(Yicai) Sept. 24 -- Shares of Yankuang Energy Group rose after the Chinese coal miner announced plans to diversify its portfolio by paying USD376 million for a controlling stake in Highfield Resources, an Australian firm that develops potash mines in Spain.

Yankuang Energy [SHA: 600188] ended up 4.3 percent at CNY14.59 (USD2.07) a share in Shanghai today. Its Hong Kong-traded stock [HKG: 1171] added 6.7 percent to HKD10.20 (USD1.31). Highfield [ASX: HFR] closed 7.1 percent higher at 30 Australian cents (21 US cents) in Sydney yesterday.

Yankuang Energy and two strategic investors have entered into binding equity raise agreements with Highfield, the Jining-based firm announced yesterday. The new shares will be issued at 50 Australian cents apiece, or a 64 percent premium on their closing price on Sept. 18.

The pair inked a non-binding letter of intent in July, outlining plans for Yankuang Energy to become the main shareholder and gain control through an asset injection and new shares subscription.

Yankuang Energy will shell out USD90 million on the new shares, while Beijing Energy International Holding will invest USD50 million, and Singapore Taizhong Global Development USD30 million.

The move will give Yankuang Energy control over the Muga potash project in Spain, marking its strategic shift towards multi-mineral development, the firm pointed out. The investment will finance the first phase of the Muga project and provide general working capital, it said.

The Muga project, Highfield’s main asset, has a planned annual potash production capacity of 1 million tonnes and will be built in two phases. According to the Joint Ore Reserve Committee Code, the project has proven and probable ore reserves of 104 million t, with a potassium chloride grade of 16.1 percent.

Access to high-quality Spanish potash resources will create synergies with Yankuang Energy’s existing Southey project in Canada, which is in the greenfield stage, it noted. After completing both projects, the miner’s potash production capacity will reach 3.8 million t a year, making it one of the top 10 global suppliers, the company added.

Yankuang Energy will additionally subscribe to USD286 million new shares of Highfield through a combination of assets and shareholder loans from its subsidiary Yancoal Canada Resources, it said, adding that the unit owns the Southey potash mine. The deadline for asset delivery is March 31 next year.

After completing the deal, which is pending approval by Highfield’s shareholders and regulators in China, Australia, Canada, and Spain, Yankuang Energy will hold most of the seats on the Australian firm’s board and appoint the management team. The new shareholding ratio was not disclosed. 

Separately, Highfield announced the same day that more investors may take part in the private placement. One has signed a non-binding agreement to buy AUD20 million (USD13.7 million) of new shares, with potential additional investments of as much as AUD50 million from other investors.

Editor: Martin Kadiev