HIGHFIELD RESOURCES LIMITED — Share Issue/Capital Change 2017

May 23, 2017

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ANNOUNCEMENT TO AUSTRALIAN SECURITIES EXCHANGE

24 May 2017

ASX Limited Companies Announcement Office Electronic Lodgement System

Dear Sirs

Section 708A Notice – Shares Issued on Conversion of Unlisted Options

Highfield Resources Limited (Company) hereby provides notice to the ASX for the purpose of section 708A(5)(e) of the Corporations Act 2001 (Cth) that it has issued 1,000,000 fully paid ordinary shares in the Company (Shares) without disclosure to investors under Part 6D.2 of the Corporations Act 2001 (Cth).

The Company states that as at the date of this notice it:

• has complied with the provisions of Chapter 2M of the Corporations Act 2001 (Cth) as they apply to the Company;

• has complied with section 674 of the Corporations Act 2001 (Cth); and

• is not aware of any excluded information within the meaning of sections 708A(7) and 708A(8) of the Corporations Act (Cth).

An Appendix 3B relating to this issue and the issue of 500,000 unlisted options is attached to this announcement.

Yours Faithfully

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Donald Stephens Company Secretary

Highfield Resources Ltd. ACN 153 918 257 ASX: HFR

Registered Office

Head Office

Directors

C/– HLB Mann Judd Avenida Carlos III, 13 - Derek Carter 169 Fullarton Road 1°B, 31002 Peter Albert Dulwich, SA 5065 Pamplona, Pauline Carr Australia Spain Richard Crookes –––––––––––––––––– –––––––––––––––––– Jim Dietz T. +61 8 8133 5000 T. +34 948 050 577 Owen Hegarty F. +61 8 8431 3502 F. +34 948 050 578

Company Secretary Donald Stephens

highfieldresources.com.au

Appendix 3B New issue announcement

Rule 2.7, 3.10.3, 3.10.4, 3.10.5

Appendix 3B

New issue announcement, application for quotation of additional securities and agreement

Information or documents not available now must be given to ASX as soon as available. Information and documents given to ASX become ASX’s property and may be made public.

Introduced 01/07/96 Origin: Appendix 5 Amended 01/07/98, 01/09/99, 01/07/00, 30/09/01, 11/03/02, 01/01/03, 24/10/05, 01/08/12, 04/03/13

Name of entity

HIGHFIELD RESOURCES LIMITED

ABN

51 153 918 257

We (the entity) give ASX the following information.

Part 1 - All issues

You must complete the relevant sections (attach sheets if there is not enough space).

• 1 +Class of +securities issued or to a) Fully Paid Ordinary Shares be issued b) Unlisted Options

• 2 Number of[+] securities issued or a) 1,000,000 to be issued (if known) or b) 500,000 maximum number which may be issued

• 3 Principal terms of the a) Same terms as ordinary securities – +securities (e.g. if options, conversion of unlisted options exercisable at exercise price and expiry date; if $0.40 on or before 31 May 2017. partly paid +securities, the b) Unlisted options exercisable at $1.85 each

• amount outstanding and due dates for payment; if on or before 18 November 2024. Options +convertible securities, the shall vest on the satisfaction of Market Performance and Total Shareholder Return

• conversion price and dates for vesting conditions as detailed in Annexure 2.

• conversion)

• See chapter 19 for defined terms.

Appendix 3B Page 1

04/03/2013

Appendix 3B New issue announcement

4 Do the+securities rank equally in all respects from the+issue date with an existing+class of quoted+securities? If the additional+securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment  the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 5 Issue price or consideration 6 Purpose of the issue (If issued as consideration for the acquisition of assets, clearly identify those assets) 6a Is the entity an+eligible entity that has obtained security holder approval under rule 7.1A? If Yes, complete sections 6b – 6h in relation to the+securities the subject of this Appendix 3B, and comply with section 6i 6b The date the security holder resolution under rule 7.1A was passed 6c Number of+securities issued without security holder approval under rule 7.1 6d Number of+securities issued with security holder approval under rule 7.1A	a) Yes. b) The options issued will not participate in dividends until shares are issued upon exercise of the options.
	a) $0.40 each b) Unlisted options were granted for nil consideration.
	a) Exercise of unlisted options. b) Unlisted options were granted pursuant to the Company’s Employee Long Term Incentive Plan.
	No
	N/A
	N/A
	N/A

• See chapter 19 for defined terms.

Appendix 3B Page 2

04/03/2013

Appendix 3B New issue announcement

6e Number of+securities issued with security holder approval under rule 7.3, or another specific security holder approval (specify date of meeting) 6f Number of+securities issued under an exception in rule 7.2 6g If+securities issued under rule 7.1A, was issue price at least 75% of 15 day VWAP as calculated under rule 7.1A.3? Include the +issue date and both values. Include the source of the VWAP calculation. 6h If+securities were issued under rule 7.1A for non-cash consideration, state date on which valuation of consideration was released to ASX Market Announcements 6i Calculate the entity’s remaining issue capacity under rule 7.1 and rule 7.1A – complete Annexure 1 and release to ASX Market Announcements 7 +Issue dates Note: The issue date may be prescribed by ASX (refer to the definition of issue date in rule 19.12). For example, the issue date for a pro rata entitlement issue must comply with the applicable timetable in Appendix 7A. Cross reference: item 33 of Appendix 3B. 8 Number and +class of all +securities quoted on ASX (_including_the +securities in section 2 if applicable)	N/A
	a) 1,000,000 b)500,000
	N/A
	N/A
	7.1 – 49,293,750
	a) 19 May 2017 b) 18 May 2017
	Number	+Class
	328,625,003	Ordinary Shares

• See chapter 19 for defined terms.

Appendix 3B Page 3

04/03/2013

Appendix 3B New issue announcement

9 Number and +class of all +securities not quoted on ASX (_including_the +securities in section 2 if applicable)	Number	+Class
	400,000 3,550,000 9,500,000 750,000 4,000,000 6,330,000 17,125,000 4,550,000 50,000,000	Unlisted Options exercisable at $0.60 on or before 30/06/17 Unlisted Options exercisable at $0.75 on or before 30/06/18 Unlisted Options exercisable at $0.75 on or before 11/09/18 Unlisted Options exercisable at $1.00 on or before 30/06/18 Unlisted Options exercisable at $1.25 on or before 30/06/18 Unlisted Options exercisable at $1.85 on or before 18/11/24 Unlisted Options exercisable at $2.00 on or before 30/06/19 Unlisted Options exercisable at $2.50 on or before 30/06/19 Class B Performance Shares

10 Dividend policy (in the case of a N/A trust, distribution policy) on the increased capital (interests)

Part 2 - Pro rata issue

11 Is security holder approval N/A required? 12 Is the issue renounceable or nonN/A renounceable? 13 Ratio in which the[+] securities N/A will be offered 14 +Class of +securities to which the N/A offer relates

• See chapter 19 for defined terms.

Appendix 3B Page 4

04/03/2013

Appendix 3B New issue announcement

	Appendix 3 New issue announcemen
15 +Record date to determine entitlements 16 Will holdings on different registers (or subregisters) be aggregated for calculating entitlements? 17 Policy for deciding entitlements in relation to fractions 18 Names of countries in which the entity has security holders who will not be sent new offer documents Note: Security holders must be told how their entitlements are to be dealt with.Cross reference: rule 7.7. 19 Closing date for receipt of acceptances or renunciations 20 Names of any underwriters 21 Amount of any underwriting fee or commission 22 Names of any brokers to the issue 23 Fee or commission payable to the broker to the issue 24 Amount of any handling fee payable to brokers who lodge acceptances or renunciations on behalf of security holders 25 If the issue is contingent on security holders’ approval, the date of the meeting 26 Date entitlement and acceptance form and offer documents will be sent to persons entitled 27 If the entity has issued options, and the terms entitle option holders to participate on exercise, the date on which notices will be sent to option holders	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A
	N/A

• See chapter 19 for defined terms.

Appendix 3B Page 5

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Appendix 3B New issue announcement

28 Date rights trading will begin (if applicable) 29 Date rights trading will end (if applicable) 30 How do security holders sell their entitlements_in full_through a broker? 31 How do security holders sell_part_ of their entitlements through a broker and accept for the balance? 32 How do security holders dispose of their entitlements (except by sale through a broker)? 33 +Issue date	N/A
	N/A
	N/A
	N/A
	N/A
	N/A

Part 3 - Quotation of securities

You need only complete this section if you are applying for quotation of securities

• 34 Type of[+] securities ( tick one )

(a) +Securities described in Part 1

(b)[All other ][+][securities ]

Example: restricted securities at the end of the escrowed period, partly paid securities that become fully paid, employee incentive share securities when restriction ends, securities issued on expiry or conversion of convertible securities

Entities that have ticked box 34(a)

Additional securities forming a new class of securities

Tick to indicate you are providing the information or documents

• 35 If the[+] securities are[+] equity securities, the names of the 20 largest holders of the additional[+] securities, and the number and percentage of additional[+] securities held by those holders

• 36 If the[+] securities are[+] equity securities, a distribution schedule of the additional +securities setting out the number of holders in the categories

• 1 - 1,000

1,001 - 5,000 5,001 - 10,000 10,001 - 100,000 100,001 and over

37 A copy of any trust deed for the additional[+] securities

• See chapter 19 for defined terms.

Appendix 3B Page 6

04/03/2013

Appendix 3B New issue announcement

Entities that have ticked box 34(b)

38 Number of[+] securities for which N/A +quotation is sought 39 +Class of +securities for which N/A quotation is sought 40 Do the[+] securities rank equally in N/A all respects from the[+] issue date with an existing[+] class of quoted +securities? If the additional[+] securities do not rank equally, please state:  the date from which they do  the extent to which they participate for the next dividend, (in the case of a trust, distribution) or interest payment  the extent to which they do not rank equally, other than in relation to the next dividend, distribution or interest payment 41 Reason for request for quotation N/A now Example: In the case of restricted securities, end of restriction period (if issued upon conversion of another[+] security, clearly identify that other[+] security) Number +Class 42 Number and +class of all N/A +securities quoted on ASX ( including the[+] securities in clause 38)

Quotation agreement

• 1 Quotation of our additional securities is in ASX’s absolute discretion. ASX may quote the[+] securities on any conditions it decides.

• 2

• We warrant the following to ASX.

• The issue of the[+] securities to be quoted complies with the law and is not for an illegal purpose.

• There is no reason why those[+] securities should not be granted[+] quotation.

• See chapter 19 for defined terms.

Appendix 3B Page 7

04/03/2013

Appendix 3B New issue announcement

• An offer of the[+] securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C(6) of the Corporations Act.

Note: An entity may need to obtain appropriate warranties from subscribers for the securities in order to be able to give this warranty

• Section 724 or section 1016E of the Corporations Act does not apply to any applications received by us in relation to any[+] securities to be quoted and that no-one has any right to return any[+] securities to be quoted under sections 737, 738 or 1016F of the Corporations Act at the time that we request that the[+] securities be quoted.

• If we are a trust, we warrant that no person has the right to return the +securities to be quoted under section 1019B of the Corporations Act at the time that we request that the[+] securities be quoted.

• 3 We will indemnify ASX to the fullest extent permitted by law in respect of any claim, action or expense arising from or connected with any breach of the warranties in this agreement.

• 4 We give ASX the information and documents required by this form. If any information or document is not available now, we will give it to ASX before +quotation of the +securities begins. We acknowledge that ASX is relying on the information and documents. We warrant that they are (will be) true and complete.

Sign here:

Donald Stephens (Company Secretary)

Date: 24 May 2017

• See chapter 19 for defined terms.

Appendix 3B Page 8

04/03/2013

Appendix 3B New issue announcement

Appendix 3B – Annexure 1

Calculation of placement capacity under rule 7.1 and rule 7.1A for eligible entities

Introduced 01/08/12 Amended 04/03/13

Part 1

Rule 7.1 – Issues exceeding 15% of capital

Step 1: Calculate “A”, the base figure from which the placement capacity is calculated

Part 1	Part 1
Rule 7.1 – Issues exceeding 15% of capital
Step 1: Calculate “A”, the base figure from which the placement capacity is calculated
Insertnumber of fully paid+ordinary securities on issue 12 months before the +issue date or date of agreement to issue	310,825,003
Addthe following: • Number of fully paid+ordinary securities issued in that 12 month period under an exception in rule 7.2 • Number of fully paid+ordinary securities issued in that 12 month period with shareholder approval • Number of partly paid+ordinary securities that became fully paid in that 12 month period Note: • Include only ordinary securities here – other classes of equity securities cannot be added • Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed • It may be useful to set out issues of securities on different dates as separate line items	153,333 – 17 August 2016 250,000 – 6 September 2016 46,667 – 5 October 2016 250,000 – 12 October 2016 4,000,000 – 12 October 2016 2,400,000 – 14 October 2016 2,000,000 – 18 October 2016 100,000 – 15 November 2016 100,000 – 6 December 2016 500,000 – 13 November 2016 600,000 – 14 December 2016 200,000 – 19 December 2016 100,000 – 23 December 2016 500,000 – 12 January 2017 1,000,000 – 31 March 2017 250,000 – 28 April 2017 4,000,000 – 12 May 2017 350,000 – 15 May 2017 1,000,000 – 19 May 2017 Nil
Subtractthe number of fully paid+ordinary securities cancelled during that 12 month period	Nil
“A”	328,625,003

• See chapter 19 for defined terms.

Appendix 3B Page 9

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Appendix 3B New issue announcement

Step 2: Calculate 15% of “A”

Step 2: Calculate 15% of “A”
“B”	0.15
	[Note: this value cannot be changed]
Multiply“A” by 0.15	49,293,750
Step 3: Calculate “C”, the amount of placement capacity under rule
7.1 that has already been used
Insertnumber of+equity securities issued
or agreed to be issued in that 12 month
period_not counting_those issued:
• Under an exception in rule 7.2
• Under rule 7.1A
• With security holder approval under rule
7.1 or rule 7.4
Note:
• This applies to equity securities, unless
specifically excluded – not just ordinary
securities
• Include here (if applicable) the securities
the subject of the Appendix 3B to which
this form is annexed
• It may be useful to set out issues of
securities on different dates as separate
line items

• Include here (if applicable) the securities the subject of the Appendix 3B to which this form is annexed

• • It may be useful to set out issues of securities on different dates as separate line items

• “C” -

Step 4: Subtract “C” from [“A” x “B”] to calculate remaining placement capacity under rule 7.1

placement capacity under rule 7.1
“A” x 0.15	49,293,750
Note: number must be same as shown in
Step 2
Subtract“C”	-
Note: number must be same as shown in
Step 3
Total[“A” x 0.15] – “C”	49,293,750
	[Note: this is the remaining placement
	capacity under rule 7.1]

• See chapter 19 for defined terms.

Appendix 3B Page 10

04/03/2013

Unlisted Option Terms – Annexure 2

1. Each option entitles the holder to one ordinary share in the Company.

2. Subject to paragraph 3, the options held by the optionholder are exercisable in whole or in part at any time during the period (Exercise Period) commencing on the date of grant and expiring at 5.00 pm (WST) on that date which is eight (8) years after the date of grant (Expiry Date). Options not exercised on or before the Expiry Date will lapse.

3. Prior to the Expiry Date, the options shall vest on satisfaction of the following Vesting Conditions (each a Vesting Condition ):

4. A. Market Based Performance:

50% of a participant’s options (known as the Market Performance -Options ) will be assessed for vesting based upon the Company’s relative share price performance at the start of the vesting period, being the 20 day Volume Weighted Average Price ( VWAP ) of the Company’s shares immediately preceding 1 July each year, to the closing price of the Company’s shares at the conclusion of the vesting period, being the 20 day VWAP immediately preceding 30 June, versus the S&P/ASX 300 Resources Index (XKR) in accordance with a defined scale as follows:

• Below 10% of index performance = nil vesting;

• Between -10% and (0%) of index performance = vests 2.5% per 1% so “at index” 25% vests;

• Above index performance = vests at 3% per 1% so at 25% above index 100% vests;

The S&P/ASX 300 Resources Index (XKR) will be measured at the start of the vesting period each year (opening index price on 1 July) and again at the end of the vesting period (closing index price on 30 June); and

• B. Total Shareholder Return:

50% of a participant’s options (known as the TSR–Options ) will be assessed for the vesting based upon the Company’s Total Shareholder Return from the opening price of the Company’s shares at the start of the Vesting Period to the closing price of the Company’s shares at the conclusion of the vesting period;

The performance measure is absolute performance based on compound annual growth rate achieved in Total Shareholder Return;

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The proportion of the TSR Options that vest into Shares will be determined in accordance with the following vesting scale:

• Zero to 10% = vests at 3% per 1% so at 10% TSR 30% vests;

• Above 10% = vests at 7% per 1% so at 20% TSR 100% vests.

Page 1

1. The optionholder must notify the Company at least five business days before exercising any options. Options are exercisable by notice in writing to the Board delivered to the registered office of the Company and payment of the exercise price of $1.85 per option in cleared funds.

2. The Company will not apply for official quotation on ASX of the options. The Company will make application for official quotation on ASX of new shares allotted on exercise of the options. Those shares will participate equally in all respects with existing issued ordinary shares, and in particular new shares allotted on exercise of the options will qualify for dividends declared after the date of their allotment.

3. The Board has the discretion to waive the Vesting Conditions, including if any of the following events occur:

4. (a) if a takeover bid is made, the takeover bid is declared unconditional and the bidder has acquired a relevant interest in more than 50% of the Company’s shares; or

5. (b) on the date of despatch of a notice of meeting to consider a scheme of arrangement between the Company and its creditors or members or any class thereof pursuant to section 411 of the Corporations Act seeking approval for a proposed compromise or arrangement for the purposes of or in connection with a scheme for the reconstruction of the Company or its amalgamation with any other company or companies; or

6. (c) on the date upon which a person or a group of associated persons becomes entitled, subsequent to the date of grant of the options, to sufficient shares to give it or them the ability, in general meeting, to replace all or allow a majority of the Board in circumstances where such ability was not already held by a person associated with such person or group of associated persons.

7. Options can only be transferred with Board approval, except that if at any time before expiry of the Exercise Period the optionholder dies, the legal personal representative of the deceased optionholder may:

8. (a) elect to be registered as the new holder of the options;

9. (b) whether or not he becomes so registered, exercise those options in accordance with the terms and conditions on which they were granted; and

10. (c) if the deceased has already exercised options, pay the exercise price in respect of those options.

11. An optionholder may only participate in new issues of securities to holders of ordinary shares in the Company if the option has been exercised and shares allotted in respect of the option before the record date for determining entitlements to the issue. The Company must give prior notice to the optionholder of any new issue before the record date for determining entitlements to the issue in accordance with the ASX Listing Rules.

12. If there is a bonus issue to the holders of ordinary shares in the capital of the Company, the number of ordinary shares over which the option is exercisable will be increased by the number of ordinary shares which the holder of the option would have received if the option had been exercised before the record date for the bonus issue.

13. If the Company makes a rights issue (other than a bonus issue), the exercise price of options on issue will be reduced according to the following formula:

A = O – E [P – (S + D)]

(N + 1)

Page 2

Where:

• A = the new exercise price of the option;

• O = the old exercise price of the option;

• E = the number of underlying ordinary shares into which one option is exercisable;

• P = the average closing sale price per ordinary share (weighted by reference to volume) recorded on the stockmarket of ASX during the five trading days immediately preceding the ex rights date or ex entitlements date (excluding special crossings and overnight sales and exchange traded option exercises);

• S = the subscription price for a security under the pro rata issue;

• D = the dividend due but not yet paid on existing underlying securities (except those to be issued under the pro rata issue); and

• N = the number of securities with rights or entitlements that must be held to receive a right to one new security.

• If, during the currency of the options the issued capital of the Company is reorganised, those options will be reorganised to the extent necessary to comply with ASX Listing Rules.

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