be held in escrow.

The Company will announce to the ASX full details (quantity and duration) of the Shares and Options required to be held in

escrow prior to the Shares commencing trading on ASX.

4.11 Financialinformation

The Company was only recently incorporated and has no operating history and limited historical financial performance.

The Company is yet to conduct its own exploration activities on the area of land the subject of the Tenements and, under

the terms of the Broadway Agreement, will not commence these activities until the Company has been admitted to the

Official List.

As a result, the Company is not in a position to disclose any key financial ratios other than its balance sheet which is

included in the Investigating Accountant’s Report set out in Section 9 of this Prospectus. Investors should read the

Investigating Accountant’s Report in full.

The Company’s start up funding will be generated from the initial public offering of Shares pursuant to this Prospectus.

The Company expects to raise further funding from the issue of securities in the future. If the Company’s proposed

exploration is successful and the Company chooses to develop its projects then the Company may also consider debt

funding.

4.12 Taxation

The acquisition and disposal of Shares will have tax consequences, which will differ depending on the individual financial

affairs of each investor. All potential investors in the Company are urged to obtain independent financial advice about the

consequences of acquiring Shares from a taxation viewpoint and generally.

To the maximum extent permitted by law, the Company, its officers and each of their respective advisors accept no liability

and responsibility with respect to the taxation consequences of subscribing for Shares under this Prospectus.

4.13 Dividendpolicy

The Board anticipates that significant expenditure will be incurred in the evaluation and development of the Company’s

projects. These activities, together with the possible acquisition of interests in other projects, are expected to dominate

the two year period following the date of this Prospectus. Accordingly, the Board does not expect to declare any dividends

during that period.

Any future determination as to the payment of dividends by the Company will be at the discretion of the Directors and

will depend on the availability of distributable earnings, operating results, the financial condition of the Company, future

capital requirements and general business and other factors considered relevant by the Directors. No assurance in relation

to the payment of dividends or franking credits attaching to dividends can be given by the Company.

4.14 Directorsandkeypersonnel

MrJonathanMurray–Non Executive Chairman

Mr Murray has more than 15 years experience as a commercial lawyer. He is a partner of Perth based law firm, Steinepreis

Paganin.

Mr Murray’s principal practice areas include equity capital markets, takeovers, project acquisitions and divestments,

corporate governance, commercial law and strategy.

Mr Murray has a Bachelor of Laws from Murdoch University in Western Australia, and is a member of the Financial Services

Institute of Australia.

Mr Murray is currently a non-executive director of ASX listed Hannans Reward NL, Laguna Resources NL, Kalgoorlie Mining

Company Limited and Peak Resources Limited.

Mr Murray does not expect that his directorships with other public companies will interfere with his ability to act as Non-

Executive Director to the Company.

MrAnthonyHall–Managing Director

Mr Hall has more than 15 years commercial experience. Prior to his appointment as Managing Director he was Head of

Strategy and Business Development for Lend Lease Solar (part of the ASX listed Lend Lease Group (LendLease)). In this

role he was responsible for setting the strategy of the newly created entity and positioning the entity for growth in the

emerging renewable energy market in Australia.

During his employment with Lend Lease, Mr Hall worked in the Venture Capital group where his responsibilities included

setting investment strategies in targeted market sectors, reviewing and assessing global companies involved in these

sectors, executing investments in these entities and ongoing involvement in investee entities.

Between February 1997 and September 1999 (aged 22 to 24) Mr Hall was an Executive Director of Commercial Nominees of

Australia Limited (CommercialNominees). The affairs of Commercial Nominees and related entities were the subject of an

ASIC and Australian Prudential Regulation Authority (APrA) review in 2001 and 2002. Mr Hall was disqualified from acting

as a responsible officer of a trustee by APRA and from acting as an investment advisor by ASIC for a period of 3 years

(expiring on 27 October 2006). Mr Hall was found to have not exercised reasonable skill, care and diligence in carrying out

his duties. There was no finding of dishonesty.

The Directors (excluding Mr Hall) do not consider this matter has any impact on his present ability to act as the Managing

Director.

Mr Hall has a Bachelor of Laws with honours and a Bachelor of Business degree from the University of Technology, Sydney,

a graduate diploma in Applied Finance and Investment from the Financial Services Institute of Australia and is a legal

practitioner of the Supreme Court of NSW and an Associate of the Chartered Secretaries Australia.

Mr Hall is not a director of any other company. Mr Hall does not expect that his other business activities will interfere with

his ability to act as Managing Director to the Company.

MrMarkArundell – Exploration Director

Mr Arundell has over 25 years experience in the mining industry working for major companies such as Rio Tinto, North

Ltd and Renison Goldfields Consolidated. Mr Arundell has a Masters of Economic Geology from the University of Tasmania,

an honours degree in Geology from the University of Melbourne and a Graduate Certificate in Management from Deakin

University.

Mr Arundell has extensive experience in potash having been a consultant to and then principal geologist for Rio Tinto

Exploration’s Industrial Minerals Exploration (IMEx) division in Australia. Mr Arundell has subsequently consulted on potash

projects for a number of clients in Australia, North America, South America, Africa, Asia and Europe.

Mr Arundell is a Member of the Australian Institute of Geoscientists, the Society of Economic Geologists and is a Fellow of

the Association of Applied Geochemists.

Mr Arundell is currently a director of ASX listed Copper Range Limited and Managing Director of ASX listed Oakland

Resources Limited.

Mr Arundell does not expect that his directorships with other companies or other business activities will interfere with his

ability to act as Executive Director to the Company.

MrScottFunston – Joint Company Secretary

Mr Funston is a qualified Chartered Accountant and Company Secretary with more than 10 years experience in the mining

industry and accounting profession. His expertise is financial management and general corporate advice. Mr Funston

possesses a strong knowledge of the ASX requirements and has assisted a number of resources companies operating

throughout Australia, Africa, Asia, Europe, USA, South America and Canada with financial accounting, stock exchange

compliance, general corporate advice and regulatory activities.

Mr Funston was previously company secretary of ASX listed Overland Resources Limited, Laguna Resources NL and

Coventry Resources Limited.

Mr Funston is currently a director of ASX listed Avanco Resources Limited and Lindian Resources Limited. Mr Funston is

also company secretary of Signature Metals Limited, Lindian Resources Limited, Oakland Resources Limited and Avanco

Resources Limited.


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MrAaronBertolatti–Joint Company Secretary

Mr Bertolatti is a qualified Chartered Accountant with over 8 years experience in the mining industry and accounting

profession. Mr Bertolatti has both local and international experience. Mr Bertolatti provides assistance to a number of

resource companies operating in Australia and Mongolia with financial accounting and stock exchange compliance.

Mr Bertolatti has significant experience in the administration of ASX listed companies, corporate governance and

corporate finance.

Mr Bertolatti is currently joint company secretary of the ASX listed Voyager Resources Limited, Copper Range Limited and

Haranga Resources Limited.

4.15 CorporateGovernance

To the extent applicable, in light of the Company’s size and nature, the Company has adopted The Corporate Governance

Principles and Recommendations (2nd Edition) as published by ASX Corporate Governance Council (recommendations).

The Company’s main corporate governance policies and practices as at the date of this Prospectus are outlined in Section

11.1 of this Prospectus.

4.16 DisclosureofDirectorsInterests

For each of the Directors, the proposed annual remuneration for the financial year following the Company being admitted

to the Official List together with the relevant interest of each of the Directors in the securities of the Company as at the

date of this Prospectus is set out in the table below.

Director remuneration Shares Options1 %held %held

postlisting postlisting

(undiluted) (fullydiluted)

Jonathan Murray2 $50,000 250,0014 — 0.57% 0.50%

Anthony Hall $200,000 500,0015 4,000,000 1.14% 9.00%

Mark Arundell3 $100,000 2,100,0016 — 4.77% 4.20%

1 Each Option is unquoted and exercisable at $0.20 on or before 1 November 2016.

2 Jonathan Murray is a partner of the law firm Steinepreis Paganin. Steinepreis Paganin has been engaged as the

Company’s solicitors and will receive fees for legal services.

3 Mark Arundell is a shareholder in Broadway Resources. The Company has entered into the Broadway Agreement with

Broadway Resources pursuant to the terms summarised in Section 12.1 of this Prospectus. Mr Arundell did not vote on the

resolution passed by the Board that resolved to enter into the Broadway Agreement.

4 1 Share is held directly by Mr Murray. 250,000 Shares are held indirectly by Mr Murray. Mr Murray has a relevant interest

in 100,000 of these Shares.

5 1 Share is held directly by Mr Hall. 500,000 Shares are held indirectly via various trust arrangements.

6 1 Share is held directly by Mr Arundell. 2,100,000 Shares are held indirectly by Mr Arundell. Mr Arundell has a relevant

interest in 2,100,000 of these Shares

4.17 AgreementswithDirectorsorrelatedparties

The Company’s policy in respect of related party arrangements is:

(a) a Director with a material personal interest in a matter is required to give notice to the other Directors before such

a matter is considered by the Board; and

(b) for the Board to consider such a matter, the Director who has a material personal interest is not present while the

matter is being considered at the meeting and does not vote on the matter.

4.18 Deedsofindemnity,insuranceandaccess

The Company has entered into a deed of indemnity, insurance and access with each of its Directors. Under these deeds,

the Company agrees to indemnify each officer to the extent permitted by the Corporations Act against any liability arising

as a result of the officer acting as an officer of the Company. The Company is also required to maintain insurance policies

for the benefit of the relevant officer and must also allow the officers to inspect board papers in certain circumstances.


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Highfield Resources – Prospectus 1716 Highfield Resources – Prospectus

5.1 TheOffer

Pursuant to this Prospectus, the Company invites applications for 20,000,000 Shares at an issue price of $0.20 per Share

to raise $4,000,000.

The Company will not accept oversubscriptions.

The Shares offered under this Prospectus will rank equally with the existing Shares on issue.

5.2 Minimumsubscription

If the minimum subscription to the Offer of $4,000,000, being the full subscription amount, has not been raised within

three months after the date of this Prospectus, the Company will not issue any Shares and will repay all application monies

for the Shares within the time prescribed under the Corporations Act, without interest.

5.3 Applications

Applications for Shares under the Offer must be made using the Application Form.

Applications for Shares must be for a minimum of 10,000 Shares and thereafter in multiples of 1,000 Shares and payment

for the Shares must be made in full at the issue price of $0.20 per Share.

Completed Application Forms and accompanying cheques, made payable to “HighfieldresourcesLimited” and crossed

“NotNegotiable”, must be mailed or delivered to the address set out on the Application Form by no later than the

Closing Date.

The Company reserves the right to close the Offer early.

5.4 ASXlisting

Application for Official Quotation by ASX of the Shares offered pursuant to this Prospectus will be made within seven days

after the date of this Prospectus.

If the Shares are not admitted to Official Quotation by ASX before the expiration of three months after the date of issue of

this Prospectus, or such period as varied by the ASIC, the Company will not issue any Shares and will repay all application

monies for the Shares within the time prescribed under the Corporations Act, without interest.

The fact that ASX may grant Official Quotation to the Shares is not to be taken in any way as an indication of the merits of

the Company or the Shares now offered for subscription.

5.5 Allotment

Subject to the minimum subscription to the Offer being reached and ASX granting conditional approval for the Company to

be admitted to the Official List, allotment of Shares offered by this Prospectus will take place as soon as practicable after

the Closing Date.

Pending the allotment and issue of the Shares or payment of refunds pursuant to this Prospectus, all application monies

will be held by the Company in trust for the applicants in a separate bank account as required by the Corporations Act. The

Company, however, will be entitled to retain all interest that accrues on the bank account and each applicant waives the

right to claim interest.

The Directors will determine the allottees of all the Shares in their sole discretion. The Directors reserve the right to reject

any application or to allocate any applicant fewer Shares than the number applied for. Where the number of Shares issued

is less than the number applied for, or where no allotment is made, surplus application monies will be refunded without any

interest to the applicant as soon as practicable after the Closing Date.

5.6 ApplicantsoutsideAustralia

This Prospectus does not, and is not intended to, constitute an offer in any place or jurisdiction, or to any person to whom,

it would not be lawful to make such an offer or to issue this Prospectus. The distribution of this Prospectus in jurisdictions

outside Australia may be restricted by law and persons who come into possession of this Prospectus should seek advice on

and observe any of these restrictions. Any failure to comply with such restrictions may constitute a violation of applicable

securities laws.

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No action has been taken to register or qualify the Shares or otherwise permit a public offering of the Shares the subject

of this Prospectus in any jurisdiction outside Australia. Applicants who are resident in countries other than Australia

should consult their professional advisers as to whether any governmental or other consents are required or whether any

other formalities need to be considered and followed.

If you are outside Australia it is your responsibility to obtain all necessary approvals for the allotment and issue of

the Shares pursuant to this Prospectus. The return of a completed Application Form will be taken by the Company to

constitute a representation and warranty by you that all relevant approvals have been obtained.

5.7 Oversubscriptions

No oversubscriptions will be accepted by the Company.

5.8 Notunderwritten

The Offer is not underwritten.

5.9 Commissionspayable

The Company reserves the right to pay a commission of 6% (exclusive of goods and services tax) of amounts subscribed

through any licensed securities dealers or Australian financial services licensee in respect of any valid applications lodged

and accepted by the Company and bearing the stamp of the licensed securities dealer or Australian financial services

licensee. Payments will be subject to the receipt of a proper tax invoice from the licensed securities dealer or Australian

financial services licensee.

6.1 Company

The Company was recently incorporated for the primary purpose of exploring for potash in northern Western Australia.

The Company has entered into the Broadway Agreement to acquire the exclusive right to earn an initial 50% interest in

the mineral rights within three (3) granted tenements in the north western region of Western Australia (the Project) from

Broadway Resources through the sole funding of drilling an initial target hole within two (2) years of the Company being

admitted to the Official List of the ASX.

The Company has the right to move to an 80% interest in the mineral rights should an Inferred JORC resource of 100

million tonnes be discovered at a grade of 20% potassium oxide (K2O) or above within four (4) years of the Company being

admitted to the Official List.

A summary of the Broadway Agreement is contained in Section 12.1 of this Prospectus.

A summary of the Project is set out below and more detailed information is included in the Independent Geologist’s Report

in Section 8 of this Prospectus.

6.2 TheProject

The Tenements are located in the Canning Basin of Western Australia.

Figure 1: Project Location Map Figure 2: Canning Basin, Regional Geology

The Canning Basin contains vast accumulations of Ordovician evaporite salt bearing sediments, 600 – 2,000 metres deep

and up to 740 metres thick, considered prospective for economic potash mineralisation.

The Tenements are centred on the McLarty sub-basin where the prospective Mallowa Salt unit is interpreted to be about

640 metres deep.

The Company has completed the following work:

(a) a review of published literature and previous exploration work for potash mineralisation within the Canning Basin;

(b) an assessment of the exploration potential for significant potash mineralisation within the Canning Basin; and

(c) a review of previous interpretations of the distribution of the Mallowa Salt within the Canning Basin by re-

interpreting seismic data integrated with petroleum well log data.

5 Details of the Offer (cont) 6 CompanyandProjectOverviewF

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Previous explorers have sampled and assayed intervals of the Mallowa Salt from selected Canning Basin petroleum wells.

This work identified low grade but encouraging potash mineralisation in petroleum well Fruitcake #1. Interpretation of

selected Canning Basin seismic survey and petroleum well log data has mapped, with reasonable confidence, the depth,

thickness and structure disruption and a realextent of the Mallowa Salt within the Canning Basin.

Compelling target areas have been identified on the Tenements. Drilling is scheduled to be completed in mid 2012, subject

to a successful capital raising under this Prospectus.

Further information on the above is contained in the Independent Geologist’s Report in Section 8 of this Prospectus.

6.3 Potash

The term potash is used to describe various minerals and chemicals valued primarily for their potassium content. The main

source of potash is potassium chloride.

Potash is a widely used nutrient fertiliser along with nitrogen and phosphorous. Fertiliser use accounts for approximately

95% of total potash consumption. The remaining balance is consumed in various industrial applications. Potash is

generally used as a component of N-P-K fertilisers, or compound fertilisers, which combine nitrogen (N), phosphate (P) and

potash (K).

There is no known substitute for potash and its role in contributing to the functions below cannot be substituted by any

other nutrient. It is an essential constituent of plant and animal life. Its primary role in plants is to support and improve:

(a) plant growth;

(b) water retention;

(c) nutrient value;

(d) enzyme activation;

(e) yield;

(f) taste; and

(g) disease resistance.

Potash also helps the milk production process in animals.

7.1 Introduction

The Shares offered under this Prospectus are considered highly speculative. An investment in the Company is not risk

free and the Directors strongly recommend potential investors consider the risk factors described below, together with

information contained elsewhere in this Prospectus, before deciding whether to apply for Shares and to consult their

professional advisers before deciding whether to apply for Shares pursuant to this Prospectus.

There are specific risks which relate directly to the business of the Company. In addition, there are other general risks,

many of which are largely beyond the control of the Company and the Directors. The risks identified in this section, or

other risk factors, may have a material impact on the financial performance of the Company and the market price of the

Shares.

The following is not intended to be an exhaustive list of the risk factors to which the Company is exposed.

7.2 Companyspecific

(a) Limitedhistory

The Company was only recently incorporated on 25 October 2011 and has no operating history and limited

historical financial performance. Minimal exploration has been conducted on the Tenements and the Company is

yet to conduct its own exploration activities. Under the terms of the Broadway Agreement the Company will not

commence these activities until the Company has been admitted to the Official List. No assurance can be given

that the Company will achieve commercial viability through the successful exploration and/or mining of the Project.

Until the Company is able to realise value from its projects, it is likely to incur ongoing operating losses.

(b) Explorationsuccess

The Tenements are at various stages of exploration, and potential investors should understand that mineral

exploration and development are high-risk undertakings.

There can be no assurance that exploration of the Tenements, or any other tenements that may be acquired in the

future, will result in the discovery of an economic ore deposit. Even if an apparently viable deposit is identified,

there is no guarantee that it can be economically exploited.

The future exploration activities of the Company may be affected by a range of factors including geological

conditions, limitations on activities due to seasonal weather patterns, unanticipated operational and technical

difficulties, industrial and environmental accidents, native title process, changing government regulations and

many other factors beyond the control of the Company.

The success of the Company will also depend upon the Company having access to sufficient capital, being able to

maintain title to its Tenements and obtaining all required approvals for its activities. In the event that exploration

programmes prove to be unsuccessful this could lead to a diminution in the value of the Tenements, a reduction in

the cash reserves of the Company and possible relinquishment of the Tenements.

The exploration costs of the Company described in the Independent Geologist’s Report in Section 8 of this

Prospectus are based on certain assumptions with respect to the method and timing of exploration. By their

nature, these estimates and assumptions are subject to significant uncertainties and, accordingly, the actual costs

may materially differ from these estimates and assumptions. Accordingly, no assurance can be given that the cost

estimates and the underlying assumptions will be realised in practice, which may materially and adversely affect

the Company’s viability.

(c) Contractualrisk

In order for the Company to be able to achieve its objectives the Company is reliant on Broadway Resources

complying with its contractual obligations under the Broadway Agreement with respect to maintaining the

Tenements in full force and effect, free from any liability to forfeiture or non-renewal.

Interests in tenements in Australia are governed by the respective State legislation and are evidenced by the

granting of licences or leases. Each licence or lease is for a specific term and carries with it annual expenditure and

reporting commitments, as well as other conditions requiring compliance.

In the event that Broadway Resources fails to comply with conditions of the Tenements which results in loss of

title to the Tenements the Company would lose its interest in the minerals rights being acquired pursuant to the

6 Company and Project Overview (cont) 7 riskFactorsF

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Broadway Resources Agreement. It may then be necessary for the Company to approach a court to seek a legal

remedy. Legal action can be costly and there can be no guarantee that a legal remedy will be ultimately granted on

the appropriate terms. The Company has no current reason to believe that Broadway will not meet and satisfy its

obligations under the Broadway Agreement.

(d) Overlappingpetroleumexplorationpermits

Each of the Tenements are overlapped, to various extents, by petroleum exploration permits (PEP) granted under

the Petroleum and Geothermal Energy Resources Act 1967 (WA). Specifically:





The Mining Act 1978 (WA) (MiningAct) provides that in the event that a dispute arises between the holder of the

relevant PEP (PEPHolder) and the Company concerning any operations carried out or proposed to be carried out

by the Company or the PEP Holder, the disputed matter will be referred to a warden of the mines as appointed

under the Mining Act (Warden). The Warden, as soon as practicable after such reference, shall inquire into the

dispute and provide a report to the Minister responsible for the Mining Act (Minister).

Upon receipt of the Warden’s report, the Minister may make such order and give such directions to the Company or

PEP Holder or to both of them as in the public interest and in the circumstances of the case may seem to him to be

just and equitable.

There can be no guarantee that there will be no conflicting interests or disputes between the PEP Holders and

the Company. However, the Company is currently in discussions with the PEP Holders as to the carrying out of

activities on the relevant overlapping areas of the Tenements. The Company has no reason to believe that it cannot

and will not carry out its activities in conjunction with the activities of the PEP Holders harmoniously.

(e) Explorationcosts

The exploration costs of the Company are based on certain assumptions with respect to the method and timing

of exploration. By their nature, these estimates and assumptions are subject to significant uncertainties and,

accordingly, the actual costs may materially differ from these estimates and assumptions. Accordingly, no

assurance can be given that the cost estimates and the underlying assumptions will be realised in practice, which

may materially and adversely affect the Company’s viability.

(f) Jointventurerisk

The Company is subject to the risk that changes in the status of any of the Company’s joint ventures (including

changes caused by financial failure or default by a participant in the joint venture) may adversely affect the

operations and performance of the Company.

(g) relianceonkeypersonnel

The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends

substantially on its senior management and its key personnel. There can be no assurance given that there will be

no detrimental impact on the Company if one or more of these employees cease their employment.

7.3 Industryspecific

(a) Environmental

The operations and proposed activities of the Company are subject to State and Federal laws and regulations

concerning the environment. As with most exploration projects and mining operations, the Company’s activities

are expected to have an impact on the environment, particularly if advanced exploration or mine development

proceeds. It is the Company’s intention to conduct its activities to the highest standard of environmental obligation,

including compliance with all environmental laws.

Mining operations have inherent risks and liabilities associated with safety and damage to the environment and the

disposal of waste products occurring as a result of mineral exploration and production. The occurrence of any such

safety or environmental incident could delay production or increase production costs. Events, such as unpredictable

rainfall or bushfires may impact on the Company’s ongoing compliance with environmental legislation, regulations

and licences. Significant liabilities could be imposed on the Company for damages, clean up costs or penalties in the

event of certain discharges into the environment, environmental damage caused by previous operations or non-

compliance with environmental laws or regulations.

The disposal of mining and process waste and mine water discharge are under constant legislative scrutiny and

regulation. There is a risk that environmental laws and regulations become more onerous making the Company’s

operations more expensive.

Approvals are required for land clearing and for ground disturbing activities. Delays in obtaining such approvals can

result in a delay to anticipated exploration programmes or mining activities.

(b) Failuretosatisfyexpenditurecommitments

Interests in tenements in Western Australia are governed by the mining acts and regulations that are current in

Western Australia and are evidenced by the granting of licences or leases. Each licence or lease is for a specific term

and carries with it annual expenditure and reporting commitments, as well as other conditions requiring compliance.

Consequently, the Company could lose title to or its interest in the Tenements if licence conditions are not met or if

insufficient funds are available to meet expenditure commitments.

(c) Minedevelopment

Possible future development of a mining operation at any of the Company’s projects is dependent on a number of

factors including, but not limited to, the acquisition and/or delineation of economically recoverable mineralisation,

favourable geological conditions, receiving the necessary approvals from all relevant authorities and parties,

seasonal weather patterns, unanticipated technical and operational difficulties encountered in extraction and

production activities, mechanical failure of operating plant and equipment, shortages or increases in the price

of consumables, spare parts and plant and equipment, cost overruns, access to the required level of funding and

contracting risk from third parties providing essential services.

If the Company commences production, its operations may be disrupted by a variety of risks and hazards which

are beyond its control, including environmental hazards, industrial accidents, technical failures, labour disputes,

unusual or unexpected rock formations, flooding and extended interruptions due to inclement of hazardous weather

conditions and fires, explosions or accidents. No assurance can be given that the Company will achieve commercial

viability through the development or mining of its projects and treatment of ore.

(d) NativetitleandAboriginalHeritage

In relation to tenements in which the Company has an interest or will in the future acquire such an interest, there

may be areas over which legitimate common law native title rights of Aboriginal Australians exist. If native title

rights do exist, the ability of the Company to gain access to tenements (through obtaining consent of any relevant

landowner), or to progress from the exploration phase to the development and mining phases of operations may be

adversely affected.

Please refer to the Solicitor’s Report on Tenements in Section 10 of this Prospectus for further details.

Further to this, it is possible that an Indigenous Land Use Agreement (ILUA) may be registered against one or

more of the tenements in which the Company has an interest. The terms and conditions of any such ILUA may be

unfavourable for, or restrictive against, the Company.

The Directors will closely monitor the potential effect of native title claims involving tenements in which the

Company has or may have an interest.

(e) Operations

The operations of the Company may be affected by various factors, including failure to locate or identify mineral

deposits, failure to achieve predicted grades in exploration and mining, operational and technical difficulties

encountered in mining, difficulties in commissioning and operating plant and equipment, mechanical failure or plant

breakdown, unanticipated metallurgical problems which may affect extraction costs, adverse weather conditions,

industrial and environmental accidents, industrial disputes and unexpected shortages or increases in the costs of

consumables, spare parts, plant and equipment.

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No assurances can be given that the Company will achieve commercial viability through the successful exploration

and/or mining of its tenement interests. Until the Company is able to realise value from its projects, it is likely to

incur ongoing operating losses.

(f) resourceestimates

The Company does not presently have any JORC Code compliant resources on the Tenements. In the event

a resource is delineated this would be an estimate only. An estimate is an expression of judgement based on

knowledge, experience and industry practice. Estimates which were valid when originally calculated may alter

significantly when new information or techniques become available. In addition, by their very nature, resource

estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. As

further information becomes available through additional fieldwork and analysis, the estimates are likely to change.

This may result in alterations to development and mining plans which may, in turn, adversely affect the Company’s

operations.

(g) Tenureandaccess

Mining and exploration tenements are subject to periodic renewal. There is no guarantee that current or future

tenements or future applications for production tenements will be approved.

Tenements are subject to the applicable mining acts and regulations in Western Australia. The renewal of the term

of a granted tenement is also subject to the discretion of the relevant Minister. Renewal conditions may include

increased expenditure and work commitments or compulsory relinquishment of areas of the tenements comprising

the Company’s projects. The imposition of new conditions or the inability to meet those conditions may adversely

affect the operations, financial position and/or performance of the Company.

Please refer to the Solicitor’s Report on Tenements in Section 10 of this Prospectus for further details.

7.4 Generalrisks

(a) Economic

General economic conditions, movements in interest and inflation rates and currency exchange rates may have an

adverse effect on the Company’s exploration, development and production activities, as well as on its ability to fund

those activities.

Further, share market conditions may affect the value of the Company’s quoted securities regardless of the

Company’s operating performance. Share market conditions are affected by many factors such as:

(i) general economic outlook;

(ii) metal prices;

(iii) interest rates and inflation rates;

(iv) currency fluctuations;

(v) changes in investor sentiment toward particular market sectors;

(vi) the demand for, and supply of, capital; and

(vii) terrorism or other hostilities.

The market price of securities can fall as well as rise and may be subject to varied and unpredictable influences

on the market for equities in general and resource exploration stocks in particular. Neither the Company nor the

Directors warrant the future performance of the Company or any return on an investment in the Company.

(b) Commoditypricevolatilityandexchangeraterisks

If the Company achieves success leading to mineral production, the revenue it will derive through the sale

of commodities exposes the potential income of the Company to commodity price and exchange rate risks.

Commodity prices fluctuate and are affected by many factors beyond the control of the Company. Such factors

include supply and demand fluctuations for precious and base metals, technological advancements, forward selling

activities and other macro-economic factors.

Furthermore, international prices of various commodities are denominated in United States dollars, whereas

the income and expenditure of the Company are and will be taken into account in Australian currency, exposing

the Company to the fluctuations and volatility of the rate of exchange between the United States dollar and the

Australian dollar as determined in international markets.

(c) Insurancerisks

The Company intends to insure its operations in accordance with industry practice. However, in certain

circumstances, the Company’s insurance may not be of a nature or level to provide adequate insurance cover.

The occurrence of an event that is not covered or fully covered by insurance could have a material adverse

effect on the business, financial condition and results of the Company.

Insurance against all risks associated with mining exploration and production is not always available and where

available the costs can be prohibitive.

(d) Competitionrisks

The industry in which the Company will be involved is subject to domestic and global competition. Although

the Company will undertake all reasonable due diligence in its business decisions and operations, the Company

will have no influence or control over the activities or actions of its competitors, whos activities or actions may,

positively or negatively, affect the operating and financial performance of the Company’s projects and business.

(e) Additionalrequirementsforcapital

The Company’s capital requirements depend on numerous factors. Depending on the Company’s ability to

generate income from its operations, the Company may require further financing in addition to amounts

raised under the capital raising. Any additional equity financing will dilute shareholdings, and debt financing,

if available, may involve restrictions on financing and operating activities. If the Company is unable to obtain

additional financing as needed, it may be required to reduce the scope of its operations and scale back its

exploration programmes as the case may be. There is however no guarantee that the Company will be able to

secure any additional funding or be able to secure funding on terms favourable to the Company.

(f) Governmentpolicychanges

Adverse changes in government policies or legislation may affect ownership of mineral interests, taxation,

royalties, land access, labour relations, and mining and exploration activities of the Company. It is possible that

the current system of exploration and mine permitting in Western Australia may change, resulting in impairment

of rights and possibly expropriation of the Company’s properties without adequate compensation.

(g) regulatoryrisks

The Company’s exploration and development activities are subject to extensive laws and regulations relating

to numerous matters including resource licence consent, conditions including environmental compliance

and rehabilitation, taxation, employee relations, health and worker safety, waste disposal, protection of the

environment, native title and heritage matters, protection of endangered and protected species and other

matters. The Company requires permits from regulatory authorities to authorise the Company’s operations.

These permits relate to exploration, development, production and rehabilitation activities.

Obtaining necessary permits can be a time consuming process and there is a risk that the Company will not

obtain these permits on acceptable terms, in a timely manner or at all. The costs and delays associated with

obtaining necessary permits and complying with these permits and applicable laws and regulations could

materially delay or restrict the Company from proceeding with the development of a project or the operation

or development of a mine. Any failure to comply with applicable laws and regulations or permits, even if

inadvertent, could result in material fines, penalties or other liabilities. In extreme cases, failure could result in

suspension of the Company’s activities or forfeiture of one or more of the Tenements.

(h) Investmentspeculative

The above list of risk factors ought not to be taken as exhaustive of the risks faced by the Company or by

investors in the Company. The above factors, and others not specifically referred to above, may in the future

materially affect the financial performance of the Company and the value of the Shares offered under this

Prospectus.

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Therefore, the Shares to be issued pursuant to this Prospectus carry no guarantee with respect to the payment of

dividends, returns of capital or the market value of those Shares.

Potential investors should consider that the investment in the Company is highly speculative and should consult

their professional advisers before deciding whether to apply for Shares pursuant to this Prospectus.

Date: 22/11/2011

Report No: R334.2011

IndependentGeologicalreportHIGHFIELDrESOUrCESLIMITEDMcLArTYPOTASHPrOJECTCanningBasin,WesternAustralia

byDr. S. DorlingMAIG

For: Highfield Resources LimitedLevel 1, 33 Richardson StPO Box 826, West Perth

Approved:

Jeff Elliot Managing Director

7 Risk Factors (cont) 8 IndependentGeologist’sreportF

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Highfield Resources – Prospectus 2928 Highfield Resources – Prospectus

Dear Sirs,

CSA Global Pty Ltd (“CSA Global”) has been commissioned by Highfield Resources Limited, (“Highfield” or “Company”) to provide

an Independent Geologist’s Report on the McLarty Potash Project (the “Project”), located in Central Western Australia, in which

Highfield is earning an interest. This report is to be included in a Prospectus to be lodged with the Australian Securities and

Investments Commission (“ASIC”) on or about 5 December 2011, offering for subscription up to 20 million Shares at an issue

price of 20¢ per Share (the “Prospectus”), to raise up to $4 million (before costs associated with the issue). The funds raised

will be used for the purpose of exploration and evaluation of the Project. CSA Global has not prepared an Independent Valuation

of the McLarty Project, we have not been requested to comment on the fairness or reasonableness of any vendor or promoter

considerations, and we have therefore not offered any opinion on these matters.

CSA Global has based its review of the Project on information provided by Highfield; along with technical reports prepared by

government agencies and other relevant published and unpublished data. No site visit was undertaken to the Project by the

author of this report. It was believed that a site visit was unnecessary given the nature of the Project. CSA Global has made all

reasonable enquires to establish the authenticity and completeness of the technical data on which it has relied and a final draft

of the report was also provided to Highfield, along with a written request to identify any material errors or omissions, prior to

lodgement. Where appropriate, and in accordance with ASIC Practice Note 55 and Update 183, consent has been obtained to quote

opinions expressed in unpublished reports prepared by other professionals on the property concerned.

The Project is understood to comprise three Exploration Licences (E4/1974, E45/3546 and E4/1934) covering an aggregate area

of approximately 1,900 square kilometres (km2). The tenements are held by Broadway Resources Pty Limited (Broadway) and

Highfield can progressively earn an interest in the project completing the following conditions:

• an initial 10% interest for issuing Broadway 3,000,000 shares in Highfield and reimbursing Broadway’s costs

up to $150,000;

• an additional 40% (total 50%) interest in the project by drilling one drill hole to target depth and spending at least

$500,000 on or before the second anniversary of Highfield being admitted to the Official List of the ASX; and

• an additional 30% (total 80%) in the project by undertaking exploration to establish an Inferred Mineral Resource of

100Mt at 20% K2O and spending a further $1,000,000 on or before the fourth anniversary of Highfield being admitted to

the Official List of the ASX.

The legal status of the Exploration Licences has not been independently verified by CSA Global. The present status of tenements

and agreements listed in this report is based on information provided by Highfield, and the report has been prepared on the

assumption that the tenements are, or will prove to be, lawfully accessible for exploration and evaluation purposes.

The Independent Geologist’s Report has been prepared in accordance with the Code and Guidelines for Assessment and Valuation

of Mineral Assets and Mineral Securities for Independent Expert Reports (“The Valmin Code”), which is binding upon Members

of the Australasian Institute of Mining and Metallurgy (AusIMM), the Australian Institute of Geoscientists (AIG), and the rules and

guidelines issued by such bodies as the ASIC and Australian Stock Exchange (ASX), which pertain to Independent Expert Reports.

The mineral properties in which Highfield has, or is earning, an interest are considered to be “Exploration Projects” that are

inherently speculative in nature. Regardless, CSA Global considers that the Project has been acquired on the basis of reasonable

technical merit. The property is also considered to be sufficiently prospective, subject to varying degrees of exploration risk, to

warrant further exploration and assessment of its economic potential, consistent with the proposed program.

The primary exploration and evaluation program summarised in the report are based on activities on the McLarty tenements.

Highfield plans to spend approximately $3.0 million in the two years of assessment of the Project with work comprising target

definition, land access and heritage studies, drilling of deep exploration drill holes and associated logging, sampling and analysis.

Exploration in subsequent years will be contingent on the results of the initial work but is likely to include further drilling,

geophysics and studies into the evaluation of the economic potential of the Project.

Highfield intends to raise up to $4 million under the Prospectus. At least 50% of the liquid assets held or funds proposed to be

raised by Highfield are understood to be committed to the acquisition, exploration, development and administration of the mineral

properties, satisfying the requirements of ASX Listing Rules 1.3.2(b) and 1.3.3(b). CSA Global also understands that Highfield has

sufficient working capital to carry out its stated objectives, satisfying the requirements of ASX Listing Rule 1.3.3(a). Highfield

has prepared staged exploration and evaluation programs, specific to the potential of the project, which are consistent with the

budget allocations. CSA Global considers that the McLarty properties have sufficient technical merit to justify the proposed

programs and associated expenditure, providing they are appropriately staged, satisfying the requirements of ASX Listing Rule

1.3.3(a). The proposed exploration budgets are also sufficient to meet the anticipated minimum annual statutory expenditure

commitments on the project tenements.

8 Independent Geologist’s Report (cont)F

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The Independent Geologist’s Report has been prepared on information available up to and including 10th November 2011. CSA

Global has provided consent for the inclusion of the Independent Geologist’s Report in Section 8 of the Prospectus, in the form

and context in which the report appears, and has not withdrawn that consent before lodgement of the Prospectus with the ASIC.

CSA Global is an exploration, mining and resource consulting firm, which has been providing services and advice to the

international minerals industry and financial institutions since 1984. The primary author of this report is Dr Simon Dorling who is

a professional geologist with 20 years experience in the evaluation of mineral properties internationally. Dr Dorling is a Principal

Geologist with CSA Global and is a Member in good standing of the AIG. The author has the appropriate relevant qualifications,

experience, competence and independence to be considered an “Expert” under the definitions provided in the VALMIN Code.

Neither CSA Global, nor the Experts or Specialists responsible for compiling this report have, or have had previously, any

material interest in Highfield or the mineral properties in which Highfield has, or is earning, an interest. Our relationship with

Highfield is solely one of professional association between client and independent consultant. This report is prepared in return for

professional fees based upon agreed commercial rates and the payment of these fees is in no way contingent on the results of this

report.

Yours faithfully,

Dr Simon Dorling

3 McLarty Project

3.1 Project Location

4 Licence Area, Location and Status

5 Geology

5.1 Regional Setting

5.1.1 Structural-Stratigraphic Framework

5.1.2 Ordovician-Silurian Stratigraphy

5.2 Project Geology and Mineralisation

6 Exploration History

6.1 Introduction

6.2 BHP Minerals

6.3 Poseidon

6.4 Rio Tinto

6.5 Conclusion

7 Potash Mineralisation

7.1 Genesis of Potash Mineralisation

7.2 Salt-Bearing Basins of Australia

7.2.1 Adavale Basin, Queensland

7.2.2 Amadeus Basin, Central Australia

7.2.3 Bonaparte Basin, Northern Australia (majority

offshore)

7.2.4 Canning Basin, Western Australia

7.2.5 Carnarvon Basin, Western Australia

7.2.6 Officer Basin, Central Australia

7.3 Playa Lakes

7.4 Prospectivity for Potash in ancient

Australian Basin

7.4.1 Adavale Basin

7.4.2 Amadeus Basin

7.4.3 Bonaparte Basin

7.4.4 Canning Basin

7.4.5 Carnarvon Basin

7.4.6 Officer Basin

8 Exploration Potential and Target

8.1 Exploration model

8.2 Exploration target

9 Exploration Rational and Strategy

10 Glossary

11 References

Figures

Figure 3.1: Project location map

Figure 5.1: Regional geological map

(Kennard et al, 1994)

Figure 5.2: Regional geological cross section

(Romine et al, 1994)

Figure 5.3: Ordovician-Silurian stratigraphic

and sequence stratigraphic tectonic

interpretation

Figure 5.4: Paleo-geographic maps for

supersequences B1 and B2 (Romine

et al., 1994)

Figure 7.1: Salt bearing basin of Australia.

Figure 8.1: Basinwide evaporite class

(after Warren, 2006)

Figure 8.2: Basinwide evaporite settings

(after Warren, 2006)

Figure 8.3: Potash and the secular evolution of

Phanerozoic seawater.

(from Warren, 2006)

Figure 8.4: Contour map of the base of the salt

sequence showing a northwest trending

low (deep) area in the southwest of the

project area (hatched) – identified as

a target area for exploration (Contour

image, Rio Tinto, 2009).

Figure 8.5: Contour map of the thickness of the

salt sequence showing a northwest

trending slope leading to an increased

thickness in the southwest of the project

area (hatched) – this is a target area

for exploration (Contour image, Rio Tinto,

2009).

Figure 8.6: Potential drill hole locations.

Tables

Table 4.1: Tenement details.

Table 9.1: Exploration budget for McLarty Potash

Project


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3 McLartyProject

3.1 ProjectLocation

The McLarty Potash Project is located in a remote and uninhabited portion of the northern Great Sandy Desert of the

southern Kimberley region about 1700km north of Perth, Western Australia. The project area covers much of the SE5115

McLarty Hills 1:250,000 map sheet but also extends onto, and covers smaller marginal portions of, the SE5116 Crossland

and SF5103 Joanna Springs 1:250,000 map sheets. Broome, about 250km to the northwest, is the nearest major town and

port (Figure 3 1).

Figure 3 1: Project location map

Access to the McLarty Potash Project area is via the Great Northern Highway and the Dampier Downs Road as well as

various petroleum exploration desert tracks and cleared seismic grid lines (Figure 3 1).

4 LicenceArea,LocationandStatus

The Ngurrara indigenous community are the native title claimants in the area. The Ngurrara native title claim WC96/32,

lodged 22 March 1996, covers most of the McLarty Potash Project area. The Ngurrara native title determination was

ratified by the Federal Court on 9th November 2007. The Ngurrara community are represented by the Kimberley Land

Council (KLC) based in Kununnurra.

The Company has informed CSA Global that Broadway has negotiated a Native Title, Heritage Protection and Mineral

Exploration Agreement with the KLC on behalf of the Native Title Claimants in the area. Negotiation of this Agreement will

allow exploration to proceed on the tenements. CSA has not verified this agreement.


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Table 4 1: Tenement details.

TenementNo Applicationdate Grantdate Holder Status Areakm2

E4/1934 4th Aug. 2009 7th Feb. 2011 Broadway Resources Pty Ltd Granted 609

E4/1974 27th Oct. 2009 1st Mar. 2011 Broadway Resources Pty Ltd Granted 648

E45/3546 28th Oct. 2009 5th Sep. 2011 Broadway Resources Pty Ltd Granted 647.4

Total 1904.4

5 Geology

5.1 regionalSetting

The McLarty Potash Project area is located in the central Canning Basin. The subsurface geological history of the Canning

Basin has been reconstructed from interpretations of a limited number of very wide-spaced petroleum exploration drill

holes, seismic survey data as well as regional gravity and magnetic survey data.

The Canning Basin covers 550,000km2 of which 430,000km2 is onshore (Figure 5 1).

Figure 5 1: Regional geological map (Kennard et al, 1994)

It contains 10-18km of Early Ordovician through to Early Cretaceous sedimentary rocks overlying Precambrian basement. It

is a long-lived, multi-phase, peri-cratonic basin which has undergone a complex structural evolution (Hocking et al., 2008).

During the 500 million year geological history of the Canning Basin various parts of the basin have undergone accelerated

subsidence and sedimentation. The basin has been controlled by several major (basin wide) tectonic events that have

resulted in the development of at least six basin phases.

This report focuses on the southern part of the Canning Basin, the development of which peaked during the Ordovician

to Silurian period from about 490 to 410 million years ago (Ma). The southern portion of the Canning Basin contains thick

evaporite sediments (of Late Ordovician age) of which some are possibly mineralised with potash.

5.1.1 Structural-StratigraphicFramework

The onshore Canning Basin is comprised of several sub-basins. The NW-SE trending contiguous Broome and Crossland

platforms separate the northern Canning Basin which includes Fitzroy Trough and Gregory Sub-basins to the north from

the Willara and Kidson and McLarty Sub-basins to the south (see Figures 5-1 and 5-2). The McLarty Sub-basin (Figure 5 1)

represents an interpreted small sub-basin partly overlying the Broome Platform and is slightly offset to the east and north

of the Willara and Kidston sub-basins respectively. Although geographically adjacent, the exact genetic relationship of the

McLarty Sub-basin with respect to neighbouring sub-basins remains uncertain.

The sediments within the Canning Basin are little deformed and are, in general, horizontal to gently dipping, generally

around 2-4°. There are large broad anticlines and synclines and localised zones of local stronger disturbance and faulting,

particularly along the margin of the basin. Some anticlines are associated with salt diapirism. The Broome Arch is a large

antiformal structure that covers much of the McLarty Hills 1:250,000 map sheet.

The Fitzroy Trough and Gregory Sub-basin contain in the order of 10-18km of Palaeozoic and lesser Mesozoic sediments.

The southern Kidson and Willara sub-basins are filled with 4-6km of Ordovician-Silurian and Permian sediments with

widespread Mesozoic cover. The Kidson sub-basin contains up to 6km of sediments that includes 3km of Ordovician-

Silurian sediments overlain by Devonian, Upper Carboniferous-Permian and Jurassic-Cretaceous sediments. The Willara

Sub-basin contains 4.5km of Ordovician-Silurian sediments beneath comparatively thin Permian and Mesozoic sediments.

The Canning Basin area has undergone six basin phases, the first three of which affected the deposition of Ordovician-

Silurian sediments. The earliest basin phase commenced with extension and rapid subsidence in the Early Ordovician

(Figure 5 3). Rifting was followed by a prolonged sag stage characterised by widespread evaporitic and playa conditions

(Carribuddy Group; Supersequences B I, B2, Figure 5 3, Kennard et al 1995, Romine et al, 1994). The second phase was

initiated by a period of minor folding, regional uplift and erosion in the earliest Devonian (Prices Creek Compressional

Movement), and includes laterally extensive, aeolian and terrestrial ‘pre-rift’ deposits (Tandalgoo and Worral formations;

Super-sequence C).

The fourth and fifth phase of tectonic activity incorporates major extension, rifting and rapid subsidence predominantly

in the northern part of the Canning Basin. The sixth and final tectonic phase was triggered by regional dextral wrench

movements in the Late Triassic to earliest Jurassic (Fitzroy Transpression Movement), see Figure 5-3.

Although the current structural configuration of the Canning Basin is the complex product of several phases of extension

and transpression (Kennard et al, 1994), the geometry of the Ordovician-Silurian basin is comparatively well preserved

south of the Dampier Range Fault system (Figure 5 1). The separation of the southern Canning Basin into the Willara,

Kidson and McLarty Sub-basins is a reflection of the structural differentiation and slightly different geological history

above a broad crustal weakness zone.

In the southern Canning Basin, the Ordovician-Silurian Megasequence accumulated in a broad intracratonic depression

containing fault-controlled half graben, associated terraces and broad platforms (Brown et aI., 1984, Figure 5 2).

Major depo-centres occur in the Willara and Kidson sub-basins with a subsidiary depo-centre in the McLarty and Samphire

sub-basins. The Anketell Shelf and Tabletop Shelf form a shallow basement along the southern flank of the Kidson Sub-

basin. The structural subdivision outlined above describes the present configuration of the basin.


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Figure 5 2: Regional geological cross section (Romine et al, 1994)

5.1.2 Ordovician-SilurianStratigraphy

The oldest units of the Ordovician-Silurian depositional cycle are clastic sediments of the Wilson Creek Sandstone, Nambeet

and Willara Formation and the carbonate rocks of the Nita Formation (Figure 5 3). Laterally extensive, bedded evaporite

sediments, covering 210,000km2, form part of the Upper Ordovician-Lower Silurian Carribuddy Group (Figure 5 3) which overly

the older sediments. The evaporites, comprising dolomite, halite (NaCl), siltstone, anhydrite (CaSO4), sandstone and limestone,

were deposited in the Kidson and Willara Sub-basins, and on the Broome Platform (including the McLarty Sub-basin). Facies

relationships conform to classical models for evaporite basins with basin-ward transition from clastic through carbonate- and

anhydrite- (gypsum) to halite-dominated sediments. The stratigraphy of the Carribuddy Group is shown in Figure 5 3. The

Carribuddy Group does not outcrop anywhere in the Canning Basin but it is up to 1500m thick in the centre of the Kidson Sub-

basin and about 1200m in the McLarty Basin.

The Carribuddy Group’s two main evaporite units are the “Mallowa Salt” and “Minjoo Salt” (Figure 5 3). The Mallowa Salt is

the largest halite accumulation in Australia. Fourteen petroleum and potash exploration drill holes intersect thick layers of

salt within the Canning Basin. The current understanding of the distribution of salt deposits in the basin has not changed

significantly since early modelling of the deposits in 1980.

The salt formations of the area are capped by shale and inbedded carbonates of the Sahara Formation of the Carribuddy Group.

Figure 5 3: Ordovician-Silurian stratigraphic and sequence stratigraphic tectonic interpretation

5.2 ProjectGeologyandMineralisation

The surface geology of the SE/51-15 McLarty Hill 1:250,000 scale map sheet was described by Gibson (1982) of the Geological

Survey of Western Australia (GSWA). The surface geology of the project area is dominated by aeolion sand plains and

longitudinal seif dunes up to 10m high. Cenozoic (Palaeogene) lacustrine claypans and calcrete duricrusts, intermittently

exposed amongst the ubiquitous Quaternary aeolian sands, are associated with a large, broad palaeochannel. Outcrops of

Jurassic and Cretaceous sediments are sparse and locally covered by lateritic soil profiles that include pisolitic sandy gravels

and ferricrete. The best outcrops are the Jurassic sediments forming the McLarty Hills.

The McLarty #1 petroleum exploration drill hole tested a location on the Broome Platform which was interpreted to be an

anticline fold closure and was drilled to basement.

In the Kidston Sub-basin salt layers are at more than 2000m depth. The evaporite sequences are substantially shallower

in the Willara sub-basin and shallowest in the McLarty sub-basin. Within the McLarty Sub-basin, the Mallowa Salt is at

640-700m depth and up to 740m thick. Evaporite deposits within the McLarty and eastern Willara Sub-basins have a very

similar thickness and they might be genetically connected. There are no drill holes in the 85km intervals between the

evaporite intersections within each sub-basin.

The Mallowa Salt is a cyclic evaporite unit of variable thickness. The thickest sections, around 730-740m thick, are in the

McLarty and eastern Willara Sub-basins in the McLarty #1 and Brooke #1 drill holes respectively (Figure 5 1). Deep drill

holes in the Canning Basin are very widely spaced so it is possible that thicker sections of the unit might be present.

The Mallowa Salt is comprised of halite-mudstone-anhydrite-dolomite cycles 2-5m thick. Minerals include halite, dolomite,

anhydrite and quartz together with haematitic pigment and haematite euhedra. The halite is interbedded with dominantly

red-brown and lesser grey to black mudstone and rare anhydrite and dolomite. Halite veins are also common in the

mudstone. The halite is chaotic and muddy, and varies from colourless to colour-banded red-brown to red depending on

the quantity of clay and iron oxide impurities. Minor dolomite and dolomitic siltstone with claystone occur at the base of

the formation. These characteristics of the salt horizons support the interpretation of the southern Canning Basin being of

the “basinwide evaporites”-type deposited under shallow water / shallow basin conditions (cf. section 8.1).

The Minjoo Salt is an evaporitic sequence of halite, minor claystone and dolomite up to 166m thick that underlies

the Mallowa Salt. Drill holes have intersected the formation in the Kidson Sub-basin and the sequences overlying the

neighbouring shelves. The Minjoo Salt grades into dolomite and shale of the Mount Troy Formation along the edges of the

Broome Platform.

In the proposed integrated sequence stratigraphic interpretation of Romine et al (1994) the formation of the salt

(Supercycle B1, Figure 5 3) occurs when the basin had reached a mature stage and the rate of subsidence was low. The

Larapintine seaway (Ordovician-Silurian Ocean) became discontinuous and fragmented, and the low latitude and arid

climate resulted in an increasingly evaporitic basin. Sedimentation was dominated by marginal marine, playa and saltern

facies coincident with gradual restriction or circulation and basin-wide regression that culminated in salt deposition.

The basinward shift in facies resulted in the development of lowstand salterns, and deposition of the Minjoo Salt and its

associated playa facies (Mt Troy Formation) in depressions within the WiIIara Sub-basin and in the vicinity of McLarty #1

(McLarty Sub-basin, Figure 5 4). Minjoo Salt deposition was restricted to the Willara and McLarty Sub-basins, and did not

occur in the Kidson Sub-basin (Figure 5 4a). The restricted salt distribution implies the existence of a feature with positive

relief between the two sub-basins (Munro Terrace, Figure 5 1 ). This feature may originate from differential compaction

of the A2 shale, or differential subsidence related to variable composition and structural behaviour of the underlying

basement blocks.

The transgression at the base of the Nibil Formation (WilIara #1) inundated the saltern and playa facies, and terminated

salt deposition. This resulted in the deposition of proximal marine calcareous and dolomitic claystone, interbedded

with thin beds of limestone and dolostone with scattered anhydrite crystals. A second regressive period and increased

restriction re-established a return to halite deposition in saltern and playa environments at the base of the Lower Mallowa

Salt (Figure 5 4). The Mallowa Salt was deposited during the super-sequence lowstand and sediments of the Sahara

Formation accumulated as transgressive and highstand deposits.

The shaley dolostones-anhydrite-halite terrigenous mudstone cycles of the Mallowa Salt (Cathro et aI., 1992) and highly

oxidised siltstone, fine grained sandstone and dolostone deposits or the Sahara Formation are a regressive super-sequence

deposited during the Ordovician Silurian mega-sequence. The thickest sections of Mallowa Salt are preserved in the Willara

and Kidson sub-basins, on the eastern Broome Platform and the McLarty Sub-basin (Figure 5 2).

Salt in Frome Rocks #1 and salt intersected in Mirbelia #2 (Figure 5 1) indicate that salterns also extended as far north

as the present southern margin of the Fitzroy Trough. In the Willara, Kidson and McLarty sub-basins compaction-related

depressions above the thick shale deposits of Supersequence A2 may have created areas of increased accommodation

during the various stages of salt deposition.

Further accommodation was cyclic, with loading during transgression, then salt precipitation capped by playa facies during

regression. These cycles have been documented by Cathro et aI. (1992) in core from Brooke #1 and can be seen in other

well’s from within these depocentres. The increase in frequency and decrease in thickness of log-based cycles suggests

deposition during the stillstand of the eustatic low. Low amplitude, high frequency sea level oscillations account for the

flooding-desiccation cycles, while thinning upward trends indicate filling of the basin.


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Figure 5 4: Paleo-geographic maps for supersequences B1 and B2 (Romine et al., 1994)

As the regressive cycle of salt deposition neared its end, and the salterns contracted, increased quantities of shale and

siltstone were deposited in each salt cycle (Pegasus #I & McLarty #I, Figure 5 4). The phase of lowstand salt accumulation

ended with, basin-wide deposition of the dolostone·nodular anhydrite marker bed. The basin-wide occurrence of a

stratigraphic marker suggests that the depositional surface was essentially flat at this time of minimum accommodation.

6 ExplorationHistory

6.1 Introduction

Evaporites were first identified in the Canning Basin in the Frome Rocks #1 petroleum exploration drill hole completed

in 1959. During the 1960s the Kidson #1 and Willara #1 petroleum exploration drill holes intersected thick evaporitic salt

deposits in the Kidson and Willara Sub-basins, respectively.

6.2 BHPMinerals

From 1985 to 1989 BHP conducted exploration for potash in the Willara Sub-basin. BHP’s work included the following (BHP

Minerals, 1989 a, b):

• A literature survey on the stratigraphy and salt deposition of the Canning Basin,

• Geochemical analysis of Vela #1 drill hole samples and examination of McLarty #1 and Munda #1 drill cores,

• Re-processing, re-plotting and interpretation of existing petroleum exploration seismic data;

• Re-processing, plotting and interpretation of Bouguer gravity data; and

• Drilling and sampling of two deep stratigraphic holes (Gingerah Hill #1 and Brooke #1).

BHP’s potash tenements over the Willara Sub-basin covered two areas, totalling 6700km2, named the Gingerah Hill and

Dragon Tree Soak prospects. The tenement packages were located proximal to Munda #1 drill hole and over the deepest

portions of the basin. The Munda #1 was originally drilled by WAPET to the top of the Mallowa Salt at 1,067m depth.

BHP identified the tenement area as being the most restricted portion of the Canning Basin at the time of salt deposition.

Gravity lows were interpreted to be domal salt structures or thickened salt deposits in topographic lows at the time of salt

deposition. High bromine reported in evaporites in the adjacent McLarty #1 drill hole, some 100km away, was considered a

favourable indicator for potash formation.

BHP drilled the Gingerah Hill #1 and Brooke #1 stratigraphic holes to test the potash potential of the Mallowa Salt evaporite

at depth. Gingerah Hill #1 experienced difficulties that resulted in the hole being abandoned within, but an estimated 300m

above the base of, the Mallowa Salt. The hole cored through 478m of Mallowa Salt from 990m to 1468m. The core was

cut and sampled at 1m intervals and assayed for bromine (Br). Tachyhydrite was identified from brine “sweating” from the

core, while carnallite and sylvite were identified by x-ray diffraction (XRD).

Brooke #1 was drilled to 2035.1m depth. It intersected a 735m interval of Mallowa Salt between 977m and 1712m. Drilling

problems resulted in most of the salt interval not being cored. Down-hole logging for temperature/differential temperature,

gamma, density, calliper and multi-channeled sonic was completed. The available core was cut and sampled at 2m intervals

while cuttings were similarly sampled at 2m intervals. Separated salts and whole samples were analysed for Na2O,K2O and

MgO using atomic absorption spectroscopy (AAS) and for Br using x-ray fluorescence (XRF).

BHP identified anomalous Br and K2O in the Mallowa Salt. Separated salt from the cuttings assayed up to 2.55% K

2O in

association with 16% carnallite. There was little correlation between results of analyses of the separated salt and whole

samples. Most of the highest separated salt K2O values were returned from cutting samples in shale.

Both holes drilled by BHP intersected the Mallowa Salt and low grade potash was identified in the unit. However, neither

hole returned continuous core for the Mallowa Salt section. Drill hole Gingerah Hills #1 did not test the entire salt section.

BHP surrendered the tenements based on the results.

6.3 Poseidon

Poseidon Limited studied bromine analyses of cuttings and core from previously drilled oil and gas wells in an attempt

to prioritise potash exploration targets. The programme was abandoned following recognition that the samples had

been contaminated by K-salt saturated drilling mud. They concluded that the cuttings and core from 12 wells were too

contaminated by K-salt saturated drilling mud to draw a meaningful conclusion from geochemical sampling and assaying.

6.4 rioTinto

Rio Tinto reviewed literature and collated GIS data as part of its preliminary assessment of the geology of the Canning

Basin evaporite deposits and potash mineralisation (Rio Tinto, 2009). The work included a collation and evaluation of the

depth and thickness of the evaporite deposits intersected within Canning Basin drill holes.

Rio chose a geochemical approach to assess the potash potential of the Mallowa Salt. They collected cuttings of the

Mallowa Salt unit from petroleum exploration drill holes Fruitcake #1, Carina #1, Leo #1, Munda #1, Musca #1, Vela #1,

Willara #1 and McLarty #1. Of the holes sampled, Fruitcake #1 and McLarty #1 are located in the McLarty Sub-basin while

the other are located in the Willara Sub-basin.

Values of over 200ppm Br in the McLarty #1 drill hole samples suggests that the brines had reached concentration levels

where potash precipitation occurred. Although the anomalous Br values are associated with zones containing less than

0.2% K, the presence of elevated Br is considered encouraging.

Samples from Fruitcake #1 returned encouraging K2O values - 30m at 1.62% K

2O (895-925m). However the Fruitcake #1

well completion report indicated that the hole was drilled with KCl salt-saturated mud and therefore there is potential for

the drilling mud to have contaminated cutting samples with KCl (Rio Tinto, 1989).

Selected samples from Fruitcake #1 drill hole were also submitted for XRD analysis to assess whether the elevated

chemical results were solely due to contamination. The XRD analyses identified sylvite (KCl) as the K-bearing mineral

associated with zones of low grade K mineralisation. Although all salt drilling in the southern Canning Basin was conducted

with KCl-saturated mud sylvite was only identified over a particular interval that was sampled which suggests that insitu

potash mineralisation was probably intersected.


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Digital seismic survey data were acquired by Rio and forwarded to Curtin University geophysical department for QA/

QC validation. The seismic data was on-forwarded to geophysical consultants Boyd Petrosearch in Alberta, Canada. Boyd

Petrosearch carried out an analysis of the southern Canning Basin seismic data along with other digital datasets (Rio

Tinto, 2009). The following work was completed:

• A preliminary review of existing data including literature, GIS information, seismic data and well log data;

• The seismic survey data, in conjunction with the petroleum exploration drill hole data, was reprocessed, replotted

and reinterpreted;

• The boundaries of the McLarty sub-basin and the Mallowa Salt were mapped;

• The depth to the top and base, as well as the thickness and structure, of both the Carribuddy Group and Mallowa

Salt were mapped; and

• The gradient of the base of the Mallowa Salt and identified areas of high, medium and low disturbance of the unit in

the basin was mapped.

6.5 Conclusion

As is the case for other basins within Australia, the bulk of the knowledge concerning potash within the Canning Basin is

derived indirectly through hydrocarbon exploration and the level of targeted potash exploration is low. However, the data

collated to date provides sound geological indications that can be incorporated into a revised geological model and this

indicates that further exploration is warranted.

7 PotashMineralisation

7.1 GenesisofPotashMineralisation

The general view is that there are two processes controlling the grade of mineralisation in ancient potash salts (Warren,

2006). One sees the potash salts, carnallite (KClMgCl2.6H2O) and sylvite (KCl), as primary precipitates or as syn-

depositional to early diagenetic replacements forming within metres of the depositional surface via brine reflux and brine

cooling. The other sees sylvite as forming later in burial via ongoing incongruent dissolution of precursor carnallite. There

is partial support for both, however if one concept is used exclusively, the models are perhaps a little limiting.

Because of its high solubility, the various textures found in ancient potash salts reflect modified and evolving origins that

are dependent on how many times and how pervasively in its burial history evolving brine chemistry came into contact

with the potash beds (Warren, 2006). The forms and textures of potash may dissolve, recrystallise and back react with

each other from the time a potash salt is first precipitated until it is exploited. Textural and mineralogical evolution

depends on how open is the hydrology of the system at various stages during its burial evolution. Alteration can occur syn-

depositionally, in brine reflux or during flushing by compactional or thermobaric subsurface waters. Tectonism (extensional

and compactional) during the various stages of a basin’s burial evolution acts as a force driving fluid flow within a basin, so

forcing and speeding up the focused circulation of potash altering waters.

With a view to exploration in the Project area, whatever model, or combination of models is used to explain the origin of

the potash salts, the most important economic aspect is that, wherever a potash bed is in contact with potentially mobile

pore fluids, these highly soluble salts are continually subject to dissolution, mobilisation and re-precipitation. When trying

to understand the distribution of potash mineralisation in a halite-dominated sequence the ability of the potash salts to

flow, dissolve, alter and re-precipitate must be accounted for in any predictive exploration model. Its ability to dissolve at

various times in its diagenetic history also explains variations in that most important feature of any deposit; namely grade.

Predicting the presents of potash in a conceptual target relies on indirect data such as structural, stratigraphic

reconstruction and geochemical pathfinder elements such as bromine. Potash exploration in Australia in the past was

driven by two conceptual views. These were:

1. High bromine content in halite crystals as an indicator that brine saturation is reaching conditions favourable for

the co-precipitation of potash minerals; and

2. Bittern salts would be deposited in the deepest part of the basin, where the thickest halite precipitated.

Ideally these concepts are correct and in some basins of the world, potash in economic quantities is actually found in such

environments. However both circumstances do not need occur to indicate potential for potash.

Such is the case in the Willara and McLarty sub-basin of the Canning Basin, where bittern salts are noted in drill holes

Fruitcake #1, Brooke # 1 and Gingerah Hill #1. Although the amounts were low, several sections showed elevated levels of

calcium chloride and magnesium-potassium chloride precipitation. These would represent the end members of a chloride

solid solution series and also the most bittern phases. Normally the less bittern of the salt series would not be deposited in

the centre of the basin. These are likely to be found closer to the margins of the basin.

Sylvite is not normally deposited in its primary form in nature. Primary sylvite is only precipitated under very special

circumstances. The normal precipitate is carnallite (KClMgCl2.6H2O). The magnesium is then leached out causing the

potassium mineral to precipitate as sylvite (KCl). The heavier magnesium- and calcium-rich brines then migrate down slope

toward the depositional centre of the basin. Some potassium chloride may migrate with the heavier brines toward the

basin centre, but not all.

It is this mobilisation of bittern salts that complicates the theory that one should look for potash where bromine levels

in halite are highest. The use of bromine is a useful exploration tool when the post-formational history, structure and

hydrological regime of the evaporite basin are reasonably well reconstructed and understood. The knowledge of structure,

and the connectivity it provides to ground water horizons, allow a prediction as to whether sylvite has been dissolved and

re-precipitated. Generally one is looking at two different generations of deposition, namely halite and bittern deposition

and sylvite re-deposition.

7.2 Salt-BearingBasinsofAustralia

Several geological basins, ranging in age from Late Proterozoic to recent, are known to host or have the potential to host

salt-bearing horizons (Figure 7 1). An overview is provided here.

Figure 7 1: Salt bearing basin of Australia.

7.2.1 AdavaleBasin,Queensland

Geology

The Early Devonian to Early Carboniferous Adavale Basin of central Queensland is entirely subsurface, occupies about

28,000km2 and contains about 4,000m of sediments and minor volcanics. Over 20 petroleum wells have been drilled

in the basin. The basin was initiated in the late Early Devonian (Emsian) as a rifted back-arc basin west of a volcanic

arc subduction zone complex. The basal unit, which comprises volcanics, volcaniclastics and continental red beds was

deposited during this rifting phase. As extension continued deposition of the widespread Emsian to Eifelian fluvio-deltaic

complex occurred, followed by an Eifelian to early Givetian unit comprising marine shales in the east and fluvio-deltaic

and marginal marine sandstones in the west. This was followed by a period of restricted clastic input with deposition of

the shallow water carbonates. As convergence began from the east, tectonic uplift barred the basin, with concomitant

deposition of extensive evaporites.


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Continued compression from the east was accompanied by major tectonic uplift of the Anakie-Nebine volcanic arc

complex, which provided the source for the final phase of sedimentation in the basin, a succession of interbedded shales

and sandstones followed by a syntectonic molasses-type, coarse siliciclastic succession. Convergence continued until

the Middle Carboniferous, with the development of a series of thrust faults. Uplift and erosion continued well into the

Late Carboniferous with only the remnants of what once was a more extensive basin being preserved. Deposition of the

overlying Galilee Basin commenced in the Late Carboniferous.

Evaporites

Salt of the Boree Salt Member of the Etonvale Formation of Devonian Age is found between 1100m and +3000m below

surface. The salt member is estimated to cover at least 3000km2. Interest in potash in the Adavale Basin first developed

when petroleum exploration began to conduct seismic surveys in the early 1960s and then again in the early 1980s. Holes

that intersected salt included; Boree #1, Bonnie #1, Bury #1, Alva #1 and Stafford #1.

Coring of the salt section has been intermittent and discontinuous. Multiple intersections of sylvinite were identified in two

of the holes (Boree #1 - 503m thick evaporite sequence from 1955m, and Bury #1) while a single intersection was identified

in Bonnie #1. Concentration of bromine in halite was between 200-300ppm and in sylvite was between 2,000-20,100ppm.

Potassium values of 3.9% (39,435ppm) were recorded in core from Bury #1. No salt was identified in the Carlow and

Ravensbourne holes. Salt at greater depth was recorded from drilling of holes to the south of Bonnie and Bury holes.

7.2.2 AmadeusBasin,CentralAustralia

Geology

The intracratonic Neoproterozoic to Early Carboniferous Amadeus Basin occupies much of the southern quarter of the

Northern Territory and extends about 150km into Western Australia, covering about 170,000km2 in total. It has a maximum

sediment thickness of 14,000m with several major depocentres including the Idirriki, Carmichael and Ooraminna Sub-

basins and Missionary Plain Trough along the northern margin and the Mount Currie and Seymour Sub-basins in the south.

Early Neoproterozoic volcanics and fluvial siliciclastics in the west form a rift sequence associated with an extensional

event caused by the breakup of the Rodinia Supercontinent.

Subsequent thermal relaxation and subsidence initiated widespread marine siliciclastic and carbonate sedimentation

associated with extensive evaporites. This marine succession is terminated by an erosional surface which is overlain by

fluvial and glacigene sediments associated with the Sturtian and Marinoan glaciations. Subsequent marine siliciclastic and

carbonate sedimentation extended into the latest Proterozoic.

Depositional patterns were changed abruptly by the Petermann Ranges Orogeny with extensive uplift along the southwest

margin of the basin feeding deposition of widespread fluvial and marine siliciclastics during the latest Proterozoic-Early

Cambrian. This was followed by deposition of a succession of marine siliciclastics and carbonates with minor evaporites

for most of the remainder of the Cambrian. In the latest Cambrian, the Delamerian Orogeny caused a change to

predominantly marine siliciclastic deposition. This continued until the Middle Ordovician when evaporites again appeared.

The final phase of deposition in the basin comprised shallow marine, fluvial and aeolian siliciclastics, which are capped by

syn-orogenic (Alice Springs Orogeny), molasse-type, coarse siliciclastics extending into the Early Carboniferous.

Evaporites

The Amadeus Basin is late Proterozoic in age, and contains evaporites which include halite of two ages: The Gillen Member

of the Upper Proterozoic Bitter Springs Formation and the Lower Cambrian Chandler Formation. Drill holes extending to

the Gillen Member are widely separated. Logging, where carried out, was not designed to assist potash exploration. Salt

members were not cored throughout.

To the south of Alice Springs in the Amadeus Basin of Central Australia there are a number of small saline playas (areas

< 50km2) with thin ephemeral sylvite/glauberite crusts. Yet there are no documented sylvite crusts in any of the larger

playas of the region, such as Lake Amadeus (area ~750km2). The absence of potash precipitates in the larger playas

reflects the nature of the inflow hydrologies to groundwater seeps in the region. All the playas are ultimately supplied by

a combination of surface runoff and seepage from a large regional groundwater outflow system that discharges into this

chain of playa lakes along an outflow zone some 500km long. The difference in the mineralogy of the surface salt crusts

between the smaller and larger playas lies in the depth to which the various playa groundwater systems tap into the

regional hydrology.

7.2.3 BonaparteBasin,NorthernAustralia(majorityoffshore)

Geology

The Bonaparte Basin developed during two phases of Palaeozoic extension and Late Triassic compression prior to

the onset of Mesozoic extension. Initial rifting occurred in the Late Devonian (NW-trending Petrel Sub-basin) and was

orthogonally overprinted in the Late Carboniferous to Early Permian by NE-trending rift basins (proto-Malita and proto-

Vulcan depocentres). Regional N-S compression in the Late Triassic resulted in widespread uplift and erosion, and,

together with salt tectonics, produced inversion structures and anticlines in the Petrel Sub-basin. Erosion and collapse

of these uplifted areas led to the widespread deposition of Lower-Middle Jurassic ‘redbeds’ and fluvio-deltaic clastics.

Late Jurassic extension resulted in a series of linked, NE-trending (Vulcan Sub-basin, Malita and Calder Grabens) and SE-

trending (Sahul Syncline) intracontinental grabens.

The Jurassic depocentres contain thick marine mudstones flanked by fan delta sandstones. A thick post-rift Cretaceous-

Tertiary succession is dominated by fine-grained clastic and carbonate facies. Late Miocene-Pliocene convergence of

the Australian and Eurasian plates resulted in flexural downwarp of the Timor Trough and widespread reactivation of the

previous extensional fault systems.

The most prospective part of the Bonaparte Basin includes the Vulcan Sub-basin, Laminaria-Flamingo High and northern

Sahul Platform. Oils in the basin are normally very light. The Late Jurassic marine section is the major source interval in

the outboard grabens, together with Middle-Lower Jurassic marine shales and coastal plain coals. In the Petrel Sub-basin

the main sources are postulated Lower Carboniferous marine shales and Permian coastal plain coals and pro-delta shales.

Evaporites

The Bonaparte Basin is found mainly offshore of the extreme northwest of the Northern Territory and the extreme

northeast of Western Australia. Seismic data and exploration drilling indicate that an evaporitic sequence was deposited

in the Bonaparte Basin during Late Silurian and Early Devonian times, and that subsequent salt movement has formed a

number of salt-induced features. Several wells drilled within the Petrel Sub-basin have encountered salt and in the Vulcan

Sub-basin to the southwest, two salt diapers have been identified.

Only a very small portion of the basin is found on the present land mass. Salt structures have been reported offshore.

There has been no evidence to date of significant onshore salt in this basin.

7.2.4 CanningBasin,WesternAustralia

Geology

The pericratonic Early Ordovician to Early Cretaceous Canning Basin of Western Australia occupies about 506,000km2, of

which 430,000km2 are onshore. It has a maximum sediment thickness of over 15,000m concentrated in two NW trending

depocentres. The northernmost of these is the Fitzroy Trough-Gregory Sub-basin complex, while the southernmost is the

Willara Sub-basin-Kidson Sub-basin complex.

Deposition in the basin commenced during an Early Ordovician phase of extension and rapid subsidence. Rifting was

followed by a prolonged sag stage characterised by widespread evaporitic and playa conditions in the Late Ordovician and

Silurian. The second basin phase was initiated by minor folding, regional uplift and erosion in the earliest Devonian and

embraces laterally extensive, aeolian and terrestrial deposits. The third phase incorporates major extension, rifting and

rapid subsidence in the mid-Devonian. The sag stage following this extension was interrupted by at least two extensional

tectonic pulses marked by influxes of conglomerates along the northern margins of the basin. The fourth basin phase was

initiated by mid-Carboniferous compression and inversion of Devonian normal faults. This phase is marked by syntectonic

fluvial deposits. The fifth phase is marked by renewed extension and rapid subsidence, coinciding with the onset of glacial

conditions in the Early Permian and incorporates a sag stage with widespread transgression following the glaciation. The

final tectonic phase was triggered by regional dextral wrench movements in the Late Triassic - Early Jurassic when up

to 3km of uplift and erosion occurred, accompanied by extensive molasse deposition. This was followed by deposition of

fluvio-deltaic and marine sediments.

Evaporites

The Canning Basin is probably one of the largest basins containing marine evaporites in Australia. The Canning Basin

is structurally complex with numerous major east/west trending faults resulting in major linear positive and negative

geological features. These are cut by northeast/southwest structural features which further subdivide the area. Salt, of


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previously determined Silurian-Devonian Age, but recently identified as Ordovician- Silurian Age is found over much of the

basin under several hundred to thousands of metres of overburden. Salt of the north half of the basin is much more structurally

deformed than that of the south half of the basin. Salt occurs in several sub-basins within the Canning Basin. Two of the sub-

basins which have been considered to have potential for potash deposition are the Kidson, Willara and McLarty sub-basins of

the southern portion of the basin.

7.2.5 CarnarvonBasin,WesternAustralia

Geology

The Carnarvon Basin is an epicratonic, faulted and gently folded, Phanerozoic basin which spans 1000 km along the west

and northwest coast of Western Australia, and covers an area of 650 000 km2, extending to the continental/oceanic crust

boundary. Onshore the basin contain up to 7km of Palaeozoic sediments, with a Mesozoic veneer which thickens northwards and

westwards, whereas in the northern (largely offshore) portion the succession is up to 15km thick as it contains thick Mesozoic

sequences.

In the Paleozoic, deposition occurred in a broad, north-opening trough, the eastern half of which is preserved as the onshore

portion of the Carnarvon Basin. The basin was initially an interior fracture basin in the Silurian, and developed into an interior

sag basin in the Devonian. The major phases of deposition, and the sequences produced by them, are outlined below.

1. Silurian to Early Devonian — continental sandstone to shallow-marine carbonate with evaporates up to 5km thick.

2. Middle Devonian to Early Carboniferous — shallow-marine carbonate, with fault-related continental and shallow-marine

sandstone and conglomerate near the basin margin. A possible hiatus at the Devonian-Carboniferous boundary divides

the sequence into a Devonian portion, about 1500m thick, and a Lower Carboniferous portion about 600m thick.

3. Late Carboniferous to early Late Permian — fluvial to marine-shelf sandstone, siltstone and shale with lesser carbonate.

About 3km of glacial and postglacial siliciclastics with lesser carbonate, below, are separated from about 2.5km of

deltaic to marine-shelf sandstone and shale, above, by an early Artinskian erosional hiatus. This was the last significant

deposition in the onshore Carnarvon Basin.

Evaporites

In the drilling of a test well in the Southern Carnarvon Basin (Yaringa No.1), halite beds of the Yaringa Salt member in the Dick

Hartog Formation were encountered. Two subsequent holes were drilled in an attempt to discover potash. Reports of traces of

the mineral sylvite were made.

Three holes were drilled in the 1960s within the project tenements, namely Yaringa #1, Hamelin Pool No.1 and Hamelin Pool

#2. Yaringa #1 was drilled by the Continental Oil Company of Australia Ltd in order to test the Yaringa Anticline which was

delineated by a seismic survey. The well intersected a salt section (called Unit B) within the “Dirk Hartog Formation”. No analysis

for potash was undertaken by Conaus.

Magellan Petroleum of Australia on behalf of Conaus and Australian Sun Oil Company drilled Hamelin Pool #1 to test for potash

since chemical analyses of salt in petroleum well Yaringa #1 (elevated bromine) indicated economic quantities of potash might

be present. Seven salt beds (1.5-6m) were logged within Hamelin Pool #1–4 within the targeted Unit B (total 17.5m). Core samples

and electric logs indicated potash was not present. Chemical analyses of salt showed amounts of potassium consistent with

derivation from clay minerals. Hamelin Pool #2 was drilled as a follow up. Three beds of salt totalling 5m were encountered in

Unit B. Neither core examination nor Schlumberger logs indicated the presence of potash.

GSWA stratigraphic well (1997), Yaringa East #1, failed to intersect the Ordovician and Silurian sediments of interest to potash

exploration. The hole was collared in the Cretaceous Toolognga Calcilutite and passed into mixed siltstone sequences of the

Winning Group and then into an extensive sequence of Devonian sandstones including the Nannyarra Sandstone, Sweeny Mia

Formation and the Kopke Sandstone. The hole was extended by Britannia Gold and reached a total depth of 1,281.5m after

intersecting a series of evaporite beds. The evaporite mineralisation included 14m (1,206 - 1,220m) and 9m (1,222 - 1,231m).

Reward Minerals Ltd has drilled three holes on neighbouring tenements to WCP held by their subsidiary Holocene Pty Ltd

in 2008/2009. The program comprised RWDK08-01, RWDK09-01 and RWDK09-02. RWDK08-01 reached a depth of 1176m

in interpreted Ordovician Tumblagooda sandstone. No evaporite sequence of significance was intersected, thus no potash

mineralisation appears to exist in the location. Holes RWDK09-01 and RWDK09-02 were abandoned at 1140m and 1480m

respectively due to technical difficulties. RWDK09-02 intersected evaporites in the Dirk Hartog Group. Alternating layers of

evaporites and carbonates were intersected from 1,089 to 1,126m. Reward reported that the top section of the evaporite appears

to be primarily halite but core recovery has been poor (<10%).

7.2.6 OfficerBasin,CentralAustralia

Geology

The large intracratonic Neoproterozoic to Late Devonian Officer Basin of Western Australia and South Australia covers

about 410,000km2 and has a maximum sediment thickness of 10,000m. There are several major depocentres, including the

Birksgate Sub-basin, Munyarai Trough, Wintinna Trough, Manya Trough and Tallaringa Trough in South Australia and the

Gibson Sub-basin, Yowalgo Sub-basin, Lennis Sub-basin, Waigen Sub-basin, Wells Sub-basin and Blake Sub-basin in Western

Australia.

Following a period of minor, short-lived rifting, thermal sag allowed deposition of predominantly fluvial and marine

siliciclastic and carbonate sediments and evaporites. This succession is terminated by an erosional surface which is

overlain by fluvial and glacigene sediments associated with the Sturtian and/or Marinoan glaciations. Depositional

patterns were changed abruptly by the Petermann Ranges Orogeny with extensive uplift along the northern margin of

the basin feeding deposition of widespread fluvial and marine siliciclastics with carbonates during the latest Proterozoic-

Late Cambrian. Cambrian sedimentation ceased with the onset of the Delamerian Orogeny, which was accompanied by

extensive basaltic volcanism in the central and western parts of the basin. A period of extension during the Ordovician led

to deposition of shallow marine to fluvio-deltaic siliciclastics in the northeastern part of the basin. Uplift associated with

the Alice Springs Orogeny terminated sedimentation in the latest Ordovician or Silurian. A suspected extensional event

during the Late Devonian provided accommodation space for the deposition of fluvial siliciclastics also in the northeastern

part of the basin.

Evaporites

Salt in the basin is reported to be of Cambrian Age. Evaporites have been recorded at many horizons below the Middle

Cambrian including the Observatory Hill Formation, Ouldburra Formation, Mena Mudstone Member, Tanana Formation,

Dey Dey Mudstone, Meramangye Formation, Coominaree Dolomite and the Alinya Formation. Evaporites of the Alinya

Formation have been deformed diapirically across much of the northeast of the basin. However, to the southwest of

the Birksgate – Coober Pedy Corridor there is evidence of stable evaporites overlying sediments of high reflectivity (as

indicated by seismic data).

7.3 PlayaLakes

A number of playa lakes in Western Australia have been explored for potash mineralisation which has formed as a result of

evaporation of surface and ground water inflows. Three target areas that have been recently pursued by potash explorers

include the following lake systems.

• Located in the Gibson Desert of WA about 320km east of Newman, Lake Disappointment is a modern playa lake

covering approximating 1600km2. Potash mineralisation occurs in lacustrine sediments of the lake and in the

entrained brine. In 2007, Reward Minerals Ltd published a Mineral Resource with a lower estimate of 7,705Mt

Indicated Mineral Resources at 3.17 kilograms/tonne (kg/t) K2SO4 containing 24 million tonnes (Mt) K2SO4 and

an upper estimate of 8,635Mt Indicated Mineral Resources at 3.17kg/t K2SO4 containing 27.37Mt K2SO4. The

difference between the upper and lower figure is the result of assumptions about the depth and area for the lake

margins.

• In 2009, ActivEX Limited announced an Inferred Mineral Resource of 5.8Mt of ore at 5.73% K2O at its Lake

Chandler potash deposit situated 45km north of Merredin and 300km east of Perth in WA. ActivEX reported in its

2010 annual report that it carried out a scoping study on a nominal throughput of 200 000 tonnes per annum (tpa)

to give the project a mine life of 25 years. ActivEX concluded that the study showed that, with the softness of the

potash market, the project would be only marginal under the current economic conditions.

• Situated in the Gibson Desert and straddling the WA-NT border (50km north of the Tropic of Capricorn) Lake

MacKay is a modern, playa lake with a surface area of more than 2250km2. Reward Minerals Ltd reported in its

2009 annual report that it has delineated an Inferred Mineral Resource at Lake MacKay of 4,780m bench cubic

metres (BCM) at 4.3kg of K2SO4 (SOP) per BCM for a total of 20.56Mt of K2SO4. The resource estimate was

generated on the basis of lakebed sediment volume to a depth of two metres and the water soluble potassium

sulphate content of the sediments which lie within the Reward Minerals’ tenement holdings.


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7.4 ProspectivityforPotashinancientAustralianBasin

As discussed above, evaporites have been identified in a number of sedimentary basins in Australia including the Adavale,

Amadeus, Bonaparte, Canning, Carnarvon and Officer. In two of the basins, the mineral sylvite (KCl) has been positively

identified, namely in the Adavale and Carnarvon Basins. In the Canning Basin minor carnallite (KCl.MgCl2.6H2O) was

identified. The age range for evaporite formation ranges from Proterozoic to Holocene.

In most basins initial drilling was conducted for oil and gas exploration and so testing for potash in salt horizons was not

routinely undertaken.

Based on the results of a preliminary Australia-wide assessment of the potash-bearing potential of sedimentary basins,

CSA Global highlight the southern Canning Basin as the highest ranking basin for potash exploration potential. A summary

of the prospectivity of each basin follows:

7.4.1 AdavaleBasin

Petroleum exploration conducted over the past 30 years provided early encouragement with clear evidence of the

presence of potassium minerals within the upper section of the thick halite sequence present in the subject tenements.

The well logs from earlier petroleum drilling illustrate the salt sequence and likely potassium beds within the halite.

Gamma profiles of four of the wells drilled in the upper and middle zones of the evaporite sequence encountered suggest

the presence of thin beds of potassium-bearing minerals, e.g., sylvite, etc. The presence of even low grade bedded sylvite in

cores taken from three holes is encouraging.

7.4.2 AmadeusBasin

There is no positive indication that potash mineralization may be present in the Amadeus Basin. Because of the sparse

number of holes drilled through the salts, the status of potash mineralization in the basin is uncertain.

7.4.3 BonaparteBasin

Only a very small portion of the basin is found on the present land mass. Salt structures have been reported offshore.

There has been no evidence to date of significant onshore salt in this basin.

7.4.4 CanningBasin

The geology, exploration and potash potential of the Canning Basin are discussed in detail in other sections of this report.

7.4.5 CarnarvonBasin

The Reward Minerals drilling east of Carnarvon has demonstrated the Yaringa Formation salt does continue further north

than previously thought. This could be considered to increase the potential for potash to the north of the historic drill

holes Yaringa #1 and Hamelin Pool #1 & #2. However, the poor recovery of core in the Reward drill holes does mean it is an

inadequate test.

Reward interpreted that Yaringa #1, Hamelin #1, and Yaringa East #1 holes are located on the western margin of a (former)

embayment structure in which brines may have evaporated to the stage of potash and magnesium crystallisation. The

Yaringa target area is based on a strong gravity low and the occurrence of significant salt intersections in the earlier holes

to the south and west of the new holes proposed.

There are some significant issues with exploring for potash in the Carnarvon Basin including;

• Very limited seismic control resulting in an inability to define Yaringa Formation on seismic data;

• Depth to top of salt increasing to the north;

• Limited thickness of salt sequence and prevalence of interbeds of insoluble; and

• Limited previous drilling.

7.4.6 OfficerBasin

Very few wells have penetrated the salt beds in the Officer Basin. From the data available there is nothing to say that

potash minerals were deposited. Until more information is available from drilling through the salt beds, the Officer Basin

will continue to have a low prospectivity rating.

8 ExplorationPotentialandTarget

8.1 Explorationmodel

The understanding of the geology of ancient salt deposit lacks, like some mineral deposit types (e.g., BIF), a modern

day counterpart and as a result the interpretation of their genesis relies heavily on the assumption of processes and

comparisons with other ancient salt deposits.

Saltern and mudflat beds, along with varying development of slope and basin deposits, occur in three interrelated regional

depositional settings:

• Platform evaporites;

• Basinwide evaporites; and

• Continental playa/lacustrine deposits.

The Kidson, Willara and McLarty Sub-basins of the southern Canning Basin area are collectively considered members of

the basinwide evaporite class of evaporite deposits (Cathro et al, 1992, Warren 2006, Figure 8 1).

Figure 8 1: Basinwide evaporite class (after Warren, 2006)

Salt basins of the basinwide-type contain thick, basinwide units > 50-100m thick of deep water / shallow water evaporites

that retain textural evidence of different but synchronous depositional settings, including mudflat, saltern, slope and

basin (Figure 8 1). When evaporite deposition took place, the whole basin was evaporitic typically saturated with the

same mineral phase across large areas of the basin. Bittern salts accumulate during the most isolated times in the basin’s

drawdown history, typically in depressions with minimal surface water influx, either in the lowest parts of the basin centre,

or in platform depressions behind the shelf-break.

The class of basinwide evaporites is further classified into three settings (Figure 8 2; Warren, 1989; Kendall, 1992):

• Deeper water - deep basin;

• Shallower water - deep basin; and

• Shallow water - shallow basin.

Based on the analysis of the limited number of drill holes within the southern Canning Basin that intersected the salt

sequence, the Ordovician-Silurian evaporite sequence is interpreted to have formed in a shallow water – shallow basin

environment (Cathro et al., 1992, Warren 2006).

Basinwide provinces such as the Canning Basin and the Michigan Basin of the Ordovician-Silurian, the Permian Basins of

Texas and northern Europe in the Late Permian, are actually composed of a series of large sub-basins. Each sub-basin in

an evaporitic province responds in its own fashion, depending on the local topography, tectonics, and climate and the total

fill can contain examples of all three end members.


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Figure 8 2: Basinwide evaporite settings (after Warren, 2006)

In the shallower water - shallow basin depositional setting deposition

starts off shallow and remains shallow throughout the deposition

of the evaporite sequence. Sedimentary signatures are dominated

by interfingering saltern, saline pan and mudflat successions often

crosscut by erosional surfaces. There is little or no evidence of deep

water evaporites. Shallow water-shallow basin evaporites are typical of

intracratonic sag fills such as in the Williston Basin in the USA and the

Canning Basin in Australia (Warren, 2006). Salt beds in intracratonic fills

are typically intercalated with shallow-water open-marine carbonates

and siliciclastics and tend to form stacked cyclic units with thicknesses

between 10m and 100m (cf., section 5.2).

Geochemical studies of this type of salt deposits across the world

indicate that brine evolution and parentage can be determined. The

parentage can be determined from the proportions of major ions in

seawater as these are thought to vary across geological time. The various

indicators of chemical evolution of seawater during the Phanerozoic (where actual salts are available for sampling and

analysis) show that Phanerozoic potash evaporite fall into two categories:

1. potash deposits with MgSO4 salts, such as poly-halite, kieserite and kainite; and

2. potash deposits with halite, sylvite and carnallite, and entirely free or very poor in the magnesium-sulphate salts.

The former group are thought to be marine-derived as they contain the bittern suite predicted by the evaporation and

back reaction of modern marine brines. The latter group makes up more than 60% of ancient potash deposits (Hardie,

1990) and are thought to have precipitated from Na-Ca-Mg-K-Cl brines with ionic proportions quite different from that of

concentrated modern seawater (Warren, 2006).

Analytical work by Kovalevich et al. (1998) from many evaporite formations of northern Pangaea, shows that during the

Phanerozoic the chemical composition of marine brines has oscillated between Na-K-Mg-Ca-Cl and Na-K-Mg-Cl-SO4 types

(Figure 8 3). The difference being the former does not precipitate MgSO4 salts when concentrated, the latter does.

Figure 8 3: Potash and the secular evolution of Phanerozoic seawater. (from Warren, 2006)

A detailed analysis of the ionic make-up of Silurian seawater of more than 100 samples of halite from various Silurian

deposits around the world was published by Brennan and Lowenstein (2002) and supports the notion that ionic

proportions in the world’s Silurian oceans were different from those of today (Figure 8 3). Samples were from three

formations in the Late Silurian Michigan Basin, the A-I, A-2, and B Evaporites of the Salina Group, and the Early Silurian in

the Canning Basin in the Mallowa Salt of the Carribuddy Group. The Silurian ocean had lower concentrations of Mg2+, Na+,

and SO4

2-, and much higher concentrations of Ca2+ relative to the ocean’s present day composition. Furthermore, Silurian

seawater had Ca2+ in excess of SO4

2. Bittern stage evaporation of Silurian seawater produced KCI-type potash minerals

that lack the MgSO4.-type late stage salts formed during the evaporation of present-day seawater and allowed sylvite as a

primary precipitate.

Detailed studies by Matthews and Egleson (1974), Leibold (1992) and Brennan and Lowenstein (2002) who analysed

bromide from bulk halite samples from various cores through the evaporite facies in the Michigan basin showed that

coarse halite at the bottom of the A-I Evaporite display a systematic up-section increase in Br concentration, ranging

from 25 to 200ppm. This type of bromine profile, indicates that this lowermost section of the A-I halite formed by the

progressive evaporation of a large shallow body of brine, which dried out at the top of the unit. In contrast, halite from the

mid-basin potash facies does not exhibit any systematic increase in the Br concentrations. Instead, the Br is relatively high

(210ppm) throughout.

It is inferred that the Michigan Basin in the USA provides, in several ways, an exploration target template for targeting

potash in the McLarty sub-basin. An assessment of work and data completed in the southern Canning basins to date allows

the following geological reconstruction and model prediction:

The review of seismic data by Boyd Petrosearch consultants determined that the evaporite beds in the Kidson, Willara and

McLarty sub-basins are little deformed and gently folded while the beds in the McLarty sub-basins to the northeast are

block-faulted near the basin margins.

The thick section of salt in the centre of the McLarty Sub-basin has apparent abrupt terminations to the north and

east. The abrupt terminations are interpreted to represent original basin margin growth faults, late-stage faults or salt

dissolution. The basin margins are considered prospective for economic potash mineralisation because of increased

evaporation near the margin and brine reflux and possible displacement and re-deposition of potash bearing brines.

Deformation, compaction in the sub-salt stratum and salt mobilisation are considered to have also caused localised

anomalous thickening of salt horizons in some areas. For example, the Mallowa Salt forms large domal salt swells in the

Willara Sub-basin and there are shallow, thick diapir-type structures of salt on the Broome platform near the coast. The

Frome Rocks #1 drill hole intersected a salt diapir and intersected 532m interval of salt from 688m depth. Deep drill holes

in the Canning Basin are very widely spaced so it is possible that thicker sections of the unit might be present.

In summary, the southern Canning Basin sub-basins, particularly the McLarty sub-basin are interpreted to have a number

of characteristics that support a positive view towards potash exploration and the delineation of an exploration strategy.

These include:

• Salt precipitation that occurred during a geological period that favoured the precipitation of potassium chloride

over potassium sulphates;

• A geological basin that accumulated thick salts sequences in a shallow depth – shallow water environment at low

latitude under arid conditions which indicate the strong possibility of bitterns formation;

• Structural-stratigraphic setting that permitted the formation of intra-basin bitten brine pools;

• Geochemical signature of the salt facies that indicated the bittern stage was reached and that higher salts

precipitated; and

• Seismic data indicating locally developed intra-basin lows which probably led to the accumulation of increased salt

thicknesses

8.2 Explorationtarget

Basin location, basin geometry, salt facies geometry, ionic geochemical signature geochemical, salt composition, and

geological period are the framework parameters for the exploration model applied towards the delineation of targets in the

Company’s tenement area.


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The exploration and targeting in the McLarty sub-basin is at an early stage and as such is highly speculative. However, a

comparison of the exploration history of the Ordovician Canning Basin/McLarty sub-basin with that of the Michigan Basin

(with which it shares several geological features) shows that its potash potential too was only recognised late and after

much conceptual interpretation. Matthews and Egleson (1974), who report on the discovery of potash in the Michigan

Basin, indicate that the initial potash intercept of approximately 3% K2O over a thickness of approximately 30m (similar

to that in Fruitcake #1) was not considered to indicate that economic thicknesses of potash existed in that basin. The

subsequent exploration effort was built on the hypothesis that closer to the margin of the basin, potash could be present

in concentrations and quantities of economic potential.

Two general areas were targeted. One was the northern pinnacle reef trend, where Dow Chemical had intersected potash

beds. The other target was on the “spillway” between the Michigan Basin and the Ohio Basin to the west, where it was

judged that depth during Silurian times would be low and percentage evaporation would be higher than in the centre of

the basin. The target on the “spillway” is the current site of a Mosaic’s solution potash mine. Unlike the hole cored in the

centre of the Michigan Basin which had a higher rate of subsidence, this area was shallower, had less subsidence, and

closer to the basin margin. Because the percentage evaporation was higher, more bittern salts could be precipitated in

the same time, and because of its proximity to fresher water inflow, dissolution of the bittern salts and re-precipitation of

sylvite as sylvinite (mechanical mixture of halite and sylvite) proceeded at a higher rate.

Within the Canning Basin the McLarty Sub-basin occupies the position of a marginal sub-basin that probably evolved under

shallow water conditions and was accentuated by localised compaction-derived depressions where salterns could form.

The shallow water conditions across the sub-basin render several parts of the basin prospective for potash exploration.

Within Highfield’s tenements two priority target areas have been identified (see Figure 8-4 and 8-5). The target areas

are in marginal areas of the sub-basin where an increased evaporation rate is predicted to have occurred. The higher

evaporation rate may have led to have led to potash mineralisation as well as for high density brine pools that may be

found in basin depressions (Figure 8 5).

Figure 8 4: Contour map of the base of the salt sequence showing a northwest trending low (deep) area in the southwest of the project area

(hatched) – identified as a target area for exploration (Contour image, Rio Tinto, 2009).

Figure 8 5: Contour map of the thickness of the salt sequence showing a northwest trending slope leading to an increased thickness in the southwest

of the project area (hatched) – this is a target area for exploration (Contour image, Rio Tinto, 2009).

The Company plans to drill test the two target areas by penetrating the entire salt sequence in the McLarty sub-basin

(Figure 5 1, Figure 8 6). The Company has identified a number of alternative drill hole locations should unforseen access

difficulties be encountered.

The Company’s initial plans include a comprehensive review of the available seismic data which will enable the potential

drillsites to be prioritised.

Figure 8 6: Potential drill hole locations.


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9 ExplorationrationalandStrategy

Highfield has provided CSA Global with a comprehensive exploration strategy for the McLarty Potash Project to cover an

initial two year period following Admission. The Company has reviewed all historic data and have identified prospective

target locations in the project area based on the following technical assumptions:

• The Canning Basin contains vast evaporite salt accumulations that have received very limited previous exploration

for potash.

• The Mallowa Salt is the main stratigraphic target for potash in the basin. It is shallowest within the McLarty Sub-

basin located over the southern margin of the regional Broome Arch.

• The McLarty Sub-basin was probably part of, and is interpreted to have less post-salt subsidence relative to, the

Willara Sub-basin, accounting for the shallower depth to Mallowa Salt. Consequently, the McLarty Sub-basin is more

prospective for potash than the Willara Sub-basin.

• The thick section of Mallowa Salt in the centre of the McLarty Sub-basin is abruptly terminated to the north and

east. This is interpreted to represent either; (i) original basin margin faults; or (ii) late-stage faulting. The marginal

areas of the McLarty Sub-basin are interpreted to be favourable locations for economic potash deposits.

• Assessment of the potash potential of the Mallowa Salt is constrained by the vast extent of the salt body

(~140,000km2), its depth, and the lack of drilling data. Only twelve drill holes in the Canning Basin have penetrated

the top of the evaporite at less than 1500m (reasonable economic depth limit for potash mining).

• Values of over 200ppm Br from McLarty #1 drill hole suggests that the bittern stage of saline brines was reached

and that potash precipitation has occurred.

• XRD work indicated the low-grade K mineralised cuttings in the Fruitcake #1 drill hole contain sylvite (KCl).

• The depth and 3-D structure of the Carribuddy Group and Mallowa Salt can be mapped with a reasonable degree of

confidence from the available seismic and drill hole data.

• The geological timing and the palaeo-geographic position of the basin are considered to have been favourable for

salt formation.

• Empirical data suggest that new concepts can be applied to guide future exploration.

CSA believes that the exploration rational proposed by Highfield is appropriate for the type of project and the current

status of technical knowledge. Highfield plans to drill two or more exploratory drill holes within the identified exploration

target areas. The company has provided CSA Global with an exploration budget for the McLarty Project covering the initial

two year period to December 2013 as summarised in Table 9 1 below.

Year 1 of Highfield’s exploration strategy concentrates on target refinement through seismic re-processing and structural

studies and sub-surface mapping, and also includes the provision for acquisition and interpretation of open file airborne

geophysical data. The first year budget also allows for diamond drilling of up to two target areas and completion of

associated works e.g. down-hole geophysics, analytical and petrographic studies. Due to the remoteness of the targets

Highfield has allowed for a considerable budget for the preparation of access roads and logistics associated with the

planned drilling.

In the lead up phase to the field programme the Company’s representatives will liaise with all stakeholders to ensure

that the Company’s plans are well communicated and that any concerns can be investigated and addressed. Community

consultation, particularly with traditional owners, will be maintained during the life of the project to ensure that socio-

economic opportunities for local people can be identified and developed.

The Year 2 programme is contingent on the results of the drilling in Year 1. On the assumption of exploration success this

may include geophysics, additional drilling, down-hole logging, sampling and analytical work and drilling for metallurgical

test-work. Provision has also been made for geological and resource modelling, and preliminary economic assessment

which will include a review of mining, processing, development and marketing options for potential potash concentrates

produced from the McLarty Project.

Table 9 1: Exploration budget for McLarty Potash Project

Year1 Estimatedcost($)

Geophysical processing and structural studies 30,000

Stakeholder consultation and heritage studies 50,000

Field camp, equipment and supplies 50,000

Road access, drill site preparation and rehabilitation 100,000

Drill rig mobilisation, drilling charges and consumables 1,3500,000

Down-hole geophysics 50,000

Geological logging and supervision 90,000

Sample analysis, petrography and mineralogy 30,000

Estimated Total – Year 1 1,750,000

Year2 Estimatedcost($)

Stakeholder consultation and heritage studies 50,000

Field camp, equipment and supplies 50,000

Road access, drill site preparation and rehabilitation 50,000

Drill rig mobilisation, drilling charges and consumables 920,000

Down-hole geophysics 50,000

Geological logging and supervision 100,000

Sample analysis, petrography and mineralogy 30,000

EstimatedTotal–Year2 1,250,000

EstimatedTotal–Years1&2 3,000,000

The estimated expenditure of A$3.0M over the initial two year period is considered to be consistent with the potential

of the McLarty Project, the geological environment and the exploration methodologies required for the targets being

tested. The planned exploration programs are well considered and budgets are reasonable to cover the costs of the

proposed activities. The budgeted expenditure is well in excess of the minimum statutory expenditure commitments on the

tenements. Sufficient work has been done on the tenements to develop sound exploration targets to justify the proposed

exploration.


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10 Glossary

Term Definition

Aeolian Refers to wind-generated geological processes and the landforms that result from them.

Algal mat A layered communal growth of algae observed in fossils an in present day tidal zones associated

with carbonate sedimentation.

Alkali metal A strongly basic metal like potassium or sodium.

Alluvial fan A low, cone shaped deposit of terrestrial sediment formed where a stream undergoes an abrupt

reduction of slope.

Alluvium Unconsolidated terrestrial sediment composed of sorted or unsorted sand, gravel, and clay that

has been deposited by water.

Angular unconformity An unconformity in which the bedding planes of the rocks above and below are not parallel.

Anhydrite An evaporite mineral with the chemical formula CaSO4.

Antiformal A fold structure whose form is convex upward.

Aquifer A permeable formation that stores and transmits groundwater in sufficient quantity to supply

wells.

Arkose A variety of sandstone containing abundant feldspar and quartz, frequently in angular, poorly

sorted grains.

Basalt A fine-grained, dark, mafic igneous rock composed largely of plagioclase feldspar and pyroxene.

Base-level The level below which a stream cannot erode; usually sea level sometimes locally the level of a

lake or resistant formation.

Basement The oldest rocks recognized in a given area, a complex of metamorphic and igneous rocks that

underlies all the sedimentary formations. Usually Precambrian or Paleozoic in age.

Basic rock Any igneous rock containing mafic minerals rich in iron and magnesium, but containing no

quartz and little sodium rich plagioclase feldspar.

Basin In tectonics, a circular, syncline-like depression of strata. In sedimentology, the site of

accumulation of a large thickness of sediments.

Bedding A characteristic of sedimentary rocks in which parallel planar surfaces separating different

grain sizes or compositions indicate successive depositional surfaces that existed at the time of

sedimentation.

Bittern Bitterns is concentrated seawater that has had approximately 70% of the sodium chloride

removed through the salt production process. It is high in magnesium and potassium salts and

its name originates from its bitter taste.

Block fault A structure formed when the crust is divided into blocks of different elevation by a set of normal

faults.

Breccia A rock type composed mainly of broken angular fragments.

Brine Water that is saturated or nearly saturated with salt.

Brine reflux Occurs when ponded brines atop the floor of an evaporitic seaway or lake become dense enough

to displace underlying pore fluids and so percolate into the underlying succession.

Bromine A chemical element with the symbol Br. It occurs as colourless, crystalline mineral halide salts,

analogous to table salt.

Calcareous Mostly or partly composed of calcium carbonate (Ca,Mg(CO3)2).

Carbonate platform A submarine or intertidal shelf whose elevation is maintained by active shallow water carbonate

deposition.

Carbonate rock A rock composed of carbonate minerals, especially limestone and dolomite.

Carboniferous A geologic period from about 359 million years ago to about 299 million years ago.

Carnallite A hydrated, potassic evaporite mineral with the chemical formula KMgCl3·6(H2O).

Carnallitite A mixture of carnallite (KMgCl3·6(H2O)) and halite (NaCl).

Chemical sediment One that is formed at or near its place of deposition by chemical precipitation, usually from

seawater.

Chemical weathering The total set of all chemical reactions that act on rock exposed to water and atmosphere and so

change it minerals to stable forms.

Clast A fragment of rock or mineral forming part of another rock.

Clastic rock A sedimentary rock formed from mineral particles (clasts) that were mechanically transported.

Claystone A sedimentary rock with a grain size of less than 4 microns, without the characteristic

lamination and fissility of shale.

Coastal plain A low plain of little relief adjacent to the ocean and covered with gently dipping sediments.

Compactional Of, pertaining to or causing compaction, the process of volume reduction and pore fluid

expulsion within a sediment in response to increasing overburden load.

Cretaceous A geologic period from about 146 to 65 million years ago.

Delta A body of sediment deposited in an ocean or lake at the mouth of a stream.

Depo-centre The site of maximum deposition within a sedimentary basin. Where the thickest development of

a sedimentary sequence will be found.

Deposition A general term for the accumulation of sediments by either physical or chemical sedimentation.

Diagenesis The physical and chemical changes undergone by sediment during lithification and compaction,

excluding erosion and metamorphism.

Diagenetic Refers to a chemical, physical, or biological change undergone by a sediment after its initial

deposition and during and after its lithification, exclusive of weathering and metamorphism

(diagenesis).

Diamond drilling A drilling technique using diamond tipped drill bits to extract cylindrical rock

Diapirism The formation of a diapir, an intrusion into brittle rocks of a more mobile, ductily-deformable and

less dense material, for example a salt dome.

Diorite A dark coloured variety of intermediate intrusive rock.

Dip The angle by which a stratum or other planar feature deviates from the horizontal. The angle is

measured in a plane perpendicular to the strike.

dolomite A carbonate mineral with the chemical formula Ca,Mg(CO3)2.

Dune An elongated mound of sand formed by wind or water.

Duricrust A hard layer on or near the surface of soil.

Dyke A narrow, tabular, near vertical igneous intrusion.

Elevation The vertical height of one point on the Earth above a given datum plane, usually sea level.

Elliptical orbit An orbit with the shape of a geometrical ellipse. All orbits are elliptical or hyperbolic, with the

Sun occupying one focus.

Eolian Pertaining to or deposited by wind.

Erosion The set of all processes by which soil and rock are loosened and moved downhill or downwind.

Eugeosyncline The seaward part of a geosyncline; characterized by clastic sediments and volcanism.


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Eustatic Describes global (as distinct from local) sea level change due to changes in either the volume of

water in the world’s oceans or net changes in the volume of the ocean basins.

Eustatic change Sea level changes that affect the whole Earth.

Evaporite A chemical sedimentary rock consisting of minerals precipitated by evaporating waters,

especially salt and gypsum.

Extension An increase in the length of a line during deformation.

Facies The set of all characteristics of a sedimentary rock that indicates its particular environment of

deposition and which distinguish it from other facies in the same rock.

Facies A body of rock with specified characteristics that formed under certain conditions of

sedimentation or that reflect a particular process or environment.

Fault A planar or gently curved fracture in the Earth’s crust across which there has been relative

displacement.

Fault plane The plane that best approximates the fracture surface of a fault.

Ferricrete A hard, erosion-resistant layer of material at the land surface that consists of near-surface

sediments cemented by iron oxide into a duricrust.

Flood plain A level plain of stratified alluvium on either side of a stream; submerged during floods and built

up silt and sand carried out of the main channel.

Geochemical sample A sample collected for geochemical analysis to determine metal or mineral content.

Geochronology The science of absolute dating and relative dating of geologic formations and events, primarily

through the measurement of daughter elements produced by radioactive decay in minerals.

Geologic cycle The sequence through which rock material passes in going from its sedimentary form, through

diastrophism and deformation of sedimentary rock, then through metamorphism and eventual

melting and magma formation, then through volcanism and plutonism to igneous rock

formation, and finally through erosion to form new sediments.

GIS Geographic Information System. A system designed to capture, store, analyse, visualise,

interpret, manage, and present all types of geographically referenced data.

Graben A downthrown block between two normal faults of parallel strike but converging dips; hence a

tensional feature. See also horst.

Gravity anomaly The value of gravity left after subtracting from a gravity measurement the reference value

based on latitude, and possibly the free-air and Bouguer corrections.

Gypsum An evaporite mineral with the chemical formula CaSO4·2H

2O.

Haematite A major ore mineral of iron and an accessory mineral in many rocks with the chemical formula

Fe2O

3.

Halite An evaporite mineral with the chemical formula NaCl. It is the mineral form of sodium chloride

and is commonly known as ‘rock salt’.

Hydrology The science of that part of the hydrologic cycle between rain and return to the sea; the study of

water on and within the land.

In situ In its original position, unmoved.

Incongruent dissolution The composition of the solute in a solution does not match that of the solid during dissolution.

Accompanied by alteration of the primary solid and possibly the formation of a secondary solid

phase.

Intra-cratonic Within a craton, the stable interior of a continental plate that has survived the splitting and

merging of continents since the Precambrian.

Jurassic A geologic period from about 200 to 146 million years ago.

Kainite A mineral salt that consists of potassium chloride and magnesium sulphate, used as a fertilizer.

(MgSO4·KCl·3H

2O)

Kieserite An unstable, evaporite mineral with the chemical formula MgSO4·H

2O.

Lacustrine Of or relating to a lake.

Limestone A sedimentary rock composed mainly of calcium carbonate.

Limestone A sedimentary rock composed principally of calcium carbonate (CaCO2), usually as the mineral

calcite.

Lithology The systematic description of rocks, in terms of mineral composition and texture.

Lithosphere The outer, rigid shell of the Earth, situated above the asthenosphere and containing the crust,

continents, and plates.

Lowstand A time during which sea levels are at their lowest. Associated with a discrete depositional unit

that develops during times of relatively low sea level, associated with exposed reef crests and

isolated, salt-forming lagoons.

Mafic mineral A dark-coloured mineral rich in iron and magnesium, especially a pyroxene, amphibole, or

olivine.

Magnetic anomaly The value of the local magnetic field remaining after the subtraction of the dipole portion of the

Earth’s field.

Mesozoic A geologic era, from about 251 million years ago to about 65 million years ago.

Mineral A naturally occurring element or compound with a precise chemical formula and a regular

internal lattice structure. Organic products are usually not included.

Mudflat Coastal wetlands that form when mud, estuarine silts, clays and marine animal detritus is

deposited by tides or rivers. Mostly within the intertidal zone, resulting in daily cycles of

submergence and exposure.

Mudstone The citified equivalent of mud, a fine grained sedimentary rock similar to shale but more

massive.

Normal fault A dip-slip fault in which the block above the fault has moved downward relative to the block

below.

Oblique-slip fault A fault that combines some strike slip motion with some dip-slip motion.

Ordovician A geologic period from about 488 to 444 million years ago.

Ore A natural deposit in which a valuable metallic element occurs in high enough concentration to

make mining economically feasible.

Ore mineral The mineral of an ore that contains the useful element.

Orogenic belt A linear region, often a former geo-syncline that has been subjected to folding, and other

deformation in a mountain-building episode.

Orogeny The tectonic process in which large areas are folded, thrust-faulted, metamorphosed, and

subjected to plutonism. The cycle ends with uplift and the formation of mountains.

Oxidation A chemical reaction in which electrons are lost from an atom and its charge becomes more

positive.

Oxidized element An element occurring in the more positively charged of two common ionic forms.

Paleogene A geologic period from about 65 to 23 million years ago.

Paleogeographic map A map showing the surface landforms and coastline of an area at some time in the geologic past.

Paleomagnetism The science of the reconstruction of the Earth’s ancient magnetic field and the positions of the

continents from the evidence of remnant magnetization in ancient rocks.


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Paleozoic A geologic era, from about 542 to 251 million years ago.

Pangaea A supercontinent, hypothesized to have comprised all the continental crust in the late

Palaeozoic and Mesozoic, about 250 million years ago.

Permian A geologic period from about 299 to 251 million years ago.

Phanerozoic The current geologic eon. From about 542 million years ago to the present.

Playa environments A type of lake system that is dry most of the time and can be flooded only occasionally.

Potash The common name for various mined and manufactured salts that contain potassium in water-

soluble form.

ppm Parts per million.

Precambrian The large span of time between the formations of the Earth to the emergence of abundant hard

shelled animals, 4.6 billion years ago to about 542 million years ago.

Quartz A common rock forming mineral composed of silica and oxygen.

Quartz arenite Sandstone containing very little except pure quartz grains and cement.

Respiration The chemical reaction by which carbohydrates are oxidized and by which all animals and plants

convert their food into energy. Carbon dioxide is released and oxygen used up.

Rifting The process by which the Earth’s crust and lithosphere are pulled apart, an example of

extensional tectonics.

Right-lateral fault A strike-slip fault on which the displacement of the far block is to the right when viewed from

either side.

Salt A mineral composed primarily of sodium chloride crystals (NaCl).

Saltern The term saltern also describes very shallow water bodies with high concentrations of salt-

forming minerals. Salterns usually begin with seawater as the initial source of brine but may

also use natural saltwater springs and streams. The water is evaporated, usually over a series of

ponds, to the point where NaCl and other salts precipitate out of the saturated brine.

Sandstone A detrital sedimentary rock composed of grains from 1/16 to 2 millimetres in diameter,

dominated in most sandstone by quartz, feldspar, and rock fragments, bound together by a

cement of silica, carbonate, or other minerals or a matrix of clay minerals.

Schist A metamorphic rock characterized by strong foliation or schistosity.

Sedimentary rock A rock formed by the accumulation and cementation of mineral grains transported by wind,

water, or ice to the site of deposition or chemically precipitated at the depositional site.

Sedimentary structure Any structure of a sedimentary or weakly metamorphosed rock that was formed at the time of

deposition; includes bedding, cross-bedding, graded bedding, ripples, scour marks, mud-cracks.

Sedimentation The process of deposition of mineral grains or precipitates in beds or other accumulations.

Seif dune A longitudinal dune that shows the sculpturing effect of cross-winds not parallel to its axis.

Seismic profile The data collected from a set of seismographs arranged in a straight line with an artificial

seismic source, especially the times of P-wave arrivals.

Seismic reflection A mode of seismic prospecting in which the seismic profile is examined for waves that have

reflected from near-horizontal strata below the surface.

Seismic refraction A mode of seismic prospecting in which the seismic profile is examined for waves that have been

refracted upward from seismic discontinuities below the profile. Greater depths may be reached

than through seismic reflection.

Shale An argillaceous, sedimentary rock with grain size less than 4 microns and closely spaced, well-

defined laminae.

Shear A narrow, linear zone of rock deformation or faulting.

Siltstone A sedimentary rock with a grain size in the range 4-62.5 microns.

Silurian A geologic period from about 444 to 416 million years ago.

Stratification A structure of sedimentary rocks, which have recognizable parallel beds of considerable lateral extent.

Stratigraphic sequence A set of beds deposited that reflects the geologic history of a region.

Stratigraphy The science of the description, correlation, and classification of strata in sedimentary rocks,

including the interpretation of the depositional environments of those strata.

Stress A quantity describing the forces acting on each part of a body in units of force per unit area.

Strike The angle between true North and the horizontal line contained in any planar feature (inclined

bed, dike, fault plane, etc.); also the geographic direction of this horizontal line.

Strike-slip fault A fault whose relative displacement is purely horizontal.

Sylvinite An ore mineral consisting of a mixture of sylvite (KCl) and halite (NaCl).

Sylvite A potassic evaporite mineral with the chemical formula KCl.

Syncline A large fold whose limbs are higher than its centre; a fold with the youngest strata in the centre.

System (stratigraphy) A stratigraphic unit larger than a series, consisting of all the rocks deposited in one period of an era.

Tachyhydrite An unstable, hydrous evaporite mineral with the chemical formula CaMg2Cl

6·12H

2O.

Tectonics The study of the movements and deformation of the crust on a large scale, including epirogeny,

metamorphism, folding, faulting, and plate tectonics.

Terrestrial Pertaining to the Earth or to land, as distinct from other planets or water.

Texture (rock) The rock characteristics of grain or crystal size, size variability, rounding or angularity, and

preferred orientation.

Thermobaric The influence of heat and pressure, resulting in mass solute transfer out of a compacting basin.

Thrust fault A dip-slip fault in which the upper block above the fault plane moves up and over the lower block,

so that older strata are placed over younger.

Tidal current A horizontal displacement of ocean water under the gravitational influence of Sun and Moon,

causing the water to pile up against the coast at high tide and move outward at low tide.

Tidal flat A broad, flat region of muddy or sandy sediment covered and uncovered in each tidal cycle.

Turbidite The sedimentary deposit of a turbidity current, typically showing graded bedding and sedimentary

structures on the undersides of the sandstones.

Turbidity current A mass of mixed water and sediment that flows downhill along the bottom of an ocean or lake because

it is denser than the surrounding water. It may reach high speeds and erode rapidly (see also Density

current).

Unconformity A surface that separates two strata. It represents an interval of time in which deposition stopped,

erosion removed some sediments and rock, and then deposition resumed (see also Angular

unconformity).

Unconsolidated material Non-lithified sediment that has no mineral cement or matrix binding its grains.

Vein A narrow, tabular, or sheet-like body of rock or minerals within a rock fracture or joint.

Water table A gently-curved surface below the ground at which the vadose zone ends and the phreatic zone

begins; the level to which a well would fill with water.

Wrench movements Strike-slip movements of rocks in which the fault surface is vertical and the fault blocks move

sideways past each other.


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11 references

BHP Minerals, 1989a, Annual and Relinquishment Report No. A27546, GWSA Open File, p. 15.

BHP Minerals, 1989b, Annual and Relinquishment Report, GWSA Open File No. A27914, p. 15

BRENNAN, S.T., and LOWENSTEIN, T.K., 2002, The major-ion composition of Silurian seawater, Geochimica et

Cosmochimica Acta, Vol. 66, No. 15, pp. 2683–2700, 2002

CATHRO, D.L., WARREN,J.K, & WILLIAMS,G.E., 1992, Halite salterns in the Canning Basin, Western Australia: a

sedimentological analysis of drill core from the Ordovician-Silurian Mallowa Salt. Sedimentology, p.39,983-1002.

Gibson D.L., 1982. McLarty Hills, Western Australia. 1:250,000 Geological Series – Explanatory Notes. Sheet SE/51-15

International Index. Geological Survey of Western Australia.

Hardie L. A. (1996) Secular variation in seawater chemistry: An explanation for the coupled secular variation in the

mineralogies of marine limestones and potash evaporites over the past 600 my. Geology 24, p.279–283.

Hardie, L. A., 1990, The roles of rifting and hydrothermal CaCl brines in the origin of potash evaporites: an hypothesis:

American Journal of Science, v. 290, p. 43 106.

Hocking, R.M., Playford, P.E., Haines, P.W. and Mory, A.J., 2008. Paleozoic geology of the Canning Basin - a field guide.

Geological Survey of Western Australia. Record 2008/18.

Kendall, A. C., 1992, Evaporites, in R. G. Walker, and N. P. James, eds., Facies Models: Responses to sea level change,

Geological Association of Canada, p. 375·-409.

KENNARD, J. M., JACKSON, M. J., ROMINE, K K., SHAW, R. D., and SOUTHGATE, P. N., 1994b. Depositional sequences and

associated petroleum systems of the Canning Basin, WA. In P. G. & R. R. PURCELL, (Eds)., The Sedimentary Basins of

Western Australia: Proceedings of the Western Australian Basins Symposium, Perth, WA, PESA, p. 657-676.

Kovalevich V. M., Peryt T. M., and Petrichenko O. I. (1998) Secular variation in seawater chemistry during the Phanerozoic

as indicated by brine inclusions in halite. J. Geol. 106, p. 695–712.

Leibold A. W. (1992) Sedimentological and geochemical constraints on Niagara/Salina deposition, Michigan Basin. Ph.D.

dissertation, University of Michigan. 280 pp.

Lowenstein T. K., Timofeeff M. N., Brennan S. T., Hardie L. A., Demicco R. V. (2001) Oscillations in Phanerozoic seawater

chemistry: Evidence from fluid inclusions in salt deposits. Science 294, p. 1086–1088.

Matthews R. D. and Egleson G. C. (1974) Origin and implications of a mid-basin potash facies in the Salina Salt of Michigan.

In Fourth Symposium on Salt, v. 1 (ed. A. H. Coogan), pp. 15–34. Northern Ohio Geological Society, Cleveland.

RIO TINTO, 2009, Combined First Annual and Final Report C159/2008 for the Period 8th August 2008 to 5th June 2009,

WAGS Open File Report, p. 25.

Romine, K.K., Southgate, P.N., Kennard, J.M., and Jackson, M.J., 1994, The Ordovician to Silurian Phase of the Canning

Basin WA: Structure and Sequences Evolution. In, In P. G. & R. R. PURCELL, (Eds)., The Sedimentary Basins of Western

Australia: Proceedings of the Western Australian Basins Symposium, Perth, WA, PESA, p. 677-696.

Warren, J. K., 1989, Evaporite sedimentology: Importance in hydrocarbon accumulation: Englewood Clifs, Prentice-Hall,

285 p.

Warren, J.K., 2006, Evaporites: Sediments, resources and hydrocarbons, Spinger Berlin Heidelberg, 1035p.

5 December 2011

The Directors

Highfield Resources Limited


WEST PERTH WA 6005

Dear Sirs

INVESTIGATINGACCOUNTANT’SrEPOrT

INTrODUCTION

This Investigating Accountant’s Report (“Report”) has been prepared for inclusion in a prospectus to be dated on or about

5 December 2011 (“Prospectus”) for the issue by Highfield Resources Limited (“Highfield” or “the Company”) of 20,000,000

ordinary shares at an issue price of $0.20 each to raise $4,000,000 (“Issue”) before the expenses of the Issue.

This Report has been included in the Prospectus to assist potential investors and their financial advisers in making an assessment

of the financial position of the Company.

STrUCTUrEOFrEPOrT

This Report has been divided into the following sections:

1. Background information;

2. Scope of report;

3. Financial information;

4. Subsequent events;

5. Statements; and

6. Declaration.

1. BackgroundInformation

The Company was registered on 25 October 2011.

HLB Mann Judd (WA Partnership) ABN 22 193 232 714

Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533.

Email: [email protected]. Website: http://www.hlb.com.au

Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of HLB International, a worldwide organisation of accounting firms and business advisers.

8 Independent Geologist’s Report (cont) 9 InvestigatingAccountant’sreportF

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As at the date of this Report, the issued share capital of the Company is 24,000,003 ordinary fully paid shares. The

following table summarises share capital movements since registration.

Date Numberissued Issueprice $

25 October 2011 Founder shares 3 $1.00 3

1 November 2011 Vendor shares 13,000,000 $0.00001 130

1 November 2011 Shares issued to acquire a 10%

interest in the McLarty Project 3,000,000 $0.00001 30

8 November 2011 Seed capital 8,000,000 $0.05 400,000

Shares on issue at the date of this Report 24,000,003 $400,163

As at the date of this Report, the Company has 6,000,000 options on issue. The following table summarises movements in

options issued since registration.

IssueDate Issuedto ExpiryDate Exerciseprice Numberissued

1 November 2011 Anthony Hall 1 November 2016 $0.20 4,000,000

1 November 2011 NEFCO Nominees Pty Ltd 1 November 2016 $0.20 2,000,000

Options on issue at the date of this Report 6,000,000

The intended use of the funds raised by the issue of shares under the Prospectus is specified in Section 4.7 of the

Prospectus.

2. Scopeofreport

You have requested HLB Mann Judd (“HLB”) to prepare this Report presenting the following information:

a) the historical financial information comprising the historical Statement of Financial Position as at 10 November 2011

and the historical Statement of Comprehensive Income and Statement of Changes in Equity for the period ended 10

November 2011 as set out in Appendix 1 to this Report; and

b) the proforma financial information comprising the proforma Statement of Financial Position as at 10 November

2011 and the proforma Statement of Comprehensive Income and Statement of Changes in Equity for the period

then ended.

The Directors have prepared and are responsible for the historical and proforma information. We disclaim any

responsibility for any reliance on this Report or on the financial information to which it relates for any purposes other than

that for which it was prepared. This Report should be read in conjunction with the full Prospectus.

We performed a review of the historical financial information of the Company for the period ended 10 November 2011

in order to ensure consistency in the application of applicable Accounting Standards and other mandatory professional

reporting requirements.

Our review of the historical and proforma financial information of the Company was carried out in accordance with

Standard on Review Engagements ASRE 2410 ‘Review of a Financial Report Performed by the Independent Auditor of

the Entity’ and included such enquiries and procedures which we considered necessary for the purposes of this Report.

The review procedures undertaken by HLB in our role as Investigating Accountant were substantially less in scope than

that of an audit examination conducted in accordance with generally accepted auditing standards. Our review was

limited primarily to an examination of the historical and proforma financial information, analytical review procedures and

discussions with senior management and consultants. A review of this nature provides less assurance than an audit and,

accordingly, this Report does not express an audit opinion on the historical financial information and proforma financial

information included in this Report or elsewhere in the Prospectus.

In relation to the information presented in this Report:

a) support by another person, corporation or an unrelated entity has not been assumed;

b) the amounts shown in respect of assets do not purport to be the amounts that would have been realised if the

assets were sold at the date of this Report; and

c) the going concern basis of accounting has been adopted.

3. FinancialInformation

Set out in Appendix 1 (attached) are:

a) The Statement of Financial Position of the Company as at 10 November 2011, and the Statement of Comprehensive

Income and Statement of Changes in Equity for the period from 25 October 2011 to 10 November 2011;

b) The proforma Statement of Financial Position of the Company as at 10 November 2011 and proforma Statement

of Comprehensive Income and Statement of Changes in Equity of the Company for the period then ended as they

would appear after incorporating the following significant events and proposed transactions by the Company

subsequent to 10 November 2011:

i) the issue by the Company pursuant to the Prospectus of 20,000,000 ordinary shares, issued at a price of

$0.20 per share, raising $4,000,000 before the expenses of the Issue;

ii) the payment by Highfield for reimbursement of costs as part of the consideration for the acquisition of 10%

of the McLarty Project from Broadway Resources Pty Ltd (“Broadway”) – the agreement with Broadway

states that these costs will not exceed $150,000. The Company anticipates these costs will be approximately

$125,000, and as a result, this amount has been included as a proforma adjustment; and

iii) the payment and write off to the share capital account of the estimated costs of the Issue of an estimated

$390,808 as set out in Section 13.8 of the Prospectus; and

c) Notes to the historical and proforma financial information.

4. SubsequentEvents

In our opinion, there have been no material items, transactions or events subsequent to 10 November 2011 not otherwise

disclosed in the Prospectus that have come to our attention during the course of our review that would require comment

in, or adjustment to, the content of this Report or which would cause such information included in this Report to be

misleading.

5. Statements

Based on our review, which was not an audit, we have not become aware of any matter that causes us to believe that:

a) the historical financial information of Highfield Resources Limited as at 10 November 2011 as set out in Appendix 1

of this Report, does not present fairly the financial position of the Company as at that date in accordance with the

measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting

Standards and other mandatory reporting requirements in Australia and its performance as represented by the

results of its operations and changes in equity for the period from 25 October 2011 to 10 November 2011; and

b) the proforma financial information of the Company as at 10 November 2011 as set out in Appendix 1 of this Report,

does not present fairly the financial position of the Company as at that date in accordance with the measurement

and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards

and other mandatory reporting requirements in Australia and its performance as represented by its results of

its operations and changes in equity for the period ended 10 November 2011, as if the transactions referred to in

Section 3 (b) of this Report had occurred at that date or during that period.

9 Investigating Accountant’s Report (cont)F

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6. Declaration

a) HLB will be paid its usual professional fees based on time involvement, for the preparation of this Report and the

review of the financial information at our normal professional rates.

b) Apart from the aforementioned fee, neither HLB, nor any of its associates will receive any other benefits, either

directly or indirectly, for or in connection with the preparation of this Report.

c) Neither HLB, nor any of its employees or associated persons has any interest in Highfield or the promotion of the

Company. HLB is the auditor of Highfield.

d) Unless specifically referred to in this Report, or elsewhere in the Prospectus, HLB was not involved in the

preparation of any other part of the Prospectus and did not cause the issue of any other part of the Prospectus.

Accordingly, HLB makes no representations or warranties as to the completeness or accuracy of the information

contained in any other part of the Prospectus.

e) HLB has consented to the inclusion of this Report in the Prospectus in the form and context in which it appears.

The inclusion of this Report should not be taken as an endorsement of the Company or a recommendation by HLB

of any participation in the Company by an intending subscriber.

Yours faithfully

HLB MANN JUDD

L DI GIALLONARDO

Partner

Appendix1

HIGHFIELDrESOUrCESLIMITED

STATEMENTOFCOMPrEHENSIVEINCOME

reviewedfor Unauditedproforma

theperiod fortheperiod

ended ended

10November 10November

Note 2011 2011

$ $

Other expenses 8 8

Share based payments – director’s remuneration 6 28,337 28,337

Share based payments – corporate advisory services 6 14,168 14,168

Loss before income tax expense (42,513) (42,513)

Income tax expense — —

Loss for the period after income tax expense (42,513) (42,513)

Other comprehensive income for the period — —

Total comprehensive loss for the period (42,513) (42,513)


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STATEMENTOFFINANCIALPOSITION

reviewed Unauditedproforma

asat asat


Note 2011 2011

$ $

ASSETS

CURRENT ASSETS

Cash and cash equivalents 3 400,125 3,884,317

TOTAL CURRENT ASSETS 400,125 3,884,317

NON CURRENT ASSETS

Exploration and evaluation expenditure 4 30 125,030

TOTAL NON CURRENT ASSETS 30 125,030

TOTAL ASSETS 400,155 4,009,347

NET ASSETS 400,155 4,009,347

EQUITY

Issued capital 5 400,163 4,009,355

Reserves 6 42,505 42,505

Accumulated losses 7 (42,513) (42,513)

TOTAL EQUITY 400,155 4,009,347


STATEMENTOFCHANGESINEQUITY

IssuedCapital reserves Accumulated

Losses

$ $ $

Balance as at 25 October 2011 — — —

Issue of shares 400,163 — —

Issue of options — 42,505 —

Loss for the period ended 10 November 2011 — — (42,513)

At 10 November 2011 (reviewed) 400,163 42,505 (42,513)

Proforma adjustments:

Issue of shares pursuant to Prospectus 4,000,000 — —

Estimated costs of Issue (390,808) — —

Proforma at 10 November 2011 (unaudited) 4,009,355 42,505 (42,513)


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NOTESTOTHEFINANCIALSTATEMENTS

Note1SummaryofSignificantAccountingPolicies

The significant accounting policies adopted in the preparation of the historical financial information and the proforma financial

information (collectively referred to as the “financial statements”) are:

(a) BasisofPreparation

The financial statements have been prepared in accordance with the measurement and recognition (but not all of the

disclosure) requirements of Australian Accounting Standards and Interpretations and the Corporations Act 2001.

The financial report has also been prepared on a historical cost basis. Cost is based on the fair values of the consideration

given in exchange for assets.

The financial report is presented in Australian dollars.

The company is an unlisted public company, incorporated in Australia. The entity’s principal activities are to evaluate and

develop various mineral exploration projects.

(b) Adoptionofnewandrevisedstandards

Changes in accounting policies on initial application of Accounting Standards

The Company has reviewed all new Standards and Interpretations that have been issued but are not yet effective for the

year ended 30 June 2012. As a result of this review the Directors have determined that there is no impact, material or

otherwise, of the new and revised Standards and Interpretations on its business and, therefore, no change necessary to

Company accounting policies.

(c) StatementofCompliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International

Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial report, comprising the financial

statements and notes thereto, complies with International Financial Reporting Standards (IFRS).

(d) Criticalaccountingjudgmentsandkeysourcesofestimationuncertainty

The application of accounting policies requires the use of judgements, estimates and assumptions about carrying values

of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are

based on historical experience and other factors that are considered to be relevant. Actual results may differ from these

estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions are recognised in the period in

which the estimate is revised if it affects only that period, or in the period of the revision and future periods if the revision

affects both current and future periods.

Share-based payment transactions:

The Company measures the cost of equity-settled transactions and cash-settled share-based payments with employees

and third parties by reference to the fair value of the equity instruments at the date at which they are granted. The fair

value at the grant date is determined using the Black and Scholes option pricing model taking into account the terms and

conditions upon which the instruments were granted and the assumptions detailed in Note 6.

(e) ForeignCurrencyTranslation

Both the functional and presentation currency of Highfield Resources Limited is Australian dollars.

(f) IncomeTax

The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the

applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to

temporary difference and to unused tax losses.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of

the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which

applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts

expected to be paid to the tax authorities.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered

from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted

or substantively enacted by the balance date.

Deferred income tax is provided on all temporary differences at the balance date between the tax bases of assets and

liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except when:

• the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a

transaction that is not a business combination and that, at the time of the transaction, affects neither the

accounting profit nor taxable profit or loss; or

• the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint

ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the

temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, 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 year when the

asset is recognised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively

enacted at the balance date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax

assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the

same taxation authority.


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(g) Othertaxes

Revenues, expenses and assets are recognised net of the amount of GST except:

• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in

which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as

applicable; and

• receivables and payables, which are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or

payables in the Statement of Financial Position.

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising

from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as

operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation

authority.

(h) Impairmentofnon-financialassetsotherthangoodwill

The Company assesses at each balance date whether there is an indication that an asset may be impaired. If any such

indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the

asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in

use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent

of those from other assets or group of assets and the asset’s value in use cannot be estimated to be close to its fair

value. In such cases the asset is tested for impairment as part of the cash-generating unit to which it belongs. When the

carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is

considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount

rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment

losses relating to continuing operations are recognised in those expense categories consistent with the function of the

impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation

decrease).

An assessment is also made at each balance date as to whether there is any indication that previously recognised

impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is

estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to

determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying

amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount

that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.

Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is

treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the

asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

(i) Cashandcashequivalents

Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily

convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts

are shown within borrowings in current liabilities in the Statement of Financial Position.

For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as

defined above, net of outstanding bank overdrafts.

(j) Tradeandotherpayables

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided

to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to

make future payments in respect of the purchase of these goods and services.

(k) Issuedcapital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are

shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new

shares or options for the acquisition of a new business are not included in the cost of acquisition as part of the purchase

consideration.

(l) Earningspershare

Basic earnings/loss per share is calculated as net profit/loss attributable to members, adjusted to exclude any costs

of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of

ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit/loss attributable to members, adjusted for:

• costs of servicing equity (other than dividends) and preference share dividends;

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been

recognised as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of

potential ordinary shares;

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus

element.

(m) Explorationandevaluationexpenditure

Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and

evaluation asset in the year in which they are incurred where the following conditions are satisfied:

(i) the rights to tenure of the area of interest are current; and

(ii) at least one of the following conditions is also met:

(a) the exploration and evaluation expenditures are expected to be recouped through successful development

and exploration of the area of interest, or alternatively, by its sale; or

(b) exploration and evaluation activities in the area of interest have not at the balance date reached a stage

which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves,

and active and significant operations in, or in relation to, the area of interest are continuing.

Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies,

exploratory drilling, trenching and sampling and associated activities and an allocation of depreciation and amortisation

of assets used in exploration and evaluation activities. General and administrative costs are only included in the

measurement of exploration and evaluation costs where they are related directly to operational activities in a particular

area of interest.

Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying

amount of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the

exploration and evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the

relevant area of interest) is estimated to determine the extent of the impairment loss (if any). Where an impairment loss

subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount,

but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been

determined had no impairment loss been recognised for the asset in previous years.

Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant

exploration and evaluation asset is tested for impairment and the balance is then reclassified to development.

Where an area of interest is abandoned, any expenditure carried forward in respect of that area is written off.


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(n) Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event,

it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a

reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

When the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the

reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense

relating to any provision is presented in the statement of comprehensive income net of any reimbursement.

Provisions are measured at the present value or management’s best estimate of the expenditure required to settle the

present obligation at the end of the reporting period.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects

the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is

recognised as an interest expense.

(o) revenue

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net

of returns, trade allowances, rebates and amounts collected on behalf of third parties. Revenue is recognised to the extent

that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The

following specific recognition criteria must also be met before revenue is recognised:

(i) Interest income

Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the

financial asset.

(p) Sharebasedpaymenttransactions

(i) Equity settled transactions:

The Company provides benefits to employees (including senior executives) of the Company in the form of share-

based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled

transactions). In addition, the Company may settle liabilities with third parties by way of granting options. This also

constitutes a share-based payment.

The cost of these equity-settled transactions is measured by reference to the fair value of the equity instruments at

the date at which they are granted. The fair value is determined by an external valuer using a Black-Scholes model,

further details of which are given in Note 6.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions

linked to the price of the shares of the Company (market conditions) if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the

period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant

employees become fully entitled to the award (the vesting period).

The cumulative expense recognised for equity-settled transactions at each balance date until vesting date reflects

(i) the extent to which the vesting period has expired and (ii) the Group’s best estimate of the number of equity

instruments that will ultimately vest. No adjustment is made for the likelihood of market performance conditions

being met as the effect of these conditions is included in the determination of fair value at grant date. The

statement of comprehensive income charge or credit for a period represents the movement in cumulative expense

recognised as at the beginning and end of that period. For share-based payments attributed to capital raising costs,

this expense is included in equity as a deduction from the proceeds of the capital raising.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only

conditional upon a market condition.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had

not been modified. In addition, an expense is recognised for any modification that increases the total fair value of

the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date

of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense

not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled

award and designated as a replacement award on the date that it is granted, the cancelled and new award are

treated as if they were a modification of the original award, as described in the previous paragraph.

(ii) Cash settled transactions:

The Company may also provide benefits to employees in the form of cash-settled share-based payments, whereby

employees render services in exchange for cash, the amounts of which are determined by reference to movements

in the price of the shares of the Company.

The cost of cash-settled transactions is measured initially at fair value at the grant date using the Black-Scholes

formula taking into account the terms and conditions upon which the instruments were granted. This fair value is

expensed over the period until vesting with recognition of a corresponding liability. The liability is remeasured to

fair value at each balance date up to and including the settlement date with changes in fair value recognised in

profit or loss.

Note2ActualandproposedtransactionstoarriveatProformaStatementofFinancialPosition.

The proforma Statement of Financial Position as at 10 November 2011 has been included for illustrative purposes to reflect the

position of the Company on the basis of the following transactions that are proposed to occur after the Company has issued

shares subject to this Prospectus:

i) Securities to be issued

• The issue by the Company pursuant to this Prospectus of 20,000,000 ordinary shares, issued at a price of

20 cents per share, raising $4,000,000 before the expenses of the Issue.

ii) Capital raising costs

• The payment and write off to the share capital account of the estimated costs of the Issue of an estimated

$390,808, as set out in Section 13.8 of the Prospectus.

iii) GST effects

• There will be minimal net GST on the capital raising costs.

iv) Other

• The payment by Highfield for reimbursement of costs as part of the consideration for the acquisition of 10%

of the McLarty Project from Broadway Resources Pty Ltd (“Broadway”) – the agreement with Broadway

states that these costs will not exceed $150,000. The Company anticipates these costs will be approximately

$125,000, and as a result, this amount has been included as a proforma adjustment.


asat asat


Note 2011 2011

$ $

Note3CashandCashEquivalents

Balance at 10 November 2011 400,125 400,125


Issue of shares pursuant to Prospectus 2(i) - 4,000,000

Capital raising costs 2(ii) - (390,808)

Reimbursement of costs as part of the consideration for the

acquisition of 10% of the McLarty Project from Broadway 2(iv) - (125,000)

400,125 3,884,317


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asat asat


Note 2011 2011

$ $

Note4ExplorationandEvaluationExpenditure

Balance at 10 November 2011 30 30


Reimbursement of costs as part of the consideration for the

acquisition of 10% of the McLarty Project from Broadway 2(iv) — 125,000

30 125,030

Note5IssuedCapital

3 shares issued to founders at $1.00 3 3

13,000,000 shares issued to Vendors at $0.00001 130 130

3,000,000 shares issued to Broadway for acquisition of a

10% interest in the McLarty Project at $0.00001 30 30

8,000,000 seed capital shares issued at $0.05 400,000 400,000

Balance at 10 November 2011 (24,000,003 shares) 400,163 400,163


Issue of 20,000,000 shares pursuant to Prospectus at $0.20 each 2(i) — 4,000,000

Estimated costs of Issue 2(ii) — (390,808)

Proforma ordinary shares (44,000,003 shares) 400,163 4,009,355

Note6reserves

1,000,000 options issued to a Director exercisable at $0.20 on or

before 1 November 2016, vesting upon successful listing on the ASX. 28,337 28,337

500,000 options issued to corporate advisors exercisable at $0.20 on or

before 1 November 2016, vesting upon successful listing on the ASX. 14,168 14,168

Balance at 10 November 2011 42,505 42,505

The following options have been issued but no expense recognised as the options will vest only upon the achievement of certain

conditions subsequent to successful listing on the ASX:

Issuedto Number Exerciseprice IssueDate Expirydate Vestingconditions

Directors 1,000,000 $0.20 1 November 2011 1 November 2016 achievement of a share price

of $0.30

Corporate advisors 500,000 $0.20 1 November 2011 1 November 2016 achievement of a share price

of $0.30


of $0.40


of $0.40


of $0.50


of $0.50

The fair value of options issued has been valued using the Black and Scholes option pricing model,

taking into account the following assumptions:

$0.20Options

Number of options 6,000,000

Date of grant 1 November 2011

Expiry date 1 November 2016

Grant date share price $0.05

Exercise price $0.20

Expected volatility 100%

Risk-free interest rate 4.89%


asat asat


2011 2011

$ $

Note7AccumulatedLosses

As at 25 October 2011 — —

Loss for the period (42,513) (42,513)

Balance as at 10 November 2011 (42,513) (42,513)


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HIGHFIELD RESOURCES LIMITED

Note8Commitments

Highfield is entitled to earn a further 40% (for a total of 50%) interest in the McLarty Project (“Project”) by spending a minimum

of $500,000 on completing one exploration drill hole on the Project within two years of Highfield being admitted to the official list

of ASX. If the drill hole is not completed during this period, Highfield will immediately transfer all of its 10% interest in the Project

back to Broadway and Broadway will retain all shares issued and any monies paid in consideration for the 10% interest (“First

Earn-In Period”).

Following the First Earn-In Period, Highfield will be entitled to earn a further 30% (for a total of 80%) interest in the Project by

completing and outlining an independently calculated and inferred JORC compliant resource of 100Mt at 20% potassium oxide

and spending a minimum of $1,000,000 within four years of Highfield being admitted to the official list of ASX (“Second Earn-In

Period”).

Following the Second Earn-In Period, Broadway has the discretion to offer an exclusive option to the Company to acquire the

remaining 20% interest in the Project. If Broadway does not grant this option to the Company, any further expenditure on the

Project following the Second Earn-In Period will be contributed by the Company and Broadway jointly and equally.

Refer to Section 12.1 of the Prospectus for further details of the agreement with Broadway.

5 December 2011

The Board of Directors


Level 1

33 Richardson Street

West Perth WA 6005

Dear Sirs

SOLICITOR’S REPORT ON TENEMENTS

This Report is prepared for inclusion in a prospectus for the issue of up to 20,000,000 shares in the capital of Highfield Resources

Limited (Company) at an issue price of $0.20 per share to raise up to $4,000,000 (Prospectus).

1. Scope

The Company has entered into an agreement with Broadway Resources Pty Ltd (ACN 138 635 622) (Broadway) pursuant

to which the Company has agreed to acquire up to an 80% interest in the McLarty potash project (Project), together with

an exclusive option to acquire the remaining 20% interest in the Project (Broadway Agreement). The Project is comprised

of Western Australian exploration licenses E04/1934, E04/1974 and E45/3546 (together the Tenements). A full summary

of the Broadway Agreement is set out in the “Material Contracts” section of the Prospectus.

We have been requested by the Company to provide a report in relation to the Tenements (Report).

Details of the Tenements taken from our searches are set out in Part I of the attached Schedule, which forms part of

this Report.

2. Search

For the purposes of this Report, we have conducted searches and made enquiries in respect of the Tenements as follows:

(a) we have obtained searches of the Tenements from the registers maintained by the Western Australian Department

of Mines and Petroleum (DMP). These searches were conducted on 24 November 2011. Key details on the status of

the Tenements are set out in Part I of the attached Schedule;

(b) we have obtained extracts (where applicable) of any registered native title claims, native title determinations and

Indigenous Land Use Agreements (ILUAs) that apply to the Tenements, as determined by the National Native Title

Tribunal (NNTT). This material was obtained on 24 November 2011. Details of any native title claims, native title

determinations and ILUAs are set out in Section 7 of this Report and Part II of the Attached Schedule;

(c) we have reviewed all material agreements relating to the Tenements provided to us or registered as dealings

against the Tenements as at the date of the DMP searches. Summaries of these material agreements is contained

in Section 12 of the Prospectus;

(d) we have obtained searches from the online Aboriginal Heritage Enquiry System (AHE) maintained by the Western

Australian Department of Indigenous Affairs (DIA) for Aboriginal sites recorded in the Register of Aboriginal sites

that overlap the Tenements. These searches were conducted on 24 November 2011. Key details of these Aboriginal

heritage sites are set out in Part I of the attached Schedule; and

(e) we obtained from the DMP Tengraph Quick Appraisals of the Tenements on 7 November 2011.

9 Investigating Accountant’s Report (cont) 10 Solicitor’sreportonTenementsF

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3. Opinion

As a result of our searches and enquiries, but subject to the assumptions and qualifications set out in this Report, we are of

the view that, as at the date of the relevant searches:

(a) (Ownership): this Report provides an accurate statement as to the registered holders of the Tenements;

(b) (Title and good standing): all of the Tenements have been granted and are in good standing as far as the payment of

rent or the incurring of expenditure is concerned; and

(c) (Third party interests): this Report provides an accurate statement as to third party interests, including encumbrances,

in relation to the Tenements.

4. ExecutiveSummary

Subject to the qualifications and assumptions in this Report, we consider the following to be material issues in relation to the

Tenements.

(a) (Ownership): At the date of our searches, Broadway is the registered holder of 100% of the Tenements.

(b) (Rent/expenditure): All rent and minimum expenditure requirements on the Tenements have been met.

(c) (Native title): Each of the Tenements is subject to the Ngurrara (Area A) native title determination (WAD 6077/1998)

(Determination). Further details are provided in Parts I and II of the attached Schedule.

Broadway has entered into an agreement with the claimants under the Determination allowing exploration activities to

be conducted on the land the subject of the Determination. Further details are set out in Section 7.3 of this Report.

(d) (Third party interests): There are no third party dealings registered against the Tenements as at the date of our search

of the DMP Register.

(e) (Aboriginal heritage sites): There were no areas and objects of Aboriginal heritage registered on the Tenements.

(f) (Bonds): None of the Tenements are subject to Bonds imposed by the DMP.

(g) (Overlapping titles): Each of the Tenements are overlapped, to various extents, by petroleum exploration permits (PEP)

granted under the Petroleum and Geothermal Energy Resources Act 1967 (WA). Specifically:




The PEPs are all held by unrelated third parties.

No private land overlaps the Tenements. Please refer to Section 10 of this Report for further information.

(h) (Registered Dealings): None of the Tenements are subject to any dealings registered with the DMP.

5. DescriptionoftheTenements

The Tenements comprise exploration licences granted under the Mining Act 1978 (WA) (Mining Act). Part I of the Schedule

provides a list of the Tenements. The following provides a description of the nature and key terms of this type of mining

tenement as set out in the Mining Act and the potential successor tenement of the Tenements, being a mining lease.

5.1 ExplorationLicence

(a) (Application): A person may lodge an application for an exploration licence and the Minister decides whether to grant

the application. An application for an exploration licence (unless a reversion application) cannot be legally transferred

and continues in the name of the applicant.

(b) (Rights): The holder of an exploration licence is entitled to enter the land and undertake operations for the purpose of

exploration for minerals in accordance with any conditions imposed on the grant of the licence.

(c) (Term): An exploration licence has a term of 5 years from the date of grant. The Minister may extend the term by a

further period of 5 years followed by a further period or periods of 2 years.

(d) (Rent): The holder of an exploration licence is required to pay an annual rent to the DMP. A tenement is liable to

forfeiture where rent is not paid when due.

(e) (Conditions): Exploration licences are granted subject to various standard conditions, including conditions relating

to minimum expenditure, the payment of prescribed rent and royalties and observance of environmental protection

and reporting requirements. Conditions may be imposed pursuant to the Mining Act and NTA. A failure to comply

with these conditions may lead to forfeiture of the exploration licence.

(f) (Relinquishment): The holder of an exploration licence granted or applied for before 10 February 2006

must relinquish not less than half of the blocks comprising the licence at the end of the third year. A further

relinquishment of not less than half of the remaining blocks is required at the end of the fourth year. The holder

of an exploration licence applied for and granted after 10 February 2006 must relinquish not less than 40% of the

blocks comprising the licence at the end of the fifth year. A failure to lodge the required partial surrender could

render the tenement liable for forfeiture.

(g) (Priority to apply for mining lease): The holder of an exploration licence has priority to apply for a mining lease

over any of the land subject to the exploration licence. Any application for a mining lease must be made prior to the

expiry of the exploration licence. The exploration licence remains in force until the application for the mining lease

is determined.

(h) (Transfer): No legal or equitable interest in an exploration licence can be transferred or otherwise dealt with during

the first year of its term without the prior written consent of the Minister. Such a transaction entered into without

consent will be void. Thereafter, there is no restriction on transfer or other dealing.

(i) (Under expenditure and forfeiture): The holder of an exploration licence must comply with the prescribed minimum

expenditure conditions unless the holder has been granted an exemption (in whole or part) from those conditions

by the Minister. To obtain an exemption, the holder of an exploration licence must apply to the Minister for the

exemption before the end of the tenement year to which the minimum expenditure relates, or within 60 days after

the end of that tenement year (unless an extension has been granted).

There are prescribed grounds upon which the Minister may grant an exemption, set out in the Mining Act. If the

exemption is granted, the Minister will issue a Certificate of Exemption and the holder will be deemed to be relieved

to the extent, and subject to the conditions, specified in the certificate.

If the exemption is refused, the DMP will commence forfeiture proceedings and the Minister may declare the

tenement to be forfeited or may impose a fine in lieu of forfeiture or decide to take no further action. Where the

Minister has imposed a fine, if the fine is not paid by the date specified by the Minister, or within 30 days of written

notice of the fine being imposed, the licence is forfeited.

(j) (Retention status): The holder of an exploration licence granted after 10 February 2006 may apply for approval of

retention status for the exploration licence. The Minister may approve the application where there is an identified

mineral resource within the exploration licence but it is impractical to mine the resource for prescribed reasons.

Where retention status is granted, the minimum expenditure requirements are reduced in the year of grant and

cease in future years. However, the Minister has the right to impose a programme of works or require the holder to

apply for a mining lease. The holder of an exploration licence applied for, or granted before, 10 February 2006, can

apply for a retention licence (see below).

5.2 MiningLease

(a) (Application): Any person may lodge an application for a mining lease, although a holder of a prospecting licence,

exploration licence or retention licence over the relevant area has priority. The Minister decides whether to grant

an application for a mining lease.

The application, where made after 10 February 2006, must be accompanied by either a mining proposal or a

“mineralisation report” indicating there is significant mineralisation in the area over which a mining lease is sought.

A mining lease accompanied by a “mineralisation report” will only be approved where the Director, Geological

Survey considers that there is a reasonable prospect that the mineralisation identified will result in a mining

operation.

(b) (Rights): The holder of a mining lease is entitled to enter the land and undertake operations for the purposes of

mining and extracting minerals. The holder has exclusive rights to the land for mining purposes.

10 Solicitor’s Report on Tenements (cont)F

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(c) (Term): A mining lease has a term of 21 years and may be renewed for successive periods of 21 years. Where a

mining lease is transferred before a renewal application has been determined, the transferee is deemed to be the

applicant.

(d) (Conditions): Mining leases are granted subject to various standard conditions, including conditions relating

to expenditure, the payment of prescribed rent and royalties and observance of environmental protection and

reporting requirements. Mining leases granted or applied for before 10 February 2006 are subject to a condition

that a mining proposal is lodged and approved before mining operations commence. An unconditional performance

bond may be required to secure performance of these obligations. A failure to comply with these conditions may

lead to forfeiture of the mining lease. These standard conditions are not detailed in the Schedule.

(e) (Transfer): The consent of the Minister is required to transfer a mining lease.

6. AboriginalHeritage

There may be areas or objects of Aboriginal heritage located on the Tenements.

We have obtained searches from the online Aboriginal Heritage Enquiry System maintained by the department for

Indigenous Affairs (DIA) for the Aboriginal sites registered on the Western Australian Register of Aboriginal sites over the

Tenements. No Aboriginal sites were identified from our searches of the Tenements. However, there is no obligation under

the relevant legislation to register sites or objects and the exact location of Aboriginal sites within the area of a known site

cannot be ascertained from these searches.

We have not obtained information from the Commonwealth in connection with any places, areas and objects, which are

registered or recognised in the National Heritage List, the Commonwealth Heritage List or other heritage lists or registers

maintained by the Commonwealth.

The Company must ensure that it does not breach the Commonwealth and applicable State legislation relating to

Aboriginal heritage as set out below. To ensure that it does not contravene such legislation, it would be prudent for

the Company (and it would accord with industry practice and Aboriginal expectations) to conduct heritage surveys to

determine if any Aboriginal sites or objects exist within the area of the Tenements. Any interference with these sites

or objects must be in strict conformity with the provisions of the relevant legislation. It may also be necessary for the

Company to enter into separate arrangements with the traditional owners of the sites.

6.1 CommonwealthLegislation

The Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth) (Commonwealth Heritage Act) is aimed at the

preservation and protection of any Aboriginal areas and objects that may be located on the Tenements.

Under the Commonwealth Heritage Act, the Minister for Aboriginal Affairs may make interim or permanent declarations

of preservation in relation to significant Aboriginal areas or objects, which have the potential to halt exploration

activities. Compensation is payable by the Minister for Aboriginal Affairs to a person who is, or is likely to be, affected by a

permanent declaration of preservation.

It is an offence to contravene a declaration made under the Commonwealth Heritage Act.

6.2 WesternAustralianLegislation

Tenements are granted subject to a condition requiring observance of the Aboriginal Heritage Act 1972 (WA) (WA Heritage

Act).

The WA Heritage Act makes it an offence to alter or damage sacred ritual or ceremonial Aboriginal sites and areas of

significance to Aboriginal persons (whether or not they are recorded on the register or otherwise known to the Register of

Aboriginal Sites, DIA or the Aboriginal Cultural Material Committee).

The Minister’s consent is required where any use of land is likely to result in the excavation, alteration or damage to an

Aboriginal site or any objects on or under that site.

Aboriginal sites may be registered under the WA Heritage Act. However, there is no requirement for a site to be registered

and the WA Heritage Act protects all registered and unregistered sites.

7. NativeTitle

7.1 Introduction

This section of the Report examines the effect of native title on the Tenements.

The existence of native title rights held by indigenous Australians was first recognised in Australia in 1992 by the High

Court in the case Mabo v. Queensland (no.2) (1992) 175 CLR 1 (Mabo no.2).

Mabo no. 2 held that certain land tenure existing as at the date of that case, including mining tenements, where granted or

renewed without due regard to native title rights, were invalid.

As a result of Mabo no. 2, the Native Title Act 1993 (Cth) (NTA) was passed to:

(a) provide a process for indigenous people to lodge claims for native title rights over land, for those claims to

be registered by the National Native Title Tribunal (NNTT) and for the Courts to assess native title claims and

determine if native title rights exist. Where a Court completes the assessment of a native title claim, it will issue a

native title determination that specifies whether or not native title rights exist;

(b) provide (together with associated State legislation) that any land tenures granted or renewed before 1 January

1994 were valid despite Mabo no. 2. This retrospective validation of land tenure was subsequently extended by the

NTA to include freehold and certain leasehold (including pastoral leases) granted or renewed before 23 December

1996; and

(c) provide that an act that may affect native title rights (such as the grant or renewal of a mining tenement) carried

out after 23 December 1996 (a Future Act) must comply with certain requirements for the Future Act to be valid

under the NTA. These requirements are called the Future Act Provisions.

The Future Act Provisions are summarised in Section 7.2 below, following which the Report identifies:

(a) native title claims and determinations that are registered against the Tenements (see Section 7.3);

(b) Tenements which have been retrospectively validated under the NTA as being granted before 23 December 1996

(see Section 7.4); and

(c) Tenements which have been granted after 23 December 1996 and as such will need to have been granted following

compliance with the Future Act Provisions to be valid under the NTA. This Report assumes that the Future Act

Provisions have been complied with in relation to these Tenements (see Section 7.4).

Note that the grant of a tenement does not need to comply with the Future Act Provisions if in fact native title has never

existed over the land covered by the Tenement, or has been validly extinguished prior to the grant of the tenement. We

have not undertaken the extensive research needed to determine if in fact native title does not exist, or has been validly

extinguished in relation to the Tenements.

Unless it is clear that native title does not exist (e.g. in relation to freehold land), the usual practice of the State is to

comply with the Future Act Provisions when granting a tenement. This ensures the grant will be valid in the event a court

determines that native title rights do exist over the land subject to the tenement and, as such, the Future Act Provisions

apply.

Where a tenement has been retrospectively validated or validly granted under the NTA, the rights under the tenement

prevail over any inconsistent native title rights.

Compensation

The Mining Act provides that holders of mining tenements are liable for compensation in relation to native title. As a

result, if it is determined that native title exists over any of the land the subject of the Tenements and the holders of the

native title apply to the Federal Court for compensation, the holder of the mining tenements may be liable and directed

to pay any compensation determined. To date, the Federal Court has not awarded compensation in relation to native title

(please note that few compensation claims have been lodged).


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7.2 FutureActProvisions

The Future Act Provisions vary depending on the Future Act to be carried out. In the case of the grant of a mining tenement,

typically there are three alternatives:

(a) the right to negotiate;

(b) an indigenous land use agreement (ILUA); and

(c) the Expedited Procedure (defined below).

Each of these are summarised below.

righttoNegotiate

The Right to Negotiate involves a formal negotiation between the State, the applicant for the tenement and any registered

native title claimants and holders of native title rights. The aim is to agree the terms on which the tenement can be granted.

The applicant for the tenement is usually liable for any compensation that the parties agree to pay to the registered native

title claimants and holders of native title. The parties may also agree on conditions that will apply to activities carried out on

the tenement (e.g. in relation to heritage surveys).

If agreement is not reached to enable the tenement to be granted, the matter may be referred to arbitration before the

NNTT, which has six (6) months to decide whether the tenement can be granted and if so, on what conditions. The NNTT

usually requires the parties to have had at least six (6) months of negotiations before it will accept a referral for arbitration.

ILUA

An ILUA is a contractual arrangement governed by the NTA. Under the NTA, an ILUA must be negotiated with all registered

native title claimants for a relevant area. The State and the applicant for the tenement are usually the other parties to the

ILUA.

An ILUA must set out the terms on which a tenement can be granted. An ILUA will also specify conditions on which activities

may be carried out within the tenement. The applicant for a tenement is usually liable for any compensation that the parties

agree to pay to the registered native title claimants and holders of native title in return for the grant of the tenement being

approved. These obligations pass to a transferee of the tenement.

Once an ILUA is agreed and registered, it is arguable that it binds the whole native title claimant group and all holders of

native title in the area (including future claimants), even though they may not be parties to it.

ExpeditedProcedure

The NTA establishes a simplified process for the carrying out of a Future Act that is unlikely to adversely affect native title

rights (Expedited Procedure). The grant of a tenement can occur under the Expedited Procedure if:

(a) the grant will not interfere directly with the carrying on of the community or social activities of the persons who are

the holders of native title in relation to the land;

(b) the grant is not likely to interfere with areas or sites of particular significance, in accordance with their traditions,

to the persons who are holders of native title in relation to the land; and

(c) the grant is not likely to involve major disturbance to any land or waters concerned or create rights whose exercise

is likely to involve major disturbance to any land.

If the State considers the above criteria are satisfied, it commences the Expedited Procedure by giving notice of the

proposed grant of the tenement in accordance with the NTA. Persons have until three (3) months after the notification date

to take steps to become a registered native title claimant or native title holder in relation to the land to be subject to the

tenement.

If there is no objection lodged by a registered native title claimant or a native title holder within four (4) months of the

notification date, the State may grant the tenement.

If one or more registered native title claimants or native title holders object within that four (4) month notice period, the

NNTT must determine whether the grant is an act attracting the Expedited Procedure. If the NNTT determines that the

Expedited Procedure applies, the State may grant the tenement. Otherwise, the Future Act Provisions (e.g. Right to Negotiate

or ILUA) must be followed before the tenement can be granted.

The State of Western Australia currently follows a policy of granting prospecting and exploration licenses under the

Expedited Procedure where the applicant has entered into a standard aboriginal heritage agreement with the relevant

registered native title claimants and native title holders. The standard heritage agreement (and ancillary agreements)

usually provide for payment of compensation by the applicant for the tenement and conditions that apply to activities

carried out within the tenement.

ExceptiontorequirementtocomplywithFutureActProvisions

The grant of a tenement does not need to comply with the Future Act Provisions if in fact native title has never existed

over the land covered by the tenement, or has been validly extinguished prior to the grant of the tenement. We have

not undertaken the extensive research needed to determine if in fact native title does not exist, or has been validly

extinguished in relation to the Tenements.

Unless it is clear that native title does not exist (e.g. in relation to freehold land), the usual practice of the State is to

comply with the Future Act Provisions when granting a tenement. This ensures the grant will be valid in the event a court

determines that native title rights do exist over the land subject to the tenement and as such, the Future Act Provisions

apply.

Where a tenement has been retrospectively validated or validly granted under the NTA, the rights under the tenement

prevail over any inconsistent native title rights.

ApplicationtotheTenements

The following sections of the Report identify:

(a) any native title claims, native title determinations and ILUAs that are registered against the Tenements (see

Section 7.3);

(b) any Tenements which have been retrospectively validated under the NTA as being granted before 23 December

1996 (see Section 7.4); and

(c) any Tenements which have been granted after 23 December 1996 and as such will need to have been granted

following compliance with the Future Act Provisions to be valid under the NTA. This Report assumes that the Future

Act Provisions have been complied with in relation to these Tenements (see Section 7.4).

7.3 registeredNativeTitleClaimsandDeterminationsandILUAs

Our searches indicate that each of the Tenements are subject to the Ngurrara (Area A) native title determination (WAD

6077/1998) (Determination). Further details are set out in Part II of the attached Schedule.

The Company has advised us that Broadway has negotiated a Native Title, Heritage Protection and Mineral Exploration

Agreement with the Kimberly Land Council (KLC) (KLC Agreement). The KLC represents the claimants under the

Determination.

The KLC Agreement will allow the Company to conduct exploration activities on the land the subject of the Determination.

Our searches did not return any results for ILUAs in relation to any of the Tenements.

Native title claimants (and holders of native title under the determinations and native title parties under ILUAs) are

entitled to certain rights under the Future Act Provisions.

7.4 ValidityofTenementsundertheNTA

The sections below examine the validity of the Tenements under the NTA.

Tenementsgrantedbefore23December1996

Our searches indicate that none of the Tenements were granted before 23 December 1996.

Tenementsgrantedafter23December1996

Our searches indicate that all of the Tenements were granted after 23 December 1996.

We have assumed that these Tenements were granted in accordance with the Future Act Provisions and as such are valid

under the NTA.


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Tenementsrenewedafter23December1996

Renewals of mining tenements made after 23 December 1996 must comply with the Future Act Provisions in order to be

valid under the NTA.

An exception is where the renewal is the first renewal of a mining tenement that was validly granted before 23 December

1996 and the following criteria are satisfied:

(a) the area to which the mining tenement applies is not extended;

(b) the term of the renewed mining tenement is not longer than the term of the old mining tenement; and

(c) the rights to be created are not greater than the rights conferred by the old mining tenement.

In such cases, the mining tenement can be renewed without complying with the Future Act Provisions. It is currently

uncertain whether this exemption applies to a second or subsequent renewal of such a mining tenement.

Our searches indicate that all of the Tenements are to be renewed in 2016.

Renewals of Tenements in the future will need to comply with the Future Act Provisions in order to be valid under the

NTA. The registered native title claimants and holders of native title identified in Section 7.3 of this Report will need to be

involved as appropriate under the Future Act Provisions.

8. rESErVES

8.1 Aboriginalreserves

As set out in Part I of the attached Schedule of this Report none of the Tenements overlap Aboriginal reserves.

The Aboriginal Affairs Planning Authority Act 1972 (WA) (AAPA) governs the establishment, management and access

to areas of land in Western Australia designated as Aboriginal reserves. The AAPA established a statutory body, the

Aboriginal Lands Trust (ALT), to be responsible for the overall management of Aboriginal reserves. A permit is required to

enter onto or pass through a number of the reserves administered by the ALT. The ALT administers the issue of permits for

entry onto those designated reserves.

Entry Permit

A mining access entry permit is required for any mining activity on any Aboriginal reserve. Mining activity includes

surveying and/or marking out of tenements, fossicking, prospecting, exploring and mining. A mining related access entry

permit also covers travelling through such Aboriginal reserves to access mining tenements outside the reserve for the

purpose of mining activities.

The Minister for Indigenous Affairs issues mining access entry permits after seeking the views of the ALT, which in turn

must be satisfied there has been adequate consultation with any resident Aboriginal community and relevant native title

interests.

An application for a mining access entry permit consists of the following actions:

(a) submitting a written request to the Legal Project Officer, Department of Indigenous Affairs requesting advice on

the grant of mining access entry permits. The request must include tenement details (number, holder, grant status),

details of the relevant Aboriginal reserve and brief details about what works are proposed;

(b) completing the requirements set out in the response provided by the Department of Indigenous Affairs which

usually includes consultation with the parties nominated by the ALT (usually the resident communities and native

title interests) and obtaining an agreement from the consulted parties; and

(c) the Department of Indigenous Affairs prepares a submission for consideration by the ALT and the Minister for

Indigenous Affairs based on the results of the consultation process.

In addition, mining may not take place on a tenement located within an Aboriginal reserve without the written

consent of the Minister for Mines and Petroleum who will consult with the Minister for Indigenous Affairs, and obtain a

recommendation from him or her as to whether mining should be allowed. Mining in this context is consistent with the

broader definition applied to mining access entry permits in that it includes prospecting and exploration and is therefore

required before the grant of prospecting licences and exploration licences not just mining leases.

8.2 Otherreserves

State Government policy provides that mining should not occur on national parks, nature reserves, conservation parks or

state forests and, where possible, a tenement applicant is encouraged to excise the conservation area from the area of the

application.

If a conservation area is not excised, the DMP will refer the application to the Department of Environment and Conservation

for comment and or consent. Under the Mining Act, mineral exploration on national parks, class “A” nature reserves and

certain conservation parks requires the concurrence of the Minister of Environment and Conservation. In relation to nature

reserves other than class “A” reserves, and certain conservation parks, the Minister for the Environment and Conservation is

required to give his recommendation in relation to the grant.

Where the Minister for the Environment and Conservation concurs with the grant or provides recommendations in relation

to the grant, additional conditions and endorsements are generally placed on the tenement. These conditions are designed

to minimise the impacts on the environment and to draw the tenement holders attention to the requirements under other

environmental protection legislation.

None of the Tenements overlap with flora and fauna reserves.

9. PastoralLeases

As set out in Part I of the attached Schedule none of the Tenements overlap with pastoral leases.

The Mining Act:

(a) prohibits the carrying out of mining activities on or near certain improvements and other features (such as livestock

and crops) on Crown land (which includes a pastoral lease) without the consent of the lessee;

(b) imposes certain restrictions on a mining tenement holder passing through Crown land, including requiring that all

necessary steps are taken to notify the occupier of any intention to pass over the Crown land and that all necessary

steps are taken to prevent damage to improvements and livestock; and

(c) provides that the holder of a mining tenement must pay compensation to an occupier of Crown land (i.e. the pastoral

lessee) in certain circumstances, in particular to make good any damage to improvements, and for any loss suffered

by the occupier from that damage or for any substantial loss of earnings suffered by the occupier as a result of, or

arising from, any exploration or mining activities, including the passing and re-passing over any land.

The DMP imposes standard conditions on mining tenements that overlay pastoral leases.

10. PetroleumExplorationPermits

Each of the Tenements are overlapped, to various extents, by petroleum exploration permits (PEP) granted under the

Petroleum and Geothermal Energy Resources Act 1967 (WA)(Petroleum Act).

Specifically:

(a) PEP 429 overlaps E04/1934 by less than 1% and E45/3546 by 52.8%;

(b) PEP 476 overlaps E04/1934 by 9.6%, E04/1974 by 87.6% and E45/3546 by 13%; and

(c) PEP 456 overlaps E45/3546 by 100%.


The Mining Act provides that in the event that a dispute arises between the holder of the relevant PEP (PEP Holder) and

the Company concerning any operations carried out or proposed to be carried out by the Company or the PEP Holder, the

disputed matter will be referred to a warden of the mines as appointed under the Mining Act (Warden). The Warden, as soon

as practicable after such reference, shall inquire into the dispute and provide a report to the Minister.

Upon receipt of the Warden’s report, the Minister may make such order and give such directions to the Company or PEP

Holder or to both of them as in the public interest and in the circumstances of the case may seem to him to be just and

equitable.

The Company has advised us that it is currently in co-operation with the PEP Holders as to the carrying out of activities on

the relevant overlapping areas of the Tenements. The Company has no reason to believe that it cannot and will not carry out

it activities in conjunction with the activities of the PEP Holders harmoniously.


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11. QUALIFICATIONSANDASSUMPTIONS

This Report is subject to the following qualifications and assumptions:

(a) we have assumed the accuracy and completeness of all Tenement searches, register extracts and other information or

responses which were obtained from the relevant department or authority including the NNTT;

(b) we assume that the registered holder of a Tenement has valid legal title to the Tenement;

(c) this Report does not cover any third party interests, including encumbrances, in relation to the Tenements that are not

apparent from our searches and the information provided to us;

(d) we have assumed that any agreements provided to us in relation to the Tenements are authentic, complete, were

within the powers and capacity of those who executed them, were duly authorised, executed, delivered and stamped

and are binding on the parties to them;

(e) with respect to the granting of the Tenements, we have assumed that the State and the applicant for the Tenements

complied with the applicable Future Act Provisions;

(f) Aboriginal heritage sites or objects (as defined in the WA Heritage Act or under the Commonwealth Heritage Act) may

exist in the areas covered by the Tenements regardless of whether or not that site has been entered on the Register

of Aboriginal Sites established by the WA Heritage Act or is the subject of a declaration under the Commonwealth

Heritage Act. We have not conducted any legal, historical, anthropological or ethnographic research regarding the

existence or likely existence of any such Aboriginal heritage sites or objects within the area of the Tenements;

(g) we have assumed the accuracy and completeness of any instructions or information which we have received from the

Company or any of its officers, agents and representatives;

(h) with respect to the application for the grant of a Tenement, we express no opinion as to whether such application

will ultimately be granted and that reasonable conditions will be imposed upon grant, although we have no reason to

believe that any application will be refused or that unreasonable conditions will be imposed unless apparent from our

searches or the information provided to us, we have assumed compliance with the requirements necessary to maintain

a Tenement in good standing;

(i) with respect to the application for the grant of a Tenement, we express no opinion as to whether such application

will ultimately be granted and that reasonable conditions will be imposed upon grant, although we have no reason to

believe that any application will be refused or that unreasonable conditions will be imposed;

(j) where Ministerial consent is required in relation to the transfer of any Tenement, we express no opinion as to whether

such consent will be granted, or the consequences of consent being refused, although we are not aware of any matter

which would cause consent to be refused;

(k) we have not conducted searches of the Database of Contaminated Sites maintained by the Department of

Environment and Conservation and express no opinion on whether any of the Tenements are subject to any

contamination or pollution;

(l) references in the Schedule to any area of land are taken from details shown on searches obtained from the relevant

department. It is not possible to verify the accuracy of those areas without conducting a survey; and

(m) the information in the Schedule is accurate as at the date the relevant searches were obtained. We cannot comment

on whether any changes have occurred in respect of the Tenements between the date of the searches and the date of

the Prospectus;

(n) native title may exist in the areas covered by the Tenements. Whilst we have conducted searches to ascertain that

native title claims and determinations, if any, have been lodged in the Federal Court in relation to the areas covered by

the Tenements, we have not conducted any research on the likely existence or non-existence of native title rights and

interests in respect of those areas. Further, the NTA contains no sunset provisions and it is possible that native title

claims could be made in the future; and

(o) Aboriginal heritage sites or objects (as defined in the WA Heritage Act or under the Commonwealth Heritage Act) may

exist in the areas covered by the Tenements regardless of whether or not that site has been entered on the Register

of Aboriginal Sites established by the WA Heritage Act or is the subject of a declaration under the Commonwealth

Heritage Act. We have not conducted any legal, historical, anthropological or ethnographic research regarding the

existence or likely existence of any such Aboriginal heritage sites or objects within the area of the Tenements.

12. Consent

We have given our written consent to the inclusion of this Report in the Prospectus and we have not withdrawn our

consent prior to the lodgement of this Prospectus with the ASIC.

Yours faithfully

STEINEPREIS PAGANIN


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icen

ce

All

of t

he

nat

ive

titl

e cl

aim

s lis

ted

in t

he

Sch

edu

le h

ave

bee

n a

ccep

ted

an

d e

nte

red

on

th

e R

egis

ter

of N

ativ

e T

itle

Cla

ims.

Ple

ase

refe

r to

Par

t II

of t

his

Sch

edu

le f

or

the

stat

us

of t

he

nat

ive

titl

e cl

aim

s.

Un

less

oth

erw

ise

ind

icat

ed, c

apit

alis

ed t

erm

s h

ave

the

sam

e m

ean

ing

giv

en t

o t

hem

in t

he

Pro

spec

tus.

Ref

eren

ces

to n

um

ber

s in

th

e “N

ote

s” c

olu

mn

ref

ers

to t

he

no

tes

follo

win

g t

his

tab

le.

No

tes:

1. T

he

licen

see’

s at

ten

tio

n is

dra

wn

to

th

e p

rovi

sio

ns

of t

he

Ab

ori

gin

al H

erit

age

Act

19

72 a

nd

any

reg

ula

tio

ns

ther

eun

der

.

2.

Th

e lic

ense

e’s

atte

nti

on

is d

raw

n t

o t

he

Env

iro

nm

enta

l Pro

tect

ion

Act

19

85

6 a

nd

th

e E

nvir

on

men

tal P

rote

ctio

n (

Cle

arin

g o

f N

ativ

e V

eget

atio

n) R

egu

lati

on

s 20

04

, wh

ich

pro

vid

es f

or

the

pro

tect

ion

of

all n

ativ

e ve

get

atio

n f

rom

dam

age

un

less

pri

or

per

mis

sio

n is

ob

tain

ed.

3.

All

surf

ace

ho

les

dri

lled

fo

r th

e p

urp

ose

of

exp

lora

tio

n a

re t

o b

e ca

pp

ed, fi

lled

or

oth

erw

ise

mad

e sa

fe im

med

iate

ly a

fter

co

mp

leti

on

.

4.

All

dis

turb

ance

s to

th

e su

rfac

e of

th

e la

nd

mad

e as

a r

esu

lt o

f ex

plo

rati

on

, in

clu

din

g c

ost

ean

s, d

rill

pad

s, g

rid

lin

es a

nd

acc

ess

trac

ks, b

ein

g b

ackfi

lled

an

d r

ehab

ilita

ted

to

th

e

sati

sfac

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n o

f th

e E

nvir

on

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tal O

ffice

r, D

epar

tmen

t of

Min

es a

nd

Pet

role

um

(D

MP

). B

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nd

reh

abili

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on

bei

ng

req

uir

ed n

o la

ter

than

6 m

on

ths

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r ex

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n u

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oth

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app

rove

d in

wri

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g b

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e E

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tal O

ffice

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MP.

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All

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der

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ulld

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ed e

qu

ipm

ent

for

surf

ace

dis

turb

ance

or

the

exca

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of

cost

ean

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pro

hib

ited

. Fo

llow

ing

ap

pro

val,

all t

ops

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oved

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min

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11.1 ASXCorporateGovernanceCouncilPrinciplesandrecommendations

The Directors monitor the business affairs of the Company on behalf of Shareholders and have formally adopted a

corporate governance policy which is designed to encourage Directors to focus their attention on accountability, risk

management and ethical conduct. The Company’s main corporate governance policies and practices are outlined below:

(a) BoardofDirectors

The Company’s Board of Directors is responsible for the corporate governance of the Company. The Board develops

strategies for the Company, reviews strategic objectives and monitors performance against those objectives. The

goals of the corporate governance processes are to:

(i) maintain and increase Shareholder value;

(ii) ensure a prudential and ethical basis for the Company’s conduct and activities; and

(iii) ensure compliance with the Company’s legal and regulatory objectives.

Consistent with these goals, the Board assumes the following responsibilities:

(i) developing initiatives for profit and asset growth;

(ii) reviewing the corporate, commercial and financial performance of the Company on a regular basis;

(iii) acting on behalf of, and being accountable to, the Shareholders; and

(iv) identifying business risks and implementing actions to manage those risks and corporate systems to assure

quality.

The Company is committed to the circulation of relevant materials to Directors in a timely manner to facilitate

Directors’ participation in the Board discussions on a fully-informed basis.

(b) CompositionoftheBoard

Election of Board members is substantially the province of the Shareholders in general meeting. However, subject

thereto, the Company is committed to the following principles:

(i) the Board is to comprise Directors with a blend of skills, experience and attributes appropriate for the

Company and its business; and

(ii) the principal criterion for the appointment of new Directors is their ability to add value to the Company and

its business.

No formal nomination committee or procedures have been adopted for the identification, appointment and review

of the Board membership, but an informal assessment process, facilitated by the Chairman in consultation with the

Company’s professional advisors, has been committed to by the Board.

(c) Independentprofessionaladvice

Subject to the Chairman’s approval (not to be unreasonably withheld), the Directors, at the Company’s expense,

may obtain independent professional advice on issues arising in the course of their duties.

(d) remunerationarrangements

The remuneration of an executive Director will be decided by the Board, without the affected executive Director

participating in that decision-making process.

The total maximum remuneration of non executive Directors is the subject of a Shareholder resolution in

accordance with the Company’s Constitution, the Corporations Act and the ASX Listing Rules, as applicable. The

determination of non executive Directors’ remuneration within that maximum will be made by the Board having

regard to the inputs and value to the Company of the respective contributions by each non executive Director.

The Board may award additional remuneration to non executive Directors called upon to perform extra services or

make special exertions on behalf of the Company.

11 CorporateGovernanceF

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In addition, a Director may be paid fees or other amounts (i.e. subject to any necessary Shareholder approval, non-cash

performance incentives such as Options) as the Directors determine where a Director performs special duties or otherwise

performs services outside the scope of the ordinary duties of a Director.

Directors are also entitled to be paid reasonable travelling, hotel and other expenses incurred by them respectively in or

about the performance of their duties as Directors.

(e) Externalaudit

The Company in general meeting is responsible for the appointment of the external auditors of the Company, and the

Board from time to time will review the scope, performance and fees of those external auditors.

(f) Auditcommittee

The Company will have an audit committee charter and due to the size and nature of activities the function of the audit

committee will be undertaken by the full Board.

(g) Identificationandmanagementofrisk

The Board’s collective experience will enable accurate identification of the principal risks that may affect the Company’s

business. Key operational risks and their management will be recurring items for deliberation at Board meetings.

(h) Ethicalstandards

The Board is committed to the establishment and maintenance of appropriate ethical standards.

(i) TradingPolicy

Under the Company’s securities trading policy, an executive or Director must not trade in any securities of the Company at

any time when they are in possession of unpublished, price-sensitive information in relation to those securities.

Before commencing to trade, an executive must first obtain the approval of the Managing Director to do so and a Director

must first obtain approval of the Chairman. Only in exceptional circumstances will approval be forthcoming inside of the

period commencing on the tenth day of the month in which the Company is required to release its Quarterly Activities

Report and Quarterly Cashflow Report and ending two days following the date of that release.

(j) ShareholderCommunicationPolicy

The Company’s objective is to promote effective communication with its Shareholders at all times.

The Company is committed to:

(i) ensuring that Shareholders and the financial markets are provided with full and timely information;

(ii) complying with continuous disclosure obligations contained in the ASX Listing Rules and the Corporations Act in

Australia; and

(iii) communicating effectively with its Shareholders and making it easier for Shareholders to communicate with the

Company.

To promote effective communication with Shareholders and encourage effective participation at general meetings,

information is communicated to Shareholders:

(i) through the release of information to the market via the ASX;

(ii) through the distribution of the annual report and notices of annual general meeting;

(iii) through Shareholder meetings and investor relations presentations;

(iv) through letters and other forms of communications directly to Shareholders; and

(v) by posting relevant information on the Company’s website: www.highfieldresources.com.au.

12.1 BroadwayAgreement

On 1 November 2011, the Company entered into an agreement with Broadway Resources, pursuant to which the Company

agreed to acquire an interest in the McLarty Potash Project (Project) (BroadwayAgreement).

The key terms of the Broadway Agreement are summarised below:

(a) (Initial10%interest): In consideration for acquiring an initial 10% interest in the Project (10% Interest) the Company

has:

(i) issued to Broadway Resources 3,000,000 Shares; and will

(ii) reimburse Broadway for tenement related costs incurred through to 30 November 2011 in the amount not

exceeding $150,000 (although the Company anticipates these costs to be approximately $125,000) subject

to the Company being admitted to the Official List within six (6) months of execution of the Broadway

Agreement.

(b) (AdmissiontotheOfficialList): In the event that the Company is not admitted to the Official List within six (6)

months of execution of the Broadway Agreement, the Broadway Agreement will be terminated and the 10% Interest

will be transferred back to Broadway Resources.

(c) (Firstfarmininterest): The Company is entitled to earn a further 40% interest in the Project (for a total interest of

50%) by spending a minimum of $500,000 on completing one (1) exploration drill hole on the Project on or before

the second anniversary of Highfield being admitted to the Official List (FirstEarn-inPeriod).

If a drill hole is not completed during the First Earn-in Period, the 10% Interest will be transferred back to Broadway

for nil consideration.

(d) (Secondfarmininterest): Following the First Earn-In Period, the Company is entitled to earn a further 30% interest

in the Project by completing and outlining an independently calculated and inferred JORC compliant mineral resource

of 100Mt at 20% K2O (potassium oxide) and spending an additional amount of $1,000,000 on or before the fourth

anniversary of Highfield being admitted to the Official List (SecondEarn-inPeriod).

(e) (Thirdfarmininterest): Following the Second Earn-in Period Broadway Resources has the discretion to offer an

exclusive option to the Company to acquire the remaining 20% interest in the Project (20%Option). In the event that

Broadway decides not to grant the 20% Option to the Company, any further expenditure on the Project following the

Second Earn-in Period will be contributed by the Company and Broadway Resources jointly and equally.

(f) (Warranties): Broadway Resources and the Company have given warranties that are standard in an agreement of this

kind.

The Broadway Agreement is otherwise on terms and conditions that are standard to an agreement of this kind.

12.2 LeadManagerandBrokerAgreement-CPSSecurities

On 2 November 2011, the Company entered into a mandate agreement with CPS Securities pursuant to which CPS Securities

was appointed as the Lead Manager and Broker to the Offer (CPSSecuritiesMandate).

Under the CPS Securities Mandate, CPS Securities will receive a management fee of 1%, (plus GST), on all funds raised under

this Prospectus. CPS Securities is also entitled to a placment fee of 5%, (plus GST), on any Shares placed by CPS under the

Offer.

12.3 CorporateAdvisoryAgreement–GarrisonCapital

The Company has entered into an agreement with Garrison Capital to provide corporate advisory services. These services

include:

(a) initial public offering services; and

(b) retainer services.

The Company will pay Garrison Capital $60,000 (plus GST) for the initial public offering services within seven (7) days after

successful admission to the Official List of the ASX.

The Company will pay Garrison Capital $60,000 per annum (plus GST) for the provision of the retainer services. The term of

the agreement is from 1 November 2011 until on or before 31 October 2013, unless extended by the parties.

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12.4 ServicesAgreement–GarrisonCapital

The Company has entered into an agreement with Garrison Capital to provide administrative services and office space

to the Company in Perth. This will include the use of the office and office equipment, services of an office manager and

secretary and maintenance of the office computer equipment. The Company will pay Garrison Capital $120,000 per annum

(plus GST) for the provision of these services. The term of the agreement is from 1 November 2011 until on or before 31

October 2013, unless extended by the parties.

12.5 ExecutiveServicesAgreement–AnthonyHall

The Company has entered into an executive services agreement with Mr Hall in relation to his appointment as Managing

Director of the Company.

The material terms and conditions of the agreement are as follows:

(a) (Term): The term of employment commenced on 1 November 2011 and will terminate on or before 31 October 2013

unless extended by both parties.

(b) (Duties): The duties to be performed by Mr Hall are in the nature usually prescribed for an appointment of

this type.

(c) (remuneration): The Company shall pay Mr Hall a consulting fee of $200,000 per annum.

(d) (Securities): Mr Hall has been issued 4,000,000 Options (on the terms set out in Section 13.3 of this Prospectus).

(e) (TerminationbyMrHall): Mr Hall may terminate the agreement by giving the Company 3 months’ written notice.

(f) (TerminationbyCompany): the Company may terminate the agreement by the Board giving 3 months’ notice in

writing, or such shorter period of notice as may be agreed by both parties.

(g) (Governinglaw): The agreement shall be governed by the laws of Western Australia.

(h) (Otherterms): The agreement also contains provisions including confidentiality, leave entitlements, intellectual

property and immediate termination rights that are customary in agreements of this type.

12.6 ExecutiveServicesAgreement–MarkArundell

The Company has entered into an executive services agreement with Mr Arundell in relation to his appointment as

Exploration Director of the Company.

The material terms and conditions of the agreement are as follows:

(a) (Term): The term of employment commenced on 1 November 2011 and will terminate on or before 31 October 2013

unless extended by both parties.

(b) (Duties): The duties to be performed by Mr Arundell are in the nature usually prescribed for an appointment of this

type.

(c) (remuneration): The Company shall pay Mr Arundell a consulting fee of $100,000 per annum.

(d) (TerminationbyMrArundell): Mr Arundell may terminate the agreement by giving the Company 3 months’ written

notice.

(e) (TerminationbyCompany): the Company may terminate the agreement by the Board giving 3 months’ notice in

writing, or such shorter period of notice as may be agreed by both parties.

(f) (Governinglaw): The agreement shall be governed by the laws of Western Australia.

(g) (Otherterms): The agreement also contains provisions including confidentiality, leave entitlements, intellectual

property and immediate termination rights that are customary in agreements of this type.

13.1 Litigation

As at the date of this Prospectus, the Company is not involved in any legal proceedings and the Directors are not aware of

any legal proceedings pending or threatened against the Company.

13.2 rightsattachingtoShares

The following is a summary of the more significant rights attaching to Shares. This summary is not exhaustive and does

not constitute a definitive statement of the rights and liabilities of Shareholders. To obtain such a statement, persons

should seek independent legal advice.

Full details of the rights attaching to Shares are set out in the Constitution, a copy of which is available for inspection at

the Company’s registered office during normal business hours.

(a) Generalmeetings

Shareholders are entitled to be present in person, or by proxy, attorney or representative to attend and vote at

general meetings of the Company.

Shareholders may requisition meetings in accordance with Section 249D of the Corporations Act and the

Constitution.

(b) Votingrights

Subject to any rights or restrictions for the time being attached to any class or classes of Shares, at general

meetings of Shareholders or classes of Shareholders:

(i) each Shareholder entitled to vote may vote in person or by proxy, attorney or representative;

(ii) on a show of hands, every person present who is a Shareholder or a proxy, attorney or representative of a

Shareholder has one vote; and

(iii) on a poll, every person present who is a Shareholder or a proxy, attorney or representative of a Shareholder

shall, in respect of each fully paid Share held by him, or in respect of which he is appointed a proxy, attorney

or representative, have one vote for the Share, but in respect of partly paid Shares shall have such number

of votes as bears the same proportion to the total of such Shares registered in the Shareholder’s name as

the amount paid (not credited) bears to the total amounts paid and payable (excluding amounts credited).

(c) Dividendrights

Subject to the rights of any preference Shareholders and to the rights of the holders of any Shares created or

raised under any special arrangement as to dividend, the Directors may from time to time declare a dividend to be

paid to the Shareholders entitled to the dividend which shall be payable on all Shares according to the proportion

that the amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited) in

respect of such Shares.

The Directors may from time to time pay to the Shareholders any interim dividends as they may determine. No

dividend shall carry interest as against the Company. The Directors may set aside out of the profits of the Company

any amounts that they may determine as reserves, to be applied at the discretion of the Directors, for any purpose

for which the profits of the Company may be properly applied.

Subject to the ASX Listing Rules and the Corporations Act, the Company may, by resolution of the Directors,

implement a dividend reinvestment plan on such terms and conditions as the Directors think fit and which

provides for any dividend which the Directors may declare from time to time payable on Shares which are

participating Shares in the dividend reinvestment plan, less any amount which the Company shall either pursuant

to the Constitution or any law be entitled or obliged to retain, be applied by the Company to the payment of the

subscription price of Shares.

(d) Winding-up

If the Company is wound up, the liquidator may, with the authority of a special resolution of the Company, divide

among the Shareholders in kind the whole or any part of the property of the Company, and may for that purpose

set such value as he considers fair upon any property to be so divided, and may determine how the division is to be

carried out as between the Shareholders or different classes of Shareholders.

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The liquidator may, with the authority of a special resolution of the Company, vest the whole or any part of any such

property in trustees upon such trusts for the benefit of the contributories as the liquidator thinks fit, but so that no

Shareholder is compelled to accept any Shares or other securities in respect of which there is any liability.

(e) Shareholderliability

As the Shares under the Prospectus are fully paid shares, they are not subject to any calls for money by the Directors and

will therefore not become liable for forfeiture.

(f) TransferofShares

Generally, Shares are freely transferable, subject to formal requirements, the registration of the transfer not resulting in

a contravention of or failure to observe the provisions of a law of Australia and the transfer not being in breach of the

Corporations Act or the ASX Listing Rules.

(g) Variationofrights

Pursuant to Section 246B of the Corporations Act, the Company may, with the sanction of a special resolution passed at a

meeting of Shareholders vary or abrogate the rights attaching to Shares.

If at any time the share capital is divided into different classes of Shares, the rights attached to any class (unless otherwise

provided by the terms of issue of the Shares of that class), whether or not the Company is being wound up, may be varied

or abrogated with the consent in writing of the holders of three-quarters of the issued Shares of that class, or if authorised

by a special resolution passed at a separate meeting of the holders of the Shares of that class.

(h) AlterationofConstitution

The Constitution can only be amended by a special resolution passed by at least three quarters of Shareholders present

and voting at the general meeting. In addition, at least 28 days written notice specifying the intention to propose the

resolution as a special resolution must be given.

13.3 Options–NEFCONomineesPtyLtdandMrHall

A summary of the terms and conditions of the 2,000,000 Options issued to NEFCO Nominees Pty Ltd as consideration for

ongoing advice and the 4,000,000 Options issued to Mr Anthony Hall in consideration for services provided in the capacity

of Executive Director and assistance with promotion of the Company both in Australia and overseas are as follows:

(a) Each Option entitles the holder the right to subscribe for one Share.

(b) The Options may not be exercised before 1 November 2013 and will expire at 5:00 pm (WST) on 31 October 2016

(ExpiryDate). Any Option not exercised before the Expiry Date will automatically lapse on the Expiry Date.

(c) The amount payable upon exercise of each Option will be $0.20 (ExercisePrice).

(d) The Options held by Mr Hall have vesting conditions attached to them and will only vest if the following conditions

have been satisfied (VestingConditions):

(i) one million Options will vest upon the date that the Company successfully lists on the ASX;

(ii) one million Options will vest if the Share price of the Company, as quoted by the ASX, reaches a level of

A$0.30 or higher;

(iii) one million Options will vest if the Share price of the Company, as quoted by the ASX, reaches a level of

A$0.40 or higher; and

(iv) one million Options will vest if the Share price of the Company, as quoted by the ASX, reaches a level of

A$0.50 or higher.

(e) The Options held by NEFCO Nominees have vesting conditions attached to them and will only vest if the following

conditions have been satisfied (VestingConditions):

(i) 500,000 Options will vest upon the date that the Company successfully lists on the ASX;

(ii) 500,000 Options will vest if the Share price of the Company, as quoted by the ASX, reaches a level of

A$0.30 or higher;

(iii) 500,000 Options will vest if the Share price of the Company, as quoted by the ASX, reaches a level of

A$0.40 or higher; and

(iv) 500,000 Options will vest if the Share price of the Company, as quoted by the ASX, reaches a level of

A$0.50 or higher.

(f) An Option holder may exercise their Options by lodging with the Company, before the Expiry Date:

(i) a written notice of exercise of Options specifying the number of Options being exercised; and

(ii) a cheque or electronic funds transfer for the Exercise Price for the number of Options being exercised,

(ExerciseNotice).

(g) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared

funds.

(h) Within 5 Business Days of receipt of the Exercise Notice accompanied by the Exercise Price, the Company will allot

the number of Shares required under these terms and conditions in respect of the number of Options specified in

the Exercise Notice.

(i) The Company will not apply for quotation of the Options on ASX.

(j) All Shares allotted upon the exercise of Options will upon allotment rank pari passu in all respects with other

Shares.

(k) The Company will apply for quotation of all Shares allotted pursuant to the exercise of Options on ASX within 10

Business Days after the date of allotment of those Shares.

(l) If at any time the issued capital of the Company is reconstructed, all rights of an Option holder are to be changed in

a manner consistent with the Corporations Act and the ASX Listing Rules at the time of the reconstruction.

(m) There are no participating rights or entitlements inherent in the Options and Option holders will not be entitled

to participate in new issues of capital offered to Shareholders during the currency of the Options. However, the

Company will ensure that for the purposes of determining entitlements to any such issue, the record date will be at

least 10 Business Days after the issue is announced. This will give Option holders the opportunity to exercise their

Options prior to the date for determining entitlements to participate in any such issue.

13.4 EmployeeShareOptionPlan

The Company has established an employee share option plan (Scheme).

The full terms of the Scheme may be inspected at the registered office of the Company during normal business hours.

A summary of the terms of the Scheme is set out below.

(a) (Eligibility): the Board may invite full or part time employees and directors of, and consultants to, the Company or

an Associated Body Corporate of the Company to participate in the Scheme (EligibleEmployee).

Eligible Employees do not possess any right to participate in the Scheme, as participation is solely determined by

the Board.

(b) (OfferofSchemeOptions): the Scheme will be administered by the Board which may, in its absolute discretion,

offer Options (SchemeOptions) to any Eligible Employee from time to time as determined by the Board and, in

exercising that discretion, may have regard to some or all of the following considerations:

(i) the Eligible Employee’s length of service with the Company;

(ii) the contribution made by the Eligible Employee to the Company;

(iii) the potential contribution of the Eligible Employee to the Company; or

(iv) any other matter the Board considers relevant.

(c) (NumberofSchemeOptions): the number of Scheme Options to be offered to an Eligible Employee will be

determined by the Board in its discretion and in accordance with the rules of the Scheme and applicable law.

(d) (Conversion): each Scheme Option is exercisable into one Share in the Company ranking equally in all respect with

the existing issued Shares in the Company.

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(e) (Consideration): Scheme Options issued under the Scheme will be issued for no consideration.

(f) (Exerciseprice): the exercise price for Scheme Options offered under the Scheme will be determined by the Board.

(g) (Exerciseconditions): the Board may impose conditions, including performance-related conditions, on the right of

a participant to exercise Scheme Option granted under the Scheme.

(h) (ExerciseofSchemeOptions): a participant in the Scheme will be entitled to exercise their Scheme Options in

respect of which the exercise conditions have been met provided the Scheme Options have not lapsed and the

exercise of the Scheme Options will not result in the Company contravening ASIC Class Order 03/184. A holder

may exercise Scheme Options by delivering an exercise notice to the Company Secretary along with the Scheme

Options certificate, and paying the applicable exercise price of the Scheme Options multiplied by the number of

Scheme Options proposed to be exercised.

Within ten (10) business days of receipt of the required items, the Company will, subject to the ASX Listing Rules,

issue to the participant the relevant number of Shares.

(i) (Cessationofemployment): the Scheme specifies the relevent expiry dates for the Scheme Options issued under

the Scheme in the circumstances that a participant in the Scheme;

(i) is dismissed by the Company;

(ii) resigns;

(iii) retires;

(iv) is retrenched; or

(v) dies or suffers total and permanent disability.

(j) (LapseofSchemeOptions): Scheme Options held by a participant in the Scheme will lapse immediately if:

(i) the Scheme Options have not been exercised by the date which is two years after the date of issue, or such

other date as the Board determines in its discretion at the time of issue of the Scheme Options;

(ii) the exercise conditions attaching to the Scheme Options are unable to be met; or

(iii) the holder ceases to be an employee or director of, or consultant to, the Company or an Associated Body

Corporate and the deadline set out in paragraph (i) has passed.

(k) (Participationinrightsissuesandbonusissues): the Scheme Options granted under the Scheme do not give the

holder any right to participate in rights issues or bonus issues unless Shares are allotted pursuant to the exercise

of the relevant Scheme Options prior to the record date for determining entitlements to such issue. The number of

Shares issued on the exercise of Scheme Options will be adjusted for bonus issues made prior to the exercise of the

Scheme Options, in accordance with the terms set out in the Scheme.

(l) (reorganisation): the terms upon which the Scheme Options will be granted will not prevent the Scheme Options

being reorganised as required by the ASX Listing Rules on the reorganisation of the capital of the Company.

(m) (Limitationonoffers): if the Company makes an offer under the Scheme where:

(i) the total number of Shares to be received on exercise of Scheme Options the subject of that offer exceeds

the limit set out in ASIC Class Order 03/184; or

(ii) the Offer does not otherwise comply with the terms and conditions set out in ASIC Class Order 03/184, the

Company must comply with Chapter 6D of the Corporations Act at the time of that offer.

(n) (Triggerevent): In the event that the Company is subject to a takeover bid which causes or is likely to cause a change in

control of the Company then the Board has the discretion to give Optionholders an immediate right to exercise their

Scheme Options.

13.5 NonExecutiveDirectorremuneration

The Constitution provides that the remuneration of non executive Directors will be not more than the aggregate fixed sum

determined by a general meeting. The aggregate remuneration for non executive Directors has been set at an amount not

to exceed $500,000 per annum.

The remuneration of executive Directors will be fixed by the Directors and may be paid by way of fixed salary or

consultancy fee.

13.6 Interestsofexpertsandadvisers

Other than as set out below or elsewhere in this Prospectus, no:

(a) person named in this Prospectus as performing a function in a professional, advisory or other capacity in

connection with the preparation or distribution of this Prospectus;

(b) promoter of the Company; or

(c) underwriter (but not a sub-underwriter) to the issue or a financial services licensee named in this Prospectus as a

financial services licensee involved in the issue,

holds, or has held within the 2 years preceding lodgement of this Prospectus with the ASIC, any interest in:

(a) the formation or promotion of the Company;

(b) any property acquired or proposed to be acquired by the Company in connection with:

(i) its formation or promotion; or

(ii) the Offer; or

(c) the Offer,

and no amounts have been paid or agreed to be paid and no benefits have been given or agreed to be given to any of

these persons for services provided in connection with:

(a) the formation or promotion of the Company; or

(b) the Offer.

CSA Global has acted as Independent Geologist and has prepared the Independent Geologist’s Report which is included in

Section 8 of this Prospectus. The Company estimates it will pay CSA Global a total of $25,000 (excluding GST) for these

services. During the 24 months preceding lodgement of this Prospectus with the ASIC, CSA Global has not received fees

from the Company for any other services.


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HLB Mann Judd has acted as Investigating Accountant and has prepared the Investigating Accountant’s Report which is

included in Section 9 of this Prospectus. The Company estimates it will pay HLB Mann Judd a total of $6,000 (excluding GST)

for these services. During the 24 months preceding lodgement of this Prospectus with the ASIC, HLB Mann Judd has not

received any fees from the Company for any other services.

Steinepreis Paganin has acted as the solicitors to the Company in relation to the Offer and has prepared the Solicitor’s Report

on Tenements which is included in Section 10 of this Prospectus. The Company estimates it will pay Steinepreis Paganin

$20,000 (excluding GST) for these services. Subsequently, fees will be charged in accordance with normal charge out rates.

During the 24 months preceding lodgement of this Prospectus with the ASIC, Steinepreis Paganin has not received fees from

the Company for any other services.

13.7 Consents

Each of the parties referred to in this Section:

(a) does not make, or purport to make, any statement in this Prospectus other than those referred to in this Section; and

(b) to the maximum extent permitted by law, expressly disclaim and take no responsibility for any part of this Prospectus

other than a reference to its name and a statement included in this Prospectus with the consent of that party as

specified in this Section.

CSA Global has given its written consent to being named as Independent Geologist in this Prospectus, the inclusion of the

Independent Geologist’s Report in Section 8 of this Prospectus in the form and context in which the report is included and

the inclusion of statements contained in the Chairman’s Letter in Section 3, Investment Overview in Section 4 and Section 5

of this Prospectus in the form and context in which those statements are included. CSA Global has not withdrawn its consent

prior to lodgement of this Prospectus with the ASIC.

HLB Mann Judd has given its written consent to being named as Investigating Accountant in this Prospectus and to the

inclusion of the Investigating Accountant’s Report in Section 9 of this Prospectus in the form and context in which the

information and report is included. HLB Mann Judd has not withdrawn its consent prior to lodgement of this Prospectus with

the ASIC.

Steinepreis Paganin has given its written consent to being named as the solicitors to the Company in this Prospectus and

to the inclusion of the Solicitor’s Report on Tenements in Section 10 of this Prospectus in the form and context in which the

report is included. Steinepreis Paganin has not withdrawn its consent prior to the lodgement of this Prospectus with the ASIC.

Advanced Share Registry Pty Ltd has given its written consent to being named as the share registry to the Company in this

Prospectus. Advanced Share Registry Pty Ltd has not withdrawn its consent prior to the lodgement of this Prospectus with

the ASIC.

13.8 ExpensesoftheOffer

The total expenses of the Offer (excluding GST) are estimated to be approximately $390,808 and are expected to be applied

towards the items set out in the table below:

ItemofExpenditure Minimumsubscription Fullsubscription

($) ($)

ASIC fees 2,137 2,137

ASX fees 27,671 27,671

Broker Commissions1 240,000 240,000

Corporate Advisory Fees 60,000 60,000

Legal fees 20,000 20,000

Independent Geologist’s fees 25,000 25,000

Investigating Accountant’s fees 6,000 6,000

Printing and distribution 10,000 10,000

TOTAL 390,808 390,808

1 Broker commissions will only be paid on applications made through a licensed securities dealers or Australian financial

services licensee and accepted by the Company (refer to Section 12.2 of this Prospectus for further information). The

amount calculated is based on 100% of applications being made in this manner. For those applications made directly to

and accepted by the Company no broker commissions will be payable and the expenses of the Offer will be reduced and

the additional funds will be put towards working capital.

13.9 Continuousdisclosureobligations

Following admission of the Company to the Official List, the Company will be a “disclosing entity” (as defined in Section

111AC of the Corporations Act) and, as such, will be subject to regular reporting and disclosure obligations. Specifically, like

all listed companies, the Company will be required to continuously disclose any information it has to the market which a

reasonable person would expect to have a material effect on the price or the value of the Company’s securities.

Price sensitive information will be publicly released through ASX before it is disclosed to Shareholders and market

participants. Distribution of other information to Shareholders and market participants will also be managed through

disclosure to the ASX. In addition, the Company will post this information on its website after the ASX confirms an

announcement has been made, with the aim of making the information readily accessible to the widest audience.

13.10 ElectronicProspectus

Pursuant to Class Order 00/44, the ASIC has exempted compliance with certain provisions of the Corporations Act to allow

distribution of an electronic prospectus and electronic application form on the basis of a paper prospectus lodged with

the ASIC, and the publication of notices referring to an electronic prospectus or electronic application form, subject to

compliance with certain conditions.

If you have received this Prospectus as an electronic Prospectus, please ensure that you have received the entire

Prospectus accompanied by the Application Form. If you have not, please contact the Company and the Company will send

you, for free, either a hard copy or a further electronic copy of this Prospectus or both. Alternatively, you may obtain a

copy of this Prospectus from the website of the Company at www.highfieldresources.com.au.

The Company reserves the right not to accept an Application Form from a person if it has reason to believe that when that

person was given access to the electronic Application Form, it was not provided together with the electronic Prospectus

and any relevant supplementary or replacement prospectus or any of those documents were incomplete or altered.

13.11 FinancialForecasts

The Directors have considered the matters set out in ASIC Regulatory Guide 170 and believe that they do not have a

reasonable basis to forecast future earnings on the basis that the operations of the Company are inherently uncertain.

Accordingly, any forecast or projection information would contain such a broad range of potential outcomes and

possibilities that it is not possible to prepare a reliable best estimate forecast or projection.

13.12 ClearingHouseElectronicSub-registerSystem(CHESS)andIssuerSponsorship

The Company will apply to participate in CHESS, for those investors who have, or wish to have, a sponsoring stockbroker.

Investors who do not wish to participate through CHESS will be issuer sponsored by the Company.

Electronic sub-registers mean that the Company will not be issuing certificates to investors. Instead, investors will be

provided with statements (similar to a bank account statement) that set out the number of Shares allotted to them under

this Prospectus. The notice will also advise holders of their Holder Identification Number or Security Holder Reference

Number and explain, for future reference, the sale and purchase procedures under CHESS and issuer sponsorship.

Electronic sub-registers also mean ownership of securities can be transferred without having to rely upon paper

documentation. Further monthly statements will be provided to holders if there have been any changes in their security

holding in the Company during the preceding month.


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13.13 Privacystatement

If you complete an Application Form, you will be providing personal information to the Company. The Company collects,

holds and will use that information to assess your application, service your needs as a Shareholder and to facilitate

distribution payments and corporate communications to you as a Shareholder.

The information may also be used from time to time and disclosed to persons inspecting the register, including bidders for

your securities in the context of takeovers, regulatory bodies including the Australian Taxation Office, authorised securities

brokers, print service providers, mail houses and the share registry.

You can access, correct and update the personal information that we hold about you. If you wish to do so, please contact

the share registry at the relevant contact number set out in this Prospectus.

Collection, maintenance and disclosure of certain personal information is governed by legislation including the Privacy Act

1988 (as amended), the Corporations Act and certain rules such as the ASX Settlement Operating Rules. You should note

that if you do not provide the information required on the application for Shares, the Company may not be able to accept

or process your application.

This Prospectus is issued by the Company and its issue has been authorised by a resolution of the Directors.

In accordance with Section 720 of the Corporations Act, each Director has consented to the lodgement of this

Prospectus with the ASIC.

Anthony Hall

Managing Director

For and on behalf of


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104 Highfield Resources – Prospectus

15 Glossary

WherethefollowingtermsareusedinthisProspectustheyhavethefollowingmeanings:

$ means an Australian dollar.

ApplicationForm means the application form attached to or accompanying this Prospectus relating

to the Offer.

ASIC means the Australian Securities & Investments Commission.

AssociatedBodyCorporate means:

(a) a related body corporate (as defined in the Corporations Act) of the Company;

(b) a body corporate which has an entitlement to not less than 20% of the voting Shares of

the Company; and

(c) a body corporate in which the Company has an entitlement to not less than 20% of the

voting shares.

ASX means ASX Limited (ACN 008 624 691) or the financial market operated by it as the context

requires.

ASXListingrules means the official listing rules of ASX.

AIG means Australian Institute of Geoscientists

Board means the board of Directors as constituted from time to time.

BroadwayAgreement means the agreement executed by the Company and Broadway Resources dated 1 November 2011,

persuant to which the Company agreed to aquire an interest in the Project, as summarised in

Section 12.1 of this Prospectus.

Broadwayresources means Broadway Resources Pty Limited (ACN 138 635 622).

ClosingDate means the closing date of the Offer as set out in the indicative timetable in the Investment

Overview in Section 4.5 of this Prospectus (subject to the Company reserving the right to

extend the Closing Date or close the Offer early).

CompanyorHighfield means Highfield Resources Limited (ACN 153 918 257).

Constitution means the constitution of the Company.

CorporationsAct means the Corporations Act 2001 (Cth).

Directors means the directors of the Company at the date of this Prospectus.

ExposurePeriod means the period of 7 days after the date of lodgement of this Prospectus, which period may be

extended by the ASIC by not more than 7 days pursuant to Section 727(3) of the Corporations Act.

ILUA means an Indigenous Land Use Agreement, as outlined in the Solicitor’s Report on Tenements.

JOrCCode means the Australasian Code for Reporting of Exploration Results, Mineral Resources and

Ore Reserves.

Mt means million tonnes.

Offer means the offer of Shares pursuant to this Prospectus as set out in Section 5 of this Prospectus.

OfficialList means the official list of ASX.

OfficialQuotation means official quotation by ASX in accordance with the ASX Listing Rules.

Option means an option to acquire a Share.

OptionHolder means a holder of an Option.

PEP means a petroleum exploration granted under the Petroleum and Geothermal Energy Resources

Act 1967 (WA).

PEPHolder means the holder of a PEP permit.

Potash means any of several compounds containing potassium, especially soluble compounds such as

potassium oxide, potassium chloride and various potassium sulfates, used chiefly in fertilisers

Project has the meaning as defined in Section 6.2 of this Prospectus.

Prospectus means this prospectus.

Section means a section of this Prospectus.

Share means a fully paid ordinary share in the capital of the Company.

Shareholder means a holder of Shares.

Tenements means the mining tenements in which the Company has an interest as further described in the

Solicitor’s Report on Tenements set out in Section 10 of this Prospectus or any one of them as

the context requires.

WST means Western Standard Time as observed in Perth, Western Australia.Completed Forms and your Completed Cheque, should be sent to: highField resourCes limited po box 826, West perth, Western australia 6872.

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WEST PERTH WA 6005

Telephone

+61 8 9200 4426

Facsimile:

+61 8 9200 4469

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highfield - asx · highfield is an australian based company with the primary objective of...

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