HIGHFIELD RESOURCES LIMITED — Interim / Quarterly Report 2012

Jul 4, 2012

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ABN 51 153 918 257

Financial Report for the Half Year Ended 30 April 2012

Highfield Resources Limited

CORPORATE DIRECTORY

Directors

Mr Jonathan Murray (Non-Executive Chairman) Mr Anthony Hall (Managing Director) Mr Mark Arundell (Executive Director)

Joint Company Secretaries

Mr Scott Funston Mr Aaron Bertolatti

Registered Office

Level 1 33 Richardson Street WEST PERTH WA 6005

Telephone: +61 8 9200 4426 Facsimile: +61 8 9200 4469 Website: www.highfieldresources.com.au

Share Registry

Advanced Share Registry Pty Ltd 150 Stirling Highway NEDLANDS WA 6009

Telephone: +61 8 9389 8033 Facsimile: +61 8 9389 7871

Auditors

HLB Mann Judd Level 4, 130 Stirling Street PERTH WA 6000

Telephone: +61 8 9227 7500 Facsimile: +61 8 9227 7533

Stock Exchange

Australian Stock Exchange (Home Exchange: Perth, Western Australia) ASX Code: HFR

Highfield Resources Limited

Contents	Page
Directors’ Report	1
Auditor’s Independence Declaration	3
Condensed Statement of Comprehensive Income	4
Condensed Statement of Financial Position	5
Condensed Statement of Cash Flows	6
Condensed Statement of Changes in Equity	7
Notes to the Condensed Financial Statements	8
Directors’ Declaration	11
Independent Auditor’s Review Report	12

Highfield Resources Limited

DIRECTORS’ REPORT

The directors of Highfield Resources Limited submit the financial report of the entity for the half-year ended 30 April 2012. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

Directors

The names of directors who held office during or since the end of the half-year and until the date of this report are as below. Directors were in office for this entire period unless otherwise stated.

Mr Jonathan Murray Executive Chairman (Appointed 25 October 2011) Mr Anthony Hall Managing Director (Appointed 25 October 2011) Mr Mark Arundell Executive Director (Appointed 25 October 2011)

Results

The loss after tax for the half-year ended 30 April 2012 was $290,298.

Review of Operations

Highfield Resources is an Australian based potash exploration and discovery company listed on the Australian Securities Exchange (ASX).

Projects

McLarty Potash Project

The McLarty Potash 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 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, with drilling scheduled to commence in October 2012 and initial core sample analysis results expected in late 2012.

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. Highfield presented its proposed work program to representatives of the Ngurrara people in April of this year in Broome.

The on-site heritage clearance activities are planned for the week commencing 30 July 2012. It is the expectation of the Board that the heritage clearance should be provided shortly thereafter. This will allow the Company to lodge its Program of Works (PoW) with the Western Australian Department of Mines and Petroleum. Approval of the PoW will enable drilling activities to commence.

As an important risk mitigation strategy, the approach of the Company has been to engage local contractors with significant local experience. Additionally, the Company executive is substantially involved in all processes and negotiation to ensure relevant stakeholders have direct access. This involvement extends to direct negotiation of contracts with contractors, presenting and negotiating directly with Traditional Owners, participating in heritage clearance activities and generally being visible in the community.

Navarra Potash Project

On 27 June 2012 the Company announced it had agreed to acquire a 100% interest in the Navarra Potash Project (Project), subject to due diligence, ASX and shareholder approval.

The Project comprises five tenements covering 430kms2. The tenements are located in the Ebro potash producing basin in Northern Spain. Exploration licenses have been granted for all five tenements and a program aimed at securing a maiden JORC resource is the Company’s initial aim.

The tenements in the Navarra sub-basin cover the Subiza Mine which was a significant potash producer in Spain between 1977 and 1996. 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$470 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.

Due diligence activities are expected to conclude on 21 July 2012 at which time it is expected definitive legal agreements will be executed subject to shareholder approval.

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Highfield Resources Limited

The material terms of the agreement to acquire the Project can be summarised as follows:

1. Subject to the satisfactory completion by the Company of due diligence, ASX and shareholder approval, the Company will issue:

2. a. 50,000,000 (50m) ordinary shares as consideration for 100% of the Project; and

3. b. 100,000,000 (100m) performance shares to be converted to ordinary shares upon the successful completion of two Project related milestones (50m ordinary shares per milestone).

4. The vendor may place two directors on the Board of the Company.

The vendor’s present intention is to place Derek Carter and Pedro Rodriguez on the Board. Both gentlemen have significant experience in mineral exploration.

Corporate

As reported to shareholders the Company has been evaluating a number of opportunities during the past six months. The acquisition of the Navarra Potash Project has resulted from these activities and it is the intention of the directors to focus on both the McLarty Potash Project and the Navarra Potash Project over the coming year.

As noted above, the acquisition of the Navarra Potash Project will see two additional directors appointed to the Board. Both proposed directors have significant mineral exploration experience and will be positive additions to the Board.

The Board would like to thank shareholders for their continued support and the directors look forward to the positive progression of the Company’s exciting potash projects over the coming year.

Subsequent Events

On 27 June 2012, the Company announced that it had entered into an agreement (subject to due diligence, ASX and shareholder approval) to acquire a 100% interest in the Navarra Potash Project located in Northern Spain.

Auditor’s Independence Declaration

Section 307C of the Corporations Act 2001 requires our auditors, HLB Mann Judd, to provide the directors of the company with an Independence Declaration in relation to the review of the half-year financial report. This Independence Declaration is set out on page 3 and forms part of this directors’ report for the half-year ended 30 April 2012.

This report is signed in accordance with a resolution of the Board of Directors made pursuant to s.306(3) of the Corporations Act 2001.

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Anthony Hall Managing Director

Perth, Western Australia 5 July 2012

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AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the review of the financial report of Highfield Resources Limited for the half-year ended 30 April 2012, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• a) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• b) any applicable code of professional conduct in relation to the review.

Perth, Western Australia 5 July 2012

W M CLARK Partner, HLB Mann Judd

HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4 130 Stirling Street Perth 6000 PO Box 8124 Perth BC 6849 Western Australia. Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a world-wide organisation of accounting firms and business advisers

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Highfield Resources Limited

Condensed Statement of Comprehensive Income for the half-year ended 30 April 2012

Note Continuing Operations Interest Received Listing and share registry expenses Professional and consultants fees 3 Service administration fees Other expenses Share based payments expense Travel and accommodation Loss before income tax Income tax expense Other comprehensive income Total comprehensive loss for the half-year Loss per share Basic loss per share (cents) Diluted loss per share (cents)	30 April 2012 $
	53,300 (2,410) (165,483) (60,000) (33,920) (42,513) (39,272)
	(290,298) - -
	(290,298)
	(0.91) (0.91)

The above Condensed Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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Highfield Resources Limited

Condensed Statement of Financial Position as at 30 April 2012

Note Current Assets Cash and cash equivalents 4 Other receivables Total Current Assets Non-Current Assets Deferred exploration & evaluation expenditure 5 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Total Current Liabilities Total Liabilities Net Assets Equity Issued capital 6 Reserves 7 Accumulated losses Total Equity	30 April 2012 $
	3,662,302 75,044
	3,737,346
	135,127
	135,127
	3,872,473
	92,249
	92,249
	92,249
	3,780,224
	4,028,009 42,513 (290,298)
	3,780,224

The above Condensed Statement of Financial Position should be read in conjunction with the accompanying notes.

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Highfield Resources Limited

Condensed Statement of Changes in Equity for the half-year ended 30 April 2012

Balance at 25 October 2011 Total comprehensive income for the half-year Loss for the half-year Total comprehensive income for the half-year Transactions with owners in their capacity as owners Issue of seed capital Shares issued by initial public offering Shares issued as part consideration for acquisition Share based payment Costs of issue Balance at 30 April 2012	Issued capital $ Accumulated losses $ Reserves $ Total $
	- - - -
	- (290,298) - (290,298)
	- (290,298) - (290,298)
	400,133 - - 400,133 4,000,000 - - 4,000,000 30 - - 30 - - 42,513 42,513 (372,154) - - (372,154)
	4,028,009 (290,298) 42,513 3,780,224

The above Condensed Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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Highfield Resources Limited

Condensed Statement of Cash Flows for the half-year ended 30 April 2012

Cash flows from operating activities Payments to suppliers and employees Interest received Net cash flows used in operating activities 4 Cash flows from investing activities Payments for exploration expenditure and project acquisition Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Payments for share issue costs Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the end of the period 4	30 April 2012 $
	(261,824) 24,300
	(237,524)
	(135,097)
	(135,097)
	4,400,133 (365,210)
	4,034,923
	3,662,302
	3,662,302

The above Condensed Statement of Cash Flows should be read in conjunction with the accompanying notes.

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Highfield Resources Limited Notes to the Condensed Financial Statements for the half-year ended 30 April 2012

1. Corporate Information

The financial report of Highfield Resources Limited (“Highfield” or “the Company”) for the half-year ended 30 April 2012 was authorised for issue in accordance with a resolution of the directors on 5 July 2012. Highfield is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The nature of the operations and the principal activities of the Company are described in the Directors Report.

2. Summary of Significant Accounting Policies

(a) Basis of Preparation

These general purpose financial statements for the half-year reporting period ended 30 April 2012 have been prepared in accordance with Australian Accounting Standard 134 Interim Financial Reporting and the Corporations Act 2001.

These half-year financial statements do not include all the notes of the type normally included in annual financial statements and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the Company as the full financial statements. The accounting policies adopted are consistent with those set out in the Prospectus. Accordingly, these half-year financial statements are to be read in conjunction with the Company’s Prospectus (the “Prospectus”) dated 5 December 2011 and any public announcements made by Highfield Resources Limited during the half-year reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The half-year report has been prepared on an accruals basis and is based on historical costs.

Comparatives

The Company was incorporated on 25 October 2011 and this is the first half-year reporting period for the Company and therefore there are no comparatives.

(b) Segment Reporting

For management purposes, the Company is organised into one main operating segment, which involves exploration for Potash. All of the Company’s activities are interrelated, and discrete financial information is reported to the Managing Director (Chief Operating Decision Maker) as a single segment. Accordingly, all significant operating decisions are based upon analysis of the Company as one segment. The financial results from this segment are equivalent to the financial statements of the Company as a whole.

3. Expenses 4. Cash And Cash Equivalents Reconciliation of cash Cash comprises of: Cash at bank Reconciliation of operating loss after tax to net cash flows from operations Loss after tax Non cash items Share based payments Costs of Issue Change in assets and liabilities Increase in trade and other receivables Increase in trade and other payables Net cash outflow from operating activities 5. Deferred Exploration and Evaluation Expenditure Opening balance Acquisition of exploration tenements Exploration and evaluation expenditure incurred during the period Closing balance Professional and consultants fees Consulting fees Corporate advisory fees Directors’ fees Other	30 April 2012 $ (113,333) (30,000) (8,333) (13,817)
	(165,483)
	3,662,302
	(290,298) 42,513 (6,944) (75,044) 92,249
	(237,524)
	- 30 135,097
	135,127

The ultimate recoupment of costs carried forward for exploration expenditure is dependent on the successful development and commercial exploitation or sale of the respective mining areas.

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Highfield Resources Limited

Notes to the Condensed Financial Statements for the half-year ended 30 April 2012

Issued Capital Ordinary shares Issued and fully paid Movements in ordinary shares on issue Opening balance Issue of seed capital Shares issued as part consideration for acquisition1 Shares issued by initial public offering Costs of issue Closing balance	No. - 21,000,003 3,000,000 20,000,000 -	4,028,009 30 April 2012 $
		$ - 400,133 30 4,000,000 (372,154)
	44,000,003	4,028,009

6. Issued Capital

1 3,000,000 shares were issued to Broadway Resources Pty Ltd for the acquisition of a 10% interest in the McLarty Project at $0.00001 per share.

7. Share Based Payments

The fair value at grant date of options granted during the reporting period was determined using the Black Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share and the risk free interest rate for the term of the option.

The table below summarises options granted during the half-year:

					Exercised	Expired	Balance at	Exercisable at
		Exercise	Balance at start	Granted during	during the	during the	end of the	end of the half-
Grant Date	Expiry date	price	of the year	the half-year	half-year	half-year	half-year	year
			Number	Number	Number	Number	Number	Number
01/11/2011	01/11/2016	$0.20	-	6,000,000	-	-	6,000,000	-

The fair value of options granted during the half-year was $42,513.

The model inputs, not included in the table above, for options granted during the half-year ended 30 April 2012 included:

• a) options are granted for no consideration;

• b) expected life of options is four years;

• c) share price at grant date of $0.05

• d) expected volatility of 100%;

• e) expected dividend yield of Nil; and

• f) a risk free interest rate from 4.89%.

8. Dividends

No dividends have been paid or provided for during the half-year.

9. Contingent Assets And Liabilities

There are no known contingent assets or liabilities.

10. Commitments

Highfield is entitled to earn a further 40% (for a total of 50%) interest in the McLarty Project (“Project”) by spending a minimum of $500,000 on completing one exploration drill hole on the Project within two years of Highfield being admitted to the official list of ASX. If the drill hole is not completed during this period, Highfield will immediately transfer all of its 10% interest in the Project back to Broadway Resources Pty Ltd (“Broadway”) and Broadway will retain all shares issued and any monies paid in consideration for the 10% interest (“First Earn-In Period”).

Following the First Earn-In Period, Highfield will be entitled to earn a further 30% (for a total of 80%) interest in the Project by completing and outlining an independently calculated and inferred JORC compliant resource of 100Mt at 20% potassium oxide and spending a minimum of $1,000,000 within four years of Highfield being admitted to the official list of ASX (“Second Earn-In Period”).

Following the Second Earn-In Period, Broadway has the discretion to offer an exclusive option to the Company to acquire the remaining 20% interest in the Project. If Broadway does not grant this option to the Company, any further expenditure on the Project following the Second Earn-In Period will be contributed by the Company and Broadway jointly and equally.

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Highfield Resources Limited

Notes to the Condensed Financial Statements for the half-year ended 30 April 2012

11. Subsequent Events

On 27 June 2012, the Company announced that it had entered into an agreement (subject to due diligence, ASX and shareholder approval) to acquire a 100% interest in the Navarra Potash Project located in Northern Spain.

Subject to the satisfactory completion by the Company of due diligence, ASX and shareholder approval, the Company will issue:

• i. 50,000,000 (50m) ordinary shares as consideration for 100% of the Project; and

• ii. 100,000,000 (100m) performance shares to be converted to ordinary shares upon the successful completion of two Project related milestones (50m ordinary shares per milestone).

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Highfield Resources Limited

Directors’ Declaration

In the opinion of the directors of Highfield Resources Limited (‘the Company’):

1. The financial statements and notes thereto, as set out on pages 4 to 10, are in accordance with the Corporations Act 2001 including:

2. a. complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations; and

3. b. giving a true and fair view of the Company’s financial position as at 30 April 2012 and of its performance for the half-year then ended.

4. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is signed in accordance with a resolution of the Board of Directors made pursuant to s.295A of the Corporations Act 2001.

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Anthony Hall Managing Director

Perth, Western Australia 5 July 2012

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INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of Highfield Resources Limited

Report on the Condensed Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Highfield Resources Limited (“the company”), which comprises the condensed statement of financial position as at 30 April 2012, the condensed statement of comprehensive income, condensed statement of changes in equity and condensed statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Directors’ responsibility for the half-year financial report

The directors of the Highfield Resources Limited are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Highfield Resources Limited financial position as at 30 April 2012 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of the company, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

HLB Mann Judd (WA Partnership) ABN 22 193 232 714 Level 4, 130 Stirling Street Perth WA 6000. PO Box 8124 Perth BC 6849 Telephone +61 (08) 9227 7500. Fax +61 (08) 9227 7533. Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au Liability limited by a scheme approved under Professional Standards Legislation

HLB Mann Judd (WA Partnership) is a member of International, a worldwide organisation of accounting firms and business advisers.

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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

Matters relating to the electronic presentation of the reviewed half-year financial report

This review report relates to the half-year financial report of the company for the half-year ended 30 April 2012 included on the company’s website. The company’s directors are responsible for the integrity of the company’s website. We have not been engaged to report on the integrity of this website. The review report refers only to the half-year financial report identified above. It does not provide an opinion on any other information which may have been hyperlinked to/from the half-year financial report. If users of the half-year financial report are concerned with the inherent risks arising from publication on a website they are advised to refer to the hard copy of the reviewed half-year financial report to confirm the information contained in this website version of the half-year financial report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Highfield Resources Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the Highfield Resources Limited’s financial position as at 30 April 2012 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

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HLB MANN JUDD
Chartered Accountants
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Perth, Western Australia 5 July 2012

W M CLARK Partner

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