HIGHFIELD RESOURCES LIMITED ACN 153 918 257

NOTICE OF ANNUAL GENERAL MEETING EXPLANATORY STATEMENT

PROXY FORM

TIME : 9:30 am (WST) DATE : Friday, 5 October 2012 PLACE : Level 1, 33 Richardson Street West Perth, WA 6005

This Notice of Annual General Meeting is an important document and requires your immediate attention. Please read it carefully. If you are in doubt as to what you should do, please consult your professional adviser.

Should you wish to discuss the matters in this Notice of Meeting please do not hesitate to contact the Company Secretary on (+61 8) 9200 4426.

CONTENTS PAGE

Notice of Annual General Meeting (setting out the proposed resolutions)	4
Explanatory Statement (explaining the proposed resolutions)	7
Glossary	31
Schedule 1 - Nomination of Auditor	32
Schedule 2 – Terms and Conditions of the Class A Performance Shares	33
Schedule 3 – Terms and Conditions of the Class B Performance Shares	35
Schedule 4 – Terms and Conditions of Taylor Collison Options	37
Schedule 5 – KCL Shareholders	38
Schedule 6 – Independent Geologist Report	39
Schedule 7 – Solicitors’ Report on Tenements	111
Schedule 8 – Pro-forma Balance Sheet	138
Proxy Form	139

TIME AND PLACE OF MEETING AND HOW TO VOTE

VENUE

The Annual General Meeting of the Shareholders of Highfield Resources Limited which this Notice of Annual General Meeting relates to will be held at 9:30 am (WST) on Friday, 5 October 2012 at:

Level 1, 33 Richardson Street West Perth, WA 6005

VOTING IN PERSON

To vote in person, attend the Annual General Meeting on the date and at the place set out above.

VOTING BY PROXY

To vote by proxy, please complete and sign the enclosed Proxy Form and return by the time and in accordance with the instructions set out on the Proxy Form.

Further details on these changes is set out below.

Proxy vote if appointment specifies way to vote

Section 250BB(1) of the Corporations Act provides that an appointment of a proxy may specify the way the proxy is to vote on a particular resolution and, if it does :

the proxy need not vote on a show of hands, but if the proxy does so, the proxy must vote that way (i.e. as directed); and
if the proxy has 2 or more appointments that specify different ways to vote on the resolution – the proxy must not vote on a show of hands; and
if the proxy is the chair of the meeting at which the resolution is voted on – the proxy must vote on a poll, and must vote that way (i.e. as directed); and

if the proxy is not the chair – the proxy need not vote on the poll, but if the proxy does so, the proxy must vote that way (i.e. as directed).

Transfer of non-chair proxy to chair in certain circumstances

Section 250BC of the Corporations Act provides that, if:

an appointment of a proxy specifies the way the proxy is to vote on a particular resolution at a meeting of the Company's members; and
the appointed proxy is not the chair of the meeting; and
at the meeting, a poll is duly demanded on the resolution; and
either of the following applies:
the proxy is not recorded as attending the meeting;
the proxy does not vote on the resolution,

the chair of the meeting is taken, before voting on the resolution closes, to have been appointed as the proxy for the purposes of voting on the resolution at the meeting.

NOTICE OF ANNUAL GENERAL MEETING

Notice is given that the Annual General Meeting of Shareholders of Highfield Resources Limited will be held at Level 1, 33 Richardson Street, West Perth, Western Australia 6005 at 9:30 am (WST) on Friday, 5 October 2012.

The Explanatory Statement provides additional information on matters to be considered at the Annual General Meeting. The Explanatory Statement and the Proxy Form are part of this Notice of Meeting.

The Directors have determined pursuant to Regulation 7.11.37 of the Corporations Regulations 2001 (Cth) that the persons eligible to vote at the Annual General Meeting are those who are registered Shareholders of the Company on Wednesday, 3 October 2012 at 9:30 am (WST).

Terms and abbreviations used in this Notice and Explanatory Statement are defined in the Glossary.

AGENDA

ORDINARY BUSINESS

Financial Statements and Reports

To receive and consider the annual financial report of the Company for the financial year ended 30 June 2012 together with the declaration of the directors, the directors’ report, the remuneration report and the auditor’s report.

1. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

To consider and if thought fit, to pass, with or without amendment, the following resolution as a non-binding resolution :

“That for the purposes of Section 250R(2) of the Corporations Act, and for all other purposes, approval is given for the adoption of the Remuneration Report as contained in the Company’s annual financial report for the financial year ended 30 June 2012.”

Note: the vote on this Resolution is advisory only and does not bind the Directors or the Company.

Voting Prohibition Statement:

A vote on this Resolution must not be cast (in any capacity) by or on behalf of any of the following persons:

(a) a member of the Key Management Personnel, details of whose remuneration are included in the Remuneration Report; or
(b) a Closely Related Party of such a member.

However, a person (the Voter ) described above may vote on this Resolution as a proxy vote if the vote is cast on behalf of a person described above and either:

(a) the vote is appointed as a proxy by writing that specifies the way the proxy is to vote on the Resolution; and
(b) the voter is the Chair and the appointment of the Chair as proxy:
(i) does not specify the way the proxy is to vote on this Resolution; and
(ii) expressly authorises the Chair to exercise the proxy even if the Resolution is connected directly or indirectly with the remuneration of a member of the Key Management Personnel for the Company, or if the Company is part of a consolidated entity, for the entity.

2. RESOLUTION 2 – RE-ELECTION OF A DIRECTOR – MR JONATHAN MURRAY

To consider and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of clause 12.11 of the Constitution and for all other purposes, Mr Jonathan Murray, a Director, retires by rotation, and being eligible,, is re-elected as a Director.”

3. RESOLUTION 3 – APPOINTMENT OF AUDITOR – HLB MANN JUDD CORPORATE (WA) PTY LTD

To consider and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, for the purposes of section 327B of the Corporations Act and for all other purposes, HLB Mann Judd Corporate (WA) Pty Ltd, having been nominated by a Shareholder and consented in writing to act in the capacity of auditor of the Company, be appointed as auditor, effective immediately.”

4. RESOLUTION 4 – CHANGE TO SCALE OF ACTIVITIES

To consider and if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That, subject to the passing of Resolutions 5 and 6, for the purposes of ASX Listing Rule 11.1.2 and for all other purposes, approval is given for the acquisition by the Company of the Navarra Potash Project on the terms and conditions set out in the Explanatory Statement and consequently to make a change in the scale of its activities to include a new potash project in Spain.”

Short Explanation : The proposed acquisition of the Navarra Potash Project, if successful, will result in the Company acquiring a new potash project in Spain. ASX Listing Rule 11.1.2 requires the Company to seek shareholder approval where it proposes to make a significant change to the scale of its activities. Please refer to the Explanatory Statement for details.

Voting Exclusion: The Company will disregard any votes cast on this Resolution by any person who may obtain a benefit, except a benefit solely in the capacity of a security holder, if the resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

5. RESOLUTION 5 – CREATION OF NEW CLASS OF SECURITIES – PERFORMANCE SHARES

To consider and, if thought fit, to pass, with or without amendment, the following resolution as a special resolution :

“That, subject to and conditional upon the passing of Resolutions 4 and 6, for the purposes of Section 246B of the Corporations Act, and for all other purposes, approval is given for the Company to be authorised to issue Class A Performance Shares and Class B Performance Shares, on the terms and conditions set out in the Explanatory Statement.”

6. RESOLUTION 6 – ISSUE OF SHARES AND PERFORMANCE SHARES TO SHAREHOLDERS OF KCL RESOURCES LIMITED

To consider and, if thought fit, to pass, with or without amendment, the following resolution as an ordinary resolution :

“That subject to the passing of Resolutions 4 and 5, for the purpose of ASX Listing Rule 7.1 and for all other purposes, Shareholders approve and authorise the Directors to allot and issue:

(a) 50,000,000 Shares;

(b) 50,000.000 Class A Performance Shares; and
(c) 50,000,000 Class B Performance Shares,

to the shareholders of KCL Resources Limited (or their nominee), as consideration for the Acquisition on the terms and conditions in the Explanatory Statement.”

Voting Exclusion: The Company will disregard any votes cast on this Resolution by the KCL Shareholders and any person who may obtain a benefit, except a benefit solely in the capacity of a security holder, if the resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

7. RESOLUTION 7 – ISSUE OF SHARES AND OPTIONS TO TAYLOR COLLISON

To consider and, if thought fit, to pass with or without amendment, the following resolution as an ordinary resolution :

“That, for the purpose of ASX Listing Rule 7.1 and for all other purposes, approval is given for the Directors to allot and issue up to 1,500,000 Shares and grant 4,000,000 Options to Taylor Collison on the terms and conditions set out in the Explanatory Statement.”

Voting Exclusion : The Company will disregard any votes cast on this Resolution by any person who may participate in the proposed issue and a person who might obtain a benefit, except a benefit solely in the capacity of a holder of ordinary securities, and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote, in accordance with the directions on the Proxy Form or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

8. RESOLUTION 8 –APPROVAL OF 10% PLACEMENT FACILITY

To consider and, if thought fit, to pass with or without amendment, the following resolution as a special resolution :

“That for the purpose of Listing Rule 7.1A and for all other purposes, Shareholders approve the issue of Equity Securities up to 10% of the issued capital of the Company (at the time of issue) calculated in accordance with the formula prescribed in Listing Rule 7.1A.2 and on the terms and conditions in the Explanatory Memorandum.”

Voting Exclusion: The Company will disregard any votes cast on this Resolution by a person (and any associates of such a person) who may participate in the 10% Placement Facility and a person who may obtain a benefit, except a benefit solely in the capacity of a security holder, if the resolution is passed and any associates of those persons. However, the Company need not disregard a vote if it is cast by a person as a proxy for a person who is entitled to vote in accordance with the directions on the Proxy Form, or, it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the Proxy Form to vote as the proxy decides.

DATED: 31 AUGUST 2012

BY ORDER OF THE BOARD

SCOTT FUNSTON COMPANY SECRETARY

EXPLANATORY STATEMENT

This Explanatory Statement has been prepared for the information of the Shareholders of the Company in connection with the business to be conducted at the Annual General Meeting to be held at Level 1, 33 Richardson Street, West Perth, Western Australia 6005 at 9:30 am (WST) on Friday, 5 October 2012.

This purpose of this Explanatory Statement is to provide information which the Directors believe to be material to Shareholders in deciding whether or not to pass the Resolutions in the Notice of Meeting.

1. FINANCIAL STATEMENTS AND REPORTS

In accordance with the Constitution, the business of the Annual General Meeting will include receipt and consideration of the annual financial report of the Company for the financial period ended 30 June 2012 together with the declaration of the Directors, the Directors’ report, the Remuneration Report and the auditor’s report.

The Company is not required to provide a hard copy of the Company’s annual financial report to Shareholders unless a Shareholder has specifically elected to receive a printed copy.

Whilst the Company will not provide a hard copy of the Company’s annual financial report unless specifically requested to do so, Shareholders may view the Company annual financial report on its website at www.highfieldresources.com.au .

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

2.1 General

The Corporations Act requires that at a listed company’s annual general meeting, a resolution that the remuneration report be adopted must be put to the shareholders. However, such a resolution is advisory only and does not bind the Directors or the Company.

The remuneration report sets out the Company’s remuneration arrangements for the Directors and senior management of the Company. The remuneration report is part of the Directors’ report contained in the annual financial report of the Company for the financial year ending 30 June 2012.

A reasonable opportunity will be provided for discussion of the remuneration report at the Annual General Meeting.

2.2 Voting consequences

Under recent changes to the Corporations Act which came into effect on 1 July 2011, if at least 25% of the votes cast on Resolution 1 are voted against adoption of the Remuneration Report in two consecutive annual general meetings, the Company will be required to put to Shareholders a resolution proposing the calling of an extraordinary general meeting to consider the appointment of directors of the Company ( Spill Resolution ) at the second annual general meeting.

If more than 50% of shareholders vote in favour of the Spill Resolution, the company must convene the extraordinary general meeting ( Spill Meeting ) within 90 days of the second annual general meeting. All of the directors who were in office when the directors’ report (as included in the company’s annual financial report for the financial year ended immediate before the second annual general meeting) was approved, other than the managing director of the company, will cease to hold office immediately before the end of the Spill Meeting but may stand for re-election at the Spill Meeting. Following the Spill Meeting those persons whose election or re-election as directors is approved will be the directors of the company.

2.3 Proxy restrictions

Shareholders appointing a proxy for Resolution 1 should note the following:

If you appoint a member of the Key Management Personnel as your proxy

If you elect to appoint a member of Key Management Personnel whose remuneration details are included in the Remuneration Report, or a Closely Related Party of that member, you must direct the proxy how they are to vote . Undirected proxies granted to these persons will not be included in any vote on Resolution 1.

If you appoint the Chair as your proxy

If you elect to appoint the Chair as your proxy, you do not need to direct the Chair how you wish them to exercise your vote on Resolution 1. However, if you do not direct the Chair how to vote, you must tick the acknowledgement on the proxy form to acknowledge that the Chair may exercise their discretion in exercising your proxy even though Resolution 1 is connected directly or indirectly with the remuneration of Key Management Personnel.

If you appoint any other person as your proxy

You do not need to direct your proxy how to vote, and you do not need to tick any further acknowledgement on the proxy form.

3. RESOLUTION 2 – RE-ELECTION OF – MR JONATHAN MURRAY

Resolutions 2 seeks approval for the re-election of Mr Jonathan Murray with effect from the end of the Annual General Meeting.

Clause 12.11 of the Constitution requires that at the Company's annual general meeting in every year, one-third of the Directors for the time being, or, if their number is not a multiple of 3, then the number nearest one-third (rounded upwards in case of doubt), shall retire from office, provided always that no Director (except a Managing Director) shall hold office for a period in excess of 3 years, or until the third annual general meeting following his or her appointment, whichever is the longer, without submitting himself or herself for re-election.

The Directors to retire at an annual general meeting are those who have been longest in office since their last election, but, as between persons who became Directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by drawing lots.

A Director who retires by rotation under clause 12.11 of the Constitution is eligible for re-election.

The Company currently has three (3) Directors and accordingly one (1) must retuire.

Mr Jonathan Murray, appointed as a Director on incorporation of the Company retires by rotation and seeks re-election. .

4. RESOLUTION 3 – APPOINTMENT OF AUDITOR – HLB MANN JUDD CORPORATE (WA) PTY LTD

HLB Mann Judd (WA) Pty Ltd were appointed as auditors for the Company pursuant to Section 327A(1) of the Corporations Act. An auditor appointed under this provision holds office until the first annual general meeting of Shareholders.

Resolution 3 seeks Shareholder approval for the appointment of HLB Mann Judd (WA) Pty Ltd as auditor for the Company. HLB Mann Judd must be re-appointed at the first annual general meeting so that they may continue to act as auditor of the Company.

In accordance with Section 328B(1) of the Corporations Act, the Company has obtained a nomination from a Shareholder for HLB Mann Judd to be appointed as auditor for the Company. A copy of this nomination is attached in Schedule 1 of this Notice.

In accordance with Section 328A(1) of the Corporations Act, HLB Mann Judd has provided the Directors with written notification of its consent to act as auditor for the Company subject to Shareholder approval of Resolution 3.

If Resolution 3 is passed, the appointment of HLB Mann Judd as auditor for the Company will take effect at the close of this Annual General Meeting.

5. OVERVIEW OF CHANGE OF SCALE OF ACTIVITIES

5.1 Background

The Company is an Australian public company listed on the official list of ASX (ASX code: HFR).

The Company was incorporated in 2011 for the primary purpose of exploring for potash in northern Western Australia. As detailed in its IPO Prospectus, the Company has entered into a farm in agreement to explore three granted tenements, together known as the McLarty Project, in WA's Canning Basin. The Canning Basin contains vast accumulations of Ordovician evaporite salt bearing sediments at relatively low depth underground that is considered prospective for economic potash mineralisation.

On 27 June 2012, the Company announced (subject to due diligence, ASX and shareholder approval) the acquisition of a 100% interest in the Navarra Potash Project ( Navarra Project ) which is located in Northern Spain (refer Figure 1) ( Acquisition ).

The acquisition of the Navarra Project will be implemented through the acquisition of a 100% shareholding in KCL Resources Limited (an unlisted Australian company) ( KCL ) which, via its wholly owned subsidiary holds a 100% interest in the Navarra Project.

5.2 Current Activities of the Company - McLarty Potash Project

The McLarty Project comprises three contiguous exploration tenements located in the south Kimberley region of northern Western Australia. It is located in the Canning Basin which contains vast accumulations of evaporite (salt) sediments considered prospective for economic potash mineralisation. The McLarty Project is centred on the McLarty Sub-basin where the prospective Mallowa Salt unit is interpreted to be approximately 640m deep.

Two robust high ranking potash targets have been identified for drill testing.

The drilling timeline is subject to obtaining necessary heritage approvals from the Ngurrara Native Title Claimant Group. The Ngurrara people have rights over the land on which the tenements are located. The Company presented its proposed work program to representatives of the Ngurrara people in April of this year in Broome.

5.3 Background on the Navarra Potash Project

The tenements comprising the Navarra Project cover 430kms[2] and are located in the Ebro potash producing basin (refer Figure 2). Iberpotash presently produces around 1 million tonnes of red potash from its Ebro Basin mines in Spain”).

Exploration licenses have been granted for both areas covered by the tenements and a drill hole program aimed at securing a maiden JORC resource is the Company’s initial aim.

The tenements in the Navarra Sub-basin cover the Sierra del Perdon Mine which was a significant potash producer in Spain between 1972 and 1997. In its latter years of operation the mine was producing around 200,000 tonnes of potash per annum. The mine was closed in 1997 when potash prices were US$110 per tonne. Potash prices are presently around US$480 per tonne.

In addition, the Company has been able to secure the services of a strong existing in country management team to ensure project continuity.

Completion of the Acquisition will affect the funds allocated to the McLarty Project in 2012. The table below provides a comparison between the Company’s proposed use of funds raised under the IPO Prospectus and the Company’s current intention, upon successful completion of the Acquisition.

Item	Prospectus Amount ($)	Revised Amount ($)
Acquisition costs for McLarty Potash Project	125,000	Nil
Exploration costs for McLarty Potash Project	3,000,000	2,000,000
Acquisition costs for Navarra Potash Project	Nil	200,000
Exploration costs for Navarra Potash Project	Nil	1,000,000
Expenses of issue	390,808	390,808
Administration costs and working capital	884,317	809,317
TOTAL	4,400,125	4,400,125

The above table is a statement of current intentions as at the date of this Notice. Intervening events may alter the way funds are ultimately applied by the Company.

The Company’s existing cash at hand will continue to be spent in accordance with previous stated objectives in relation to the Company’s current operations.

The exploration budged proposed is conceptual in nature and any subsequent stages of exploration will be dependent on the success of the previous stage with potential for changes to the program as results are achieved.

North Rim Exploration, Ltd has prepared an Independent Geologist’s Report on the Navarra Project contained in Schedule 6 to this Notice.

Urià Menedez has prepared a Solicitor’s Report on Tenements contained in Schedule 7 to this Notice.

Please refer to both the Independent Geologist’s Report and the Solicitor’s Report on Tenements for further details on the Navarra Project.

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Figure 1 – Map of Spain showing location of the Navarra Project

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Figure 2 – Map of Ebro Basin showing location of tenements in Navarra and Catalan sub-basins

5.4 Acquisition terms

Pursuant to the Acquisition Agreement and subject to a number of conditions precedent, Highfield has agreed to acquire 100% of the issued share capital of KCL which, via its wholly owned subsidiary Geocali S.L. ( Geocali S.L. ), holds 100% of the Navarra Project.

Highfield intends to facilitate the Acquisition via personal offers to each individual KCL shareholder ( KCL Shareholder ) to acquire their relevant interest in KCL ( Personal Offers ).

Further details of the Acquisition are summarised below.

(a) Consideration

Subject to:

(i) receipt by Highfield of all approvals required by the Corporations Act and ASX Listing Rules;
(ii) Highfield completing due diligence on the Navarra Project to its sole satisfaction (which has been successfully completed); and
(iii) all of the KCL Shareholders accepting their relevant Personal Offer;

Highfield will provide the following in consideration for the Acquisition:

(iv) 50,000,000 fully paid ordinary shares in the capital of Highfield ( Consideration Shares );
(v) 100,000.000 performance shares ( Performance Shares ) upon satisfaction of the following milestones ( Milestones ):
(A) 50,000,000 Performance Shares upon delineation of a JORC Code (or equivalent) compliant Indicated Mineral Resource of:
- (I) 150 million tonnes at a minimum grade of 13% K20 by content; or
- (II) 125 million tonnes at a minimum grade of 14% K2O by content; or
- (III) 100 million tonnes at a minimum grade of 15% K2O by content; or
- (IV) 75 million tonnes at a minimum grade of 17% K2O by content; or
- (V) 50 million tonnes at a minimum grade of 20% K2O by content on the Project ( A Class Performance Shares ); and
(B) 50,000,000 Performance Shares upon announcement by the Company to ASX of receipt of all required approvals for the construction of an operating mine with capacity for 500,000 tonnes of potash per annum on the Project ( B Class Performance Shares ).

The Consideration Shares and Performance Shares will be issued to the KCL Shareholders in proportion to their shareholdings in KCL, as set out in Schedule 5.

Approval for the issue of the Consideration Shares is being sought pursuant to Resolution 6.

The terms and conditions of the Performance Shares are set out in Schedules 2 and 3 of this Notice. Approval for the issue of the Performance Shares is being sought pursuant to Resolutions 5 and 6.

(b) Agreement to reimburse for expenditure

Highfield must use its best endeavours to do all things necessary to achieve the Milestones. However, Highfield will immediately notify the Key KCL Shareholders if it reasonably resolves that:

(i) the Navarra Project is not commercially viable; and
(ii) it is not in the best interests of its Shareholders to continue to use its best endeavours to achieve the Milestones,

(being the Project Resolution ).

Upon receiving notice of the Project Resolution, the KCL Shareholders may elect to:

(iii) seek a review of the Project Resolution; or
(iv) fund the expenses incurred on the Navarra Project ( Expenses ) themselves in order to achieve the Milestones.

In the event that the KCL Shareholders make the election pursuant to clause (ii) above, Highfield agrees to reimburse the KCL Shareholders for the Expenses incurred by them via the issue of that number of Shares which when multiplied by the Issue Price equals the value of the Expenses ( Reimbursement Shares ) (subject to the receipt of any required shareholder approvals).

For the purposes of the above, the Issue Price means the price that is not less than the volume weighted average market price for shares calculated over the 30 days on which sales in Shares are recorded before the day on which the Reimbursement Shares are issued.

(c)

Sale of Navarra Project prior to achievement of Milestones

In the event that:

(i) Highfield sells the Navarra Project prior to the completion of sufficient work to enable the Milestones to be achieved; and
(ii) the Project is sold for greater than $10 million,

Highfield will convert the Performance Shares to Shares subject to the following formula:

Performance Shares converted = (Sale price of project – AUD10 million) / $ 0.20.

For the avoidance of doubt, the maximum number of Performance Shares that will be issued to the KCL Shareholders is 100,000,000 Performance Shares.

(d)

Board Representation

The KCL Shareholders may place up to two directors on the board of the Company ( Board ) subject to the approval of the nominations by the existing Directors of the Company. There is no requirement, nor intention for any of the existing Directors to resign. As such, the Board will comprise of five directors with two representing the KCL Shareholders.

The KCL Shareholders currently propose to nominate Derek Carter and Pedro Rodriguez to the Board of the Company.

Details of Messrs Carter and Rodriguez are set out below.

Derek Carter BSc, MSc, FAusIMM(CP)

Derek Carter has over 40 years experience in exploration and mine geology, including 17 years in management of ASX-listed exploration companies. He held senior positions in the Shell Group of Companies and Burmine Ltd before founding Minotaur in 1993. He was Managing Director of the ASX Listed Minotaur Resources Limited from its inception until early 2010 when he became Chairman of that company. He is also Chairman of Petratherm Ltd, and is a Director of both Mithril Resources Ltd and Toro Energy Ltd, all of which are listed on the ASX.

He was Vice President and later, President, of the South Australian Chamber of Mines and Energy and was a Director of the Australian Gold Council. He is a member of the South Australian Resources Development Board, and the South Australian Minerals and Petroleum Experts Group and is a board member of the Australasian Institute of Mining and Metallury (AusIMM).

He was awarded AMEC's Prospector of the Year Award (jointly) in 2003, is a Centenary medalist and was recently honored with the President's Award from the AusIMM.

Pedro Rodriguez BSc, MSc

For more than 30 years Pedro Rodriguez has carried out professional activities in the mining business in Spain, including working with six international mining companies ( Peñarrolla Spain-SMMPE, BILLITON International, NAVAN-Almagrera, NEWMONT Spain ,ORMONDE Mining , Heemskirk Consolidated Limited -HSK ), ranging from basic exploration supervision work to high administrative posts with direct responsibility in the Board of Directors of a Mining-Chemical Complex with more than 460 direct employees and a volume of sales greater than US$ 58 million /Year, and with a production of more than 1,4 million Tm/Year of polimetallic mineral of Copper, Zinc and Lead, and 300,000 Tm/Year of Suphuric Acid plus 900 Tm/Year of Copper Sulphate.

In recent years his main profesional function has been related to mining direction and technical-administrative management, with emphasis on coordination of feasibililty studies, control of production operation and fixed/variable operational expenditure.

Messrs Carter and Rodriguez will be appointed to the Board at Settlement.

The Company believes the addition of both men to the Board will strengthen the composition of the Board.

(e) Corporate advisory fee

Pursuant to the Taylor Collison Mandate, the Company has engaged Taylor Collison to provide corporate and financial services in connection with the Acquisition.

In the event that the Acquisition is successfully completed, the Company has agreed to pay to Taylor Collison a fee equal to:

(i) that number of Shares equating to 3.0% of the total number of Shares issued to the KCL or KCL’s Shareholders as consideration payable for the Acquisition; and
(ii) 4,000,000 Options exercisable at $0.20 within 4 years of their issue ( Taylor Collison Options ).

Approval for the issue of the Taylor Collison Shares and Taylor Collison Options is being sought pursuant to Resolution 7. Further details are set out in section 9 of the Explanatory Statement.

5.5 Pro-forma capital structure

The effect of the Acquisition on the capital structure of the Company following Completion of the Acquisition will be as follows:[1]

	Shares	Options	Performance Shares
Current issued capital	44,000,003	6,000,0002	Nil
Issued pursuant to Acquisition	50,000,000	Nil	100,000,0003
Corporate advisory services relating to the Acquisition5	1,500,000	4,000,0004	Nil
Total	95,500,003	10,000,000	100,000,000

Notes :

1 This assumes no other securities are issued or converted other than pursuant to the Acquisition and the corporate advisory services relating to the Acquisition.
2 Exercisable at 20 cents on or before 1 November 2016.
3
4
This is comprised of 50,000,000 A Class Performance Shares on the terms and conditions set out in Schedule 2 and 50,000,000 B Class Performance Shares on the terms and conditions set out in Schedule 3.
Exercisable at 20 cents on or before the fourth anniversary after issue.
5 Refer to section 5.4(c) and section 9 of this Notice for further information.

5.6 Pro-forma balance sheet

An unaudited pro-forma balance sheet of the Company following completion of the Acquisition is set out in Schedule 8 to this Notice.

5.7 Advantages of the Acquisition

The Directors are of the view that the following non-exhaustive list of advantages may be relevant to a Shareholder’s decision on how to vote on the proposed Resolutions:

(a) the potash exploration activities from the Navarra Project represent a significant opportunity for the Company;
(b) the Acquisition represents a significant opportunity for the Company to increase the scale of its activities which should increase the number and size of the investor pool that may invest in the Company’s shares;
(c) the Acquisition provides an opportunity for the Company to diversify into overseas, specifically Spanish, exploration and development;
(d) should the Company be successful with its exploration there is an opportunity to build substantial value for investors with money spent on ground;
(e) the addition of Mr Derek Carter and Mr Pedro Rodriguez to the Board of the Company as part of the Transaction will provide an experienced set of skills to guide the growth of the Company;
(f) the Company will also continue to assess a range of potash projects within Australia and internationally for potential acquisition or joint venture, with a view to increased consolidation of projects held by the Company;
(g) the Company’s enlarged size following acquisition of the Navarra Project should improve access to future equity funding. It is anticipated to also provide the flexibility to support project funding initiatives and accelerate proposed exploration activities;

(h) the Performance Shares will convert on the satisfaction of the Milestones into fully paid ordinary shares. The Company has structured the Performance Shares to incentivise and align the interests of the KCL Shareholders with the interests of the Company and existing Shareholders.

5.8 Disadvantages of the Acquisition

The Directors are of the view that the following non-exhaustive list of disadvantages may be relevant to a Shareholder’s decision on how to vote on the proposed Resolutions:

(a) the Acquisition will result in the issue of additional Shares and Performance Shares to the KCL Shareholders and Taylor Collison which will have a dilutionary effect on the holdings of existing Shareholders;
(b) the Company will be changing the scale of its activities to include, which may not be consistent with the objectives of all Shareholders;
(c) there are many risk factors associated with the change in nature of the Company’s activities, including exploration risk, and risks associated with the requirement to obtain environmental and other regulatory approvals;
(d) a significant future outlay of funds will be required which will increase funding pressure on the Company in order to continue with the exploration activities at the McLarty Project;
(e) the Project may not turn out to be commercially viable and thus losses may be incurred. In general terms, investments in listed exploration companies are high risk and for those Shareholders who consider that the proposed Acquisition is a risk worth taking, then the proposed acquisition of the Navarra Project may be reasonable;
(f) there is no guarantee that the exploration proposed to be conducted on the Navarra Project by the Company will result in an economic outcome; and
(g) the risk factors associated with the Acquisition and the Project. Some of these risk factors are summarised below in section 5.9 of the Explanatory Statement.

5.9 Risk factors

Shareholders should be aware that if Resolutions 4, 5 and 6 are approved and the Acquisition is completed, the Company will be changing the scale of its activities. Based on the information available, a non-exhaustive list of risk factors in relation to the Acquisition are as follows:

Risks associated with the Navarra Project and the Acquisition

Tenement applications

As disclosed in the Solicitors’ Report on Tenements contained in Schedule 7 of this Notice, two of the six tenements comprising the Navarra Project are yet to be awarded in the name of Geocali and are still considered applications for grant of title.

The Company cannot guarantee that these outstanding applications or additional applications for licenses made by the Company will ultimately be granted, in whole or in part. Further the Company cannot guarantee that renewals of valid licenses will be granted on a timely basis, or at all.

Please refer to the Solicitors Report on Tenements in Schedule 7 for further information.

(b)

Failure to satisfy minimum exploration requirements.

Interests in tenements in Spain are governed by the relevant mining acts and regulations existent in that jurisdiction and are evidence by the granting of licenses. Each tenement is for a specific term and carries with it annual exploration commitments as well as other conditions requiring compliance.

A number of the tenements the subject of the Navarra Project are yet to have exploration works commences on them. Under Spanish law, there is a risk that these licenses may be subject to revocation. The Company intends to commence exploration works on the Navarra Project as soon as practicable, and will take appropriate steps to mitigate this risk of revocation.

Please refer to the Solicitors’ Report on Tenements contained in Schedule 7 of this Notice for further details.

(c)

Impairment of capital

Under Spanish law, Geocali’s share capital is considered “impaired”. Although impairment situations are not unusual, Geocali’s share capital must be reinstated. Failure to effectively reinstate the issued share capital within the required time frames may result in the risk that Geocali be dissolved and wound up. The Company is aware of the need to reinstate the capital of Geocali, and will take all necessary action to ensure the reinstatement is effected and the risk of dissolution is minimised.

Please refer to the Solicitors’ Report on Tenements contained in Schedule 7 of this Notice for further details.

(d) General project risks

The Navarra Project is located in Spain. The Company will be subject to the risks associated with operating in Spain. Such risks can include economic instability or change, currency nonconvertibility or instability and changes of law affecting foreign ownership, government participation, taxation, working conditions, rates of exchange, exchange control, exploration licensing, export duties, repatriation of income or return of capital, environmental protection, mine safety, labour relations as well as government control over mineral properties or government regulations. Should there be a material change in the political legal and social environments in Spain, the Directors may re-amend investments, decisions and commitments to its Spanish assets.

Changes to Spanish mining or investment policies and legislation or a shift in political attitude may adversely affect the Company’s operations and profitability.

(e)

Exploration success

Potential investors should understand that mineral exploration and development are high-risk undertakings.

There can be no assurance that exploration of the Navarra Project, 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 the Navarra Project 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 Navarra Project, a reduction in the cash reserves of the Company and possible relinquishment of the Navarra Project.

The exploration costs of the Company described in the Independent Geologist’s Report 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) Exploration costs

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.

(g) Resource and reserve estimates

Future resource estimates will be expressions of judgement based on knowledge, experience and industry practice. Estimates that 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 that may, in turn, adversely affect the Project’s operations.

Risks relating to the Company’s Operations

(h) Future capital requirements

Significant future funding will be required by the Company to develop the Navarra Project. There can be no assurance that such funding will be available on satisfactory terms or at all. 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 program as the case may be, which may adversely affect the business and financial condition of the Company and its performance.

(i) Operating risks

The current and future operations of the Company, including exploration, appraisal and possible production activities may be affected by a range of factors.

The Navarra Project will be subject to climatic conditions which restrict the period within which exploration; appraisal and possibly production activities may take place and may also place Company personnel at risk if exposed to these conditions.

A summary of factors that may affect the operations of the Company, include:

(i) geological conditions;
(ii) unanticipated operational and technical difficulties encountered in geophysical surveys, drilling and production activities;
(iii) mechanical failure of operating plant and equipment, industrial and environmental accidents, acts of terrorism or political or civil unrest and other force majeure events;
(iv)
industrial action, disputation or disruptions;
(v) unavailability of aircraft or drilling equipment to undertake airborne electromagnetic and other geological and geophysical investigations;
(vi) unexpected shortages or increases in the costs of consumables, spare parts, plant and equipment;

(vii) prevention or restriction of access by reason of political unrest, outbreak of hostilities, and inability to obtain consents or approvals;
(viii) current exploration operations and future mine development of the tenements are subject to the Company’s ability to obtain a wide range of permits, licences, and approvals and there is no guarantee that such permits, licences and approvals will be granted or will be granted in a timely matter; and
(ix) advancement of the exploration operations to mine development can be a lengthy process taking a number of years where the Company’s projects may be subject to new laws, regulations, and taxes which may have a material impact on the Company.

(j)

Exploration success

There can be no assurance that exploration of the Navarra Project will result in the discovery of economic iron ore deposits. Even if an apparently viable deposit is identified, there is no guarantee it can be economically exploited.

(k)

Contractors and Contractual Disputes

The Company is subject to a variety of contracts including contracts with contractors. The Directors are unable to predict the risk of:

(i) financial failure or default by a participant in any joint venture to which the Company is a party; or
(ii) insolvency or other managerial failure by any of the operators and contractors used by the Company in its exploration activities; or
(iii) insolvency or other managerial failure by any of the other service providers used by the Company or operators for any activity.
(l)

Foreign exchange risk

The Company will be exposed to the volatility and fluctuations of the exchange rate between the United States dollar, the Euro and the Australian dollar.

Global currencies are affected by a number of factors that are beyond the control of the Company. These factors include economic conditions in the relevant country and elsewhere and the outlook for interest rates, inflation and other economic factors. These factors may have a positive or negative effect on the Company's exploration, project development and production plans and activities together with the ability to fund those plans and activities.

(m)

Environmental risks

The operations and proposed activities of the Navarra Project are subject to Spanish laws and regulation concerning the environment. As with most exploration projects and mining operations, the Company’s activities are expected to have an impact on the environment. It is the Company’s intention to conduct its activities to the highest standard of environmental obligation, including compliance with all environmental laws.

Further, the Company may require approval from the relevant authorities before it can undertake activities that are likely to impact the environment. Failure to obtain such approvals will prevent the Company from undertaking its desired activities. The Company is unable to predict the effect of additional environmental laws and regulations that may be adopted in the future, including whether any such laws or regulations would materially increase the Company's cost of doing business or affect its operations in any area.

(n)

Potential acquisitions

As part of its business strategy, the Company intends to make acquisitions of, or significant investments in, complementary companies or projects. Any such future transactions would be accompanied by the risks commonly encountered in making such acquisitions.

General risks

(o) General economic and political Risks

Changes in the general economic and political climate in Spain and on a global basis could impact on economic growth, iron ore prices, interest rates, the rate of inflation, taxation and tariff laws, domestic security which may affect the value and viability of any iron ore activity that may be conducted by the Company.

(p) Insurance risks

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 of 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.

(q) Market risk

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) interest rates and inflation rates;
(iii) currency fluctuations;
(iv) commodity price fluctuations;
(v) changes in investor sentiment toward particular market sectors;
(vi) the demand for, and supply of, capital; and
(vii) terrorism and other hostilities.

(r) Government

Government action or policy change, both in Australia and Canadian, particularly in relation to lands and infrastructure, compliance with environmental regulations, taxation and royalties, may adversely affect the Company’s operations and financial performance.

(s)

Competition risk

The industry in which the Company will be involved is subject to domestic and global competition. While 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, whose activities or actions may, positively or negatively, affect the operating and financial performance of the Company’s projects and business.

(t)

Reliance on key personnel

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.

Security Investments

Shareholders should be aware that there are risks associated with any securities investment. Securities listed on the stock market, and in particular securities of mining and exploration companies have experienced extreme price and volume fluctuations that have often been unrelated to the operating performances of such companies. These factors may materially affect the market price of the securities regardless of the Company’s performance.

Investment speculative

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 Company’s securities.

5.10 Directors’ Recommendation

It is the view of the Company directors that the Acquisition will give the Company’s Shareholders the opportunity to participate in a potentially significant exploration and development programme in respect of a highly prospective project.

In addition, the Acquisition and accordingly the interest in the Navarra Project, presents an opportunity for the Company to acquire prospective and strategic potash projects.

The Acquisition, is the first step in the Company’s strategy designed at targeting world class discoveries and implementing intensive, targeted exploration programs to own a ‘company making’ project.

For the above reasons, the Directors of Highfield unanimously recommend that Shareholders vote in favour of Resolutions 4 - 6 (inclusive). The current Directors have agreed to put the Resolutions to Shareholders and have approved the information contained in this Explanatory Statement.

Each of the Directors intends to vote their Shares in favour of each of Resolutions –4 - 6 (inclusive).

5.11 Competent Persons Statement

The information in this Notice 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 Highfield. 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 Notice of the matters based on his information in the form and context in which it appears.

6. RESOLUTION 6 – CHANGE OF SCALE OF ACTIVITIES

6.1 General

The Acquisition, if approved by Shareholders at the General Meeting, will have a significant impact on the scale of activities undertaken by the Company. Accordingly, Resolution 4 seeks Shareholder approval for the Acquisition pursuant to ASX Listing Rule 11.1.2.

Resolution 4 is conditional on Resolutions 5 and 6 being approved.

6.2 ASX Listing Rule 11.1

ASX Listing Rule 11.1 provides that where an entity proposes to make a significant change, either directly or indirectly, to the scale of its activities, it must provide full details to ASX as soon as practicable. ASX Listing Rule 11.1.2 provides that, if ASX requires, the entity must get the approval of Shareholders and must comply with any requirements of ASX in relation to the Notice of Meeting.

ASX has advised the Company that the change in the scale of the Company’s activities does not require the Company to recomply with the admission requirements set out in Chapters 1 and 2 of the ASX Listing Rules in accordance with ASX Listing Rule 11.1.3.

For this reason, the Company is seeking Shareholder approval for the Company to change the scale of its activities under ASX Listing Rule 11.1.2.

7. RESOLUTION 5 – CREATION OF A NEW CLASS OF SECURITIES – PERFORMANCE SHARES

Pursuant to the Acquisition Agreement, the Company has agreed to issue the KCL Shareholders Performance Shares as part consideration for the Acquisition. Resolution 5 seeks Shareholder approval for the Company to be authorised to issue the Performance Shares.

Resolution 5 is conditional on Resolutions 4 and 6 being approved.

A company with a single class of shares on issue which proposes to issue new shares not having the same rights as its existing shares, is taken to vary the rights of existing shareholders unless the constitution already provides for such an issue.

Section 246B of the Corporations Act and clause 3.1 of the Constitution provide that the rights attaching to a class of shares cannot be varied without:

(a) a special resolution passed at a meeting of the holders of the issued shares of the affected class; or
(b) the written consent of the holders of 75% of the votes of the affected class.

Subject to receipt approval for Resolution 5, upon Settlement, the Company will issue a total of 100,000,000 Performance Shares to the KCL Shareholders (in proportion to their shareholding in KCL) with the following Milestones:

(a) 50,000,000 Performance Shares upon delineation of a JORC Code (or equivalent) compliant Indicated Mineral Resource of:
(I) 150 million tonnes at a minimum grade of 13% K20 by content; or
(II) 125 million tonnes at a minimum grade of 14% K2O by content; or
(III) 100 million tonnes at a minimum grade of 15% K2O by content; or
(IV) 75 million tonnes at a minimum grade of 17% K2O by content; or
(V) 50 million tonnes at a minimum grade of 20% K2O by content on the Project ( A Class Performance Shares ); and
(b) 50,000,000 Performance Shares upon announcement by the Company to ASX of receipt of all required approvals for the construction of an operating mine with capacity for 500,000 tonnes of potash per annum on the Project ( B Class Performance Shares ).

The full terms and conditions of the Performance Shares are set out in Schedules 2 and 3.

The Company currently has only one class of shares on issue being fully paid ordinary shares. The terms of the Performance Shares are not the same as the terms of the existing Shares on issue. Accordingly, Shareholder approval is being sought for the Company to issue the Performance Shares.

8. RESOLUTION 6 – ISSUE OF SHARES AND PERFORMANCE SHARES TO SHAREHOLDERS OF KCL RESOURCES LIMITED

8.1 General

As outlined in section 5.4(a) of this Explanatory Statement, the Company will, amongst other things, allot and issue:

(a) 50,000,000 Shares;
(b) 50,000,000 Class A Performance Shares; and
(c) 50,000,000 Class B Performance Shares,

( Consideration Securities ) to the non-related KCL Shareholders (or their nominees) as set out in Schedule 5 in consideration for the Acquisition.

The Performance Share will each convert into one fully paid ordinary share on achievement of the Milestones.

Resolution 8 seeks Shareholder approval for the allotment and issue of the Consideration Securities.

Resolution 6 is conditional on Resolution 4 and 5 being approved.

None of the KCL Shareholders are related parties of the Company, other than by reason of the Acquisition. Accordingly, Shareholder approval is not required under the related party provisions of the Corporations Act or the ASX Listing Rules for the issue or the Consideration Securities.

The KCL Shareholders, as individuals or through their nominees will not control 20% or more of the Shares in the Company upon completion of the Acquisition.

8.2 ASX Listing Rule 7.1

ASX Listing Rule 7.1 provides that a company must not, subject to specified exceptions, issue or agree to issue during any 12 month period any equity securities, or other securities with rights to conversion to equity (such as an option), if the number of those securities exceeds 15% of the number of securities in the same class on issue at the commencement of that 12 month period.

The effect of Resolution 6 will be to allow the Directors to issue the Consideration Securities in consideration of the Acquisition during the period of 3 months after the Annual General Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

8.3 Technical information required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the issue of the Consideration Securities for the purpose of the Acquisition:

(a) the maximum number of securities to be issued is:
(i) 50,000,000 Shares;
(ii) 50,000,000 Class A Performance Shares; and
(iii) 50,000,000 Class B Performance Shares,

( the Performance Shares ) which will be issued on the terms and conditions set out in Schedules 2 and 3 of this Notice;

(b) it is intended that issue and allotment of the Consideration Securities will occur on the same date, being settlement of the Acquisition which will be no later than 3 months after the date of this Meeting (or a later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules);
(c) the Consideration Securities will be issued for nil cash consideration as they are being issued for consideration for the acquisition of KCL;
(d) the Consideration Securities will be allotted and issued to the KCL Shareholders who are not related parties of the Company;
(e) the Shares issued will be fully paid ordinary shares in the capital of the Company issued on the same terms and conditions as the Company's existing Shares;
(f) the Class A Performance Shares will be issued on the terms and conditions set out in Schedule 2 of this Notice;
(g) the Class B Performance Shares will be issued on the terms and conditions set out in Schedule 3 of this Notice; and
(h) no funds will be raised by issue of the Consideration Securities as they will be issued in Consideration for the acquisition of KCL.

9. RESOLUTION 7 – PLACEMENT OF SHARES AND OPTIONS TO TAYLOR COLLISON

9.1 General

As outlined in section 5.4(c) of the Explanatory Statement, the Company has agreed to issue to Taylor Collision the Taylor Collison shares and Taylor Collison Options as part consideration for the provision of corporate services in relation to introducing KCL Resources to the Company ( Placement ).

Resolution 7 seeks Shareholder approval for the allotment and issue of the Taylor Collison Shares and Taylor Collison Options.

None of the subscribers pursuant to this issue will be related parties of the Company.

A summary of ASX Listing Rule 7.1 is set out in Section 8.2 above.

The effect of Resolution 7 will be to allow the Directors to issue the Taylor Collison Shares and Taylor Collison Options pursuant to the Placement during the period of 3 months after the Meeting (or a longer period, if allowed by ASX), without using the Company’s 15% annual placement capacity.

9.2 Technical information required by ASX Listing Rule 7.1

Pursuant to and in accordance with ASX Listing Rule 7.3, the following information is provided in relation to the Placement:

(a) the maximum number of Options to be granted is 4,000,000;
(b) the maximum number of Shares to be granted is 1,500,000;
(c) the Taylor Collison Shares and Taylor Collison Options will be issued no later than 3 months after the date of the Meeting (or such later date to the extent permitted by any ASX waiver or modification of the ASX Listing Rules) and it is intended that allotment will occur on the same date;
(d) the Taylor Collison Shares and Taylor Collison Options will be issued for nil cash consideration as they are being provided in consideration for the provision of corporate services;
(e) the Taylor Collison Shares and Taylor Collison Options will be allotted and issued to Taylor Collison (or its nominees);
(f) the Taylor Collison Options will be issued on the terms and conditions set out in Schedule 4; and
(g) no funds will be raised from the Placement as the Taylor Collison Shares and Taylor Collison Options are being issued in part consideration of corporate services.

10. RESOLUTION 8 – APPROVAL OF 10% PLACEMENT FACILITY

10.1 General

Listing Rule 7.1A enables entities to issue Equity Securities up to 10% of its issued share capital through placements over a 12 month period after the annual general meeting ( 10% Placement Facility ). The 10% Placement Facility is in addition to the Company’s 15% placement capacity under Listing Rule 7.1.

An eligible entity for the purposes of Listing Rule 7.1A is an entity that:

(a) is not included in the S&P/ASX 300 Index; and
(b) has a market capitalisation of $300 million or less (excluding restricted securities and securities quoted on a deferred settlement basis).

The Company is an eligible entity.

The Company is now seeking shareholder approval by way of a special resolution to have the ability to issue Equity Securities under the 10% Placement Facility.The exact number of Equity Securities to be issued under the 10% Placement Facility will be determined in accordance with the formula prescribed in Listing Rule 7.1A.2. Further information is set out in Section 9.2(c) below.

The effect of Resolution 8 will be to all the Directors to issue the Equity Securities under Listing Rule 7.1A during the 10% Placement Period without using the Company’s 15% placement capacity under Listing Rule 7.1.

Resolution 8 is a special resolution and therefore requires approval of 75% of the votes cast by Shareholders present and eligible to vote (in person, by proxy, by attorney or, in the case of a corporate Shareholder, by a corporate representative).

10.2 Description of Listing Rule 7.1A

(a) Shareholder Approval

The ability to issue Equity Securities under the 10% Placement Facility is subject to shareholder approval by way of a special resolution at an annual general meeting.

(b) Equity Securities

Any Equity Securities issued under the 10% Placement Facility must be in the same class as an existing quoted class of Equity Securities of the Company.

(c) Formula for calculating 10% Placement Facility

Listing Rule 7.1A.2 provides that eligible entities which have obtained shareholder approval at an annual general meeting may issue or agree to issue, during the 12 month period after the date of the annual general meeting, a number of Equity Securities calculated in accordance with the following formula:

(A x D) – E

A is the number of shares on issue 12 months before the date of issue or agreement:
(i) plus the number of fully paid shares issued in the 12 months under an exception in Listing Rule 7.2;
(ii) plus the number of partly paid shares that become fully paid in the 12 months;
(iii) plus the number of fully paid shares issued in the 12 months with approval of holders of shares under Listing Rule 7.1 and 7.4. This does not include an issue of fully paid shares under the entity’s 15% placement capacity without shareholder approval;
(iv) less the number of fully paid shares cancelled in the 12 months.

Note that A has the same meaning in Listing Rule 7.1 when calculating an entity’s 15% placement capacity.

D is 10%
E is the number of Equity Securities issued or agreed to be issued under the Listing Rule 7.1A.2 in the 12 months before the date of the issue or agreement to issue that are not issued with the approval of shareholders under Listing Rule 7.1 or 7.4.

10.3 Minimum Issue Price

The issue price of Equity Securities issued under Listing Rule 7.1A must be not less than 75% of the volume weighted average price ( VWAP ) of Equity Securities in the same class calculated over the 15 Trading Days immediately before:

(a) the date on which the price at which the Equity Securities are to be issued is agreed; or
(b) if the Equity Securities are not issued within 5 Trading Days of the date in paragraph (a) above, the date on which the Equity Securities are issued.

10.4 10% Placement Period

Shareholder approval of the 10% Placement Facility under Listing Rule 7.1A is valid from the date of the annual general meeting at which the approval is obtained and expires the earlier to occur of:

(a) the date that is 12 months after the date of the annual general meeting at which approval is obtained; or
(b) the date of the approval by shareholders of a transaction under Listing Rules 11.1.2 (a significant change to the nature or scale of activities) or 11.2 (disposal of main understanding),

or such longer period if allowed by ASX ( 10% Placement Period ).

10.5 Specific Information required by Listing Rule 7.3A

Pursuant to and in accordance with Listing Rule 7.3A, the following information is provided in relation to the approval of the 10% Placement Facility:

(a) the Equity Securities will be issued at an issue price of not less than 75% of the VWAP for the Company’s Equity Securities over the 15 Trading Days immediately before:
(i) the date on which the price at which the Equity Securities are to be issued is agreed; or
(ii) if the Equity Securities are not issued within 5 Trading Days of the date in paragraph (i) above, the date on which the Equity Securities are issued.
(b) If Resolution 8 is approved by Shareholders and the Company issues Equity Securities under the 10% Placement Capacity, the existing Shareholders’ voting power in the Company will be diluted as shown in the below table (in the case of Options, only if the Options are exercised). There is a risk that:
(i) the market price for the Company’s Equity Securities may be significantly lower on the date of the issue of the Equity Securities than on the date of the Meeting; and
(ii) the Equity Securities may be issued at a price that is at a discount to the market price for the Company’s Equity Securities on the issue date

which may have an effect on the amount of funds raised by the issue of the Equity Securities.

The table below shows the dilution of existing Shareholders on the basis of the current market price of Shares and the current number of ordinary securities for variable “A” calculated in accordance with the formula in Listing Rule 7.1A(2) as at the date of this Notice.

The table also shows:

(i) two examples where variable “A” has increased, by 50% and 100%. Variable “A” is based on the number of ordinary securities the Company has on issue. The number of ordinary securities on issue may increase as a result of issues of ordinary securities that do not require Shareholder approval (for example, a pro rata entitlements issue or scrip issued under a takeover offer) or future specific placements under Listing Rule 7.1 that are approved at a future Shareholders’ meeting; and
(ii) two examples of where the issue price of ordinary securities has decreased by 50% and increased by 50% as against the current market price.

Variable ‘A’ in Listing Rule 7.1A.2			Dilution
		$0.11 50% decrease in Issue Price	$0.22 Issue Price	$0.44 100% Increase in Issue Price
Current Variable A 44,000,003 Shares	10% Voting Dilution	4,400,003	4,400,003	4,400,003
	Funds raised	$484,000	$968,000	$1,936,000
50% increase in current Variable A 66,000,004 Shares	10% Voting Dilution	6,600,004	6,600,004	6,600,004
	Funds raised	$726,000	$1,452,000	$2,904,000
100% increase in current Variable A 88,000,006 Shares	10% Voting Dilution	8,800,006	8,800,006	8,800,006
	Funds Raised	$968,001	$1,936,002	$3,872,004

The table has been prepared on the following assumptions:

(i) The Company issues the maximum number of Equity Securities available under the 10% Placement Facility.
(ii) No Options (including any Options issued under the 10% Placement Facility) are exercised before the date of the issue of the Equity Securities;
(iii) The 10% voting dilution reflects the aggregate percentage dilution against the issued share capital at the time of issue. This is why the voting dilution is shown in each example as 10%.
(iv) The table does not show an example of dilution that may be caused to a particular Shareholder by reason of placements under the 10% Placement Facility, based on that Shareholder’s holding at the date of the Meeting.
(v) The table shows only the effect of issues of Equity Securities under Listing Rule 7.1A, not under the 15% placement capacity under Listing Rule 7.1.
(vi) The issue of Equity Securities under the 10% Placement Facility consists only of Shares. If the issue of Equity Securities includes Options, it is assumed that those Options are exercised into Shares for the purpose of calculating the voting dilution effect on existing Shareholders.
(vii) The issue price is $0.22, being the closing price of the Shares on the ASX on 30 August 2012.
(c) The Company will only issue and allot the Equity Securities during the 10% Placement Period. The approval under Resolution 8 for the issue of the Equity Securities will cease to be valid in the event that Shareholders approve a transaction under Listing Rule 11.1.2 (a significant change to the nature or scale of activities or Listing Rule 11.2 (disposal of main undertaking).

(d) The Company may seek to issue the Equity Securities for the following purposes:
(i) non-cash consideration for the acquisition of new resources assets and investments. In such circumstances the Company will provide a valuation of the non-cash consideration as required by Listing Rule 7.1A.3; or
(ii) cash consideration. In such circumstances, the Company intends to allocate the funds towards increased and accelerated exploration at the Navarra Project. Subject to the outcome of these programs, funds would then be used for project, feasibility studies and ongoing project administration and additional working capital.

The Company will comply with the disclosure obligations under the Listing Rules 7.1A(4) and 3.10.5A upon issue of any Equity Securities. The Company’s allocation policy is dependent on the prevailing market conditions at the time of any proposed issue pursuant to the 10% Placement Facility.

The identity of the allottees of Equity Securities will be determined on a case-by-case basis having regard to the factors including but not limited to the following:

(i) the methods of raising funds that are available to the Company, including but not limited to, rights issue or other issue in which existing security holders can participate;
(ii) the effect of the issue of the Equity Securities on the control of the Company;
(iii) the financial situation and solvency of the Company; and
(iv) advice from corporate, financial and broking advisers (if applicable).

The allottees under the 10% Placement Facility have not been determined as at the date of this Notice byt may include existing substantial Shareholders and/or new Shareholders who are not related parties or associates of a related party of the Company.

Further, if the Company is successful in acquiring new resources assets or investments, it is likely that the allottees under the 10% Placement Facility will be vendors of the new resources assets or investments.

(e) The Company has not previously obtained Shareholder approval under Listing Rule 7.1A.
(f) A voting exclusion statement is included in the Notice. At the date of the Notice, the Company has not approached any particular existing Shareholder or security holder or an identifiable class of existing security holder to participate in the issue of the Equity Securities. No existing Shareholder’s votes will therefore be excluded under the voting exclusion in the Notice.

11. ENQUIRIES

Shareholders are required to contact the Company Secretary on +61 8 9200 4426 if they have any queries in respect of the matters set out in this Notice.

GLOSSARY

$ means Australian dollars.

10% Placement Facility has the meaning given in Section 9.1.

10% Placement Period has the meaning given in Section 9.5.

A Class Performance Shares mean performance shares issue on the terms and conditions set out in Schedule 2.

Annual General Meeting or Meeting means the meeting convened by the Notice.

Acquisition means the acquisition of the Navarra Potash Project by the Company pursuant to the Acquisition Agreement.

Acquisition Agreement means the heads of agreement executed by the Company and KCL dated 22 June 2012.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited.

ASX Listing Rules or Listing Rules means the Listing Rules of ASX.

B Class Performance Shares mean performance shares issue on the terms and conditions set out in Schedule 3.

Board means the board of directors of the Company.

Business Day means Monday to Friday inclusive, except New Year’s Day, Good Friday, Easter Monday, Christmas Day, Boxing Day, and any other day that ASX declares is not a business day.

Closely Related Party of a member of the Key Management Personnel means:

(a) a spouse or child of the member;
(b) a child of the member’s spouse;
(c) a dependent of the member or the member’s spouse;
(d) anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealing with the entity;
(e) a company the member controls; or
(f) a person prescribed by the Corporations Regulations 2001 (Cth).

Company or Highfield means Highfield Resources Limited (ACN 153 918 257).

Constitution means the Company’s constitution.

Corporations Act means the Corporations Act 2001 (Cth).

Directors mean the current directors of the Company.

Equity Securities has the same meaning as in the ASX Listing Rules.

Explanatory Statement means the explanatory statement to the Notice.

Geocali means Geocali S.L.,KCL’s wholly owned Spanish subsidiary.

Implementation Agreement means the agreement executed by the Company and Key KCL Shareholders on 13 August 2012.

IPO Prospectus means the Company’s initial public offering prospectus dated 5 December 2011.

KCL means KCL Resources Limited (ACN 150 161 658).

KCL Shareholders means the shareholders of KCL.

Key KCL Shareholders means Mr Derek Carter and Mr Pedro Rodrguez.

Key Management Personnel has the same meaning as in the accounting standards and broadly includes those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, including any director (whether executive or otherwise) of the Company.

Milestones means the milestones attaching to the Performance Shares as set out in section 5.4(a).

Navarra Project means the Navarra Potash Project located in Spain. Further details are set out in the Independent Geologists Report in Schedule 6 and the Solicitors’ Report on Tenements in Schedule 7.

Notice of Meeting or Notice of Annual General Meeting means this notice of annual general meeting including the Explanatory Statement.

Option means an option which entitles the holder to subscribe for one Share.

Performance Shares means the A Class Performance Shares and B Class Performance Shares together.

Proxy Form means the proxy form accompanying the Notice.

Remuneration Report means the remuneration report set out in the Director’s report section of the Company’s annual financial report for the year ended 30 June 2012.

Resolutions means the resolutions set out in the Notice of Meeting, or any one of them, as the context requires.

Settlement means settlement and completion of the Acquisition pursuant to the Acquisition Agreeent and Implementation Deed.

Share means a share in the Company.

Shareholder means a shareholder in the Company.

Taylor Collison means Taylor Collison Limited (ACN 008 172 450).

Taylor Collison Mandate means the agreement executed by the Company and Taylor Collison pursuant to which Taylor Collison has agreed to provide corporate and financial services to the Company.

Taylor Collison Options means 4,000,000 Options to be issued to Taylor Collison pursuant to the Taylor Collison Mandate.

Taylor Collison Shares means 1,500,000 Shares to be issue to Taylor Collison pursuant to the Taylor Collison Mandate.

VWAP means volume weight average price.

WST means Western Standard Time as observed in Perth, Western Australia.

SCHEDULE 1 – NOMINATION OF AUDITOR

The Company Secretary Highfield Resources Limited Level 1, 33 Richardson Street West Perth WA 6005

Dear Sir

NOMINATION OF AUDITOR

I, Jonathan Murray, a shareholder of Highfield Resources Limited (ACN 153 918 257) ( Company ), hereby nominate pursuant to section 328B of the Corporations Act (Cth) 2001, HLB Mann Judd Corporate (WA) Pty Ltd of Level 4, 130 Stirling Street, PERTH, WA 6000 for appointment as auditor of the Company at the next Annual General Meeting of the Company or any adjournment thereof.

Yours faithfully Jonathan Murray

SCHEDULE 2 - TERMS OF CLASS A PERFORMANCE SHARES

The terms and conditions of the A Class Performance Shares are as follows:

Rights attaching to the A Class Performance Shares

(a) ( A Class Performance Shares ) Each A Class Performance Share is a share in the capital of Highfield Resources Limited (ACN 153 918 257) ( Company ).
(b) ( General meetings ) The A Class Performance Shares shall confer on the holder ( Holder ) the right to receive notices of general meetings and financial reports and accounts of Highfield that are circulated to holders of fully paid ordinary shares in the capital of Highfield ( Shareholders ). Holders have the right to attend general meetings of Shareholders.
(c) ( No voting rights ) The A Class Performance Shares do not entitle the Holder to vote on any resolutions proposed at a general meeting of Shareholders.
(d) ( No dividend rights ) The A Class Performance Shares do not entitle the Holder to any dividends.
(e) ( Rights on winding up ) The A Class Performance Shares participate in the surplus profits or assets of Highfield upon winding up of Highfield only to the extent of $0.000001 per A Class Performance Share.
(f)
( Transferable ) The A Class Performance Shares are not transferrable.
(g) ( Reorganisation of capital ) If at any time the issued capital of Highfield is reconstructed, all rights of a Holder will be changed to the extent necessary to comply with the applicable ASX Listing Rules at the time of reorganisation.
(h) ( Application to ASX ) The A Class Performance Shares will not be quoted on ASX. However, upon conversion of the A Class Performance Shares into fully paid ordinary shares ( Shares ), Highfield must within 2 Business Days after the conversion, apply for the official quotation of the Shares arising from the conversion on ASX.
(i) ( Participation in entitlements and bonus issues ) Holders of A Class Performance Shares will not be entitled to participate in new issues of capital offered to holders of Shares such as bonus issues and entitlement issues.
(j) ( No other rights ) The A Class Performance Shares give the Holders no rights other than those expressly provided by these terms and those provided at law where such rights at law cannot be excluded by these terms.

Conversion of the A Class Performance Shares

(k) ( Conversion on achievement of milestones ) Each A Class Performance Shares will automatically convert into one Share upon delineation of a JORC Code (or equivalent) compliant Indicated Mineral Resource of:
(i) 150 million tonnes of potash at or above 13% K2O by content; or
(ii) 125 million tonnes of potash at or above 14% K2O by content; or
(iii) 100 million tonnes of potash at or above 15% K2O by content; or
(iv) 75 million tonnes of potash at or above 17% K2O by content; or
(v) 50 million tonnes of potash at or above 20% K2O by content,

on the Navarra Potash Project (being the Milestone ).

(l) ( Redemption if Milestone not achieved ) If the Milestone is not achieved by the date which is five years from the date of issue of the A Class Performance Shares to the Holder, then the A

Class Performance Shares held by a Holder will be automatically redeemed by Highfield for the sum of $0.000001 within 10 Business Days of non satisfaction of the Milestone.

(m) ( Conversion procedure ) Highfield will issue the Holder with a new holding statement for the Shares within 10 Business Days following the conversion of the A Class Performance Shares into Shares.
(n) ( Ranking upon conversion ) The Shares into which the A Class Performance Shares may convert will rank pari passu in all respects with existing Shares.

SCHEDULE 3 - TERMS OF CLASS B PERFORMANCE SHARES

The terms and conditions of the B Class Performance Shares are as follows:

Rights attaching to the B Class Performance Shares

(a) ( B Class Performance Shares ) Each B Class Performance Share is a share in the capital of Highfield Resources Limited (ACN 153 918 257) ( Company ).
(b) ( General meetings ) The B Class Performance Shares shall confer on the holder ( Holder ) the right to receive notices of general meetings and financial reports and accounts of Highfield that are circulated to holders of fully paid ordinary shares in the capital of Highfield ( Shareholders Holders have the right to attend general meetings of Shareholders.
(c) ( No voting rights ) The B Class Performance Shares do not entitle the Holder to vote on any resolutions proposed at a general meeting of Shareholders.
(d) ( No dividend rights ) The B Class Performance Shares do not entitle the Holder to any dividends.
(e) ( Rights on winding up ) The B Class Performance Shares participate in the surplus profits or assets of Highfield upon winding up of Highfield only to the extent of $0.000001 per B Class Performance Share.
(f) ( Transferable ) The B Class Performance Shares are not transferrable.
(g) ( Reorganisation of capital ) If at any time the issued capital of Highfield is reconstructed, all rights of a Holder will be changed to the extent necessary to comply with the applicable ASX Listing Rules at the time of reorganisation.
(h) ( Application to ASX ) The B Class Performance Shares will not be quoted on ASX. However, upon conversion of the B Class Performance Shares into fully paid ordinary shares ( Shares Highfield must within 2 Business Days after the conversion, apply for the official quotation of the Shares arising from the conversion on ASX.
(i) ( Participation in entitlements and bonus issues ) Holders of B Class Performance Shares will not be entitled to participate in new issues of capital offered to holders of Shares such as bonus issues and entitlement issues.
(j) ( No other rights ) The B Class Performance Shares give the Holders no rights other than those expressly provided by these terms and those provided at law where such rights at law cannot be excluded by these terms.

Conversion of the B Class Performance Shares

(k) ( Conversion on achievement of milestones ) Each B Class Performance Shares will automatically convert into one Share upon the receipt, to the reasonable satisfaction of Highfield of all referral approvals and utility contracts required to construct and operation a 500,000 tonne per annum potash mine on the Project (including all required Government approvals, water and energy contracts necessary to operate the mine) ( Milestone ).
(l) ( Redemption if Milestone not achieved ) If the Milestone is not achieved by the date which is five years from the date of issue of the B Class Performance Shares to the Holder, then the B Class Performance Shares held by a Holder will be automatically redeemed by Highfield for the sum of $0.000001 within 10 Business Days of non satisfaction of the Milestone.
(m) ( Conversion procedure ) Highfield will issue the Holder with a new holding statement for the Shares within 10 Business Days following the conversion of the B Class Performance Shares into Shares.
(n) ( Ranking upon conversion ) The Shares into which the B Class Performance Shares may convert will rank pari passu in all respects with existing Shares.

SCHEDULE 4 - TERMS AND CONDITIONS OF TAYLOR COLLISON OPTIONS

The material terms and conditions of the Options offered pursuant to the Share and Option Placement are set out below:

(a) The options have an expiry date of 5.00pm (WST) on 1 November 2016 ( Expiry Date ). Any option not exercised before the Expiry Date will automatically lapse on the Expiry Date.
(b) Each option gives the optionholder the right to subscribe for one Share. To obtain the right given by each option, the optionholder must exercise the options in accordance with the terms and conditions of the options.
(c) The exercise price payable upon exercise of each option will be 20 cents ( Exercise Price ).
(d) All or part of the options may be exercised at any time prior to the Expiry Date, from time to time.
(e) An optionholder 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,

( Exercise Notice ).

(f) An Exercise Notice is only effective when the Company has received the full amount of the Exercise Price in cleared funds.
(g) 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.
(h) All Shares allotted upon the exercise of options will upon allotment rank pari passu in all respects with other Shares.
(i) The Company will not apply for quotation of the options on ASX.
(j) The Company will apply for quotation by ASX of all Shares allotted pursuant to the exercise of options within 10 Business Days after the date of allotment of those Shares.
(k) In the event of any reorganisation (including consolidation, sub-division, reduction or return) of the issued capital of the Company before the expiry of any options, the number of options to which an optionholder is entitled or the Exercise Price of the options or both will be reconstructed (as appropriate) in accordance with the Listing Rules.
(l) An option does not confer the right to a change in exercise price or a change in the number of underlying securities over which the option can be exercised.
(m) There are no participating rights or entitlements inherent in the options and optionholders 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 the proposed issue notice of the new issue will be given to optionholders at least seven (7) business days before the record date. This will give optionholders the opportunity to exercise their options prior to the date for determining entitlements to participate in any such issue.

SCHEDULE 5 – KCL SHAREHOLDERS

KCL Shareholder	Relevant interest in KCL	Entitlement to Consideration Shares	Entitlement to Performance Shares	Entitlement to Performance Shares	Entitlement to Performance Shares

			A Class	B Class	Total
Yoix Pty Ltd	4.301%	2,150,538	2,150,538	2,150,538	6,451,614
Richard Hillis ATF The BM Hillis Family Trust	4.301%	2,150,538	2,150,538	2,150,538	6,451,614
Derek & Carlsa Carter ATF The Salamanca Super Fund	11.021%	5,510,752	5,510,752	5,510,752	16,532,256
Donald Stephens ATF Donald Stephens Family Trust No 2	4.301%	2,150,538	2,150,538	2,150,538	6,451,614
Dorica Nominees P/L	4.301%	2,150,538	2,150,538	2,150,537	6,451,613
Craig & Suzanne Ball ATF CPB Super Fund	2.867%	1,433,692	1,433,692	1,433,692	4,301,076
Michael & Tracey Whiting ATF Whiting Family Super Fund	2.867%	1,433,692	1,433,692	1,433,692	4,301,076
Calama Holdings P/L ATF Mambat Super Fund A/c	2.867%	1,433,692	1,433,692	1,433,692	4,301,076
Greenslade Holdings P/L	4.301%	2,150,538	2,150,538	2,150,537	6,451,613
Wootoona Investments P/L	4.301%	2,150,538	2,150,537	2,150,538	6,451,613
Sapphire Chip P/L	4.301%	2,150,538	2,150,537	2,150,538	6,451,613
Graham Ascough ATF Ascough Family Trust	4.301%	2,150,537	2,150,538	2,150,538	6,451,613
Terry Kallis ATF Kallis Family Trust	4.301%	2,150,538	2,150,538	2,150,538	6,451,613
Simon Holford	4.301%	2,150,538	2,150,538	2,150,538	6,451,613
Raul Fernandez	11.021%	5,510,752	5,510,752	5,510,752	16,532,256
Jose Fernandez	11.021%	5,510,752	5,510,752	5,510,752	16,532,256
Pedro Fernandez	11.021%	5,510,752	5,510,752	5,510,752	16,532,256
Jimbzal P/L ATF The Taylor Family Trust	4.301%	2,150,537	2,150,538	2,150,538	6,451,613
TOTAL	100%	50,000,000	50,000,000	50,000,000	150,000,000

SCHEDULE 6 – INDEPENDENT GEOLOGIST REPORT

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PROPERTY REVIEW SUMMARY REPORT

SIERRA DEL PERDÓN AND JAVIER-PINTANO, SPAIN

Prepared For:

Highfield Resources Limited Level 1, 33 Richardson Street West Perth, WA 6005 Australia

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Prepared By:

Kelsey Mayes, P.Geo.

North Rim Exploration, Ltd. Avord Tower, 1020 – 606 Spadina Crescent East Saskatoon, Saskatchewan S7K 3H1

Reviewed and Approved By:

Lola Piché, P.Geo. and

Tabetha Stirrett, P. Geo. North Rim Exploration, Ltd.

Original: August 10[th] , 2012 Revised: August 30[th] , 2012

FINAL

Report Number: 12-933

Avord Tower, 1020-606 Spadina Crescent East ∙ Saskatoon, Saskatchewan ∙ S7K 3H1 ∙ (306) 244-4878

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Highfield Resources 2012 Property Review, Spain August 30[th] , 2012

CONTENTS	CONTENTS	CONTENTS
CONTENTS .................................................................................................................................. 2
LIST	OF TABLES ........................................................................................................................... 4
1.0	EXECUTIVE SUMMARY............................................................................................................ 5
2.0	INTRODUCTION AND TERMS OF REFERENCE................................................................................14
	2.1	TERMS OF REFERENCE ....................................................................................................... 15
	2.2	AVAILABLE DATA ............................................................................................................... 16
	2.3	SITE VISIT........................................................................................................................... 17
3.0	RELIANCE ON OTHER EXPERTS.................................................................................................17
	3.1	OTHER TECHNICAL CONTRIBUTORS ................................................................................... 18
4.0	PROPERTY DESCRIPTION........................................................................................................18
	4.1	PROPERTY DESCRIPTION AND LOCATION ........................................................................... 18
5.0	ACCESSIBILITY,CLIMATE,LOCAL RESOURCES,INFRASTRUCTURE,AND PHYSIOGRAPHY..........................19
	5.1	ACCESSIBILITY .................................................................................................................... 19
	5.2	CLIMATE ............................................................................................................................ 20
	5.3	LOCAL RESOURCES ............................................................................................................ 20
	5.4	INFRASTRUCTURE .............................................................................................................. 22
	5.5	PHYSIOGRAPHY ................................................................................................................. 23
6.0	GEOLOGICAL SETTING AND MINERALIZATION..............................................................................24
	6.1	DISTURBANCES AFFECTING GEOLOGY OF THE POTASH-BEARING MEMBERS ...................... 26
	6.2	OTHER CONSIDERATIONS .................................................................................................. 28
7.0	DEPOSIT TYPE......................................................................................................................28
8.0	SIERRA	DEL PERDÓN.............................................................................................................32
	8.1	DATA QUALITY ................................................................................................................... 33
	8.1.1	SEISMIC DATA ............................................................................................................... 34
	8.1.2	HISTORICAL REPORTS .................................................................................................... 35
	8.1.3	GEOMATICS DATA QUALITY ........................................................................................... 38
	8.2	RESERVE CALCULATIONS/GRADE SUMMARY ...................................................................... 39
	8.2.1	1960 RESERVE CALCULATION......................................................................................... 40
	8.2.2	1963 RESERVE CALCULATION......................................................................................... 40
	8.2.3	1970 GRADE ESTIMATION ............................................................................................. 41

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Page 2 of 72

		Highfield Resources
		2012 Property Review, Spain
		August 30th,2012
	8.2.4	1973 RESERVE CALCULATION......................................................................................... 41
	8.2.5	1974 RESERVE CALCULATION......................................................................................... 41
	8.2.6	1977 RESERVE CALCULATION......................................................................................... 41
	8.2.7	1982/1987 RESERVE ESTIMATION .................................................................................. 42
	8.2.8	1993 GRADE ESTIMATION ............................................................................................. 42
	8.2.9	PRODUCTION RECORDS ................................................................................................. 43
	8.3	GRADE SUMMARY AND COMPARISON ............................................................................... 44
9.0	JAVIER-PINTANO..................................................................................................................45
	9.1	DATA QUALITY ................................................................................................................... 46
	9.2	HISTORICAL RESOURCE CALCULATION ............................................................................... 47
	9.2.1	DATAMINE/GEOLOGICAL QUALITY................................................................................. 48
	9.2.2	ASSAY DATA QUALITY .................................................................................................... 49
	9.2.3	DRILL HOLES WITHOUT COLLAR LOCATIONS .................................................................. 51
	9.3	INSOLUBLE CONTENT ........................................................................................................ 54
	9.3.1	CROSS-SECTIONS ........................................................................................................... 55
	9.4	POTASH INTERBEDS ........................................................................................................... 58
	9.5	GEOLOGICAL RE-MODEL .................................................................................................... 59
10.0	CONCLUSIONS....................................................................................................................62
11.0	RECOMMENDATIONS...........................................................................................................64
12.0	SIGNATURE PAGE................................................................................................................71
13.0	REFERENCES......................................................................................................................72

LIST OF FIGURES

FIGURE 4-1: PROJECT AREA LOCATION MAP FOR SIERRA DEL PERDÓN AND JAVIER-PINTANO (INTERNAL DOCUMENT). ........................ 19 FIGURE 5-1: POWER LINES WITHIN SIERRA DEL PERDÓN PROJECT AREA. ................................................................................. 20 FIGURE 5-2: PROJECT AREA AND INFRASTRUCTURE MAP FOR SIERRA DEL PERDÓN AND JAVIER-PINTANO AREAS. ............................... 21 FIGURE 5-3: EXISTING INFRASTRUCTURE WITHIN SIERRA DEL PERDÓN PROJECT AREA EXTENTS. .................................................... 22 FIGURE 5-4: STORAGE SHED IN THE SUBIZA DECLINE AREA. .................................................................................................. 23 FIGURE 5-5: JAVIER AREA LANDSCAPE AND SURROUNDINGS. ................................................................................................ 24 FIGURE 6-1: REGIONAL GEOLOGY OF NORTHERN SPAIN AND THE EBRO BASIN (INTERNAL KCL SUMMARY DOCUMENT). ...................... 25 FIGURE 6-2: ANOMALIES THAT AFFECT POTASH-BEARING MEMBERS. ..................................................................................... 27 FIGURE 8-1: 1982 RESERVE BLOCK MAP MEANT TO ILLUSTRATE GENERAL BLOCK LOCATIONS. ...................................................... 32 FIGURE 8-2: AVAILABLE SEISMIC DATA (GREEN) IN RELATION TO COMPLETED SEISMIC LINES AND BLOCKS. ........................................ 36 FIGURE 8-3: EXAMPLE OF A HARD COPY SEISMIC SLICE FOR LINE P-4. ..................................................................................... 37 FIGURE 8-4: GEOREFERENCING AND AREA DISCREPANCIES. BLUE ARROWS DENOTE ACTUAL LOCATION OF TOWNS. ............................ 39 FIGURE 9-1: DRILL HOLE LOCATION MAP FOR JAVIER-PINTANO AREA (MODIFIED FROM INTERNAL SUMMARY REPORT). ....................... 45

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Highfield Resources 2012 Property Review, Spain August 30[th] , 2012

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FIGURE 9-2: HISTORICAL RESOURCE CALCULATION (MODIFIED FROM INTERNAL DOCUMENTS). GREEN DENOTES INFERRED AND RED DENOTES INDICATED HISTORIC RESOURCES. NOTE: DRILL HOLE UDL OVERLIES DRILL HOLE JP-4. .......................................... 47 FIGURE 9-3: INFILL PORTION OF RESOURCE BUFFERS. ......................................................................................................... 48 FIGURE 9-4: CORRELATION FOR JP-1 BETWEEN WIRELINE LOGS AND ASSAY HISTOGRAM. ............................................................ 50 FIGURE 9-5: PINTANO AREA ASSAY DATA VARIANCE GRAPH. ................................................................................................ 51 FIGURE 9-6: JAVIER AREA ASSAY DATA VARIANCE GRAPH. .................................................................................................... 51 FIGURE 9-7: JP-3 VS. JP-3D ASSAY DATA. ...................................................................................................................... 52 FIGURE 9-8: PP-2 VS. PP2-B ASSAY DATA. NOTE: THE Y-AXIS SCALE DIFFERENCE. ..................................................................... 53 FIGURE 9-9: INSOLUBLE VS. %K2O GRAPH FOR JAVIER-PINTANO ASSAYS. ............................................................................... 54 FIGURE 9-10: CROSS-SECTION A-A’ THROUGH THE PINTANO AREA. ...................................................................................... 56 FIGURE 9-11: INSOLUBLE CONTENT VS. % K2O FOR PP-2. .................................................................................................. 57 FIGURE 9-12: INSOLUBLE CONTENT VS. % K2O FOR PP-3. .................................................................................................. 57 FIGURE 9-13: INTERBED SALT INCLUDING IN ORIGINAL POTASH SEAM AS SHOWN IN DRILL HOLE PP-3............................................. 58 FIGURE 9-14: TOTAL EVAPORITE THICKNESS MAP. ............................................................................................................. 59 FIGURE 9-15: POTASH INTERVAL THICKNESS GRID. THICKER INTERVALS ARE SHOWN IN GREY AND ORANGE. ..................................... 60 FIGURE 9-16: GRADE X THICKNESS MAP. THICKEST AREAS ARE SHOWN IN YELLOWS AND ORANGES. ............................................... 61 FIGURE 9-17: GRADE X THICKNESS MAP OVERLAIN WITH HISTORICAL RESOURCE CALCULATION BUFFERS. ........................................ 61

LIST OF TABLES

TABLE 2-1: GLOSSARY OF TERMS AND PHRASES. ............................................................................................................... 14 TABLE 4-1: AREA CALCULATION FOR MINING AND EXPLORATION AREAS. ................................................................................. 19 TABLE 7-1: SUMMARY OF POTASSIUM SALTS AND THEIR COMPOSITION................................................................................... 30 TABLE 8-1: 1977 BLOCK SUMMARY. ............................................................................................................................. 33 TABLE 8-2: AVAILABLE DATA BY YEAR FOR THE SIERRA DEL PERDÓN MINING AREA. .................................................................... 34 TABLE 8-3: AVAILABLE SEISMIC, REPORT AND RESERVE DATA. .............................................................................................. 38 TABLE 8-4: SUMMARY OF K2O GRADES AND MINERALOGY. ................................................................................................. 44 TABLE 11-1: SIERRA DEL PERDÓN RECOMMENDATIONS (FOCUS ON BLOCK D AND F). ................................................................ 65 TABLE 11-2: RECOMMENDATIONS FOR THE JAVIER-PINTANO AREA (FOCUS ON PINTANO AREA). .................................................. 68

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Highfield Resources 2012 Property Review, Spain August 30[th] , 2012

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1.0 EXECUTIVE SUMMARY

Précis

North Rim Exploration Ltd. (herein referred to as “North Rim”) is a geological and engineering consulting firm from Saskatoon, Canada established in 1984 with expertise in potash. Its principles have collectively been responsible for abundant NI 43-101 reports on various potash assets globally.
North Rim was engaged by the ASX Listed Highfield Resources Limited (herein referred to as “Highfield” or “the client”) to review a potential acquisition of potash assets in Spain’s Ebro Basin. The initial engagement encompassed:
1) A review of the Project Area to provide recommendations to Highfield as to the data quality and quantity available and the general outlook of the available data (positive or negative); and
2) Recommendations on necessary actions to complete a JORC Code Compliant Resource for each area.
The Project Area comprises two distinct areas within the Ebro Basin:
1) Sierra del Perdón; and
2) Javier-Pintano.
The Sierra del Perdón area comprises six different zones with four of the six being partially or completely mined. It appears that Zone B was the last area to be partially mined according to production records. Importantly with the production history and further analysis of this area it may be possible to finalise a JORC Code Compliant Inferred Resource.
From available maps, it appears that the majority of Block D from the Sierra del Perdón area has not been mined (will need to be confirmed through production records). A minimum of three (3) additional drill holes may be necessary to confirm the Historical Resource and pending positive results the Resource may be upgraded to a higher Resource Category.
The Javier-Pintano area contains sixteen (16) drill holes with available geological information. From high level preliminary modelling by North Rim, some areas appear to indicate 7.0 m thick intervals of potash mineralization (interbeds included). Resampling of available drill core would be a recommended step in order to complete a JORC Code Compliant Resource.
There are no apparent or easily identifiable major risks to the Project Area in terms of accessibility, local resources, climate, infrastructure, and physiography.
This report discusses various actions necessary to enhance the Project Area and proposes recommendations in order to complete JORC Code Compliant Resource

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Calculations for both the Sierra del Perdón and Javier- Pintano areas, pending positive results of confirmation drilling and sampling program.

The project is not without risk; however, there are sufficient positive factors that may suggest potential in furthering the development of the Project Area. With appropriate geological and structural interpretations and data acquisition there may be potential for exploration upside.

Introduction

The client is in an agreement with KCL Resources to acquire 100% interest in their JavierPintano and Sierra del Perdón property locations located in Spain. North Rim has been engaged to complete a data review of all existing project information with the objective of completing an initial property review of the exploration area (Javier – Pintano) and the historic mining area (Sierra del Perdón). North Rim understands that the intent of the study is to review the geology and resource of the properties, and provide recommendations of what tasks (if any) are required to get the projects to a JORC Code compliant Resource. Recommendations provided in this report for the path forward relies on the experience of senior technical personal and their judgment of the level of information that is required to satisfy JORC requirements. This report has been prepared for inclusion in Highfield’s notice to shareholders of the 2012 annual general meeting.

A well prepared technical report (JORC or 43-101) is based on strong science and experience and is aimed at mitigating risks and/or communicating level of risks to potential investors. North Rim understands that Highfield would like to potentially develop the Project Areas for potash mining purposes, and to provide value to Highfield shareholders. The property review was designed to collect the pertinent information necessary for the basis of a risk mitigated approach.

The information in this notice that relates to Exploration Results, Minerals Resources or Ore Reserves is based on information reviewed and compiled by Ms Lola Piché, who is a Member of the Association of Professional Engineers and Geoscientists of Saskatchewan. Ms Piché is the Director of Technical Services and Innovations and a member of North Rim’s Board of Directors. Ms Piché has sufficient experience which is relevant to the style of mineralization and the type of deposit under consideration and to the activity which she 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. Ms Piché consents to the inclusion in this report to the matters based on the information in the form and context in which it appears.

North Rim visited Madrid from July 3[rd] to 7[th] , 2012 in order to meet with the Highfield team and KCL representatives who assisted with document translation and clarification. As part of the trip, a site visit was completed for the Sierra del Perdón area as well as the Javier area on July

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6[th] and 7[th] , 2012. The site visit was guided by a KCL representative. General infrastructure including existing structures, power and water sources, as well as access to communications was reviewed for high level analysis. The general lay of the land was observed to determine accessibility within the Project Area extents.

Aspects of a JORC Code Technical Report that were not planned as part of the original scope of work (i.e. infrastructure) were added to the review process as part of the site visit. The following items were reviewed in general terms during the site visit to the properties: accessibility, climate, local resources, infrastructure and physiography. Due to their relevance to overall project risks and the usefulness of documenting observations for future use in JORC reports, sections discussing these items have been added to the report.

North Rim is independent of Highfield and any associated partners and has no interest in any manner in the property in question.

Geology and Mineralization

The potash deposits within the Spanish states of Navarra and Catalonia occur within separate potash sub-basins created during the orogeny responsible for the Pyrenees Range. Subsequent tectonism and salt deformation added complexity to the Ebro Basin evaporite geometry, eventually deforming the potash-bearing salt packages into broad anticlinal structures. The Ebro Basin is complicated by deformation and uplift, and results from the seismic data and interpretive cross-sections within the area show faulting and potential salt structures such as domes and anticlines.

Property Review – Sierra del Perdón

The Sierra del Perdón area was historically an operating mine until its closure in 1997. The mine began production in 1963, initially only long wall mining sylvite, but later was followed by the mining of both sylvite and carnallite resources in various blocks (Garrett, 1996).

The majority of data reviewed by North Rim was in Spanish and required translation to English for proper review. Seismic data was limited ranging from 1979 to 1985 with years missing in between. No data more recent than 1985 was available. More extensive data is available regarding mine production, Reserve Calculations, geochemistry, geology and general mine reports, but for many years data is missing or unavailable. North Rim understands that no original assay or geophysical wireline data is available.

The review of the historical Reserve Calculations formed the basis for the Sierra del Perdón property review.

Property Review – Javier-Pintano

Javier-Pintano is an exploration area east of the old mine workings with historical drilling and seismic completed in the area. The majority of data for the Javier-Pintano area was in the form

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of a digital database called Datamine. North Rim used the Datamine information and imported it into the modelling software ‘Vulcan’ in an attempt to re-model and understand the parameters and assumptions used for a historical Resource Calculation. A historical Resource Calculation was completed in Datamine by KCL representatives to include both an Inferred and Indicated Resource.

The comparison of the Historical Resource Calculation and the data sets imported into Vulcan formed the basis for the Javier-Pintano property review.

Conclusions

The following conclusions are made by the authors:

There are no apparent or easily identifiable major risks to the project in terms of accessibility, local resources, climate, infrastructure and physiography.
Topography in the western areas of the project may pose some limitations or challenges to surface infrastructure development in this area if it was required; however, there are significant flat-lying areas with the project extents. Topography should also be consider during exploration program planning as it could add significant challenges and cost to seismic or drilling programs.
Reserve Calculations for the Sierra del Perdón area do not fully list or explain assumptions and methodologies or supply the original raw data. Without this information the Historic Reserve Calculations cannot be recalculated at this time and thus cannot be verified.
Production records for the Sierra del Perdón area are useful regarding the quality of the deposit and its mineability. In terms of defining a JORC Resource the production records provide confidence in the ability to mine the deposit in the area, particularly in the existing mining blocks.
Maps outlining the Sierra del Perdón mining area illustrate the location of interpreted faults and the structural complexity of the area.
The preliminary review of the mining area suggests Block D and F may be the most prospective as they have not been previously mined; however, these areas may represent deeper areas geologically.
No geophysical wireline data or assays are available within the Sierra del Perdón area.
Data quality of the assays and geophysical wireline data within the Javier-Pintano area correlate well and cores are available for viewing and potential re-sampling.
The carnallite content within the Javier-Pintano area appears less pervasive than discussed in the regional geology of the Sierra del Perdón area, but further investigations may be necessary.

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All drill holes within the Javier-Pintano area are considered vertical, as no downhole surveys were given. This may impact the assay, geophysical wireline and geological intersection thicknesses.
Grids illustrated for the Javier-Pintano area display the relative complexity of the deposit likely due to deepening extents of the basin. There is a high variation in depth to potash and evaporite thickness over short distances as the area appears structurally complex.
The preliminary contouring results of a grade times thickness grid for Javier-Pintano indicates areas to the south east may be the most prospective.

Overall, both the Sierra del Perdón and Javier-Pintano areas show prospectivity for potash exploration and potential development. The following points summarize the highlights of the two areas which comprise the Project Area:

Sierra del Perdón:

It is a well-established area with existing infrastructure and old mine workings;
The area has been previously mined with existing production data, including both the production of sylvite and carnallite;
Production data and underground grade mapping is available for Block B which may be useful when considering resource determination;
Ample seismic has been completed over the mine and expansion area outlining the areas with structural complexity; and
Based on North Rim’s initial review process the potential for potash may exist in the D Block. There is future potential for Block F, which has no available data at this time.

Javier-Pintano:

The area is easily accessed with good infrastructure in place;
Acceptable down hole data is available as sixteen drill holes drilled between 1988 and 1991 have been completed within the immediate area;
Required data for resource determination that is currently available includes; assay data, geophysical wireline data and some drill core (condition of cores is currently unknown). Brief review of the well data shows good correlation between assays and the wireline data. More follow up work is required; and
Preliminary resource mapping by North Rim suggests that potash members may extend up to 7.0 m in thickness (interbed salts included).

Areas Requiring Further Investigation

Further work will need to be conducted geologically to understand the full nature of the mineralization and structural complexity of the areas. Both areas require additional efforts or

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follow up work in order to meet with current potash industry standards for resources. Small, but significant improvements should be made to assay sampling and Resource / Reserve Calculations in order to bring the Project Area up to a JORC compliant resource level.

Historical Resource / Reserve Calculations: The production records for the Sierra del Perdón area are only useful for inferring resources in areas where the production came from, unless further information can be provided that proves that the geology, mining methods or parameters in one block can be geologically extrapolated in other blocks. Within the Sierra del Perdón area there is no method of qualifying the listed grades other than to compare them between years, and against real production numbers. This is due to changes in areas, parameters, assumptions and mineralogy (sylvite vs. carnallite) between blocks and years. The mineability of the deeper blocks within the Sierra del Perdón area will require further investigation in terms of moving towards an advanced JORC compliant Resource or Reserve. Preliminary attempts at reproducing and correlating production records with the historic Reserve Calculations for the Subiza area (Block B) are so far unsuccessful due to inconsistencies in the data sets. A more detailed comparison using a complete record of production reports, georeferenced mine plans, maps, and potentially information from former mine personnel may be more successful.

A discrepancy was noted within the buffers used for historical Resource Calculations in the Javier-Pintano area. The extra space included would contribute additional resource that normally would not be included. The radius of influence should maintain its circular shape for the polygons. Interbed salts within the potash horizon were also included in the historical Resource Calculation within the Javier-Pintano area, adding low grade material to the potash horizon thickness.

Seismic Re-Interpretation: Seismic has been complete over the mine area extents and portions of the exploration area. The review of seismic data to define structure and potentially anomalous areas is a necessary step in the verification of the geology. Confirmation of this will be necessary for defining a JORC compliant Resource for both the Sierra del Perdón and JavierPintano areas as both areas appear structurally complex.

Assay Data: Little information is available regarding the assay sampling methods. Resampling of historical core should be completed by an independent laboratory, which uses quality control check samples and blank standards as part of the assay record. Insoluble content will be required when reviewing future assays, as high insoluble content is noted in the Javier-Pintano area; 44% of the all samples which were reviewed by North Rim (which contain > 5% K2O) have an insoluble content of over 20%. This will impact mining considerations in subsequent studies.

Coordinate Systems: Difficulties with coordinate systems and georeferencing historical maps were noted within the Sierra del Perdón area. Efforts will be required to rectify the inconsistencies in the data and ensure proper well locations are used.

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Recommendations

All recommendations and conclusions are based upon getting the Project Area up to current industry standards and further testing the prospectivity of each area for the purpose of advancing towards development.

The recommendations for the Sierra del Perdón area focus on Block D and F as these areas have yet to be mined and should therefore have the most significant untouched "resources". The Javier-Pintano recommendations focus primarily on the Pintano area as it was identified through the re-modeling and grid development as potentially being the most prospective area. The recommended steps are summarized within this section, but are outlined in more detail in Section 11.0.

Sierra del Perdón:

1) Corporate and Legal: Legal transactions, land location / potential and local permitting requirements should be reviewed. A summary of permitting steps and limiting factors or licensing requirements should be included.
2) Data Review and Data Verification: Known missing data should be compiled as well as investigations into unidentified data that is assumed to exist. Data compilation and review of all existing files, maps, reports etc. would be completed, including the completion of seismic re-interpretation. Determination of the likelihood of verifying the historical calculations would be concluded at this time. Data could be compiled into a central database for ease of management and data sharing.
3) Fatal Flaw Assessment: This would include a high level review of the Project Area for any identifiable “show stoppers” in a number of categories, including: economics, environment, mining / metallurgy, marketing, legal and social or governmental factors.
4) Potential JORC Report: If positive results are obtained through Steps 1 to 3, the generation of a JORC Report or Exploration Target may be completed.
5) Exploration Program Planning: Drill hole targets and drilling program design would be completed. Consideration of new 2D or 3D seismic data acquisition may be considered during this step.
6) Execute on Exploration Plan: Any drilling or seismic would be completed in this step. The seismic could be re-interpreted to include the newly acquired information.
7) Project Updates: The geological model and central database would be updated with the newly interpreted and acquired information. Step 3 would be updated to include any new findings.
8) JORC Report: If a JORC Report was not completed in Step 4, it could be completed in this step.

Using complete production records and comprehensive, trusted historical data, the option may exist to determine remaining mine resources within the Sierra del Perdón area. In order to

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enhance the mining area further, it is recommended that three (3) drill holes be completed in Block D and three (3) drill holes be completed in Block F. Drill holes are spaced at large distances and three point calculations are the preferred method for both areas. Proper geological data will need to be collected including: geophysical wireline data, assays, geological descriptions and any drill test deemed necessary. The cost of these drill holes is yet to be determined.

Javier-Pintano:

1) Corporate and Legal: Legal transactions, land location / potential and local permitting requirements should be reviewed. A summary of permitting steps and limiting factors or licensing requirements should be included.
2) Fatal Flaw Assessment: This would include a high level review of the Project Area for any identifiable “show stoppers” in a number of categories, including: economics, environment, mining / metallurgy, marketing, legal and social or governmental factors.
3) Data Review and Data Verification: Data compilation and review of all existing files, maps, reports etc. would be completed, including the completion of seismic reinterpretation and update of Step 2. JORC calculation parameters and classification may be determined within this step.
4) JORC Report: If positive results are obtained through Steps 1 to 3, the generation of a JORC Report or Exploration Target may be completed.
5) Exploration Program Planning: Drill hole targets and drilling program design would be completed. Consideration of new 2D or 3D seismic data acquisition may be considered during this step.
6) Execute on Exploration Plan: Any drilling or seismic would be completed in this step. The seismic could be re-interpreted to include the newly acquired information.
7) More Detailed Project Assessment: The geological model would be updated with the newly interpreted and acquired information. Complete a Preliminary Economic Assessment (PEA).
8) JORC Report: Using the results of Steps 6 and 7 a JORC Report could be generated. Dependent on client preference, the JORC Report could also be completed after Step 6, and updated after Step 7.

Sixteen (16) drill holes currently exist within the Javier-Pintano area. It is recommended that two (2) additional drill holes be completed in the area in order to gain representative data for a Resource Calculation. Currently, drill holes in the exploration area are present in a linear pattern and three point calculations are the preferred method. Proper geological data will need to be collected including: geophysical wireline data, assays, geological descriptions and any drill test deemed necessary. The cost of these drill holes is yet to be determined. Re-sampling of available cores would be necessary to confirm the presence of sylvite and identify

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accompanying mineralogies (i.e. clays). This would add additional confidence to assay data from drill holes that may or cannot be re-sampled.

Based on the above conclusions and recommendations there may be potential in furthering the development of the Project Area. Although, follow up work needs to be completed, with the appropriate geological and structural interpretations and data acquisition the Project Area may suggest potential for exploration upside. However, until the required data is compiled it is not certain at this time if a JORC compliant Resource Calculation can be completed without new drilling data.

In terms of a JORC Code Resource Calculation the mining method and preliminary mining parameters will need to be determined before a potential resource could advance in classification. It is recommended that the preferred mining method be chosen early in the project development, prior to completion of exploration efforts so that data collection during exploration work can maximize its usefulness for mine design at a later stage.

North Rim has made no attempt to verify the contents of the Historical Resource or Reserve Calculations for the purposes of this report and have simply stated the findings of the review process. An independent review of the available data was completed for both the Sierra del Perdón and Javier Pintano areas; however, at this time North Rim cannot verify the historical calculations or consider them compliant in accordance with the JORC Code.

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2.0 INTRODUCTION AND TERMS OF REFERENCE

Throughout this report geological, technical, and potash industry specific terminology is commonly employed. Table 2-1, below, provides an alphabetized list of definitions for many of these terms and phrases.

Table 2-1: Glossary of terms and phrases.

		GLOSSARY OF TERMS
	Chemical Formula
Term		Definition

Assay	N/A	A test performed to determine a sample’s chemical content.
Carnallite	KCl.MgCl2· 6H2O	A mineral containing hydrated potassium and magnesium chloride.
Halite	NaCl	Sodium Chloride – Naturally occurring salt mineral.
Sylvite	KCl	Potassium Chloride – A metal halide salt composed of potassium and chlorine. Generally known as potash.
Sylvinite	N/A	Mineralogical mixture of halite and sylvite +/- minor clay and carnallite.
K2O	K2O	Potassium Oxide - A standard generally used to indicate and report ore grade.
Insoluble	N/A	Water-insoluble impurities, generally clay, anhydrite, dolomite or quartz.
Seismic Anomaly	N/A	A structural change in the natural, uniformly bedded geology.

North Rim Exploration Ltd. (“North Rim”) was engaged by Highfield Resources (“Highfield” or “the client”), an Australian based company, to conduct a preliminary property review for several potash permits located in the Ebro Basin in Spain (herein referred to as the “Project Area”). The client is in agreement with KCL Resources to acquire 100% interest in their JavierPintano and Sierra del Perdón property locations. North Rim has been engaged to complete a data review of all existing project information with the objective of completing an initial property review of the exploration area (Javier-Pintano) and the historic mining area (Sierra del Perdón). The review involved the analysis of historical data collected by previous potash exploration efforts, historical mining and production data, and publicly available sources including technical reports, and geological reports. KCL Resources released a Brokerage Report stating the contents of the Project Area. The details of the Brokerage report were reviewed and compared with the findings from the historical data.

North Rim understands that the intent of the study is to review the geology and resource of the properties, and provide recommendations of what tasks (if any) are required to get the projects to a JORC Code compliant standard. Recommendations provided in this report for the path forward relies on the experience of senior technical personal and their judgment of the level of information that is required to satisfy the following JORC requirement:

“Competent Persons are advised to ensure that the quality of work carried out by them when preparing or signing off Resource/Reserve estimates is

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commensurate with the level of (professional) risk accepted. It is important that Competent Persons preparing estimates, or signing off estimates prepared by others, understand that, by so doing, they are accepting full responsibility for the work… Competent Persons should consider carefully the nature of the review work necessary to allow them to confidently accept this level of responsibility (Stephenson, 1997).”

A well prepared technical report (JORC or NI 43-101) is based on strong science and experience and is aimed at mitigating risks and/or communicating the level of risk to potential investors. North Rim understands that Highfield would like to potentially develop the Project Areas for potash mining purposes, and to provide value to Highfield shareholders. The property review was designed to collect the pertinent information necessary for the basis of a risk mitigated approach and included the following scope of work:

A review of the quantity and quality of data available;
A review of sampling, database management and verification;
A review of methodologies and content of geological and mineralization models generated for the projects;
A review of the reasonability of the reporting classification and supporting documentation and whether they follow accepted industry standards and guidelines; and
Recommendations for follow up work and exploration strategies in order for the resource to be JORC Code compliant.

Aspects of a JORC Code Technical Report that were not planned as part of the original scope of work (listed above) were added to the review process as part of the site visit. The following items were reviewed in general terms during the site visit to the properties; accessibility, climate, local resources, infrastructure and physiography. Due to their relevance to overall project risks and the usefulness of documenting observations for future use in JORC reports, sections discussing these items have been added to the report. The following report constitutes the findings of the above scope of work and provides recommendations for further development of the Project Area.

North Rim is independent of Highfield and any associated partners and has no interest in any manner in the property in question.

2.1 TERMS OF REFERENCE

North Rim Exploration Ltd. is a privately held geological and mine engineering consulting firm based in Saskatoon, Saskatchewan that was founded in 1984 by Mr. Steve Halabura, P.Geo, F.E.C. (Hon.). North Rim has been issued a Certificate of Authorization No. C905 with the

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Association of Professional Engineers and Geoscientists of Saskatchewan (APEGS), and holds a “Permission to Consult” in the field of geology for potash, petroleum, and other precious and industrial minerals resources.

The Qualified Person (QP under NI 43-101 standards) and reviewer for this report is Ms Lola Piché, P. Geo. of North Rim Exploration Ltd. Lola Piché is the Director of Technical Services and Innovations, a shareholder, and member of the Board of Directors at North Rim. As the Director of Technical Services and Innovations she is responsible for the quality and variety of services provided by North Rim. Ms Piché is a proven team builder and leader at North Rim who excels at working with clients to create and direct integrated technical teams for exploration and/ or development goals with consistent project success.

Ms Piché holds an Honors Bachelor of Science Degree from the University of Saskatchewan and is registered with the Professional Engineers and Geoscientists of Saskatchewan. She is a member of the Canadian Institute of Mining, and Metallurgy and Petroleum (CIM), the Canadian Mining Innovation Council (CMIC) and the Solution Mining Research Institute (SMRI). Ms Piché was recently invited to be a member of the CIM Sub-committee for Potash Best Practices, a committee currently evaluating the CIM “Best Practice Guidelines” for Potash which have not been updated since 2003.

As a consulting Geologist, Ms Piché has more than 12 years of technical experience. Her expertise is in the evaluation of subsurface geology with a focus on mining of potash and other evaporites. Her experience as a geologist includes; evaluation of stratigraphy, sedimentology, and resource valuations of evaporites, industrial minerals and oil and gas deposits particularly in the Western Canadian, Williston and Northern U.S Rockies Basins. In the Potash and evaporites field, she has worked on more than 40 potash exploration projects that include; evaluation of potential properties, design and management of exploration programs, evaluation of exploration program results, Resource Calculations and NI 43-101 generation. She has been the primary author on more than a dozen “potash mining integrity studies” for various clients. These studies involved identification of geological factors that could have an effect on mine planning, roof stability or ingress of fluid (brine, brackish or fresh water) at the mining level.

2.2 AVAILABLE DATA

The majority of available data has been inspected by Ms Kelsey Mayes, P.Geo. and Ms Lola Piché, P. Geo., of North Rim to verify their contents. Mr. Louis Fourie, P.Geo. of North Rim was responsible for the modelling assessment associated with the Javier-Pintano area. Due to time sensitivities and the fact that the majority of documentation is in Spanish, not all material could be fully reviewed prior to the completion of this report. Dependent on the content of the remaining data, it is recommended that all data be fully translated to English and more time be

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spent reviewing and analysing the outstanding information. The comments and opinions that are presented herein are based upon these works; based on personal experience with other potash deposits and the specific technical information from within the Project Area.

The reader is reminded that the term “ore” should not be used, disclosed, or implied unless proven reserves have been estimated on the property. To be called ore, the economic factor must be taken into account and it must be possible to extract metals or minerals profitably from the ore. Since no proven reserves have been identified during the course of work undertaken to prepare this report, the term “ore” has not be used.

2.3 SITE VISIT

Ms Kelsey Mayes and Ms Lola Piché met with Highfield in Madrid, Spain from July 3[rd] to July 7[th] , 2012 for an initial project introduction. During this time the following was completed:

Determined what data was available for review and the quality of the data;
Discussed and clarified documentation with the KCL and Highfield team for both the Sierra del Perdón and Javier-Pintano areas; and
Translated some of the necessary material from Spanish to English for review.

A site visit was completed by the Ms Mayes and Ms Piché from July 6[th] to 7[th] , 2012, accompanied by a KCL representative. During the site visit the following activities were undertaken:

Completed a tour of the Sierra del Perdón area, specifically near the old mine processing facility and the Beriain and Subiza shaft areas;
Located and surveyed the Beriain and Subiza shaft storage locations for future reference on maps;
Completed a tour of the Javier area; and
Observed the infrastructure, water sources, local communities and general lay of the land surrounding the Project Area.

3.0 RELIANCE ON OTHER EXPERTS

In the preparation of this report, North Rim has acquired and employed information from KCL representatives. These sources are based upon the results of previous potash exploration and mining activities as well as academic reports carried out in the Ebro Basin, Spain. The preliminary assessment involved analysis of data collected through previous potash exploration, presumably publicly available record sources including technical reports, and geological reports. North Rim does not take responsibility for the accuracy of this historical data and these items will hereinafter be referred to as “internal documents”, “internal summary reports” or “historical information.” It is not known if the personnel, facilities, or

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analytical procedures used by previous evaluators were independent, or if the authors of those reports were considered “Qualified Persons” (QP) as defined by National Instrument 43-101 or “Competent Persons” as defined by The JORC Code. The purposes of the site visit and property review were to confirm as much as possible the accuracy and quality of the historical information for the Project Area, as well as to develop recommendations for future work within the Project Area. Recommendations will focus on advancement of the property in terms of a JORC Code compliant resource.

North Rim has held internal discussions with company management as well as with other external experts in the potash industry who have been involved with work in the Ebro Basin in Spain. The author has relied upon the following experts for technical information:

Mr. Pedro Rodriguez and Mr. José Prada of geoTREX (a KCL Associate) for translation and collection of documentation. Mr Rodriguez acted as chaperone for the site visit from July 6[th] to the 7[th] , 2012. Both gentlemen were on site in Madrid during North Rim’s visit.
Mr. Mark Arundell of Highfield Resources for technical assistance and advisement regarding the Project Area data.
Mr. Anthony Hall, Managing Director of Highfield Resources for general project information and scope. Mr. Hall was onsite in Madrid during North Rim’s visit.
Mr. Derek Carter of Highfield Resources and KCL Resources for general project information and scope.

3.1 OTHER TECHNICAL CONTRIBUTORS

Mr. Louis Fouris, a North Rim resource geologist who provided geological expertise and modeling of the Javier-Pintano area.
Ms Kelsey Mayes, a North Rim geologist, conducted the site visit, provided geological expertise and has prepared this report.
Ms Tabetha Stirrett, North Rim’s Senior Geologist and Business Development Manager for technical expertise and assistance in preparation and review of this report.

4.0 PROPERTY DESCRIPTION

4.1 PROPERTY DESCRIPTION AND LOCATION

The Project Area is divided into two areas: the Sierra del Perdón historical mining area and the Javier-Pintano exploration area. The two areas are present in the northern portion of Spain, near the city of Pamplona in the Navarra and Aragon States. The mining area is comprised of two adjacent parcels of land, whereas the exploration area is composed of four contiguous packages, (Table 4-1 and Figure 4-1).

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Table 4-1: Area calculation for mining and exploration areas.

	Sierra del Perdón Javier-Pintano Total Area(m2) 155,952,428.36 245,287,442.97 * Area calculated by ArcGIS, 2012

Property descriptions and locations were obtained from historical documents provided by KCl and Highfield to North Rim. No attempt to independently verify the land tenure information was made by the authors.

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Figure 4-1: Project Area location map for Sierra del Perdón and Javier-Pintano (internal document).

5.0 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE, AND PHYSIOGRAPHY

The majority of material outlined in the following section was briefly reviewed during North Rim’s site visit. Based the limited observations during the site visit, there are no apparent or easily identifiable major risks to the project in terms of accessibility, local resources, climate, infrastructure and physiography. The topography in the western areas of the project may pose some limitations or challenges to surface infrastructure development in this area if it was required. There is however significant flat-lying areas in the area. It is recommended that a more thorough, detailed review and assessment be completed in the future to verify this brief, preliminary assessment.

5.1 ACCESSIBILITY

The Project Area is located within the Ebro Basin, approximately 450 km northeast of Madrid. Accessible by ocean and boat, Spain has access to ports and shipping lanes along the coast. The

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highways and roads are generally good, and both areas are accessible by vehicle along major highways and grid roads. Major highways access the Project Area including AP-15 and A-127 as well as highway A-21 which connects Sierra del Perdón and Javier-Pintano (Figure 5-2).

5.2 CLIMATE

The climate in Spain is characterized as a warm Mediterranean climate with balanced dry summers and winters. Spain is considered to be one of the warmest parts of Europe. Northern Spain, where the Project Area is located, tends to be more cool and arid than the south; however, the Spanish climate is highly varied but comfortable. The northern coastal regions are more cool and humid with an average annual temperature of 14°C, whereas, central Spain, near Madrid, has a cooler winter (average temp of 8°C) and hotter summer (average temp of 23°C) (Spain - Climate, 2012). Yearly rainfall is quite varied throughout Spain with an average annual rainfall of 39” in the north, 16 – 31” in the south and 20” in the central plains (Spain - Climate, 2012).

5.3 LOCAL RESOURCES

The nearby city of Pamplona allows access to supplies, personnel, equipment and accommodation. Several smaller communities are located in close proximity to the Project Area including Olite, Subiza, Sanguesa and Berdun to name a few. Due to the high unemployment rates in Spain, especially among young people, local labour may be readily available, although it is not known what the availability of those with technical trades and professions would be. The town of Olite was used as a base during the site visit and had many different hotels and accommodations readily available.

Spain is the third largest producer of wind power in the world after China and the U.S (MWPS, 2012). Observed during the site visit were abundant wind turbines throughout the northern parts of Spain. Spain is known for its use of other renewable energy sources such as solar and biomass. Figure 5-1 shows power lines within the Sierra del Perdón Project Area.

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Figure 5-1: Power lines within Sierra del Perdón Project Area.

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Figure 5-2: Project area and infrastructure map for Sierra del Perdón and Javier-Pintano areas.

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The Javier area, also visited is in close proximity to a water reservoir and surrounding towns. Power lines are visible near the Property Area extents.

Hydroelectric dams are present in Spain along the Spain-Portugal border and give Spain access to power produced at these hydroelectric facilities. Water supply has never been an issue in Spain; instead it is the uneven distribution of water. Water supply is said to be abundant in the north and generally considered OK to drink, whereas the south can often suffer from shortages (Practical Matters of Spain - Water, 2000 - 2012).

Communications (phone and internet) are readily available in most communities, especially the larger centers like Madrid or even Pamplona, and cell service is available within the Project Area boundaries. Internet services seem to be widespread and easily accessible.

5.4 INFRASTRUCTURE

The Project Area is bound to the north by highway A-21 which connects the Sierra del Perdón and Javier-Pintano areas. Many other major highways and road systems connect to the Project Area and appear to be a main mode of transportation inland. The roads travelled during the site visit were in very good condition and often double lane where traffic was heaviest. A series of train tracks are evident north of Sierra del Perdón and west of Javier-Pintano (Figure 5-2).

In close proximity to Pamplona and the historic mine workings, the Sierra del Perdón area is located in an area of existing infrastructure with readily accessible power lines (Figure 5-1) and gas pipelines. The former mine administrative building, processing plants and production storage sheds are still present in the area (Figure 5-3, Figure 5-4). A salt factory is still in operation near Sierra del Perdón, manufacturing consumable/industrial salt from the former mine tailings.

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Figure 5-3: Existing infrastructure within Sierra del Perdón Project Area extents.

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Figure 5-4: Storage shed in the Subiza decline area.

5.5 PHYSIOGRAPHY

With the second highest mean altitude in Europe of 660 m, Spain is considered to be quite mountainous (Travel Net). Although lacking very high peaks, mountain ranges run from east to west and southward at their extents. The Pyrenees Mountain Range separates Spain from the rest of Europe to the east with several other mountain ranges scattered throughout the country including the Sierra Nevada, Sierra de Gredos and Picos de Europa (Travel Net). Large amounts of coastline and beaches are present in Spain stretching some 3,144 km (Travel Net). Rivers and water bodies are also common in Spain, with many large natural lake bodies as well as some artificial reservoirs and dams.

In areas of drastic topography changes, (such as the hills in the western areas of the Sierra del Perdón area) may pose some limitations or challenges to surface infrastructure development in this area if it was required. There is however significant flat-lying areas in both the Perdon and Javier-Pintano areas for surface infrastructure development if the geology is suitable in these locations. Topography should also be consider during exploration program planning as it could add significant challenges and cost to seismic or drilling programs.

Highly varied flora is present in Spain, varying from artic vegetation in the higher altitudes to boreal vegetation common to ocean climates including green pastures, and deciduous trees and shrubs (Travel Net). Mediterranean vegetation is more common in the north including

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various types of pines and cedar trees (Travel Net). Figure 5-5 shows some of the landscape in and around the Javier area location.

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Figure 5-5: Javier area landscape and surroundings.

6.0 GEOLOGICAL SETTING AND MINERALIZATION

The potash deposits within the Spanish states of Navarra and Catalonia occur within separate yet genetically-related potash sub-basins created during the orogeny responsible for the Pyrenees Range during the Eocene (Figure 6-1). These sub-basins are situated within a roughly east-west trending foreland basin, the Ebro Basin, which parallels the present day Ebro Valley (Rios, 1968). During the Eocene-Oligocene, the Ebro Basin was connected to the world ocean to the east. Upon basin restriction, intense evaporation led to the accumulation of thick successions of marine evaporite sediments composed of marl, gypsum, halite, and potassium salts. Subsequent tectonism and salt deformation added complexity to the Ebro Basin evaporite geometry, eventually deforming the potash-bearing salt packages into broad anticlinal structures. These evaporite units were in turn overlain by a thick cover of OligoceneNeogene basin-fill sediments (Garcia del Cura, ND).

Later-stage tectonism affected the Ebro Basin such that the Catalonia area (eastern extents of the basin) remained a relatively stable sub-basin, while the Navarra district (western extents of the basin) became an allochthonous relict sub-basin transported by thrusting (Rios, 1968). The resulting basin architecture suggests that salt deformation was greater in the eastern portion of the basin, such that the potash seams were uplifted to shallow enough depths that they are presently exploited in areas situated near anticlinal axes in the Catalonia area (Garcia del Cura, ND).

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Figure 6-1: Regional geology of northern Spain and the Ebro Basin (internal KCL summary document).

Alternatively, in the west, the Navarra portion of these potash seams were historically exploited at the Subiza Mine, which extracted ore from synclines between the salt antiforms as erosion has removed much of the salt package from the antiform cores (Rios, 1968).

The stratigraphy of the potash-bearing evaporites of the Sierra del Perdón and Javier-Pintano areas is quite similar, and as such, can be described as having the following sequence, stratigraphically from bottom to top:

1) Deep basal marine marls representative of the lowest unit upon which the evaporite formations are present (Garcia del Cura, ND);
2) Laminated anhydrites, varying in thickness from 0.6 – 1.0 m (Garcia del Cura, ND);
3) A massive unit of thick, banded halite approximately 10 m thick (internal summary document supplied to North Rim states that this unit can range from 40 – 50 m thick in the Javier area and up to 130 m in the Pintano area);
4) A sylvinitic bed averaging 2 m in thickness formed of 18 thin sylvite beds ( 4 – 14 cm), alternating with halite beds (2 – 12 cm) and thin layers of clay within the halite ( 0 – 25 cm) (Garrett, 1996). According to Garrett, anhydrite and polyhalite are among the solids within the insoluble layers;
5) A thin halite layer lies on top of the sylvite package ( 0.7 – 1 m thick), but sometimes is absent all together (Garrett, 1996);

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6) An upper bed of thick carnallite, ranging from 10 – 12 m thick and composed of 8 thinner beds of carnallite that alternate with halite and thin clay layers (Garrett, 1996). According to an internal summary report, the Javier-Pintano area lacks this carnallitic unit (Section 9.2.2);
7) An upper halite unit composed of sequences of red mudstones (dm to m scale) and halite layers (cm scale) that are highly varied in thickness (Garcia del Cura, ND); and
8) An upper marl and mudstone layer with local anhydrite layers. This interval is usually up to 50 m in thickness.

This generalized stratigraphy is relatively similar to that of the Catalonia area, differentiated only by the thicknesses (Garcia del Cura, ND).

Upper conglomerates are present within the Navarra area stratigraphy and have been noted to hold large amounts of fluid and act as potential aquifers. This is discussed briefly in Sections 8.2.2 and 8.2.6.

6.1 DISTURBANCES AFFECTING GEOLOGY OF THE POTASH-BEARING MEMBERS

A disturbance that affects the normal characteristics of a potash-bearing salt horizon is considered to be an “anomaly” and thereby represents an area which is generally not suitable for mining. Salt anomalies can substantially reduce the thickness and grade of the potash mineralized zone resulting in ore of undesirable composition being processed. Salt anomalies also can indicate proximity to collapse structures (Warren, 2006) which, if water-bearing, may be disastrous to a potash mine.

A “Leach anomaly” describes a post-depositional situation where the sylvinite bed has been replaced by a halite mass through introduction of diagenetic sodium-saturated brine. Such anomalies are colloquially referred to as “salt horses”, a corruption of the term “salt horst” by miners. The potash beds within leach anomalies are often thinner than their unaltered equivalents (Warren 2006), although stratigraphic boundaries are commonly preserved (Halabura & Hardy, 2007).

A “washout anomaly” occurs where the sylvinite bed has been replaced or altered to a halite mass that consists of medium to large (0.5 to 1.0 cm) euhedral to subhedral halite crystals within a groundmass of smaller intermixed halite and clay insolubles. Clay intraclasts up to 1.0 cm long may be present, typically with a concentration of clay at the top and base of the altered zone. This type of disturbance is interpreted to be penecontemporaneous (i.e., occurring at the same time as deposition of the primary sylvinite, or shortly thereafter) and are thus local in nature.

The third type of anomaly is a “dissolution and collapse anomaly” formed where the evaporite formation has been removed by dissolution of salt and the resulting void is in-filled by material caved from above. This type of disturbance may be local (i.e., less than a square kilometer) or it

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may be regional (i.e., extending over a number of square kilometers) and may affect the entire thickness of the evaporite formation.

The three anomalies discussed above can be found outlined in Figure 6-2.

Within the Project Area other disturbances have most likely affected the potash-bearing members including faulting and other structural disturbances. The extent and severity of the faulting could be identified through cross-section development, modeling and seismic interpretation.

An important aspect of estimating the potash potential of an area is to identify portions of the ground that may contain disturbances which affect the potash-bearing strata. Generally, a combination of surface reflection seismic studies, both 2D and 3D, and careful examination of surface drill holes, underground (“in-seam”) geophysics, and geological observations of mining rooms is sufficient to identify potentially anomalous ground. The identification and delineation of deleterious anomalies must be taken into consideration during the exploration, mine planning and development phases of any potash project.

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Figure 6-2: Anomalies that affect potash-bearing members.

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6.2 OTHER CONSIDERATIONS

As with other potash deposits and early phase potash exploration programs, three geology related factors need to be considered when evaluating a potential resource:

Continuity of Potash;
Quantity of Potash; and
Quality of Potash.

Items such as high insoluble or high carnallite content are often considered for a sylvinite target potash project as part of Quality of Potash (reduced sylvinite grade).

The potash deposit may also be affected by geological phenomena that can have deleterious effects. These include, but are not limited to:

Depositional limitations and local paleotopography;
Salt flow, salt doming;
Post depositional tectonic structures and magmatic disruption;
Absence of material due to erosion; and
Leach, washout, and salt collapse anomalies.

The seismic data currently available for the Project Area has not been evaluated or reinterpreted at this point, therefore the possibility of the above mentioned anomalies still exists in the area. Further work such as regional 2D and possibly 3D seismic investigations, may help identify subsurface structures, anomalies, and potential potash sub-basins in other portions of the Project Area. These risks could be mitigated through the geological evaluation of available geological strip logs, geophysical wireline and assay data. Risks could also be mitigated by further understanding the experiences of the former mine with occurrences of anomalies, either through interviews with former employees or through still missing mine records. This is discussed in more detail within the report.

The Eocene stratigraphy of the Ebro Basin and the local processes affecting evaporite formation, potash precipitation, preservation, diagenesis and dissolution are topics of both historical and on-going research by numerous industry, academic, and government bodies. Detailed stratigraphic and structural correlations are beyond the scope of this report, but should be considered for follow up work to better understand the Project Area.

7.0 DEPOSIT TYPE

The word “potash” is a contraction of the term “muriate of potash” widely applied to naturally occurring potassium-bearing salts and their manufactured products. It is often expressed by the chemical formula “KCl” (“potassium chloride”). Although several salt species are classified as potash minerals, sylvite (“KCl”) is the natural form of the principal ore mineral; therefore the typical potash ore dominated by sylvite is called “sylvinite.” One tonne of chemically pure “KCl”

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contains an equivalent of 0.63 tonnes of “K2O” (potassium oxide), which permits comparison of the nutrient levels in various forms of potash. Specifying “K2O” is a common way to indicate the amount of potassium in ore, or fertilizer. Potash has historically been used in the manufacturing of many industrial and commercial materials including soaps, glass, and textiles. The most common use for potash is as a primary ingredient in the production of crop fertilizers around the world.

Potash deposits are a type of industrial mineral deposit that occurs primarily within sequences of salt-bearing evaporite sediments. Evaporite bodies are usually laterally extensive, layered and tabular in shape, although they can be structurally deformed and folded to varying degrees syn/post burial. As they share a common formative genesis, potash mineral accumulations are hosted within the bedded halite layers of these evaporitic sequences, and are typically confined to relatively narrow stratiform intervals within the depositional sequence.

The extreme solubility of potash salts results in their formation in highly restricted settings, precipitating towards the end of the carbonate-evaporite depositional series (Warren, 2006). Potash salts are precipitated from saturated potassic brines as chemical sediments deposited at, or very near, the depositional surface as the basin approaches desiccation. Their geologic provenance therefore dictates that, excluding deformation, erosion, and other postdepositional destructive processes, nearly all potash deposits will exhibit some degree of lateral continuity. Potash grade may vary greatly between deposits. As described by Warren (2006), two controls (or combination of) to determine potash grade are currently proposed:

1) Sylvinite and carnallite are precipitated from solution at or within a few meters of the depositional surface by the actions of brine reflux and brine cooling. Potash grade and mineralogical character are directly related to and controlled by original brine chemistry as well as the geological mechanisms affecting the deposit at the time of deposition; or
2) As the absence of primary sylvite in modern day analogues suggests, potash grade is controlled by the post-depositional alteration and replacement of primary carnallitebearing sediments to sylvite. The character of the deposit continually evolves while it is in contact with diagenetic fluids.

The authors propose that potash deposits can be of either “simple” or “complex” mineralogical character. For the purposes of this report, a “simple” potash is considered to be any deposit characterized by “sylvinite” dominated ore with variable concentrations of impurities including halite, carnallite (KMgCl3•6H2O), and insolubles. The potash deposits underlying the plains of Saskatchewan, Canada can also be considered a mineralogically “simple” potash deposit. Deposits with ores bearing mixtures of various bittern potash salts and other exotic

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contaminant species are considered to be of a “complex” nature. The potash deposits mined at Carlsbad, New Mexico contain sylvite dominated ores with minor langbeinite (2MgSO4•K2SO4), polyhalite (2CaSO4•MgSO4•K2SO4•2H2O) and variable proportions of insoluble contaminants, and can therefore be considered an example of a “complex” deposit. Table 7-1 from Warren (2006) provides a summary of the various potash minerals and ores.

The potash deposits underlying Highfield’s Project Area is characterized potentially by a predominantly “simple” deposit mineralogy dominated by various potash salts, predominantly halite and carnallite, with accessory insoluble such as clays, muds, anhydrite and potentially polyhalite (Section 6.0).

Table 7-1: Summary of potassium salts and their composition.

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Most of the world’s salt and potash resources are extracted from these types of deposits with the majority of Canadian deposits employing conventional mining methods (Warren, 2006). In situations where the deposit cannot be conventionally mined due to depth, solution mining may be employed. Depth is not the only factor; sub-surface temperature is also a consideration.

It should be noted that the presence of magnesium (“Mg”) is typically unfavorable in current technology flotation potash plants as concentrations over 0.25 % Mg may decrease the efficiency of the plant and additional processing may be required. In Saskatchewan current processing plant technology for solution mining can handle up to 0.51 % Mg, or 5.84 % carnallite (2.0 % MgCl2), in the mill feed (Stirrett, 2012). The presence of high percentages of carnallite is unfavorable in conventional underground mine workings, as it may present stability issues due to the mineral’s affinity for moisture and natural deliquescent nature and lower compressive strength. Conventional underground mines in Saskatchewan will avoid areas that have higher than 8.0 to 10.0% carnallite (3.43% MgCl2) due to mining instability issues (Stirrett, 2012). This is partly due to the depths of the conventional mines in Saskatchewan and the resulting rock pressures. The above quoted numbers may change in other deposits throughout the world as these are typical of Saskatchewan deposits.

Current data sources indicate that the depth of mining in the Sierra del Perdón area is shallower and that there is a history of some carnallite production from conventional mining in the A and E blocks. It is recommended that the history of carnallite mining and depths to the mining level be reviewed in more detail for the Sierra del Perdón area to better assess the potential mining methods.

Regardless of the unfavorable presence of carnallite many companies worldwide, more recently in Saskatchewan have expressed interest in solution mining carnallite to produce fertilizer grade potash and other by-products through in-depth engineering processes. Carnallite is currently produced by DEUSA International in North Thuringia, Germany through solution mining processes (PK Potash, November/December 2005). Other companies worldwide are expressing interest in carnallite production in location such as, the Congo (MagMinerals Inc., Ontario Canada), Iran (Iran Minerals Production & Supply Co. (IMPASCO)) and Saskatchewan (Karnalyte Resources Inc.). Properties in Laos are also in the mining consideration phase with the intent to mine carnallite in conjunction with sylvinite.

These types of mining procedures would have to be reviewed fully by qualified engineering firms to determine the possibility of carnallite mining within the Project Area. As noted above, the history of conventional mining in the Sierra del Perdón area could also be researched and evaluated further. In terms of a JORC Code Resource Calculation the mining method and preliminary mining parameters will need to be determined before a potential resource could advance in classification. It is recommended that the preferred mining method be chosen early

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in the project development, prior to completion of exploration efforts so that data collection during exploration work can maximize its usefulness for mine design at a later stage.

8.0 SIERRA DEL PERDÓN

Sections 8.0 to 8.3 are summaries complied from the North Rim site visit and data review referring to grades used to prepare the Historical Resource and Reserve Calculations for the Project Area. A large portion of the historical documentation has not been included within this section. There is not sufficient information at this time to clearly disclose these estimates in accordance with the JORC Code. Additional work will be necessary to confirm these estimates.

The Sierra del Perdón was historically an operating mine until its closure in 1997. The mine began production in 1963 initially only long wall mining sylvite, but later was followed by the mining of both sylvite and carnallite resources in various blocks (Garrett, 1996).

The following section outlines the initial review process of the available data performed by North Rim. Figure 8-1 completed in 1982 gives a good overview of the different blocks discussed within this section as well as providing general drill hole and some shaft locations. It is important to note that Figure 8-1 does not correspond to all sections discussed herein, but is simply for visual aid and general understanding only. Table 8-1 summarizes the correlation between block letter and block name as listed in the internal 1977 document. The Guendalain area which is reference throughout some documents has not been listed in Table 8-1, but is listed with the Esparza block in the 1963 internal report, so for the purposes of this report will be denoted as part of Block A.

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Figure 8-1: 1982 Reserve block map meant to illustrate general block locations.

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Table 8-1: 1977 Block summary.

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8.1 DATA QUALITY

The majority of historical data for the Sierra del Perdón mining area was obtained from government libraries and databases in Spain from which digital or hard copy documents could be obtained. Data for the Sierra del Perdón mining area was readily available and collected by KCL representatives. These historical documents and the some of their contents therein have been reviewed for accuracy, reasonableness and compliance with JORC Code standards for the purposes of this report. A variable amount of data was available in terms of quality and quantity, although a significant amount of data appears to be missing (shown by Table 8-3). To the best of North Rim’s knowledge, no core is available within the Sierra del Perdón area.

Historical mining, production, seismic and geological reports and maps were available for the Sierra del Perdón area, as well as general maps outlining drill hole, decline and mine shaft locations. Geological strip logs are available for the mining area, as well as the full suite of production records; however, this data was not yet available to the authors prior to the completion of this report. Often, there are years where no information is available, leaving gaps in the “mining story” and uncertainties in what was occurring during those years. Table 8-2 outlines the available data within the mining area by year, easily identifying areas of known missing or incomplete data collection.

In addition to the “known” missing data, there is still other data that is assumed to have existed at one time that may or may not still exist. The “unidentified data that is assumed to exist” may include;

Mine data such as mine elevations, mine surveys and final mine layouts;
Further information on mining methods and mine experience;
More information from formal mine personnel (i.e. transcripts of mine personnel interviews); and
Records of mine reclamation/mine closure efforts.

It is recommended that efforts be made to collect the “known” missing data, and the “unidentified, assumed missing data” as part of the path forward.

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Table 8-2: Available data by year for the Sierra del Perdón mining area.


Year		Description

SEI		SMIC
1979	Mini Sosie Map- Seismic
1982	Seismic Map showing Evaporite goes with 1983 West Rim Seismic S ª Perdon Deposit TOMO II).
1983	Seismic Report
1985	Seismic Report/Geologyand exploration details
1985	Seismic Report (seismic slices as well and wireline log) X, Y coordinates for the exploration hole used for seismic tie (drilled in 1983, pg. 30)


RESERVES
1963	Report for original Reserves (partially translated document)/ Cross- Sections of the Areas(Plano 352/1)/Geological Map
1967	MiningLevel Plans(Beriain and Guendolain Areas)
1970	Report of some drill holes and average grades of blocks (partially translated document)
1973	Reserve Calculation Spreadsheet (goes with 1963 Report?)
1974	Carnallite Reserve Calculation/Chart/Reserve Map/Stratigraphic Chart (partiallytranslated document)
1977	Gives Reserve Calculations/Stratigraphic Column (partially translated document)/Isopach Mapand Block Map
1980	Geological Isopach Map
1982	Geology Books outlining the numbers found in the KCL brokerage report(translated document)/Reserve Area Map (M-155-82)
1983	Geological Report mostlyon E/F Reserve Blocks
1984	Guendolain-Undiano Reserve Map/ Mining Reserve Block Map/Subiza Exploitation Area maps
1985	Regional Geology Report/Geochemistry/Some Seismic (TOMO I), Petrological/Geochemical Report\Geological Columns (northern blocks) (TOMO III)/Undiano-Beriain MiningLevel Map
1987	MiningMapand Projected Mining
1988	Subiza GeochemistryReport/Lab Specifics(should be reviewed)
1990	MiningMapand Projected Mining
1993	Subiza Review of Production (Partially translated)/Coloured K2O Map/Pillar Design Map
2012	Summary that Pedro Made for us of Reserves etc…. (from the production reports)
	Production Records: 1972, 1974, 1984, 1985, 1986, 1988, 1990, 1991, 1997, and 1998 (only pages showing production, not full document)

NO DATE ASSOCIATED WITH INFORMATION
	Isopach Maps of the MiningArea x 3
	Cross-Section Maps
	Structural Geology/Seismic maps
	Annual Report
	Subiza Geophysical Report

8.1.1 SEISMIC DATA

Seismic data was limited ranging from 1979 to 1985 with years missing in between. No data more recent than 1985 was available. Due to time constraints the majority of the seismic data was not fully reviewed and was more or less skimmed for content and useful maps. Figure 8-2 outlines the seismic lines that have been shot within the Sierra del Perdón area as well as relative locations of drill holes. The majority of seismic lines along the western half of the map (illustrated in green in Figure 8-2) are available in hard copy for re-interpretation; however, the majority of slices covering the mining area are not available at this time. Conversations with RPS Boyd PetroSearch out of Calgary, Alberta Canada have been initiated; they would be

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available to review and re-interpret the seismic documents if required by the client. No digital or raw seismic data is available; therefore interpretations would have to be made off hard copies (example shown in Figure 8-3). Boyd’s initial opinion of the available data is as follows (email communication on July 26[th] , 2012):

“If we are able to get a hold of the original paper sections, or have the original versions scanned at a higher resolution, then we will be able to proceed without issue. The PDF image received is of insufficient quality to have digitized.

If there is a way to have the images scanned at a higher resolution, then it will not be a problem to move forward with having the historic data converted to SEGY data that can be loaded into a workstation. In addition to PDF’s, high resolution TIFF files of the scanned sections may be a requirement.

The data looks to be of decent quality and resolution. Once the historic data is digitized, I am confident that we can provide an updated interpretation. Of course, the quality of the geological correlation will be tied to the availability of geophysical logs.”

The review of seismic data is a necessary step in the review and verification of geology towards reaching the stage of a JORC Resource. Seismic re-interpretation can confirm the previous interpretations of structure in the area, review potential anomalous areas and give a general sense of continuity and quality of the deposit. It is recommended that the high resolution scanning, conversion to SEGY data, reprocessing and re-interpretation of the seismic data be completed as part of the seismic data evaluation. It is also recommended that the efforts be made to collect the missing seismic data and complete the same evaluation of this data.

8.1.2 HISTORICAL REPORTS

More extensive data is available regarding mine production, Reserve Calculations, geochemistry, geology and general mine reports. There are still several years of missing data. The corresponding figures/maps for reports are not always present and some maps do not appear to have a corresponding report. A lack of correlation between reports is quite evident as most reports will list differing Reserve numbers and where explained, different assumptions, parameters and deduction coefficients, thus making it extremely difficult to compare the many Reserve Calculations. Of significance is that none of the Reserve Calculations fully list or explain assumptions and methodology, or provide the background raw data that was used in the calculations. Without this information the historic Reserve Calculations cannot be recalculated and thus cannot be verified at this time. Specifically, North Rim was not able to view any assay data or downhole geophysical logs. Geological strip logs are available for some of the drill holes within the mine area; however, they have not been supplied to date. North Rim understands that no original assay or geophysical wireline data is available.

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Figure 8-2: Available seismic data (green) in relation to completed seismic lines and blocks.

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Highfield Resources
2012 Property Review, Spain
August 30 [th] , 2012
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Figure 8-3: Example of a hard copy seismic slice for line P-4.

Records from the mine production provide useful information about the quality of the deposit and its mineability. In terms of defining a JORC Resource the production records provide confidence in the ability to mine the deposit in the area, particularly in the existing mining blocks. At this time it is unclear how the mining blocks were historically selected or determined. Further information on the geology of the deposit (through the seismic review) is required before it can be concluded that mineability of shallower mining blocks (already mined) correlates to the mineability of the remaining blocks, that are presumably cut off from the historic mining blocks by faults. Further work also needs to be done to assess the historic production records. For example, sylvite and carnallite occurred at the mine in some of the mining blocks. Early production records do not appear to separate out the production based on K2O from sylvite or from carnallite. Early production records also do not always separate out production from different mining blocks. At present not all of the production records have been collected. It is recommended that the data compilation be completed and a full record of production be assessed. This would be predominantly useful combined with any information that can be collected by interviewing former mine personnel. The more that is understood about the former mine operations and experience, the more useful and meaningful the production records become. Table 8-3 lists the years of data that were made available for this review process. Note the missing years.

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Table 8-3: Available seismic, report and Reserve data.

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8.1.3 GEOMATICS DATA QUALITY

Available maps displayed with UTM coordinates were easily georeferenced and used by North Rim’s mapping department. Even though the maps appeared to georeference properly in space, some portions of the information did not always appear to line up accurately, such as the town and city locations. Figure 8-4 outlines this discrepancy shown between the red and green town outlines, with the true town location shown by the google map image in the background (denoted by blue arrows). Town locations do not appear to fit well between historical maps or when overlaid with independent maps (i.e. Google images). Disagreement between the red and green triangular outline illustrates the variation in the area listed for the Subiza (B Block – see Table 8-1) in 1982 and 1984.

UTM WGS 84 was used as the projection for georeferencing the towns and maps. Since the discrepancies in the towns do not appear to be shifted consistently one direction or another it does not appear to be a datum problem. If there was a problem with the datum, all of the locations or reference points (such as the towns) would be consistently out a set number of meters in the same direction, which is not the case here. The discrepancies are most likely due to inaccurately referenced points on the historical maps.

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Figure 8-4: Georeferencing and area discrepancies. Blue arrows denote actual location of towns.

Other mine area maps were referenced on a local grid system which could not be georeferenced, whereas some other maps had no coordinate system at all.

Drill hole locations were georeferenced and they appeared to overly very well between different historical maps. Unfortunately, no drill hole collar locations are available for the mine area for further verification.

It is recommended that each historic map’s accuracy should be evaluated individually and that all historic maps be compiled into one central data storage location such as a GeoDatabase. All historical maps and schematics could be digitized, geospatially referenced, and compiled into a digital computer GIS project for ease of future use and reference. Compilation of such data into consumer software such as ArcGIS would be beneficial as it would provide a centralized point of access for technical information and promote ease of data sharing amongst peers. A GeoDatabase (“.gdb”) could be used to organize and store the various data layers, which could then be output in a variety of mapping formats.

8.2 RESERVE CALCULATIONS/GRADE SUMMARY

Reserve Calculations and grades were historically stated for the mining area for several different years including; 1960, 1963, 1973, 1974, 1977, 1982 and 1993. Production records are available for the mine; however, the full review of these documents did not fit within the timeline for the report. This section will summarize general parameters used for the

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calculations and the grade summaries outlined in those documents. All of Reserve Calculations for the Sierra del Perdón area are stated as K2O values but:

Some are listed as sylvite Reserves;
Some are listed as carnallite Reserves;
Some are unspecified (unsure if it is a sylvite or carnallite Reserve or combined);
Reserves are listed without any associated grade;
Different cut-offs, assumptions and parameters are used;
Reserve values are stated for certain blocks and areas and can be exclusive of other blocks; and
Reserve values are reported differently (in-situ, exploitable, salable).

Many of the Reserve calculations are listed without K2O values, which is not standard as Reserve Calculations should be correlated to an assay grade.

The above non-compliant issues made it difficult to compare and validate the given Reserve values. Based on this no tonnages will be disclosed in the report.

8.2.1 1960 RESERVE CALCULATION

No assumptions were listed for these calculations; therefore, North Rim could not confirm these numbers.

8.2.2 1963 RESERVE CALCULATION

The calculation completed in 1963 was one of the more thorough Reserve Calculations for the area. This appears to be the first report to release Reserve numbers and list assumptions and general parameters for the Sierra del Perdón area. A Reserve Calculation for both sylvite and carnallite was completed from sylvite (1.95 m thick) and from carnallite (3.0 m thick). Sylvite was calculated for what appears to be the A, B and E Blocks (Guendalain area considered part of Block A – see Table 8-1). Deductions were listed in the 1963 report and included the following parameters for a salable product:

200 m on either side of a fault;
100 m on either side of a fold;
300 m at the edges of the deposit;
180 m radius around mine shafts; and
100 m radius around drill holes.

The density and the thickness are both listed for sylvite and carnallite as well:

Sylvite density = 2.0 (t/m[3] ), thickness = 1.95 m; and
Carnallite density = 1.9 (t/m[3] ), thickness = 3.0 m.

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No map was included with this report, therefore without an area there is no method to compare the Reserves and apply the assumptions.

Reference to water rich conglomerates is discussed in some detail which would be in agreement with statements made in the 1977 report (Section 8.2.6), also suggestive of concerns with overlying aquifers. The presence and nature of the overlying aquifers should be examined during any further exploration work and be presented as a potential mine risk that should be evaluated and considered during mine design and planning for conventional mining methods in the future.

8.2.3 1970 GRADE ESTIMATION

In 1970 no Reserve Calculation was completed, instead sylvite and carnallite grades were stated for both the Subiza (Block B) and Guendalain area (Block A). The Subiza block is recorded from sylvite at an average thickness of 7.0 m. The literature (Section 6.0) suggests that the sylvite interval is only approximately 2 m thick, making this an anomalously thick zone, if the records are accurate. This will require confirmation and follow up work.

8.2.4 1973 RESERVE CALCULATION

A Reserve Calculation summary table, dated 1973, was made available to North Rim; however, there is no supporting report material or maps to support or compare the numbers with. The historical table lists the A, B and C Blocks and has separated the C Block into five sub-blocks, C1 – C5.

Since only the surface density is listed at the bottom of the historic table, the thickness can be inferred if the general density of sylvinite (2.0 t/m[3] ) and carnallite (1.9 t/m[3] ) are used (quoted values from 1963 report). North Rim was able to back calculate how the historical table was prepared, but there is no method of confirming the numbers without supporting maps or original data, nor any raw data to confirm grades or thicknesses against.

A security coefficient (translation from original document) was also applied in the historical calculations, which North Rim has no information on. There was no information to support the development of this coefficient or any of the parameters or assumptions that may have been used.

8.2.5 1974 RESERVE CALCULATION

Carnallite Reserves were stated and re-calculated in 1974 using different parameters from those identified in 1963. No mention of deductions or other parameters were discussed.

8.2.6 1977 RESERVE CALCULATION

A fairly detailed Reserve Calculation was completed in 1977, but it is not specified if the K2O values are from sylvite, carnallite or a combination of both. In 1977 only the A, C and D Blocks were calculated and considered to be areas in which they could be mined using room and pillar.

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Block B was excluded due to interpreted inflow risks from sandstone aquifers and was considered a Reserve area, but according to the 1977 report was not included in the five year plan going forward. Block F was also excluded as they did not have any information regarding the presence of potassium within that area. Block B Reserves were not calculated and was listed as being 5.0 – 6.5 m thick. Similarly to the comments made in Section 8.2.3, this seems anomalously thick and should be followed up.

The following deductions were considered for the 1977 calculation and are shown in comparison to those included in the 1963 report:

300 m from the edge of the deposit (same as 1963);
300 m on either side of a fault (100 m greater than 1963);
50 m radius around drill holes (50 m smaller than 1963);
Folds/mine shaft deductions not listed;
Surface density of 4.0 Tm/m[2 ] (unless Block d2, then 5.0 Tm/m[2] is used);
It is a sedimentary deposit; and
Only one layer is exploited.

In terms of a JORC Resource, the 1977 Reserve Calculation is not currently considered useful. The use of results from one high grade well for defining the Reserves in the relatively large area of Block B is also not appropriate according to current industry level standards.

8.2.7 1982/1987 RESERVE ESTIMATION

In 1982 and 1987 two books list Reserve Calculations which are for the Sierra del Perdón mining area and appear to be the same as those listed in the KCL Brokerage Report. Both of these books have been referenced within this report. The 1987 book by Marina also states a Reserve Calculation for the Subiza area (Block B (from 1986 production)) and listed a sylvite grade of 13% K2O.

No assumptions, parameters or deductions are listed for these two years; the Reserves are simply stated with the associated grades. North Rim has no way of confirming or reproducing these numbers and it simply states total Reserves, not indicating what blocks may have been included or potentially excluded.

8.2.8 1993 GRADE ESTIMATION

The 1993 annual report issued by POSUSA was reviewed by North Rim. This company appeared to have been producing primarily only the Subiza area for the periods that were reported for. Production grades for the Subiza area were reported from 1986 to 1993 and range from 13.89 – 15.52% K2O with neither production from sylvite or carnallite specified. The grades are linked to the salable and producible price of K2O; therefore, it is assumed the K2O grade may also be listed as salable or producible.

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Stated within the contents of the report are negative forecasts for 1994 based on the world price of potash and the increased average cost of manufacturing. The report also suggests that there may be a higher content of magnesium chloride (assumed from carnallite) which would substantially decrease the yield from production of potassium chloride (assumed from sylvite).

Similar to other reports, this report provides interesting information, but insufficient background information to be of use in an independent verification required for inclusion in a JORC Resource.

8.2.9 PRODUCTION RECORDS

Production records are available for the Sierra del Perdón mining area; however, all of the original data was not obtained by North Rim prior to completion of this report. Some select data from 1972 – 1997 production reports (excluding 1976 – 1982 and 1992 – 1995) was made available in the form of summary charts. North Rim would require additional time in order to review all of the production data and ensure that it reconciles properly in the summary chart supplied.

From the brief review of the production reports available the following conclusions were drawn:

Production data is not always separated by block, but instead is lumped by year. This makes it extremely difficult to confirm numbers shown in Reserve Calculations for separate blocks in various years. It may be possible to complete this exercise for Block B only;
Different dilution factors appear to have been used and need to be considered when reviewing the listed grades;
No plant/processing efficiencies are provided and must be inferred in order to calculate in-situ grades from the stated post-production product grades; and
Some production years list dilution factors, whereas other years do not.

Some maps for the Subiza area (Block B) are available showing the areas of the mine that have been mined out in 1987 and 1990 which may be useful for comparing the actual production numbers. Time did not allow for the comparison of the data and further investigations need to be made with regards to the production data.

The production records are only useful for inferring resources in areas where the production came from, unless further information can be provided that proves that the geology, mining methods or parameters in one block can be repeated in other blocks. As previously stated for most of the mine blocks, insufficient data is available to confirm or define geology and mining parameters. The exception is that production records may be useful for supporting overall confidence in the mineability of the remaining Block B. It is recommended that attempts be

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made to reconcile mine plan drawings and production records as a means of trying to calculate a potential inferred resource number for the unmined Block B.

8.3 GRADE SUMMARY AND COMPARISON

Summary tables of K2O grades are shown in Table 8-4 in order to compare the different years.

Outlined in Table 8-4 are the average K2O grades listed for various blocks and mineralogies (sylvite or carnallite). There is no real method of qualifying the listed grades other than to compare them between years, and actual production numbers. The production numbers listed in 1993 for the Subiza area are significantly lower than those listed for the Subiza area in 1963, 1970 and 1977.

Table 8-4: Summary of K2O grades and mineralogy.

		Block Average K2O Grade(%) Mineral Specification A 18.00 Sylvite A(Guendalain) 16.25 Sylvite E 18.00 Sylvite B 18.00 Sylvite B 28.40 Sylvite B 28.40 Sylvite B 13.00 Sylvite B 14.38 Unspecified B 14.59 Unspecified B 15.52 Unspecified B 15.02 Unspecified B 14.51 Unspecified B 14.02 Unspecified B 13.89 Unspecified B 14.13 Unspecified Assumed All 23.00 Sylvite Assumed All 21.00 Carnallite Assumed All 23.00 Sylvite Assumed All 21.00 Carnallite Assumed All 12.60 Carnallite	Block Average K2O Grade(%) Mineral Specification A 18.00 Sylvite A(Guendalain) 16.25 Sylvite E 18.00 Sylvite B 18.00 Sylvite B 28.40 Sylvite B 28.40 Sylvite B 13.00 Sylvite B 14.38 Unspecified B 14.59 Unspecified B 15.52 Unspecified B 15.02 Unspecified B 14.51 Unspecified B 14.02 Unspecified B 13.89 Unspecified B 14.13 Unspecified Assumed All 23.00 Sylvite Assumed All 21.00 Carnallite Assumed All 23.00 Sylvite Assumed All 21.00 Carnallite Assumed All 12.60 Carnallite	Block Average K2O Grade(%) Mineral Specification A 18.00 Sylvite A(Guendalain) 16.25 Sylvite E 18.00 Sylvite B 18.00 Sylvite B 28.40 Sylvite B 28.40 Sylvite B 13.00 Sylvite B 14.38 Unspecified B 14.59 Unspecified B 15.52 Unspecified B 15.02 Unspecified B 14.51 Unspecified B 14.02 Unspecified B 13.89 Unspecified B 14.13 Unspecified Assumed All 23.00 Sylvite Assumed All 21.00 Carnallite Assumed All 23.00 Sylvite Assumed All 21.00 Carnallite Assumed All 12.60 Carnallite
Block	Year	Block	Average K2O Grade(%)	Mineral Specification
A	1963	A	18.00	Sylvite
	1970	A(Guendalain)	16.25	Sylvite
E	1963	E	18.00	Sylvite
B	1963	B	18.00	Sylvite
	1970	B	28.40	Sylvite
	1977	B	28.40	Sylvite
	1987	B	13.00	Sylvite
	1993	B	14.38	Unspecified
		B	14.59	Unspecified
		B	15.52	Unspecified
		B	15.02	Unspecified
		B	14.51	Unspecified
		B	14.02	Unspecified
		B	13.89	Unspecified
		B	14.13	Unspecified
All	1982	Assumed All	23.00	Sylvite
		Assumed All	21.00	Carnallite
	1987	Assumed All	23.00	Sylvite
		Assumed All	21.00	Carnallite
	1963	Assumed All	12.60	Carnallite

As the production data has not been reconciled to date it is difficult to comment on the value of the grades for the mining blocks and areas. Data appears to suggest that there is variability in grades and without assay data or geophysical wireline data, confidence is reduced in the values listed. Production data for blocks other than Block B will be able to supply an average for the blocks (as the production numbers are combined, if mined together); however, individual block grades will likely not be able to be confirmed.

These assumptions and grades have not been confirmed by North Rim and are only included as findings and summaries of the historical documentation. The historical estimates and reserves are currently not reported in accordance with the JORC Code so have not been included within this report. Follow up work would need to be completed in order to bring the historical information up to compliance.

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9.0 JAVIER-PINTANO

Javier-Pintano is an exploration area east of the old mine workings with historical drilling and seismic completed in the area. The following section outlines the initial review process of the available data performed by North Rim and the attempt to re-model the Datamine file.

Figure 9-1 displays the general drill hole locations within the tenements; however, there are additional drill holes present outside the property extents, that were primarily drilled for petroleum exploration and have not been included within this report. Sixteen drill holes are present in Figure 9-1, but one just north of JP-3 is not named and therefore was not considered. The Javier area is considered to be the western extents of the property, and the Pintano area is along the eastern portion.

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Figure 9-1: Drill hole location map for Javier-Pintano area (modified from internal summary report).

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9.1 DATA QUALITY

The majority of historical data for the Javier-Pintano area was primarily in the form of a digital database. Data for the Javier-Pintano area was readily available and collected by KCL representatives. These historical documents and the some of their contents therein have been reviewed for accuracy, reasonableness and compliance with JORC Code standards for the purposes of this report. Some drill core completed in the Javier-Pintano area are available for inspection in Cordova, Spain, but an appointment has to be booked ahead of time for viewing, thus North Rim did not review any core.

The data supplied to North Rim for the area was in the form of a digital database called Datamine. The following exports were taken from Datamine and imported into North Rim’s modelling software Vulcan in an attempt to re-model and understand the parameters and assumptions used for the historical Resource Calculation:

Licence area (dxf files)
Collar, lithology and assay tables
Seismic (dxf files)
Indicated & Inferred Polygons (dxf files)

An excel spreadsheet was supplied to North Rim containing similar data to the Datamine files, but also included brief geological interpretations, and drilling methods (tricone vs. coring) for some of the drill holes. All drill holes used for the historical modelling (shown in Figure 9-2) have assay data available, which was used by North Rim in their re-modelling process (Section 9.3). Two drill holes included in the assay data, JP-3D and PP2-B have not been used in the remodelling as there was no collar locations available (discussed further in Section 9.2.3).

Geophysical wireline logs and core photos were made available to North Rim, but due to time constraints the core photos were not reviewed. The wireline data was briefly looked at for correlative purposes for some of the drill holes. A geological report for the Javier-Pintano area was available and deals primarily with structural geology and regional mappings. This report has not yet been translated into English. It is recommended that the original Spanish reports be translated in English for future use. Several other geological reports, some with geological strip logs and seismic were also available for review, but again, due to time constraints, the majority of the data could only be reviewed briefly.

No raw or supporting documentation for seismic data was available for cross reference within the Project Area. Assay data was available; however it is unknown if the documentation is original or reformatted. Overall, there seemed a fairly good correlation between the various data sources and sets; however, there are some issues with missing or poor quality data within for the Javier-Pintano area (discussed further in Section 9.2.1).

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9.2 HISTORICAL RESOURCE CALCULATION

As previously stated the focus of this study was to assess data quality and methodologies used in the historic Resource Calculation for the Javier-Pintano area. The historical calculations have not been confirmed or approved by North Rim and should not be considered compliant with JORC Code standards. There is also no guarantee that all or any of the historic resource reviewed and discussed will convert to a JORC Resource in the future.

The historical Resource Calculation for the Javier-Pintano area was completed in Datamine by KCL representatives to include both an Inferred and Indicated Resource. A polygonal method was used with a radius of influence of 500 m for Indicated and 700 m for Inferred. The Resource was calculated using 10 different drill holes as shown in Figure 9-2, as some of the outlying holes did not intersect potassium minerals.

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Figure 9-2: Historical Resource calculation (modified from internal documents). Green denotes Inferred and red denotes Indicated historic Resources. Note: Drill hole UDL overlies drill hole JP-4.

Figure 9-3 outlines a discrepancy noted by North Rim during the review. After the buffers were historically applied to complete the calculation, space between the polygons was included in the area. The red infill shows the area included for the Indicated buffers (blue polygons) and the green infill shows the area included for the Inferred buffers (light yellow polygons). This space would add additional resource that normally would not be included. It is recommended that the polygons be reduced to respect a true radial pattern for generation of ROI polygons.

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Figure 9-3: Infill portion of Resource buffers.

The historical assumptions and parameters have not been confirmed by North Rim and are only included as findings and summaries of the historical documentation. The historical estimates and reserves are currently not reported in accordance with the JORC Code. Follow up work would need to be completed in order to bring the historical information up to compliance.

9.2.1 DATAMINE/GEOLOGICAL QUALITY

The following things were noted within the Datamine data:

There was no deviation data collected for any of the wells;
Good correspondence in lithological data between the various sources;
Good correspondence between assay data and wireline logs;
The collars of the drill holes could not be checked against the topography, as there were import problems with the supplied DEM/topography (not seen as critical for this review); and
The seismic data did import, but it seemed to be of low quality and did not appear to conform very well to the lithologies provided. The KCL English summary report also came to the conclusion that the Seismic interpretations were of poor quality and requires re-processing and new interpretations.

The data exported from Datamine was imported into a Vulcan Project. Potash seams were picked by North Rim directly from the supplied assays, and checked against the picks made previously for the historical Resource Calculation (described further in the following sections).

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9.2.2 ASSAY DATA QUALITY

From the drill holes reviewed it appears that the downhole geophysical logs correlate very well with the assay data. A random sample comparison was completed for drill hole JP-1 as shown in Figure 9-4. More time would need to be allotted to review all the wireline data, and confirm all drill hole assay information (i.e. complete histograms for all drill holes as a check to ensure assay data appears reasonable and accurate).

The sample intervals for the assays seem reasonable (<30 cm). Thirty centimeters is typically used for a maximum sample length for potash in order to assure samples aren’t diluted and confidence is maintained in the interval mineralogy.

Some concerns arose when reviewing the assay data and the following was noted:

Some drill holes such as JP-3 and PP-2 did not complete enough shoulder sampling on either side of the mineralization. Shoulder sampling is an important procedure to ensure that all mineralization is captured and helps identify the exact extents of seams;
Assays may need to be depth shifted slightly to correlate with the downhole geophysical logs, if, for instance, the drill core was not properly depth corrected; and
Photographs from core viewed during the July 18th, 2012 meeting indicates that assay sampling may have been completed by cutting a small groove on the side of the core. Typical sampling technique for potash is to sample either half or whole core samples in order to avoid “nugget” effects of large sylvite or halite crystals.

Assays for Javier-Pintano list a value for MgCl2 which can be converted to carnallite easily by multiplying by 2.91. Where present, the MgCl2 values are below 5% (14.6% carnallite) and are found as thin interbeds and local packages up to ~1.5 m. From a brief overview it would appear that the carnallite content within the exploration area is less pervasive than discussed in the regional geology of the Sierra del Perdón area, but further investigations may be necessary.

Following the observation that the assay sampling may have been completed using small cuts on the side of the core rather than ¼ or ½ core sampling the decision was made to test for the possibilities of “nugget” effects using down-hole variogram techniques. Graphs outlining the vertical variance of the Javier and Pintano areas (separately graphed) were completed using the available assay data in order to get a sense of its quality and distribution. As these types of graphs can be used for various types of interpretations, they are simply meant as a visual aid and are therefore only briefly discussed. The data used for the modeling was confined to the historically selected potash zones (Section 9.4) and only percent K2O was considered. Interbed salts were thus included, but floor and roof salts were excluded.

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Figure 9-4: Correlation for JP-1 between wireline logs and assay histogram.

Shown in Figure 9-5, the variogram for the Pintano area does not yield any useful results, which can be attributed to the lack of assay data available for the area. The results are inconclusive and more assay data would be needed in order to successfully complete the variogram. It is recommended that Highfield seek permission for re-sampling of the core for confirmation sampling.

The data for the Javier area yields a very useful vertical variogram as shown in Figure 9-6. The modeled range of this graph is 4.0 m. The modeled range indicates that the value of an unknown sample could be calculated from samples within a 4.0 m radius of its own position. A nugget effect of 0.25 was achieved, which is relatively low given the complexity of the deposit. The nugget effect is defined to be the expected variance between adjacent samples, indicating the amount of variability from one sample to the next. The Javier data sets may suggest that the distribution of potash is quite predictable considering the vertical dimension only .

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Figure 9-5: Pintano area assay data variance graph.

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Figure 9-6: Javier area assay data variance graph.

9.2.3 DRILL HOLES WITHOUT COLLAR LOCATIONS

All drill holes are considered to be vertical, as no downhole surveys were given for the drill holes, stating otherwise. It is unknown if the assays or geophysical wireline data are reading

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true vertical depth (90° from surface to bottom of hole) or measured depth (true length of the borehole, which if often not 90°). This can skew the data slightly, making the mineralized intersections appear thicker if they are drilled at an inclined angle. If drill holes are shallow enough and are meant to be drilled vertically there shouldn’t be a lot of deviation in the drill hole; however, it should still be considered as an area of reduced confidence that requires some follow up.

Two drill holes, JP-3D and PP-2B are listed in the information provided to North Rim but they do not have any collar data and are not located on the area maps. It was suggested by KCL representatives that these drill holes may be wedge holes, but no confirmation can be made. North Rim compared the assayed section from JP-3D to JP-3 and PP-2B to PP-2 to see how closely the assays are between the different drill holes. Figure 9-7 and Figure 9-8 show a comparison of the assayed intervals for JP-3 vs. JP-3D and PP-2 vs. PP-2B.

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Figure 9-7: JP-3 vs. JP-3D assay data.

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Figure 9-8: PP-2 vs. PP2-B assay data. Note: the y-axis scale difference.

It is worth noting that the sample intervals for the holes are not the same, so the depths on the x-axis will not exactly match between drill holes. The results do not appear to correlate very well between the two sets of wells, but this would only be accurate if the wells were twinned and therefore comparable downhole. If these drill holes are wedges, it is not likely that the assays will correlate exactly since the wedge would be angled off the original hole, thus intersecting the potash interval slightly differently.

As samples and sample intervals do not match between the compared holes, it seems unlikely that JP-3D or PP-2B are twins or re-samples of the same holes; however, this is simply speculation based on the available data and variations may be noted due to sampling methods or discrepancies. These drill holes could be wedge holes, but without proper deviation/survey information there is no way to confirm this.

In terms of a JORC Resource, the unexplained existence of these “orphan assays” reduces the level of confidence in the overall geologic model of the area. Further efforts should be made to track the history of these orphan assays, and to re-sample or re-drill the holes PP2- and JP-3D.

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9.3 INSOLUBLE CONTENT

Javier-Pintano drill hole assay results list percentages for both insoluble and clays. As clays are typically considered a type of insoluble it is unknown if they are in fact included in the insoluble percentage and then broken out separately. In all cases, the insoluble content is higher than the clays which would make the above statement a possibility. Other insolubles to consider would be anhydrite and possibly polyhalite (Section 6.0). By adding up all of the mineral percentages listed for each assays (KCl, MgCl2, NaCl, Insolubles & Clays), the total percentage comes out as greater than 100% when both the clays and insoluble are included. If the clays are assumed to be included in the insoluble percentage, the total comes in under or at 100%. It is therefore assumed that the assay result of insoluble percent includes the clay percent value.

The insoluble content is very high throughout all of the assayed holes. Plotted in Figure 9-9 is a graph of all the assayed intervals, concluding that 44% of all samples containing greater than 5% K2O have an insoluble content of over 20% (denoted by the red ellipse). High insoluble content can complicate mining processes, and can be a limiting factor or possibly a fatal flaw to mining processes depending on mining method and nature of the insoluble occurrence. It is recommended that further work be completed to better understand the percentage and nature of insoluble distribution. When the geology of the insoluble is further understood it should then be evaluated by mine engineers to determine the level of concern it may present for the chosen type of mining method.

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Figure 9-9: Insoluble vs. %K2O graph for Javier-Pintano assays.

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9.3.1 CROSS-SECTIONS

Cross-section A-A’ was generated (Figure 9-10) to compare the insoluble content as well as the potash interval thickness. PP-2 appears to have a much smaller mineralized interval than PP-3 to the east (shown as red shading), but both show high insoluble content generally above and below the mineralization (PP-2 does not show adequate shoulder sampling to know for sure – Section 9.2.2). Figure 9-11 and Figure 9-12 show the insoluble vs. K2O content of PP-2 and PP-3 more clearly (blow-ups of graphs from cross-section). Drill hole P-1 could not be included in the cross-section, as wireline logs were not available.

Mineralization thins towards the west as there appears to be thin/barren zone between the Javier and Pintano areas, possibly due to uplift or salt doming. North Rim would expect the Javier area to thin to the east, creating a “mirror-like” image for lack of a better term. Section 9.5 touches on this briefly.

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Figure 9-10: Cross-section A-A’ through the Pintano area.

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Figure 9-11: Insoluble content vs. % K2O for PP-2.

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Figure 9-12: Insoluble content vs. % K2O for PP-3.

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9.4 POTASH INTERBEDS

For the purposes of reviewing the original model in Datamine, the provided potash intervals defined by KCL representatives were compared by North Rim to the assay data.

It should be noted that in several instances, such as drill hole PP-3, the original pick used to calculate the geological resource included significant interbed salts of up to 4.0 m (Figure 9-13). The interbed unit is essentially halite, averaging <2.2 % K2O. The original picks could be more accurately described as potash “zones”, rather than seams. Again using PP-3 as an example, the potash seam was originally from 779.79 to 812.55 m with an average grade of 8.0% K2O, whereas a potash zone picked based on assay data could (for instance) split this into two intervals from 783.24 to 786.70 m (average grade 8.0% K2O), and 791.38 to 808.87 m (average grade 11.3% K2O).

If the halite interbed units correlate through the area then separating the potash zones and not including the interbed salt would give a more accurate geological picture of the potash interval. If the interbed salt is to be included in the calculations as part of necessary mined waste material (i.e. mining parameters such as a mining height), it should always be noted so that the reader is aware of the diluted grade and overstated thickness.

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Figure 9-13: Interbed salt including in original potash seam as shown in drill hole PP-3.

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9.5 GEOLOGICAL RE-MODEL

Using the Vulcan program a model of the historical data was completed; however, due to a lack of data the model may be of limited use, due to:

No useful structural data; for example, there are no faults included in the model;
Accompanying reports showed faulting in the areas and included preliminary seismic slices; and
The English summary report prepared by KCL indicates that the original seismic interprets need reworking. The seismic could have a significant impact on resource determination and general modelling; however, seismic data interpretation would have to be done from hard copy documents as digital files are limited/not available.

The following figures outline some of the findings developed though the brief re-model completed for the purposes of this report. Note that within the figures, the medial portion of the figure should be ignored due to lacking data in the area.

The grid illustrated in Figure 9-14 displays the relative complexity of the deposit likely due to deepening extents of the basin. While the center of the grid is not that meaningful, due to the fact that the available seismic data indicates that the basin is shallow in this area, variability can be observed in the southeast, as well as the northwest. In both areas there are blue/purple holes indicating a decrease in evaporite thickness. These changes are occurring over relatively short distance, potentially introducing a higher level of risk, and effectively reducing the confidence in the continuity of the geology

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Figure 9-14: Total evaporite thickness map.

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As the thickness of the potash zone is plotted (including interbed salts), a more complex picture is created as shown in Figure 9-15. The thickest intersections correlate with the deepening basin, but variations over small distances are still very evident, especially in the northwest (Javier area). For example, the distance between JP-2 and JP-3 is significantly less than 1 km (shown by the black sphere), with the potash zone changing from less than 2.0 m, to nearly 20.0 m, which illustrates the basin complexity further still.

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Figure 9-15: Potash interval thickness grid. Thicker intervals are shown in grey and orange.

Due to a wide variation in potash interval thickness, a grade (% K2O) x thickness grid was calculated (Figure 9-16). The grid was contoured at a grade x thickness value of 12, which was derived from a series of cut-off parameters used in the Datamine model: i.e. using a minimum thickness (1.5 m), and a minimum grade of 8.0 % K2O. This map is useful to identify areas of low mineralization, as well as highly prospective areas which may not always be identified if using only grade or thickness. The preliminary contouring results of a grade x thickness grid indicates areas to the south east (in the Pintano Area) may be the most prospective and could warrant further investigation.

Figure 9-17 outlines a summary of the general grade x thickness map overlain with the historical Inferred and Indicated Resource buffers. Drill hole JP-4 (shown by black sphere) when compared to the other drill holes included in the historical resource shows lower grade values and should likely be followed up in future calculations. All other drill holes historically calculated appear to fall reasonably within the mineralized areas.

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Figure 9-16: Grade x thickness map. Thickest areas are shown in yellows and oranges.

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Figure 9-17: Grade x thickness map overlain with historical Resource Calculation buffers.

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10.0 CONCLUSIONS

The following conclusions are made by the authors:

There are no apparent or easily identifiable major risks to the project in terms of accessibility, local resources, climate, infrastructure and physiography.
Topography in the western areas of the project may pose some limitations or challenges to surface infrastructure development in this area if it was required; however, there are significant flat-lying areas with the project extents. Topography should also be consider during exploration program planning as it could add significant challenges and cost to seismic or drilling programs.
Reserve Calculations for the Sierra del Perdón area do not fully list or explain assumptions and methodologies or supply the original raw data. Without this information the historic Reserve Calculations cannot be recalculated at this time and thus cannot be verified.
Production records for the Sierra del Perdón area are useful regarding the quality of the deposit and its mineability. In terms of defining a JORC Resource the production records provide confidence in the ability to mine the deposit in the area, particularly in the existing mining blocks.
Maps outlining the Sierra del Perdón mining area illustrate the location of interpreted faults and the structural complexity of the area.
The preliminary review of the mining area suggests Block D and F may be the most prospective as they have not been previously mined; however, these areas may represent deeper areas geologically.
No geophysical wireline data or assays are available within the Sierra del Perdón area.
Data quality of the assays and geophysical wireline data within the Javier-Pintano area correlate well and cores are available for viewing and potential re-sampling.
The carnallite content within the Javier-Pintano area appears less pervasive than discussed in the regional geology of the Sierra del Perdón area, but further investigations may be necessary.
All drill holes within the Javier-Pintano area are considered vertical, as no downhole surveys were given. This may impact the assay, geophysical wireline and geological intersection thicknesses.
Grids illustrated for the Javier-Pintano area display the relative complexity of the deposit likely due to deepening extents of the basin. There is a high variation in depth to potash and evaporite thickness over short distances as the area appears structurally complex.
The preliminary contouring results of a grade times thickness grid for Javier-Pintano indicates areas to the south east may be the most prospective.

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Sierra del Perdón:

It is a well-established area with existing infrastructure and old mine workings;
The area has been previously mined with existing production data, including both the production of sylvite and carnallite;
Production data and underground grade mapping is available for Block B which may be useful when considering resource determination;
Ample seismic has been completed over the mine and expansion area outlining the areas with structural complexity; and
Based on North Rim’s initial review process the potential for potash may exist in the D Block. There is future potential for Block F, which has no available data at this time.

Javier-Pintano:

The area is easily accessed with good infrastructure in place;
Acceptable down hole data is available as sixteen drill holes drilled between 1988 and 1991 have been completed within the immediate area;
Required data for resource determination that is currently available includes; reformatted assay data, geophysical wireline data and some drill core (unsure of current condition). Brief review of the well data shows good correlation between assays and the wireline data. More follow up work is required; and
Preliminary resource mapping by North Rim suggests that potash members may extend up to 7.0 m in thickness (interbed salts included).

Areas Requiring Further Investigation

Further work will need to be conducted geologically to understand the full nature of the mineralization and structural complexity of the areas. Both areas require additional efforts or follow up work in order to meet with current potash industry standards for resources. Small, but significant improvements should be made to assay sampling and Resource / Reserve Calculations in order to bring the Project Area up to a JORC compliant resource level.

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parameters, assumptions and mineralogy (sylvite vs. carnallite) between blocks and years. The mineability of the deeper blocks within the Sierra del Perdón area will require further investigation in terms of moving towards an advanced JORC compliant Resource or Reserve. Preliminary attempts at reproducing and correlating production records with the historic Reserve Calculations for the Subiza area (Block B) are so far unsuccessful due to inconsistencies in the data sets. A more detailed comparison using a complete record of production reports, georeferenced mine plans, maps, and potentially information from former mine personnel may be more successful.

Assay Data: Little information is available regarding the assay sampling methods. Resampling of historical core should be completed by an independent laboratory, which uses quality control check samples and blank standards as part of the assay record. Insoluble content will be required when reviewing future assays, as high insoluble content is noted in the Javier-Pintano area; 44% of all samples (which contain > 5% K2O) have an insoluble content of over 20%. This will impact mining considerations in subsequent studies.

11.0 RECOMMENDATIONS

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Table 11-1 and Table 11-2 outline the author’s recommendations in table format, broken out in a step by step process. All recommendations and conclusions are based upon getting the Project Area up to current industry standards and further testing the prospectivity of each area for the purpose of advancing towards development.

Table 11-1: Sierra del Perdón recommendations (focus on Block D and F).

Recommended Step	Descriptions
Step 1: Corporate/ Legal
Complete Transaction
Land Review and Potential Acquisition
Legal Review of Local Permitting Regulations:
- For Exploration Work Mine Development	Should include a summary of any limiting factors (such as restricted drilling areas) and / or licencing requirements for exploration work.
- For Development and Licencing	Should include a list of permits or steps that would be required,for example: EIS approval.
Step 2: Data Review and Data Verification
Known Missing Data:
Drill Hole StripPlots for Historic wells
Eastern/ Northern Seismic Lines not included in the 1983 and 1985 reports	Not in data records: "PER" Seismic Lines
Complete the record of production reports (collect all original reports)
Western Seismic Line Data (Higher resolution)	The seismic data from the 1985 report may need to be scanned at a higher resolution for use in seismic re-interp. (as per Roger Edgecombe's email of July 26,2012)
Unidentified data that is assumed to exist:
Mine data such as mine elevations, mine surveys and final mine layouts.	Digital files would be ideal.
Further information on mining methods and mine experience	Mining methods - cut heights, room width, extraction ratio, etc.), and mine experience could be Geology or engineering related and could include things like: grade control, grade monitoring, rock mechanics test work or room closure information, any history of any inflow occurrences in the mine,etc.
Transcripts of mine personnel interviews	If a meeting is scheduled with former mine personal we recommend a list of questions be prepared, and transcripts of this meeting be
Records from mine reclamation / mine closure efforts

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Recommended Step	Descriptions
Data Compilation
Translate all documents and data to English
Whereverpossiblegeoreference data
Organize and store in one central location - one option is the generation of a Geodatabase	All historical maps and schematics could be digitized, geospatially referenced, and compiled into a central area. We recommend a format such as a GIS project for ease of future use and reference. Compilation of such data into consumer software such as ArcGIS would be beneficial as it would provide a centralized point of access for technical information and promote ease of data sharing amongst peers. A GeoDatabase (“.gdb”) could be used to organize and store the various data layers, which could then be output in a variety of mapping formats. Read only versions can be issued for data sharing.
Data Review
Review translated documents
Have RPS Boyd Petrosearch review all seismic data and provide recommendations
Determine if any of the additional historic data can be used in a Resource Calculation (or verification of old Reserve Calculations) for Areas D and F	Based on the results on any new data acquisition, and the review of the seismic determine if a JORC Exploration Target could be prepared from existing data
Step 3: Fatal Flaw Assessment
Fatal Flaw Assessment Considering:	A high level review of the Project Area for any identifiable "show stoppers" in each of the listed categories
- Economic Model Review
- Environmental Assessment
- Mining and Metallurgical Considerations
- Marketing
- Legal(Permitting,licensing,etc.)
- Social and Government Factors
Step 4: Potential JORC report
Generate JORC report	If the results of Steps 1 to 3 are satisfactory for the generation of a JORC Resource or Exploration Target a JORC report could be prepared at this point.
Step 5: Exploration Program Planning
Have RPS Boyd Petrosearch re-interpret Seismic data for areas D and F
Use This Information to establish drill hole targets	Recommend a six hole drill hole program: a three hole drill program in D Block and 3 holes in the F (western) Block for a good representation and data set for a Resource Calculation (three point calculations arepreferred in both areas).

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Recommended Step	Descriptions
Define Drilling Program Design	The parameters of the drilling program should be defined prior to obtaining quotes. Parameters addressed in a typical drilling program includes items such as: projected geology, casing intervals, coring intervals, geophysical logging program, mud or drilling fluid parameters, any Drill Stem Test intervals, etc. The drilling program design can be used to generate scopes of work for tender packages for the drilling.
Consider new seismic data acquisition either 2D or 3D	Seismic is useful in identifying anomalies such as salt dissolution features, changes in dip, thinning of the salt, and to some degree, changes in grade (amplitude changes in sylvinite beds of sufficient resolution can indicate grade). If B Block is being considered, 3D seismic can identify the old mine room locations.
Step 6: Execute on Exploration Plan
Have required capital inplace
Complete Drilling	Core recoveries and assay sampling to be completed under guidance of CP for data collection verification.
Complete any additional Seismic data acquisition
Review seismic re-interp with newly acquired drillingdata	The new drill holes can be used to verify or confirm seismic interpretations
Step 7: Project Updates
Update Geologic Model	Incorporate exploration program data into Geodatabase/Geologic Model.
Update Fatal Flaw Assessment	Review exploration results to determine if any new "show stoppers" or project risks have been identified(orprevious ones removed).
Step 8: JORC report
Using the updated project results, generate a JORC report	Note, work on the report will overlap with the Project Updates (Step 7) and results from the fatal flaw assessment could effect the resource classification. Its recommended that project risks (present or absent) be discussed in the JORC report.

Using complete production records and comprehensive, trusted historical data, the option may exist to determine remaining mine resources within the Sierra del Perdón area. In order to enhance the mining area further, it is recommended that three (3) drill holes be completed in Block D and three (3) drill holes be completed in Block F. Drill holes are spaced at large distances and three point calculations are the preferred method for both areas. Proper geological data will need to be collected including: geophysical wireline data, assays, geological

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descriptions and any drill test deemed necessary. The cost of these drill holes is yet to be determined.

Table 11-2: Recommendations for the Javier-Pintano area (focus on Pintano area).

Recommended Step	Descriptions
Step 1: Corporate/ Legal
Complete Transaction
Land Review and Potential Acquisition	Are there options for more land to the south east?
Legal Review of Local Permitting Regulations:
- For Exploration Work Mine Development	Should include a summary of any limiting factors (such as restricted drilling areas) and / or licencing requirements for exploration work.
- For Development and Licencing	should include a list of permits or steps that would be required,for example: EIS approval.
Step 2: Fatal Flaw Assessment
Fatal Flaw Assessment Considering:	A high level review of the Project Area for any identifiable "show stoppers" in each of the listed categories.
- Economic Model Review
- Environmental Assessment
- Mining and Metallurgical Considerations
- Marketing
- Legal (Permitting, licensing, etc.)
- Social and Government Factors
Step 3: Data Review and Data Verification
Data Verification
Have RPS Boyd Petrosearch re-interpret the Seismic Data	Intention is to work out the geological structure and incorporate it into a Geological Model towards a Resource Calculation.
Complete confirmation assay test work and potentially dissolution test work	Acquire permission to use half of the existing cores for test work in independent laboratories.
Data Compilation
Translate all documents and data to English
Organize and store in one central location
Data Review
Review translated documents
Incorporate Seismic re-interp into a Geological Model

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Recommended Step	Descriptions
Update Fatal Flaw Assessment	Determine if data verification has changed the conclusions of the fatal flaw assessment.
Determine JORC calculation parameters and classification	Based on the results of the data verification and data review and fatal flaw assessment determine if a JORC exploration target or JORC resource could be prepared from existing data and what the appropriateparameters would be(i.e. ROI,etc.).
Step 4: JORC report
Generate JORC report	If the results of Steps 1 to 3 are satisfactory for the generation of a JORC Resource or Exploration Target a JORC report could be prepared at this point.
Step 5: Exploration Program Planning
Use Seismic re-interp to determine drill hole placements	Recommend two additional drill holes for a good representation and data set for a Resource Calculation. (three point calculations are preferred - current drilling plan is all linear).
Define Drilling Program Design	The parameters of the drilling program should be defined prior to obtaining quotes. Parameters addressed in a typical drilling program includes items such as: projected geology, casing intervals, coring intervals, geophysical logging program, mud or drilling fluid parameters, any Drill Stem Test intervals, etc. The drilling program design can be used to generate scopes of work for tender packages for the drilling.
Consider new seismic data acquisition either 2D or 3D	Seismic is useful in identifying anomalies such as salt dissolution features, changes in dip, thinning of the salt, and to some degree, changes in grade (amplitude changes in sylvinite beds of sufficient resolution can indicate grade).
Step 6: Execute on Exploration Plan
Have required capital inplace
Complete Drilling	Core recoveries and assay sampling to be completed under guidance of CP for data collection verification.
Complete any additional seismic data acquisition
Review seismic re-interp with newly acquired drillingdata	The new drill holes can be used to verify or confirm seismic interpretations
Step 7: More Detailed Project Assessment
Update Geologic Model	Incorporate exploration program data into Geodatabase/Geologic Model

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	Recommended Step Descriptions Complete a Preliminary Economic Assessment Study Using the results of Step 6 and 7, generate a JORC report Another option: a JORC report could be prepared after Step6 and an update done after Step7. Step 8: JORC report
	Recommended Step	Descriptions
	Complete a Preliminary Economic Assessment Study
	Step 8: JORC report
	Using the results of Step 6 and 7, generate a JORC report	Another option: a JORC report could be prepared after Step6 and an update done after Step7.

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12.0 SIGNATURE PAGE

Respectfully submitted by:

Signed and Sealed

Kelsey Mayes, Professional Geologist Geologist

Reviewed and Approved By:

Signed and Sealed

Lola Piché, Professional Geologist

Director of Technical Services and Innovations

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13.0 REFERENCES

Practical Matters of Spain - Water . (2000 - 2012). Retrieved 07 23, 2012, from IDEAL SPAIN: http://www.idealspain.com/Pages/Information/water.html

MWPS . (2012). Retrieved 07 17, 2012, from Top 5 Wind Power Producing Countries in the World: http://www.mywindpowersystem.com/2010/02/08/top-5-wind-powerproducing-countries-world/
Spain - Climate . (2012). Retrieved 07 17, 2012, from Encyclopedia of the Nations: http://www.nationsencyclopedia.com/Europe/Spain-CLIMATE.html

Garcia del Cura, M. (ND). Mineral Resources.

Garrett, D. E. (1996). Potash Deposits, Processing, Properties and Uses. London: Chapman & Hall.

Guzman, F. V. (1982). Spain Mineral Deposits (Spanish Version). Geological Institute of Spain.

Halabura, S. P., & Hardy, M. P. (2007). An Overview of the Geology of Solution Mining of Potash in Saskatchewan. Solution Mining Research Institute. Halifax, Nova Scotia.

Marina, E. (1987). The Mining Industry in Spain (English Version). Geological Institute of Spain.

PK Potash. (November/December 2005). Happy Birthday Ercosplan. Fertilizer International No. 409 . Retrieved from

http://www.ercosplan.com/pdf_abstract/potash%20ercosplan%20PK-409%20LR.pdf

Rios, J. (1968). Saline Deposits of Spain. BCS Potash , p. 59.

RPS Boyd PetroSearch. (2012, 07 26). Personal Communication with North Rim.

Stephenson, P. R. (1997, August). Table 2 - Signing off a Resource/Reserve Estimation. AIG NEWS No. 49.
Stirrett, T. A. (2012, May 09). Technical Summary Report Encanto Potash Corp., 2012 Potash Resource Assessment for the Muskowekwan First Nations Home Reserve Project South Eastern Saskatchewan, Canada. Saskatoon, Saskatchewan.

Travel Net . (n.d.). Retrieved 07 17, 2012, from

http://www.travelnet.co.il/espagne/menu/TheLand2.htm

Warren, J. K. (2006). Evaporites, Sediments, Resources and Hydrocarbons. Germany: Springer.

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SCHEDULE 7 – SOLICITOR’S REPORT ON TENEMENTS

111

Due Diligence Report

on

the Spanish company

Geoalcali, S.L.

AT THE REQUEST OF Highfield Resources Ltd.

Madrid, August 21, 2012

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INDEX

0.	Executive Summary …………………………………………………………….	6
I.	Corporate ……………………………………………………………………….	11
II.	Mining Issues …………………………..………...……………………………...	14
III.	Real Estate ……………………………………………………………………...	23
IV.	Others: Agreements, Labour Issues, Subsidies and Litigation ………..………...	24

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0. INTRODUCTION

1. This report summarises the conclusions of the due diligence review of the Spanish company Geoalcali, S.L. (“ Geoalcali ” or the “ Company ”), a 100% subsidiary of the Australian company KCL Resources Ltd. (“ KCL ”), within the prospective acquisition of KCL by the Client through a share deal subject to Australian law (the “ Transaction ”) (the “ Report ”).

2. This Report has been prepared at the request of Highfield Resources Limited (the “ Client ”) for its own and exclusive benefit and within the scope of the Transaction; therefore, it may not be used for any other purposes or by any other parties save to the extent that such disclosure or different use is expressly authorised in writing by Uría Menéndez.

3. For the purposes of this Report, we have reviewed the documentation made available to us by the Company which is listed in Annex I of this report (the “ Documentation made available ”). Unless otherwise expressly indicated, we have not conducted independent searches or investigations as to the Company or assets, nor have we inspected the Commercial or Land Registries or visited any premises owned or used by the Company to verify the information received.

4. The scope of this Report is limited to the following matters: (i) corporate, (ii) contracts, (iii) real estate, (iv) mining permits, (v) labour, (vi) subsidies, and (vii) litigation, therefore excluding other matters such as planning, insurance, industrial and tax.

5. This Report is not a legal opinion, and is not and must not be regarded as a substitute for specific legal advice on the matters covered herein. This Report merely addresses certain areas of potential legal concern, which have been drawn from the Documentation made available, and which should be considered by the Client when deciding about the Transaction. Likewise, this Report does not address the advisability or feasibility of the Transaction nor constitutes an invitation or inducement to provide, if required, any financing to the Transaction nor to engage in any investment related to the Company.

6. Our task has been limited to reviewing the Documentation made available from a legal perspective. We have not reviewed any documents which are not drafted in Spanish or English. Likewise, we have not reviewed any technical (such as technical projects for mining permits), commercial (e.g., quantities, prices, rates, etc.), economic or accounting documents. To the extent that this Report does address or summarize any such documents, or any technical, commercial, economic or accounting matters set forth in any other documents, such aspect(s) of this Report should not be relied upon in any form or to any degree. Moreover, we have not judged the correctness and reasonableness of the economic, technical or commercial terms of the documentation reviewed.

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A proper technical, economic or commercial assessment of the documents necessarily requires commercial and industry knowledge, expertise and savvy, none of which we purport to possess. Therefore, we do not assume responsibility for the accuracy or completeness of the information and conclusions concerning commercial, economic and technical matters contained in this Report. Accordingly, the review should not be viewed as a substitute for examination of appropriate documents by commercial and technical personnel.

7. Unless otherwise expressly indicated and in addition to all other assumptions contained herein, this Report is based on the following assumptions:

(i) this Report is based on the documents provided to us and we have assumed that such documents are accurate and complete in all respects and are not misleading in any respect;
(ii) the copies of the documents provided are complete and accurate and conform to the corresponding originals. Signatures are authentic and have been made by persons legally authorised to represent the respective entity;
(iii) when the documents provided to us are originals, they are authentic and complete in all respects. All the stamps and seals on the documents are authentic;
(iv) each of the contractual documents provided to us is in full force and effect and reflect all amendments which have been made to them and have not been terminated;
(v) each party to each document had the capacity, power and authority and took all actions necessary to execute and to exercise its respective rights and perform its respective obligations under each such document, including, without limitation, the payment of any applicable stamp duty and filing the contract or document with any applicable authority;
(vi) each of the documents provided to us is valid, binding and enforceable on each of the parties thereto in accordance with its respective terms, and each of such parties has duly complied with the provisions of such document;
(vii) there are no documents, facts or circumstances in respect of the matters addressed to in this Report other than those provided or communicated to us in writing which could affect, change or contradict the documents or the contents thereof and thus, the conclusions of this Report;
(viii) none of the parties to the documents are seeking, or will seek, to conduct any particular transaction or any associated activity in a manner or for a purpose not expressly evidenced on the face of the applicable document which might render the document or any relevant transaction or associated activity unenforceable, illegal, void or voidable;
(ix) all the resolutions of the corporate bodies that we have reviewed were validly adopted and remain in force, and there are no resolutions which revoke, oppose or amend the resolutions and decisions reviewed by us, except for such amendments, if any, as may be contained in the resolutions and decisions that we have reviewed; and

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(x) there are no restrictions, whether in the articles of association, of a contractual, or any other nature whatsoever, which are binding on either party and which are set out in any document that has not been reviewed by us, but which may affect the information contained in this Report, nor are there any agreements between the parties to the documents or with any other third parties which revoke, amend or replace in whole or in part, or which may in any manner affect, the information contained in this Report.

8. The review has been conducted under Spanish law and does not take into account any other law. Consequently, this Report is limited to the Company and to legal matters to which Spanish law applies.

9. The validity of this Report is of one year as from the date of its issuance. Uría Menéndez shall not be liable for any question related to this Report after said date.

Uría Menéndez shall only be liable vis-à-vis the Client and for any material incorrectness or inaccuracy of the Report attributable to the gross negligence or wilful misconduct of Uría Menéndez.

10. This Report shall be governed by and shall be construed in accordance with Spanish law. The exclusive place of venue for all court proceedings which may arise out or in connection with the Report shall be the city of Madrid (Spain).

Madrid, August 21, 2012

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EXECUTIVE SUMMARY

This section of the Report highlights certain key issues in relation to the Company which the Client should take into consideration for the purposes of the Transaction. A more detailed explanation of each of these matters is provided in the relevant sections of this Report. Thus, this executive summary must be read and considered in conjunction with such other sections of this Report, and not as a substitute.

Capitalized terms in each section of this executive summary shall have the same meaning as in their respective sections of this Report.

1. Corporate

1.1. The Company is duly incorporated and registered at the Commercial Registry of Salamanca. The Company does not have the required corporate books. We have been informed that the books are in the process of being legalized and completed.
1.2. As of today, the Company’s share capital is divided into 4,000 shares ( participaciones sociales ) of a face value of €1 each, numbered from 1 to 4,000, fully subscribed and paid up. All the Company’s shares are owned by KCL. KCL is therefore the sole shareholder of the Company.

KCL’s title over the Company’s shares derives from a deed of purchase and sale of the Company’s shares executed by Geotrex Gestión Minera, S.L., Mr. Derek Northleigh Carter and Mrs. Carlsa Joyce Carter, as sellers, and KCL, as purchaser, on August 10, 2012, before the notary public of the city of Salamanca (Spain) Mr. Carlos Hernández Fernádez-Canteli.

The required deed stating the situation of sole shareholder of the Company was also granted on August 10, 2012 before the same notary public. We have no evidence that this deed has been recorded with the Commercial Registry yet.

We have been informed that the Company’s shares are free of charges and encumbrances of any kind. However, since we have not been provided with the Company’s Shares Registry Book, we have not been able to double check this information.

1.3. According to information verbally provided, the Company has received (i) a share holders loan for an amount of €34,384, and (ii) a loan from KCL for an amount of €60,000. None of these loans have been documented; consequently, we do not know their finality, terms and conditions.
1.4. According to the 2011 annual accounts, the Company´s share capital is impaired (due to a negative equity of €711.55). Although impairment situations are not unusual in newly incorporated companies with a share capital slightly above the minimum legally required (€3,000) who have had certain commercial activity since their incorporation, the Company´s share capital must be adequately reinstated because under Spanish law

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having a net equity lower than 50% of the share capital is an event that may cause the dissolution and winding up of the relevant company.

To reinstate the Company´s share capital any of the following routes could be followed:

(i) To convert part of the shareholders loan into a profit participating loan which shall (a) qualify as equity for the purposes of considering whether or not the company has impaired capital, (b) be subordinated, and (c) bear a floating interest based on the evolution of the borrower’s business; or
(ii) To increase the Company´s share capital in consideration for offsetting the shareholder´s loan.

2. Agreements

As of today, and except for the purchase and sale agreement described in section 1.2 above, the Company has not entered into any kind of agreement, either verbal or in written, with any third party.

3. Mining issues

3.1. Below is a chart summarising the status of the different mining permits awarded to and requested by the Company as of today:

Name of the Permit	Number of Grids	Status	Term	Observations

EXPLORATION PERMITS
Las Molineras	324	Awarded	1 year	Apart from researching, no other exploration works have been initiated yet.

Muga	315	Awarded	1 year	�Pending publication of the resolution awarding the permit with the relevant official gazettes. �Apart from researching, no other exploration works have been initiated yet.

Despeñaperros	324	Application withdrawn	1 year	As per the Company’s request,the application for this permit was shelved by the mining authority on November 30, 2011.

INVESTIGATION PERMITS

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Name of the Permit	Number of Grids	Status	Term	Observations

Goyo	195	Application filed on July 19, 2011	3 years	�Not awarded yet. Pending definitive approval by mining authority. Not expected by the Company until September. �The Company originally requested the permit over 261 mining grids; the Company later renounced to 66 grids. �One of the Town Halls affected by the application filed allegations requesting that all mining grids extending over its territory are excluded from the application due to their incompatibility with planning regulations. On May 24, 2012 the Company opposed to this petition.

Quiñones	285	Awarded	3 years	�The resolution provided is not signed by the competent authority. �The resolution awarding this permit must still be published with the official gazettes to make it effective vis-à-vis third parties. This a straight forward process. �9 mining grids of this investigation permit are affected by a pre-existing mining right held by a third party. Both rights are considered compatible by the mining authority.

Adios	270	Awarded	3 years	�The resolution provided is not signed by the competent authority. �The resolution awarding this permit must still be published with the official gazettes to make it effective vis-à-vis third parties. This a straight forward process. �Part of the surface of this investigation permit is affected by a pre-existing mining right held by a third party. Both rights are considered compatible by the mining authority.

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Name of the Permit	Number of Grids	Status	Term	Observations

Fronterizo	35	Application filed on June 21, 2012	3 years	�Not awarded yet. Very early administrative stage. �The Company is now dealing with the payment of fees and with the preparation of the documentation supporting the application.

3.2. Like mining concessions, exploration and investigation permits may be transferred in whole or in part to a third party with enough technical and financial solvency. However, the transfer of said permits must be authorized by the competent mining authority.

Although when requesting an administrative authorization to transfer mining rights the Mining Law seems to be thinking only in asset deals (i.e. when there is an effective change in the holder/owner of the permit) and not in share deals (as it is the case of the Transaction), it cannot be totally discarded that the mining authorities could consider than an authorization to complete the Transaction is required. However, we believe this risk to be low because once KCL has completed the acquisition of the Company, the acquisition of KCL by the Client (with the ultimate consequence of acquiring the mining permits held by the Company) shall be done at Australian level and there will be no effective change in the shareholders of the Company (that shall remain to be KCL).

In our opinion, the risk that an authorization could be required is higher in the transaction between KCL and the Company because in that case there will be an effective change in the totality of the share capital of the Company from the original shareholders (Geotrex and Mr. and Mrs. Carter) to KCL. This risk is reinforced by the fact that the only assets owned by the Company as of today are the exploration and investigation permits awarded and in the process of being awarded, so it could be understood by the mining authorities that the ultimate ratio for KCL to acquire the Company was to acquire the mining permits and not the Company, which is only the vehicle to acquire the permits.

However, the Company has verbally informed that the mining authorities are fully aware of the sale of the Company to KCL and they have not requested such an authorization.

4. Real Estate

As of today the Company has not executed any agreement to allow the occupation of the land necessary to carry out exploration or investigation works.

5. Labour

The Company does not have and has never had any employees or any self-employees or independent contractors or individuals employed by third companies whose contractual relationships could be formally or materially qualified as employment relationships with the Company.

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6. Subsidies

The Company has not applied for nor awarded with any subsidy, grant, aid or incentive as of today.

7. Litigation

The Company is not engaged in any litigation, arbitration or other dispute resolution process, or administrative or criminal proceedings, whether as claimant, defendant or otherwise.

The Company has further informed that (i) no litigation, arbitration or other dispute resolution process, or administrative or criminal proceedings by or against any Company is pending, threatened or expected, and (ii) there exists no fact or circumstance likely to give rise to any litigation, arbitration, mediation or administrative, civil or criminal proceedings.

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I. CORPORATE

1. General details

The general corporate details of the Company are summarized in the table below:

Type of company	Private Limited Liability Company (Sociedad de Responsabilidad Limitada).
	The Company was incorporated by means of a public deed executed on July 14, 2011 before the Notary of Salamanca Mr. Juan Antonio Blanco González, with number 1,477 of his records (the “Deed of Incorporation”).
Incorporation of the Company

Registration with the Commercial Registry	The deed of incorporation of the Company was registered with the Commercial Registry of Salamanca at volume 420, sheet SA-13985.
Registered address	Avenida de Italia 8, 1º Izq, oficina 4 (37006 Salamanca).
	The Company´s corporate purpose includes the exploration and extraction of mining resources, the implementation and organization of mining industries and obtaining mining, industrial or chemical products.
Corporate purpose

Share capital	The share capital of the Company amounts to €4,000. The share capital is divided into 4,000 shares (participaciones sociales) of a face value of €1 each, numbered from 1 to 4,000, both inclusive. The shares are fully subscribed and paid up. The Company was incorporated with the legal minimum share capital of €3,000 which was later increased up to €4,000 via a share capital increase executed on June 13, 2012 before the Notary of Salamanca Mr. Juan Antonio Blanco González, with number 1,104 of his records (the “Deed of Capital Increase”). The Deed of Capital Increase was duly recorded at the Commercial Registry. We have been informed that the Company’s shares are free of charges and encumbrances of any kind. However, please note that we have not been provided with the Company’s corporate books, and therefore we have not been able to double check this information.

Shareholders	Sole shareholder: KCL owns 100% of the Company’s share capital by virtue of a deed of purchase and sale of the Company’s shares executed byGeotrex Gestión Minera,S.L.,Mr. Derek Northleigh Carter and Mrs.

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	Carlsa Joyce Carter, as sellers, and KCL, as purchaser, on August 10, 2012, before the notary public of the city of Salamanca (Spain) Mr. Carlos Hernández Fernádez-Canteli. The required deed stating the situation of sole shareholder of the Company was granted on August 10, 2012 before the same notary public (number 1978 of the notary’s professional files). We have no evidence that this deed has been recorded yet with the Commercial Registry.
Managing Body	A sole director: Mr. Pedro Antonio Rodríguez Fernández.
Powers of attorney	There are four individuals with powers of attorney: (i) Mr. Alfonso Hernández Hernández; (ii) Mr. Raul Hidalgo Fernández; (iii) Mr. Fernando Martín Buenadicha; and (iv) Mr. Jose M. Prada Fernández.

Auditors	No auditors have been appointed and since the Company was incorporated on July 14, 2011 there is no legal obligation to appoint any either.

Corporate Books	The Company does not have the required corporate books. We have been informed that the books are in the process of being legalized and completed.

2. Loans

The Company has received (i) a share holders loan for an amount of €34,384 and (ii) a loan from KCL for an amount of €60,000. According to the information provided, none of these loans have been documented; consequently, we do not know their finality, terms and conditions (repayments obligations, interests, maturity date, etc.).

We recommend that the Client is aware of and agrees on the economic terms and conditions of these loans before closing the Transaction.

3. Capital Impairment

Under Spanish Corporations Law ( Ley de Sociedades de Capital ), if the net equity of a company falls below 50% of its share capital, the company must be wound-up unless the share capital is adequately reinstated.

According to the 2011 annual accounts, the Company´s share capital is impaired due to a negative equity of €711.55 (which is lower than 50% of its share capital). Consequently, the Company´s share capital must be reinstated.

Impairment situations are not unusual in newly incorporated companies with a share capital slightly above the minimum legally required (€3,000) who have had certain commercial activity since their incorporation. However, the Company´s share capital must be adequately reinstated because under Spanish law having a net equity lower than 50% of the share capital is an event that may cause the dissolution and winding up of the relevant company. In this regard please note that:

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(i) The share capital reinstatement or the dissolution and winding up shall be resolved by the shareholders of the Company after a meeting called by the directors within the two months following the date on which the Company has fallen under the cause of dissolution and winding-up;
(ii) Failing to reinstate the share capital or to wind up the Company shall allow any third party to request the court to order the winding up; and
(iii) The Company´s directors are jointly and severally liable for all the Company’s obligations arising from the date on which the capital impairment occurred up to the date on which the capital impairment is overcome if they (i) do not call the general shareholders’ meeting within two months in order to resolve the dissolution and winding-up or the mechanism to overcome the capital impairment; and (ii) do not request the court to approve the dissolution and winding up of the Company within two months from the date shareholders meeting should have taken place (if it was not finally held), or from the date of the meeting (if the resolution passed was against the dissolution and winding-up).

To reinstate the Company’s share capital, the following alternatives could be followed without the need of contributing additional resources to the Company:

(i) To convert part of the current shareholders loan into a profit participating loan ( préstamo participativo ) in the amount necessary to overcome the event of dissolution and winding up. The main characteristics of profit participating loans are as follows: (a) they qualify as equity for the purposes of considering whether or not the relevant company has impaired capital; (b) they are subordinated; and (c) the lender must receive a floating interest based on the evolution of the borrower’s business; and
(ii) To increase the Company´s share capital in consideration for offsetting the shareholder´s loan.

4. Post Closing

Since the Company will be indirectly acquired by taking control of its parent company in Australia, no action or formality will be required in Spain. However, in transactions that are completed at a higher corporate level it is usual to remove the directors of the indirectly acquired company linked to the seller and to revoke the powers of attorney granted to its employees and officers on completion. If the Client intends to do so, it will be necessary to pass:

(i) A minutes of shareholders meeting (to change the management body);
(ii) Minutes of the meeting held by the new management body (to revoke the powers of attorney); and
(iii) Certificates of the minutes of the minutes described in (i) and (ii) for their notarization and registration at the Commercial Registry of Salamanca.

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II. MINING ISSUES

1. General overview of the Spanish mining system

1.1. Law 22/1973 on Mining (the “ Mining Law ”) governs the exploration and exploitation of mineral deposits and other geological resources in Spain. Law 22/1973 was further developed by Royal Decree 2857/1978 (“ RD 2857/1978 ”).

Under Spanish law, all geological structures, rocks and minerals below ground level are regarded of public domain; as a consequence, their commercial exploitation must be previously authorized and supervised by the mining authorities. Sub-surface materials are classified in four sections under Spanish law (sections A, B, C and D). The minerals that the Company intends to exploit belong all to Section C, which requires the awarding of a mining concession to exploit them.

For that purpose, before applying for the relevant concession, mining companies normally (but are not legally obliged to) apply first for exploration and/or investigation permits, which authorize them to carry out works aimed at determining the existence of mineral resources suitable for commercial exploitation within a certain perimeter (calculated in mining grids[1] ) and give them a preferential right to apply for a mining concession relating to such resources within the area covered by said permits. The Mining Law also provides for the possibility to apply for direct mining concessions, without having to apply first for exploration and investigations permits.

In short and very general terms, the difference between exploration and investigation permits are the following:

(i) Exploration permits allow only non-intrusive investigation techniques with a low or inexistent alteration of the exploration area, while investigation permits allow for more intrusive techniques. In our experience, the limits as to what must be considered intrusive and non-intrusive vary much among regions;
(ii) Exploration permits can only be awarded for extensions greater than 300 but smaller than 3,000 mining grids, while investigation permits can only be awarded for a maximum surface area of 300 mining grids[2] ; and
(iii) Exploration permits are awarded for a maximum of one year (renewable for one additional year), while investigation permits are awarded for the term requested by the applicant, which cannot exceed three years. This term may be renewed for additional periods of three years and, in some cases, longer periods, depending on the scope and characteristics of the intended works and other circumstances.
1 A mining grid is equivalent to approximately 30 hectares.
2 Mining concessions can only be awarded for a maximum extension of 100 mining grids.

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1.2. The competent authority to award investigation and exploration permits is the government of the autonomous region where the exploration or investigation works will be carried out. If the permit affects to more than one autonomous region, the competent authority to process and award the permits shall be the central government (Ministry of Industry, Tourism and Trade).
1.3. Exploration permits: the holder an exploration permit is entitled to carry out during a term of one year (extendable to an additional year) studies and reconnaissance works in the exploration area using only non-intrusive techniques.

Exploration permit may be revoked if the holder: (i) voluntarily renounces to it, (ii) does not pay the relevant taxes; (iii) does not comply with applicable regulations or with the exploration works plans approved by the mining authority, or (iii) does not initiate the exploration works or does not comply with the terms agreed with the mining authority.

If an investigation permit or a direct concession (in case the exploration works clearly determined the existence of mineral resources capable of being exploited) is not requested before the expiration of the exploration permit, this latter permit shall be terminated and the holder of the exploration permit shall no longer have a preferential right to obtain an investigation permit or a concession over the area covered by the original exploration permit.

1.4. Investigation permits: the holder of an exploration permit is entitled to apply at any time during its term of validity (and with a preferential right over third parties) for an investigation permit. For that purpose, the applicant must provide an investigation project ( proyecto de investigación ), including an investigation programme, a detailed budget for the investigation works and maps of the area covered by the application, among others information. Once the application and annexed documentation is considered complete by the mining authority, the details of the application shall be published in the official gazette and in the notice board of the Town Halls affected by the permit so that third parties may file allegations against it.

Prior to the awarding of the investigation permit, the mining authority must decide whether the application is compatible with any other pre-existing mining rights existing over the same area. If the authority considers that the application is compatible with said rights, the investigation permit may be awarded. If not, the mining authority will have to decide which of the two permits/applications is of a greater interest for the public domain. In case it is the pre-existing right, then the mining authority will not award the investigation permit over the area affected by the pre-existing right.

The resolution awarding the investigation permit must be published in the official gazettes to make it public and effective vis-à-vis third parties.

From a mining standpoint, the holder an investigation permit must comply with the following main obligations: (i) submit to the mining authority the first working plan ( plan de labores ) within four months from the date it has legal title to occupy the land affected by the investigation works, (ii) initiate the investigation works within six months from the same date, (iii) carry out the works in accordance and with the intensity described in the working plan approved by the mining authority, (iv) submit an investigation working plan for subsequent years, and (v) payment of the relevant taxes.

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The mining authority is entitled to modify the investigation project or impose a deposit of a ten per cent of the investigation budget in case the works are substantially delayed with respect to the schedule approved by the mining authority.

Moreover, the breach of the obligations imposed to the holder of an investigation permit could ultimately entail the revocation of the permit.

2. Description of the mining rights awarded to and requested by the Company

2.1. According to Documentation made available, the Company has been awarded as of today with the following mining permits:

(i) “Las Molineras” exploration permit

The Company applied for this permit on July 19, 2011 and was awarded with it as per Resolution of the General Directorate of Energy and Mines of the Regional Government of Aragón of November 22, 2011, with the following main characteristics:

Surface: 324 mining grids (equivalent to approximately 9,720 hectares).
Municipalities affected: Urriés, Sigúés, Artieda, Los Pintanos, Isuerre, Navardún and Lobera de Onsella (all of them in the Autonomous Region of Aragón).
Term: 1 year.
Works authorized: geological, geochemical, petrographic and mineralogical studies, cartography at a scale of 1:10,000, 1:5,000 and 1:2,000, and geophysical investigations, all of them with no substantial alteration of the environment and the surface area.
Type: section C.

The resolution awarding “Las Molineras” exploration permit was published in the Official Gazette of the Autonomous Region of Aragon of January 19, 2012.

According to the Documentation made available, “Las Molineras” exploration permit seems to be in good standing. The Company has reported that, apart from researching, no exploration works have been started yet in connection with this permit.

(ii) “Muga” exploration permit

The Company applied for this permit on October 13, 2011, and was awarded with it as per Resolution of the General Directorate of Energy and Mines of the Spanish Ministry of Industry, Tourism and Trade of June 5, 2012.

This permit was awarded by the central government (the Ministry of Industry, Tourism and Trade) and not the regional government because the permit affects to two different autonomous regions (Navarra and Aragon), and therefore the competence to process and resolve about this permit lies on the central government.

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The main characteristics of this permit are as follows:

Surface: 315 mining grids (equivalent to approximately 9,450 hectares).
Municipalities affected: Navardún, Urriés, Undués de Lerda and Sos del Rey Católico (Autonomous Regions of Navarra and Aragón).
Term: 1 year.
Type: section C.

In connection with “Muga” exploration permit, it must be noted that:

(a) Unlike “Las Molineras”, this permit has not been published yet in the relevant official gazettes. Although this is a formality and therefore a matter of time, it is required to make the permit effective vis-à-vis third parties. The Company expects that the publication takes place within the following weeks; and
(b) One mining grid of this permit is affected by a third company’s application for a different investigation permit named “Urriés”. However, considering that the application made by the Company is for an exploration permit, there is no incompatibility between both applications. This notwithstanding, it must be noted that if the Company intends to convert this exploration permit into an investigation permit, it will need to be ascertained whether there is an incompatibility with the “Urriés” investigation permit (in case it is finally awarded). In any event, an eventual incompatibility between both permits would only affect to a single mining grid.

According to the Documentation made available, “Muga” exploration permit seems to be in good standing. The Company has reported that no exploration works have been started in connection with this permit.

(iii) “Quiñones” investigation permit

The Company formally applied for “Quiñones” investigation permit on July 19, 2011, and was awarded with it as per Resolution of the General Directorate of Energy and Mines of the Regional Government of Navarra of August 7, 2012, with the following main characteristics:

Surface: 285 mining grids (equivalent to approximately 8,550 hectares).
Municipalities affected: Aranguren, Biurrun-Olcoz, Cizur, Noain, Galar, Tiebas-Muruarte de Reta, Unzué and Beriain (Navrra).
Term: 3 years.
Type: section C.

In connection with this permit, it must be noted that:

(a) Nine mining grids included within its perimeter are affected by a preexisting mining right awarded to a third company named Salinas de Navarra, S.A., and which allows this company to deposit salt. By awarding

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this investigation permit, the authority consider that the pre-existing right and this permit are compatible.

(b) The resolution awarding this permit is not signed by the competent authority. As a consequence, we do not know whether it is only a draft or the definitive resolution. This should be clarified by the Company, and if it is the definitive resolution, the Company should request that the resolution is duly signed.
(c) The definitive resolution duly signed must still be published with the official Gazette of the Autonomous Region of Navarra in order to make the investigation permit effective vis-à-vis third parties.
(iv) “Adiós” investigation permit

The Company formally applied for “Adios” investigation permit on July 19, 2011, and was awarded with it as per Resolution of the General Directorate of Energy and Mines of the Regional Government of Navarra of August 7, 2012, with the following main characteristics:

Surface: 270 mining grids (equivalent to approximately 8,100 hectares).
Municipalities affected: Adios, Biurrun-Olcoz, Cizur, Etxari, Galar, Legarda, Muruzabal, Puente de la Reina, Ucar, Uterga, Zabalza and Zizur Mayor.
Term: 3 years.
Type: section C.

In connection with this permit, it must be noted that:

  - **(a)** A number of mining grids included within its perimeter are affected by a mining concession awarded to a third company named Azanza Hermanos, S.L. which allows this company to exploit a mine of dry goods. By awarding this investigation permit, the authority consider that the preexisting right and this permit are compatible.

  - **(b)** The resolution awarding this permit is not signed by the competent authority. As a consequence, we do not know whether it is only a draft or the definitive resolution. This should be clarified by the Company, and if it is the definitive resolution, the Company should request that the resolution is duly signed.

  - **(c)** The definitive resolution duly signed must still be published with the official Gazette of the Autonomous Region of Navarra in order to make the investigation permit effective vis-à-vis third parties.

2.2. According to the Documentation made available, the Company has formally applied for but not yet been awarded with the following mining permits:
(i) “Goyo” investigation permit

The Company formally applied for “Goyo” investigation permit on July 19, 2011. Although the original application included 261 mining grids in the Autonomous

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Regions of Navarra and Aragón, on May 17, 2012 the Company voluntarily renounced to 66 mining grids (those affecting to the Autonomous Region of Aragon), so that the application for this permits comprises now 195 mining grids (equivalent to approximately 5,850 hectares). The investigation permit has been requested for a term of 3 years.

The permit has not been awarded yet. According to applicable regulations, the formal admission of this application by the regional government was published with the Official Gazette of the Autonomous Region of Navarra of March 20, 2012, to the make it public and allow third parties to submit allegations against it.

According to the information provided, one of the Town Halls affected by the application (Liedana) filed allegations requesting that all mining grids extending over its territory were excluded from the application due to incompatibility with planning regulations. On May 24, 2012 the Company opposed to this petition.

The Company has been unofficially informed by the mining authority that the awarding of the permit (including the grids extending over the municipality of Liedana) has been positively informed by the technical staff of the regional government, and that it is only pending of definitive approval and signing by the General Directorate of Energy and Mines of the Regional Government.

Once the investigation permit is awarded and notified to the Company, the relevant resolution must be published with the Official Gazette of the Autonomous Region of Navarra in order to make the awarding of the permit effective vis-à-vis third parties.

(ii) “Fronterizo” investigation permit

On June 21, 2012, the Company formally applied for “Fronterizo” investigation permit. The application for this permit included 35 mining grids (equivalent to approximately 1,050 hectares) in the Autonomous Regions of Navarra and Aragon. This investigation permit has been requested for a term of 3 years.

The permit has not been awarded yet. Unlike “Goyo”, “Quiñones” and “Adios”, this investigation permit is in an earlier administrative stage, and thus it will still take some time (difficult to determine) before it is awarded. The Company is now dealing with the payment of fees and preparing the technical documentation supporting the application.

Like any other application for an investigation permit, it will need to go through a public information period where third parties shall be entitled to file allegations against the application. At this stage it is not possible to anticipate whether this permit shall be awarded.

(iii) “Despeñaperros” exploration permit

The Company formally applied for an additional exploration permit on July 19, 2011. The application for this permit included 324 mining grids (equivalent to approximately 9,720 hectares) in the Autonomous Region of Navarra.

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On October 13, 2011 the Company formally renounced to this application, and on November 30, 2011, the application for “Despeñaperros” exploration permit was shelved by the mining authority.

2.3. Below is a summary chart of all mining permits awarded to and requested by the Company as of today:

Name of the Permit	Number of Grids	Status	Term	Observations

		EXPLORATION PERMITS
Las Molineras	324	Awarded	1 year	Apart from researching, no other exploration works have been initiated yet.

Muga	315	Awarded	1 year	�Pending publication of the resolution awarding the permit with the relevant official gazettes. �Apart from researching, no other exploration works have been initiated yet.

Despeñaperros	324	Application withdrawn	1 year	The Company formally renounced to this application on October 13, 2011. The application was shelved by the mining authority as per Resolution dated November 30, 2011.

		INVESTIGATION PERMITS
Goyo	195	Application filed on July 19, 2011	3 years	�Not awarded yet. Pending definitive approval by mining authority. Not expected by the Company until September. �The Company originally requested the permit over 261 mining grids; however, the Company later formally renounced to 66 grids. �One of the Town Halls affected by the application filed allegations requesting that all mining grids extending over its territory are excluded from the application due to their incompatibility with planning regulations. On May 24, 2012 the Company opposed to this petition.

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Name of the Permit	Number of Grids	Status	Term	Observations

Quiñones	285	Awarded	3	y e a r s �The resolution provided is not signed by the competent authority. �The resolution awarding the permit must still be published with the official gazettes to make it effective vis-à-vis third parties. �9 mining grids of this investigation permit are affected by a pre-existing mining right held by a third party. Both rights are considered compatible by the mining authority.

Adios	270	Awarded	3 years	�The resolution provided is not signed by the competent authority. �The resolution awarding the permit must still be published with the official gazettes to make it effective vis-à-vis third parties. �Part of the surface of this investigation permit is affected by a pre-existing mining right (concession) held by a third party. Both rights are considered compatible by the mining authority.

Fronterizo	35	Application filed on June 21, 2012	3 years	�Not awarded yet. Very early administrative stage. �The Company is now dealing with the payment of fees associated to the application and with the preparation of the documentation supporting the application.

2.4. According to the Documentation made available, the Company has not been requested by the mining authorities to deposit any kind of guarantees to be awarded with the different exploration and investigation permits requested.

3. Transfer of mining rights under Spanish law

Like mining concessions, exploration and investigation permits may be transferred and assigned in whole or in part to a third party with enough technical and financial solvency.

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Although when requesting an administrative authorization to transfer mining rights the Mining Law seems to be thinking only in asset deals where there is an effective change in the holder/owner of the permit, rather than in share deals (as it is the case of the Transaction), it cannot be discarded that the mining authorities could consider than an authorization to complete the Transaction is required. However, we believe this risk to be low because once KCL has completed the acquisition of the Company, the acquisition of KCL by the Client (with the ultimate consequence of acquiring the mining permits held by the Company) shall be done at Australian level and there will be no effective change in the shareholders of the Company (that shall remain to be KCL).

In our opinion, the risk that an authorization could be required is higher in the case of the transaction between KCL and the Company because in that case there will be an effective change in the totality of the share capital of the Company from the original shareholders (Geotrex and Mr. and Mrs. Carter) to KCL. This risk would be reinforced by the fact that the only assets owned by the Company as of today are the exploration and investigations permits already awarded and in the process of being awarded, so it could be understood by the mining authorities that the ultimate ratio for KCL to acquire the Company was to acquire the mining permits and not the Company, which is only the vehicle to acquire said permits.

However, the Company has verbally informed that the mining authorities are fully aware of the sale of the Company to KCL and they have not requested such an authorization.

According to the Mining Law, should an authorization be finally required, it may be obtained before or after the Transaction is closed. However, if the Transaction is closed before the authorization is awarded, the transfer of the permits shall not be fully effective from an administrative standpoint until the authorization is awarded. According to recent case law, if the authorization is finally not awarded the transfer of the permits could be declared null and void with effects ex tunc .

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III. REAL ESTATE

1. Introduction

In order to carry out any works under an investigation permit it is necessary that the holder of the permit enters into an agreement with the relevant landowners to allow the occupation of the land and the execution of the works. In case the holder of the investigation permit cannot reach an agreement with all or any of the landowners, it must initiate a specific administrative procedure to allow the temporary occupation of the land.

Consequently, in order to carry out any investigation works under the investigation permits described in sections II of this Report, the Company must enter into agreements (either purchase and sale, lease, etc.) with the landowners to occupy the land and carry out the investigation works.

2. Real estate agreements entered into by the Company to allow the occupation of land to carry out exploration and investigation works

According to the information provided, the Company has not executed as of today any agreement to allow the occupation of land to carry out exploration or investigation works.

Although this is not a contingency as of today, it must be noted that the Company is legally obliged to initiate the investigation works within six months from the date it has legal title to occupy the land to carry out the works. Although there is not a legal term to reach an agreement with the landowners, the execution of the agreements –or, alternatively, the completion of the administrative procedure to allow the temporary occupation of the land, as explained before- must be coordinated with the timing for the investigation works approved by the mining authority as part of the investigation permit.

Since the breach of the obligation to initiate the investigation works within six months from the date the Company has legal title to occupy the land could entail the revocation of the investigation permit, the execution of the real estate agreements must be closely followed by the Company once the permits are awarded in order to avoid any risks of not fulfilling the timing assumed under the permits and also the risk to breach the above mentioned obligation to initiate the investigation works within six months from the date the Company has legal title to occupy the land.

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IV. OTHER QUESTIONS:

AGREEMENTS, LABOUR ISSUES, SUBSIDIES AND LITIGATION

According to the information provided, as of today the Company:

(i) Has not entered into any kind of agreement, either verbal or in written, with any third party.
(ii) Does not have and has never had any employees or any self-employees or independent contractors or individuals employed by third companies whose contractual relationships could be formally or materially qualified as employment relationships with the Company.
(iii) Has not applied for nor awarded with any subsidy, grant, aid or incentive.
(iv) Is not engaged in any litigation, arbitration or other dispute resolution process, or administrative or criminal proceedings, whether as claimant, defendant or otherwise.

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ANNEX 1

DOCUMENTATION MADE AVAILABLE

1. Resolution issued by the Spanish Ministry of Industry, Tourism and Trade, dated June 5, 2012.

2. Announcement published in the Navarra Official Gazette dated March 20, 2012.

3. Resolution issued by the Navarra Regional Government awarding “Las Molineras” exploration permit, dated November 22, 2011.

4. Announcement published in the Aragon Official Gazette dated January 19, 2012 (awarding “Las Molineras” exploration permit).

5. Application filed by the Company for “Despeñaperros” exploration permit, dated July 19, 2011.

6. Application filed by the Company for “Las Molineras” exploration permit, dated July 19, 2011.

7. Application filed by the Company for “Quiñones” investigation permit, dated July 19, 2011.

8. Application filed by the Company for “Adios” investigation permit, dated July 19, 2011.

9. Application filed by the Company for “Fronterizo” investigation permit, dated June 18, 2012.

10. Application filed by the Company for “Goyo” investigation permit, dated July 19, 2011.

11. Evidence of payment of tax associated to application for “Muga” exploration permit, dated October 17, 2010.

12. Evidence of payment of tax associated to application for “Despeñaperros” exploration permit, dated August 5, 2011.

13. Evidence of payment of tax associated to application for “Las Molineras” exploration permit, dated August 5, 2011.

14. Announcement published in the Navarra Official Gazette dated January 19, 2012.

15. Application filed by the Company for “Muga” exploration permit, dated October 13, 2011.

16. Notification made by the Navarra Regional Government, dated May 5, 2011.

17. Notification made by the Navarra Regional Government, dated May 5, 2011.

18. Resolution issued by the Navarra Regional Government, dated November 30, 2011.

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19. Financing plan corresponding to the applications for “Las Molineras” and “Muga” exploration permits and for “Goyo”, “Quiñones” and “Adios” investigation permits.

20. Allegations filed by the Company in relation to “Adios” investigation permit, dated May 24, 2012.

21. Allegations filed by the Company in relation to “Quiñones” investigation permit, dated May 24, 2012.

22. Resolution of the Aragon Regional Government, dated November 30, 2011.

23. Draft of the allegations filed by the Company regarding “Goyo” investigation permit, dated May 24, 2012.

24. Online informative report dated July 11, 2012 describing the corporate details of the Company.

25. Deed of incorporation executed on July 14, 2011 before the Notary of Salamanca Mr. Juan Antonio Blanco González, with number 1,477 of his records (includes the Company´s by-laws).

26. Deed of share capital increase executed on June 13, 2012 before the Notary of Salamanca Mr. Juan Antonio Blanco González, with number 1,104 of his records.

27. Company´s annual accounts for year 2011 filed at the Commercial Registry (balance sheet, profit and loss account and director´s report).

28. Certificate issued by the Commercial Registry on July 8, 2011 confirming that the Company´s corporate name was available.

29. Certificate issued by the Spanish Tax Authorities on July 14, 2011 providing the tax identification number of the Company.

30. Purchase option agreement executed on July 16, 2012 between Geotrex Gestión Minera, Mr Derek Carter and KCL Resources Ltd. with respect to the 4,000 shares of the Company.

31. Resolution from the Navarra Regional Government dated August 7, 2012 (Quiñones and Adios investigation permits).

32. Deed executed on August 10, 2012 before notary public Mr. Carlos Hernandez Fernandez-Canteli.

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SCHEDULE 8 – PRO-FORMA BALANCE SHEET

The unaudited pro-forma Balance Sheet for Highfield as at 30 June 2012 have been prepared on the accounting policies normally adopted by the Company and reflect the changes to its financial position. The historical and pro forma financial information is presented in abbreviated form, insofar as it does not include all of the disclosures required by Australian Accounting Standards applicable to annual financial statements. They have been prepared on the assumption that all shares and options proposed to be issued as part of the transaction are issued.

	Audited Balance Sheet	Unaudited pro forma Balance Sheet
	As at 30 June 2012	As at 30 June 2012
Current Assets Cash Receivables	3,557,760 77,159	3,693,722 78,680
	3,634,919	3,772,402
Non-Current Assets Exploration properties	190,797	20,664,956
	190,797	20,664,956
TOTAL ASSETS	3,825,716	24,437,358
Current Liabilities Creditors & borrowings	107,766	111,266
	107,766	111,266
TOTAL LIABILITIES	107,766	111,266

NET ASSETS	3,717,950	24,326,092
Share Capital Reserves Retained Loss	4,028,009 78,365 (388,694)	24,498,009 531,739 (703,656)
TOTAL SHAREHOLDER EQUITY	3,717,950	24,326,092

138

HIGHFIELD RESOURCES LIMITED ACN 153 918 257 ANNUAL GENERAL MEETING - APPOINTMENT OF PROXY

I/We of

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being a member of Highfield Resources Limited entitled to attend and vote at the Annual General Meeting, hereby

Appoint Name of proxy

OR the Chair of the Annual General Meeting as your proxy

or failing the person so named or, if no person is named, the Chair of the Annual General Meeting, or the Chair’s nominee, to vote in accordance with the following directions, or, if no directions have been given, and subject to the relevant laws as the proxy sees fit, at the Annual General Meeting to be held at 9:30 am (WST), on Friday, 5 October 2012 at Level 1, 33 Richardson Street, West Perth, Western Australia, and at any adjournment thereof.

Comment

“ Important for Resolution 1 : If the Chair of the Meeting or any member of the Key Management Personnel of the Company whose remuneration details are included in the Remuneration Report or a Closely Related Party of that member is your proxy and you have not directed the proxy to vote on Resolution 1, the proxy will be prevented from casting your votes on Resolution 1. If the Chair, another member of the Key Management Personnel of the Company whose remuneration details are included in the Remuneration Report or Closely Related Party of that member is your proxy, in order for your votes to be counted on Resolution 1, you must direct your proxy how to vote on Resolution 1.”

If no directions are given, the Chair will vote in favour of all the Resolutions in which the Chair is entitled to vote undirected proxies.

OR

Voting on Business	of the Annual General Meeting	FOR AGAINST ABSTAIN	FOR AGAINST ABSTAIN	FOR AGAINST ABSTAIN	FOR AGAINST ABSTAIN	FOR AGAINST ABSTAIN	FOR AGAINST ABSTAIN	FOR AGAINST ABSTAIN
Resolution 1	Adoption of Remuneration Report
Resolution 2	Re-Election of a Director – Mr Jonathan Murray
Resolution 3	Appointment of Auditor –
	HLB Mann Judd Corporate (WA) Pty Ltd
Resolution 4	Change to Scale of Activities
Resolution 5	Issue of New Class of Shares – Performance Shares
Resolution 6	Approval to issue Shares and Performance Shares to Shareholder of KCL Resources Limited
Resolution 7	Approval to issue Shares and Options to Taylor Collison
Resolution 8	Approval of 10% Placement Facility

Please note : If you mark the abstain box for a particular Resolution, you are directing your proxy not to vote on that Resolution on a show of hands or on a poll and your votes will not to be counted in computing the required majority on a poll.

If two proxies are being appointed, the proportion of voting rights this proxy represents is %

Signature of Member(s): Date: ____

Individual or Member 1 Sole Director/Company Secretary	Member 2 Director	Member 3

		Director/Company Secretary

Contact Name: _____ Contact Ph (daytime): _________

139

HIGHFIELD RESOURCES LIMITED ACN 153 918 257

Instructions for Completing ‘Appointment of Proxy’ Form

( Appointing a Proxy ): A member entitled to attend and vote at an Annual General Meeting is entitled to appoint not more than two proxies to attend and vote on a poll on their behalf. The appointment of a second proxy must be done on a separate copy of the Proxy Form. Where more than one proxy is appointed, such proxy must be allocated a proportion of the member’s voting rights. If a member appoints two proxies and the appointment does not specify this proportion, each proxy may exercise half the votes. A duly appointed proxy need not be a member of the Company.
( Direction to Vote ): A member may direct a proxy how to vote by marking one of the boxes opposite each item of business. Where a box is not marked the proxy may vote as they choose. Where more than one box is marked on an item the vote will be invalid on that item.

3. ( Signing Instructions ):

( Individual ): Where the holding is in one name, the member must sign.
( Joint Holding ): Where the holding is in more than one name, all of the members should sign.
( Power of Attorney ): If you have not already provided the Power of Attorney with the registry, please attach a certified photocopy of the Power of Attorney to this form when you return it.
( Companies ): Where the company has a sole director who is also the sole company secretary, that person must sign. Where the company (pursuant to Section 204A of the Corporations Act) does not have a company secretary, a sole director can also sign alone. Otherwise, a director jointly with either another director or a company secretary must sign. Please sign in the appropriate place to indicate the office held.
( Attending the Meeting ): Completion of a Proxy Form will not prevent individual members from attending the Annual General Meeting in person if they wish. Where a member completes and lodges a valid Proxy Form and attends the Annual General Meeting in person, then the proxy’s authority to speak and vote for that member is suspended while the member is present at the Annual General Meeting.
( Return of Proxy Form ): To vote by proxy, please complete and sign the enclosed Proxy Form and return by:
(a) deliver the proxy form by hand to the Company’s registered office at Level 1, 33 Richardson Street, West Perth, Western Australia;
(b) mail the proxy form to the Company’s registered office at PO Box 826 West Perth, Western Australia, 6872; or
(c) send the proxy from by facsimile to the Company on facsimile number +61 8 9200 4469,

so that it is received not later than 9:30 am (WST) on Wednesday, 3 October 2012.

Proxy forms received later than this time will be invalid.

140

AI assistant

HIGHFIELD RESOURCES LIMITED — AGM Information 2012

65048_rns_2012-09-04_83f01b2b-3562-4ef0-992d-afff6ea39a84.pdf

NOTICE OF ANNUAL GENERAL MEETING EXPLANATORY STATEMENT

PROXY FORM

CONTENTS PAGE

TIME AND PLACE OF MEETING AND HOW TO VOTE

VENUE

VOTING IN PERSON

VOTING BY PROXY

Proxy vote if appointment specifies way to vote

Transfer of non-chair proxy to chair in certain circumstances

NOTICE OF ANNUAL GENERAL MEETING

AGENDA

ORDINARY BUSINESS

Financial Statements and Reports

1. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

Voting Prohibition Statement:

2. RESOLUTION 2 – RE-ELECTION OF A DIRECTOR – MR JONATHAN MURRAY

3. RESOLUTION 3 – APPOINTMENT OF AUDITOR – HLB MANN JUDD CORPORATE (WA) PTY LTD

4. RESOLUTION 4 – CHANGE TO SCALE OF ACTIVITIES

5. RESOLUTION 5 – CREATION OF NEW CLASS OF SECURITIES – PERFORMANCE SHARES

6. RESOLUTION 6 – ISSUE OF SHARES AND PERFORMANCE SHARES TO SHAREHOLDERS OF KCL RESOURCES LIMITED

7. RESOLUTION 7 – ISSUE OF SHARES AND OPTIONS TO TAYLOR COLLISON

8. RESOLUTION 8 –APPROVAL OF 10% PLACEMENT FACILITY

DATED: 31 AUGUST 2012

BY ORDER OF THE BOARD

SCOTT FUNSTON COMPANY SECRETARY

EXPLANATORY STATEMENT

1. FINANCIAL STATEMENTS AND REPORTS

2. RESOLUTION 1 – ADOPTION OF REMUNERATION REPORT

2.1 General

2.2 Voting consequences

2.3 Proxy restrictions

If you appoint a member of the Key Management Personnel as your proxy

If you appoint the Chair as your proxy

If you appoint any other person as your proxy

3. RESOLUTION 2 – RE-ELECTION OF – MR JONATHAN MURRAY

4. RESOLUTION 3 – APPOINTMENT OF AUDITOR – HLB MANN JUDD CORPORATE (WA) PTY LTD

5. OVERVIEW OF CHANGE OF SCALE OF ACTIVITIES

5.1 Background

5.2 Current Activities of the Company - McLarty Potash Project

5.3 Background on the Navarra Potash Project

(a) Consideration

(b) Agreement to reimburse for expenditure

(being the Project Resolution ).

(c)

Sale of Navarra Project prior to achievement of Milestones

Performance Shares converted = (Sale price of project – AUD10 million) / $ 0.20.

(d)

Board Representation

Pedro Rodriguez BSc, MSc

(e) Corporate advisory fee

5.5 Pro-forma capital structure

Notes :

5.6 Pro-forma balance sheet

5.7 Advantages of the Acquisition

5.8 Disadvantages of the Acquisition

5.9 Risk factors

Risks associated with the Navarra Project and the Acquisition

Tenement applications

(b)

Failure to satisfy minimum exploration requirements.

(c)

Impairment of capital

(d) General project risks

(e)

Exploration success

(f) Exploration costs

(g) Resource and reserve estimates

Risks relating to the Company’s Operations

(h) Future capital requirements

(i) Operating risks

(j)

Exploration success

(k)

Contractors and Contractual Disputes

Foreign exchange risk

(m)

Environmental risks

HIGHFIELD RESOURCES LIMITED AGM Information 2012