HIGHFIELD RESOURCES LIMITED — Interim / Quarterly Report 2015

Jan 27, 2016

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ASX Release 28 January 2016

DECEMBER 2015 QUARTERLY ACTIVITIES AND CASHFLOW REPORT

Highlights

• Muga Potash Mine Project optimisation completed (refer to ASX Announcement dated 17 November 2015) including:

• Mine life increased from 24 to 47 years at a production rate of 1.08m tonnes of K60 granular muriate of potash (MOP) per annum

• Project NPV10 increased from US$1.42bn to US$1.46bn, NPV8 increased from US$1.80bn to US$2.04bn

• Proved and Probable Ore Reserves increase from 146m tonnes at an average grade of 12.7% K2O to 253m tonnes with an average grade of 11.5%, an increase of 73% from the Definitive Feasibility Study (DFS) of 30 March 2015

• Pre-production capex estimated at €267m

• Direct employment of over 800 employees, and expected to induce a further 3,500 indirect jobs

• Subsequent to Muga’s optimisation the intersection of 31 metres of potash mineralisation across all three seams in geotechnical drill hole J15-02 suggests likely increase in size of Mineral Resource Estimate, mine and reserve life (refer to ASX Announcement dated 18 December)

• Entered into a collaboration agreement with Acciona Infraestructura, part of the Acciona Group of Companies, to construct the Muga Potash Mine (refer to ASX Announcement dated 29 December)

• Credit approval received from three of the four Mandated Leading Arrangers to participate in long-term project finance facility required to construct the Muga mine (refer to ASX Announcement dated 29 December 2015)

• Post Quarter-end, independent report by Argus FMB confirms Highfield will be the highest margin potash producer globally and lowest cost potash producer in its target markets of Europe, Brazil and the US (refer to ASX Announcement dated 19 January 2016).

Corporate:

• Former PotashCorp Chief Operating Officer Jim Dietz appointed as an independent non-executive director

• Experienced mining executive Pauline Carr appointed as an independent non-executive director

Financial Strength:

• Cash at bank as at 31 December 2015: $107.5m

Plans for March Quarter:

Muga Project:

• Final credit approvals for Project Finance facility

• Receipt of positive environmental declaration

Other Projects:

• Drilling to test exploration target in Pintanos Potash Project

• Advancement of strategies for de-icing salt and, vacuum salt sales

• Progression of SOP strategy from MOP to provide additional fertiliser options

Highfield Resources Ltd. ACN 153 918 257 ASX: HFR

Issued Capital

310.6 million shares 51.5 million performance shares 52.8 million options

Registered Office C/– HLB Mann Judd 169 Fullarton Road Dulwich, SA 5065 Australia

Head Office

Avenida Carlos III, 13 - 1°B, 31002 Pamplona, Spain

• –––––––––––––––––– –––––––––––––––––– T. +61 8 8133 5098 T. +34 948 050 577 F. +61 8 8431 3502 F. +34 948 050 578

Directors Derek Carter Pauline Carr Richard Crookes Jim Dietz Anthony Hall Owen Hegarty Pedro Rodriguez

Company Secretary Donald Stephens

www.highfieldresources.com.au

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Muga Potash Project

Overview

Highfield Resources (ASX: HFR) (“Highfield” or “the Company”) is a Spanish potash developer. The Company’s flagship Muga Potash Project is targeting the relatively shallow sylvinite beds in the Muga Project area that cover about 80km[2] . Mineralisation commences at depths from surface of less than 200 metres and appears ideal for a relatively low-cost conventional mine accessed via a dual decline, as demonstrated in the Company’s DFS completed in March 2015 (refer to ASX announcement dated 30 March 2015).

Mine Optimisation

As part of preparing Muga for construction, Highfield completed further optimisation of the project with a focus on underground design and equipment selection to improve operational efficiencies. Initiatives and outcomes included:

• Altering the mine plan to include an additional sylvinite seam (Capa A) resulting in an increased mine life from 24 to 47 years. This excludes any potential upside from the substantial Exploration Target;

• Electing to use a combination of continuous miners and road headers to increase productivity in production and infrastructure development;

• Increasing the number of main infrastructure galleries in the mine plan from one to three to reduce ramp up risk and increase likely operational efficiency;

• Increasing the size of the underground conveyor belt system to cater for an increase in underground tonnage and to enable better expansion options;

• Increasing the size of underground storage to enable more flexibility in smoothing grade profile to the processing plant;

• Increasing the size of the conveyor belt to surface in one decline to 1,500 tonnes per hour of material;

• Increasing the size and flexibility of the processing plant to deal with higher throughput of material;

• • Altering mine and process plant design to deliver a constant 90k tonnes of granular K60 per month (1.08m tonnes per annum) for the balance of the revised 47-year mine life; and
• • Factoring in potential mine expansion into design to allow seamless expansion of production in the future.

The optimisation initiatives increased in pre-production capex by approximately 7%, from €249.5m (€243.4m plus €6.1m escalation) to €267m. NPV10 and NPV8 both increased due to the additional mine life to US$1.46bn and US$2.04bn respectively.

Employment increased to over 800 full time positions with expected induced indirect employment estimated at a further 3,500 positions.

More information on the optimised mine plan can be found in the ASX Announcement dated 17 November 2015.

Resource and Ore Reserve Upgrade

Highfield´s independent competent persons, Consultores Independientes en Gestión de Recursos Naturales S.A (“CRN”), calculated an upgraded Mineral Resource Estimate (“MRE”) which included the results of geotechnical drill holes (refer ASX announcement dated 29 May 2015), and is an update of the MRE calculated by Agapito Associates, Inc. (“Agapito”) (refer ASX Release of 24 February 2015).

CRN issued an upgraded JORC Code-compliant Measured and Indicated Mineral Resource Estimate of 224.5m tonnes of sylvinite at an average grade of 13.4% K2O based on an 8.0% K2O-in-sylvinite cutoff grade at a minimum 1.5 metres bed true thickness (Table 1). The estimate also included beds thinner than 1.5 metres where the grade-thickness product exceeds 12.0% K2O-in-sylvinite-m, thus satisfying the 8.0% K2O-in-sylvinite grade equivalency at 1.5 metres.

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It should be noted that the cutoff requirement used to calculate this Resource (and related Reserve) is an increase in comparison to the previous MRE from 24 February 2015, as it no longer includes K2O contained in carnallite, which is unlikely to be recoverable given the Company’s proposed ore treatment methods. The cutoff previously used referred to total K2O.

Table 1: Muga JORC Mineral Resource Estimate (effective date 17 Nov 2015)

	K2O (%) MgO (%) Na2O (%) Insolubles (%) Average Bed Thickness (m) Tonnes In- Place (Mt)
Measured	13.6 0.40 29.6 12.8 2.66 75.1 13.3 0.34 29.4 12.3 2.50 149.4
Indicated
TOTAL MEASURED & INDICATED	13.4 0.36 29.5 12.5 2.55 224.5
Inferred	13.8 0.38 29.7 12.0 2.59 39.2
TOTAL	13.5 0.36 29.5 12.4 2.56 263.7

Notes:

Measured and Indicated Resources are reported inclusive of Proved and Probable Reserves. Resource Estimate does not include any out-of-bed dilution. Resource cut-offs: (a) true thickness ≥ 1.5m: grade cutoff ≥ 8.0 K2O-in-sylvinite, or (b) true thickness < 1.5m: gradethickness cutoff ≥ 12.0% K2O-in-sylvinite-m.

Resource tonnes reduced by 5% for Measured and Indicated categories and 15% for Inferred category.

Radii of Influence are as follows:

Measured Resource— Potash meeting cutoff criteria located within an ellipse with boundaries 500m along strike and 250m across strike centred on an exploration core hole with assays, except where otherwise limited by geologic boundaries.

Indicated Resource— Potash meeting cutoff criteria located within an ellipse with boundaries 1,500m along strike and 750m across strike centred on an exploration core hole with assays (excluding Resources included in the Measured category), except where otherwise limited by geologic boundaries.

Inferred Resource— Potash meeting cutoff criteria located within an ellipse with boundaries 2,000m along strike and 1,000m centred on an exploration core hole with assays (excluding Resources included in the Measured and Indicated categories), except where otherwise limited by geologic boundaries.

The Ore Reserve used for current mine design and consequent production profile is based upon the updated MRE discussed in this document (refer to Table 1), as calculated by CRN. The updated Ore Reserve is shown below (Table 2):

Table 2: Ore Reserve Summary

Proved Reserves	Probable Reserves	Proved and Probable Reserves
Mt K2O (%)	Mt K2O (%)	Mt K2O (%)
81.6 11.7	172.1 11.4	253.7 11.5

Notes:

The JORC-compliant Measured and Indicated Resources reported in this document have formed the basis for the calculation of these Proved and Probable Reserves.

Extraction ratios of an average 77% have been applied to the Measured and Indicated Resources reported in this document to calculate Proved and Probable Reserves.

Dilutionary material of approximately 81m tonnes is included in the Reserves. This material has an average grade of 7.5% K2O.

The current mining plan contemplates an initial mine life of 47 years as shown below (Table 3):

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Table 3: Mining Summary	Table 3: Mining Summary
	Tonnes %
Average per annum ROM	6,219,452 253,702,671 86% 40,430,326 14%
Total Proved and Probable Ore
Total Inferred Resources
TOTAL ORE AND RESOURCES	294,132,997 100%
Average product per annum	1,022,029
Total Granular MOP	48,035,356

Collaboration Agreement with Acciona

Highfield entered into a collaboration agreement with Acciona Infraestructuras (“Acciona”), part of the Acciona Group of Companies, to construct the Muga Potash Mine.

Acciona is a Spanish headquartered company and has many years of experience in construction in Spain.

Under the collaboration agreement, Acciona is working with Highfield over a three-month period to prepare a submission to construct the mine and installations under a guaranteed maximum price contract where it is responsible for program, cost and quality risk.

Partnering with Acciona is designed to reduce delivery risk to ensure that the mine will be built on time and within budget. The outsourced arrangement is not expected to increase cost.

The parties have also agreed to deliver the project in accordance with the Company´s Fair Procurement Policy that gives preference to local suppliers and contractors where possible.

Project Finance mandate

The Company received credit approval from two of the four Mandated Lead Arrangers (“MLA”) to participate in a long-term project finance facility for the development of Muga mine in December. The third MLA confirmed credit approval in mid-January 2016 with the final MLA expected to confirm credit approval in early February.

The credit approvals, which are subject to satisfactory documentation and finalisation of due diligence, are for each bank to participate equally in the eight (8) year term facility and cost overrun facility (together the “Project Finance Facilities”) totalling up to €222m as previously announced (refer to ASX Announcement dated 27 August 2015).

Argus FMB independent report

Post Quarter-end, an independent report by global fertiliser consultant Argus FMB, commissioned by the European project finance banking syndicate, has determined that based on average potash prices for the 2015 calendar year, the Muga mine will position the Company as the highest margin potash producer globally.

The report on the global potash market included a specific focus on the Muga mine and concluded that once in operation, Highfield will be the highest margin producer globally, assuming a sales ratio of 75%/25% into the European and the US markets respectively.

The report also concluded that Highfield will be the lowest cost potash producer on a delivered-to-customer basis into the Company’s target markets of Europe, Brazil and the US.

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Average margin $/t
Margin Curve
250
Highfield
200
150
100
50
0
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75
MOP Capacity (mn t)
Estimated margin of each producer based on a weighted average of sales to different markets
Prices are 2015 whole-year averages
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Figure 1: Margin Curve of all Global Potash Producers

More information on Argus FMB’s independent report can be found in the ASX Announcement dated 19 January, 2016.

Exploration

Additional exploration results from Muga included an intersection of 31 metres of potash mineralisation starting at a depth to surface of 493 metres in geotechnical drill hole J15-02. The hole was drilled for geotechnical purposes in an area close to the base of the eastern decline, approximately 1km north of the historical Undues de Lerda hole and the modern hole J13-04. Assays results confirmed that the intercepted mineralisation includes beds P0, PA and PB.

The drill hole contained an average grade of 10.8% K2O, intersecting all three seams within this area of the mine plan including:

• Capa 0 – 4.5 metres at 15.7% K2O from 503 metres below surface;

• Capa A – 2.4 metres at 17.3% K2O from 509 metres below surface; and

• Capa B – 3.6 metres at 16.8% K2O from 514 metres below surface.

The intersection has strengthened Highfield’s belief that the deposit is open to the south and there is potential to further extend the project life.

More information on drill hole J15-02 can be found in the ASX Announcement dated 18 December 2015.

Vipasca Potash Project

Highfield´s 100%-owned Vipasca Project area includes the majority of the Vipasca permit, the entire Borneau permit and half of the Osquia permit. The Company is focusing on the deeper, higher-grade potash mineralisation that occurs in the P1 and P2 potash beds. The beds are located in the Muga subbasin, which runs along strike to the north-west into the Vipasca permit area.

Limited work was carried out on the Vipasca Project during the Quarter.

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Pintano Potash Project

Highfield´s 100%-owned Pintano Project abuts the Muga Project and covers an area of 65km2. Depths from surface to mineralisation commence at around 500 metres. The Company is building on substantial historical potash exploration information which includes seven drill holes and 10 seismic profiles completed in the late 1980s.

Limited work was carried out on the Pintano Project during the Quarter.

Sierra del Perdón Potash Project

Highfield´s 100%-owned Sierra del Perdón Project is located less than 10km from Pamplona and is within 40km of the Company´s flagship Muga Project.

Sierra del Perdón is a brownfield project which has hosted two former operating potash mines. The evaporite was historically mined, primarily for sylvinite but also for carnallite, before the mine closure in late 1996 due to relatively low potash prices of around US$100/tonne. There is potential for potash exploitation in new, unmined areas in the Sierra del Perdón Project area and for limited additional production from brownfield (adjacent to historically mined) areas.

Limited work was carried out on the Sierra del Perdón Project over the Quarter.

Izaga Potash Project

Highfield´s 100%-owned Izaga Project covers an area of more than 100km[2] , where historic drill holes and 2D seismic show a relatively continuous evaporite with drill hole intersects containing potash. With further positive exploration results, the Project could display similar attributes to the Muga Project.

Permit applications are currently under consideration and likely to be determined in the first half of CY2016.

Basin Wide Potash Production and Logistics Scheme

The Company is investigating options for the exploitation of potash and salt mineralisation across its basinwide project portfolio.

As reported in the previous Quarterly Activities Report dated 30 October 2015, global engineering consultancy, AECOM, has been appointed to provide support to the Company´s engineering team and will report on multiple transport options including rail extensions and slurry pipelines to a railhead. This process is ongoing.

Geoalcali Foundation

Overview

The Geoalcali Foundation is a not-for-profit Spanish foundation, supported exclusively by the Company. It was established to deliver projects into the communities in which the Company will operate its mines. Further information can be found at the foundation’s website, www.geoalcali.com/geoalcali-foundation.

Projects

The Company’s community engagement program was expanded in the Quarter to include a broader focus on the region of Aragón. Ongoing initiatives include a fertiliser education program in collaboration with the Agricultural Technology Centre of Aragón, the OrganiK nursery and fertiliser project, and a number of social welfare programs and cultural initiatives throughout the region.

The Geoalcali Foundation now supports over 15 community projects.

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Corporate

Independent Directors

Highfield appointed Mr. James “Jim” F. Dietz as an independent Non-Executive Director in November. Jim has more than 40 years of experience in the fertiliser, chemical and petroleum industries, primarily in senior operational roles. From 2000 to 2010 he was Chief Operating Officer (“COO”) of Potash Corporation of Saskatchewan (“PotashCorp”), the world’s largest fertiliser company, as part of a 17-year tenure with the company. He was responsible for global operations, safety, health and environment performance and procurement.

Jim is a chemical engineer and holds a Masters and Bachelors designation from Ohio State University.

As foreshadowed last quarter, Ms. Pauline Carr was appointed as an independent Non-Executive Director following the receipt of the requisite shareholder approvals at the 2015 AGM.

Pauline is an experienced mining executive with over 25 years’ commercial experience in the fields of management, corporate governance and compliance, mergers and acquisitions, investor and stakeholder relations and corporate restructures.

Cash position

As at 31 December 2015, the Company had A$107.5 million in cash on its balance sheet.

Annual Review of Ore Reserves and Mineral Resources

In accordance with ASX Listing Rule 5, the Company has performed an annual review of all JORCcompliant ore reserves and mineral resources as at 31 December 2015. Going forward, Highfield will conduct its annual review of reserves and resources on 30 June of each year.

Muga Project

A maiden Ore Reserve for the Muga Project was calculated as part of the Definitive Feasibility Study as released to the ASX on 30 March 2015.

An updated Ore Reserve for the Muga Project was calculated as part of the project optimisation released to the ASX on 17 November 2015. The Company considers this Ore Reserve to be accurate as at 31 December 2015.

Table 4: Muga Ore Reserves Summary

	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14
Proved Probable PROVED & PROBABLE RESERVES	81.6 11.7% 28.6 12.7% 172.1 11.4% 117.5 12.7%	N/A N/A
	253.7 11.5% 146.0 12.7%	N/A

Highfield released an update to the existing JORC-compliant Mineral Resource Estimate (“MRE) to the ASX on 24 February 2015.

A further update to this MRE was released to the ASX as part of the project optimisation study on 17 November 2015. The Company considers this MRE to be accurate as at 31 December 2015. The MRE includes all Ore Reserves shown above in Table 4.

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Table 5: Muga Mineral Resources Summary

	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14
Measured Indicated TOTAL MEASURED & INDICATED	75.1 13.6% 149.4 13.3%	42.5 11.8% 196.8 11.2%	17.4 11.3% 139.9 11.3%
	224.5 13.4%	239.3 11.3%	157.3 11.3%
Inferred TOTAL	39.2 13.8%	63.1 12.2%	111.3 11.1%
	263.7 13.5%	302.4 11.5%	268.6 11.2%

Sierra del Perdón Project

Highfield released a maiden MRE for the Sierra del Perdón Project to the ASX on 7 April 2015. The Company considers this MRE to be accurate as at 31 December 2015.

Table 6: Sierra del Perdón Mineral Resources Summary

	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14
Measured Indicated TOTAL MEASURED & INDICATED	0 41.8 10.7%	0 41.8 10.7%	N/A N/A
	41.8 10.7%	41.8 10.7%	N/A
Inferred TOTAL	40.3 10.5%	40.3 10.5%	N/A
	82.1 10.6%	82.1 10.6%	N/A

Pintano Project

Highfield released a maiden MRE for the Pintano Project to the ASX on 20 November 2013. The Company considers this MRE to be accurate as at 31 December 2015.

Table 7: Pintano Mineral Resources Summary

	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14
Measured Indicated TOTAL MEASURED & INDICATED Inferred TOTAL	0 0	0 0	0 0
	0	0	0
	187 11.2%	187 11.2%	187 11.2%
	187 11.2%	187 11.2%	187 11.2%

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Summary

A summary of Highfield’s total Ore Reserves and Mineral Resources is shown below.

Table 8: Highfield Total Ore Reserves Summary (all projects)

	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14
Proved Probable PROVED & PROBABLE RESERVES	81.6 11.7% 28.6 12.7% 172.1 11.4% 117.5 12.7%	N/A N/A
	253.7 11.5% 146.0 12.7%	N/A

Table 9: Highfield Total Mineral Resources Summary (all projects)

The MRE includes all Ore Reserves shown above in Table 8.

	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14	Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) Tonnes In- Place (Mt) K2O (%) 31-Dec-15 30-Jun-15 30-Jun-14
Measured Indicated TOTAL MEASURED & INDICATED Inferred TOTAL	75.1 13.6% 191.2 12.7%	42.5 11.8% 238.6 11.1%	17.4 11.3% 139.9 11.3%
	266.3 13.0%	281.1 11.2%	157.3 11.3%
	266.5 11.5%	290.4 11.3%	298.3 11.2%
	532.8 12.2%	571.5 11.3%	455.6 11.2%

Corporate Governance – Resources and Reserve Calculations

Due to the nature, stage and size of the Company’s existing operations, the Company believes there would be no efficiencies gained by establishing a separate mineral resources and reserves committee responsible for reviewing and monitoring the Company’s processes for calculating mineral resources and reserves and for ensuring that the appropriate internal controls are applied to such calculations. However, the Company ensures that all Mineral Resource calculations are prepared by a competent, senior geologist and are reviewed and verified independently by a qualified person. In addition, the existing composition of the Highfield Board of Directors includes three qualified geologists.

Competent Persons’ Statement

This ASX release was prepared by Mr. Anthony Hall, Managing Director of Highfield Resources. The information in this release that relates to Ore Reserves, Mineral Resources, Exploration Results and Exploration Targets is based on information prepared by Mr. José Antonio Zuazo Osinaga, Technical Director of CRN, S.A.; Mr. Jesús Fernández Carrasco. Managing Director of CRN, S.A. and Mr Manuel Jesus Gonzalez Roldan, Geologist of CRN, S.A. Mr. José Antonio Zuazo and Mr. Jesús Fernández, are licensed professional geologists in Spain, and are registered members of the European Federation of Geologists, an accredited organisation to which the Competent Person (CP) under JORC Code Reporting Standards must belong in order to report Exploration Results, Mineral Resources, Ore Reserves or Exploration Targets through the ASX. Mr. José Antonio Zuazo-Osinaga has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as a CP as defined in the 2012 Edition of the JORC Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.

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For more information:

Company

Anthony Hall Managing Director Ph: + 34 617 872 100

Investor Relations Executives

Simon Hinsley APAC Investor Relations Ph: +61 401 809 653

Hayden Locke Head of Corporate Development Ph: +34 609 811 257

Nuala Gallagher / Simon Hudson UK Investor Relations Ph: +44 207 920 3150

Table 8: Summary of Highfield’s Mineral Interests as at 31 December 2015

Project	Region	Permit Name	Permit Type	Applied	Granted	Ref #	Area Km2	Holder	Structure
Sierra del Perdón	Navarra	Quiñones	Investigation	19/07/2011	7/08/2012	35760	32.48	Geoalcali SL	100%
Sierra del Perdón	Navarra	Adiós	Investigation	19/07/2011	7/08/2012	35770	75.60	Geoalcali SL	100%
Sierra del Perdón	Navarra	Amplicación de Adiós	Investigation	26/10/2012	14/02/2014	35880	40.90	Geoalcali SL	100%
							148.98
Muga	Navarra	Goyo	Investigation	19/07/2011	24/12/2012	35780	27.72	Geoalcali SL	100%
Muga	Navarra	Goyo Sur	Investigation	25/07/2014	Pending	35920	8.96	Geoalcali SL	100%
Muga	Aragón	Fronterizo	Investigation	21/06/2012	5/02/2014	Z-3502/N-3585	9.80	Geoalcali SL	100%
Muga	Aragón	Muga	Investigation	29/05/2013	7/04/2014	3500	20.40	Geoalcali SL	100%
Muga	Aragón	Muga Sur	Investigation	25/09/2014	Pending	3524	7.28	Geoalcali SL	100%
							74.16
Vipasca(Muga)*	Navarra	Vipasca	Investigation	6/11/2013	11/12/2014	35900	38.92	Geoalcali SL	100%
Vipasca(Izaga)*	Navarra	Osquia	Investigation	28/04/2015	Pending	35970	81.20	Geoalcali SL	100%
Vipasca	Navarra	Borneau	Investigation	28/04/2015	Pending	35960	80.33	Geoalcali SL	100%
							200.45
Pintano	Aragón	Molineras 10	Investigation	20/11/2012	6/03/2014	3495/10	18.20	Geoalcali SL	100%
Pintano	Aragón	Molineras 20	Investigation	19/02/2013	Pending	3495/20	16.80	Geoalcali SL	100%
Pintano	Aragón	Puntarrón	Investigation	7/05/2014	Pending	3509	30.24	Geoalcali SL	100%
							65.24
Izaga	Navarra	Girardi	Investigation	28/04/2015	Pending	35950	79.17	Geoalcali SL	100%
							79.17
*Permit includes areas in two Projects						Total	568.00

Location: All permits are located in Spain.

Holder: Geoalcali SL is a 100%-owned Spanish subsidiary of Highfield Resources Limited. Changes: Nil

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www.highfieldresources.com.au

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About Highfield Resources

Highfield Resources is an ASX-listed potash company with five 100%-owned projects located in Spain.

Highfield’s Muga, Vipasca, Pintano, Izaga and Sierra del Perdón potash projects are located in the Ebro potash producing basin in Northern Spain, covering a project area of more than 550km[2] . The Sierra del Perdón project includes two former operating potash mines.

The Company completed a Definitive Feasibility Study for its flagship Muga Project in March 2015, which was optimised in November 2015 to enhance operational efficiencies, sales and marketing activities and the life of mine. Highfield expects to receive a positive environmental declaration in the first quarter of 2016 to enable it commence construction of the Mine.

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Figure 2: Location of Highfield´s Muga, Vipasca, Pintano, Izaga and Sierra del Perdón Projects in Northern Spain

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www.highfieldresources.com.au

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/2013

Name of entity

HIGHFIELD RESOURCES LIMITED

ABN

51 153 918 257

Quarter ended (“current quarter”) 31 December 2015

Consolidated statement of cash flows

Cash flows related to operating activities 1.1 Receipts from product sales and related debtors 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) administration 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Other (provide details if material) Net Operating Cash Flows	Current quarter $A’000	Year to date (6 months) $A’000
	(7,192) - - (907) - 1,133 - - -	(11,293) - - (2,039) - 1,156 - - -
	(6,966)	(12,176)
Cash flows related to investing activities 1.8 Payment for purchases of: (a) prospects (b) equity investments (c) other fixed assets 1.9 Proceeds from sale of: (a) prospects (b) equity investments (c) other fixed assets 1.10 Loans to other entities 1.11 Loans repaid by other entities 1.12 Other (provide details if material) Net investing cash flows 1.13 Total operating and investing cash flows (carried forward)	- - (16) - - - - - -	- - (45) - - - - - -
	(16)	(45)
	(6,982)	(12,221)

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

1.13 Total operating and investing cash flows (brought forward)	(6,982)	(12,221)
Cash flows related to financing activities 1.14 Proceeds from issues of shares, options, etc. 1.15 Proceeds from sale of forfeited shares 1.16 Proceeds from borrowings 1.17 Repayment of borrowings 1.18 Dividends paid 1.19 Other (provide details if material) - Fundraising costs Net financing cash flows	188 - - - - (2)	188 - - - - (2)
	186	186
Net increase (decrease) in cash held 1.20 Cash at beginning of quarter/year to date 1.21 Exchange rate adjustments to item 1.20 1.22 Cash at end ofquarter	(6,796) 115,774 (1,392)	(12,035) 118,776 845
	107,586	107,586

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

1.23 1.24	Aggregate amount of payments to the parties included in item 1.2 Aggregate amount of loans to the parties included in item 1.10	Current quarter $A'000
		311
		-
1.25	Explanation necessaryfor an understandingof the transactions
	Payments for Directors consulting fees and Directors fees - $311k

Non-cash financing and investing activities

2.1 2.2	Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows
	Nil
	Details of outlays made by other entities to establish or increase their share in projects in which the reportingentityhas an interest
	Nil

• See chapter 19 for defined terms.

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Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Financing facilities available

Add notes as necessary for an understanding of the position.

3.1 Loan facilities 3.2 Credit standby arrangements	Amount available $A’000	Amount used $A’000
	-	-
	-	-

Estimated cash outflows for next quarter

4.1 Exploration and evaluation 4.2 Development 4.3 Production 4.4 Administration	$A’000
	1,379
	22,397
	-
	986
Total	24,762

Reconciliation of cash

Reconciliation of cash
Reconciliation of cash at the end of the quarter (as	Current quarter	Previous quarter
shown in the consolidated statement of cash flows)	$A’000	$A’000
to the related items in the accounts is as follows.
5.1 Cash on hand and at bank	22,742	38,114
5.2 Deposits at call	84,844	77,660
5.3 Bank overdraft	-	-
5.4 Other (provide details)	-	-
Total: cash at end of quarter(item 1.22)	107,586	115,774

Changes in interests in mining tenements

6 Interests in mining tenements held 6.1 Interests in mining tenements relinquished, reduced or lapsed 6.2 Interests in mining tenements acquired or increased	Tenement reference	Nature of interest (note(2))	Interest at beginning ofquarter	Interest at end of quarter
	Refer to the Tenement Table in the Activity Report above.	-	-	-
	-	-	-	-
	-	-	-	-

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates.

	Total number	Number quoted	Issue price per security (see note 3) (cents)	Issue price per security (see note 3) (cents)	Amount paid up per security (see note 3) (cents)	Amount paid up per security (see note 3) (cents)
7.1 Performance+securities 7.2 Changes during quarter (a) Increases through issues (b) Decreases through returns of capital, buy- backs, redemptions	50,000,000	-
7.3 +Ordinary securities 7.4 Changes during quarter (a) Increases through issues; - Option conversion (b) Decreases through returns of capital, buy- backs	310,575,003	310,575,003
	250,000	250,000
7.5 +Convertible debt securities(description) 7.6 Changes during quarter (a) Increases through issues (b) Decreases through securities matured, converted
7.7 Options - Unlisted options 7.8 Issued during quarter: - Unlisted options 7.9 Exercised during quarter - Unlisted options 7.10 Expired during quarter	4,400,000 4,000,000 2,400,000 7,000,000 500,000 500,000 4,500,000 9,500,000 750,000 4,000,000 15,225,000			Exercise price $0.20 $0.20 $0.30 $0.40 $0.60 $0.60 $0.75 $0.75 $1.00 $1.25 $2.00		Expiry date 01/11/2016 19/10/2016 31/01/2017 31/05/2017 30/06/2017 31/01/2017 30/06/2018 11/09/2018 30/06/2018 30/06/2018 30/06/2019
	12,225,000			Exercise price $2.00		Expiry date 30/06/2019
	250,000			Exercise price $0.75		Expiry date 30/06/2018
7.11 Debentures (totals only)
7.12 Unsecured notes(totals only)

• See chapter 19 for defined terms.

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Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act or other standards acceptable to ASX (see note 5).

• 2 This statement does give a true and fair view of the matters disclosed.

Sign here:

Donald Stephens (Company Secretary)

Date: 28 January 2016

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2 The “Nature of interest” (items 6.1 and 6.2) includes options in respect of interests in mining tenements and petroleum tenements acquired, exercised or lapsed during the reporting period. If the entity is involved in a joint venture agreement and there are conditions precedent which will change its percentage interest in a mining tenement or petroleum tenement, it should disclose the change of percentage interest and conditions precedent in the list required for items 6.1 and 6.2.

• 3 Issued and quoted securities The issue price and amount paid up is not required in items 7.1 and 7.3 for fully paid securities .

• 4 The definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report.

• 5 Accounting Standards ASX will accept, for example, the use of International Financial Reporting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

== == == == ==

• See chapter 19 for defined terms.

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Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Appendix 1 – Summary of Expenditure Incurred per Project

Project	Quarter Cash Spend $A’000
Sierra Del Perdón	24
Muga-Vipasca	6,971
Pintano	197
Total	7,192

• See chapter 19 for defined terms.

Appendix 5B Page 6

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