(Yicai) July 22 -- Shares of Highfield Resources plunged after Chinese coal mining giant Yankuang Energy Group announced a deal at the end of last week to take control of the Spanish potash miner.

HFR [ASX: HFR] fell 11.1 percent to 28 Australian cents (19 US cents) in Sydney today before trading of the shares was paused, potentially until July 24, pending a further announcement, the Pamplona-based company said earlier today.

Yancoal Energy signed a non-binding agreement with Highfield Resources to become its largest shareholder on July 19, the Chinese firm announced late on the same day.

Under the deal, Yankuang Energy will transfer 100 percent of the shares in Yancoal Canada Resources to HFR in exchange for newly issued shares of HFR. HFR will also raise USD220 million from a private placement of shares to strategic investors, to which Yankuang Energy will contribute as much as USD90 million.

The move will help Yankuang Energy acquire high-quality potash resources, expedite the completion of the development of resources, enhance its competitiveness, and reduce the operational risks of Yancoal Canada, it noted.

After the deal is implemented, HFR will have the potential to increase its annual potash production capacity to 3.8 million tons to become one of the world’s top 10 suppliers, Yicai calculated based on data previously released by the company.

Founded in 2011, Yancoal Canada is a wholly-owned unit of Yankuang Energy principally engaged in the exploration and development of potash. It owns the Southey project in Canada, which has about 1.7 million tons of potassium chloride reserves, a greenfield potash mine project, and four other potash mining rights.

Incorporated in Australia, HFR mainly develops potash projects, with its core project being a potash mine under construction in northern Spain with potash reserves of about 280 million tons. The project’s first phase has a designated capacity of 500,000 tons per year.

Yankuang’s shares [SHA: 600188] closed 0.3 percent up at CNY15.54 (USD2.14) each in Shanghai today. In Hong Kong, the company’s stock [HKG: 1171] rose 0.9 percent to HKD10.02 (USD1.28).

Editor: Futura Costaglione