Disposal of Warrants and Interest in Shares

15 June 2016

Highlands Natural Resources plc ("Highlands" or "the Company")

Disposal of Warrants and Interest in Shares

Highlands, the London listed natural resources company, is pleased to announce that it has been notified by Diversion Technologies LLC ('Diversion') that Diversion has today entered into arrangements to sell its entire holding of 30 million warrants in Highlands to an institutional investor (the "Institutional Investor").  The 30 million warrants were granted to Diversion by Highlands as part of the consideration to acquire a 75% interest in the pending patents for DT Ultravert, which has the potential to transform and significantly reduce the costs associated with unconventional exploration and production via re-fracking.  These warrants are exercisable into ordinary shares in Highlands at 25 pence per share so, if the Institutional Investor takes up its options to acquire the entire holding (as described below) and exercises the warrants, Highlands will receive new funds of £7.5 million.  This is a potentially significant event in the development of Highlands.  Whilst Diversion did not have the financial resources to exercise the warrants, the structure of the arrangements with the Institutional Investor specifically contemplate the warrants being exercised.

Summary of the terms of the disposal

Diversion has today entered into arrangements to sell its entire holding of 30 million warrants in Highlands to the Institutional Investor.  The arrangements are in three parts.

Initially, the Institutional Investor has the right, within the next two days, to acquire 10 million warrants ('Stage 1 Warrants') at a price of 5 pence per warrant, payable to Diversion.

In addition, Diversion has granted the Institutional Investor an option to acquire its remaining warrants as follows:

1.   Subject to exercising the Stage 1 Warrants within the next four weeks, the Institutional Investor is entitled to acquire a further 10 million warrants ('Stage 2 Warrants') at a price equal to 10 pence per warrant plus 50 per cent. of any amount by which the Highlands share price on the day prior to exercise exceeds 55 pence.  For example, if the Highlands share price that day was 65 pence, then the price for the acquisition of the Stage 2 Warrants would be 15 pence per warrant.

2.   Subject to exercising the Stage 2 Warrants within the following four weeks, the Institutional Investor is entitled to acquire the final 10 million warrants at a price equal to 10 pence per warrant plus 50 per cent. of any amount by which the Highlands share price on the day prior to exercise exceeds 55 pence.

Diversion was issued with its 30 million warrants in May last year following the sale to Highlands of a 75 per cent. interest in the patent applications for its proprietary re-fracking technology, DT Ultravert.  Pursuant to that transaction, Diversion was also issued with 1.9 million ordinary shares in Highlands which it continues to hold.  The warrants may be exercised at any time up to 29 May 2018.

Robert Price, Chairman of Highlands, has a beneficial interest in the warrants which are the subject of these arrangements as a 37.5 per cent. shareholder in Diversion.  Mr. Price continues to own 12,000,000 ordinary shares directly, an amount unchanged since the IPO and which represents 35.4 per cent. of the total voting rights.  He also holds all of the warrants (23,750,000) that he was issued at the time of the IPO.

Highlands CEO Robert Price said, "This transaction by Diversion could represent a significant fundraising for Highlands.  When we made our acquisition of Diversion last year, structuring the consideration predominantly in warrants was done in the expectation that, following a future share price rise, the exercise of these warrants would enable Highlands to raise significant new funds both for the development of DT Ultravert and for other ventures. Diversion did not have the cash resources to exercise the warrants but the arrangement with the Institutional Investor has put Highlands in a position to realise that plan.

"In addition to the potential new funds for Highlands, the exercise of Diversion's warrants will represent a significant step in rebalancing Highlands' capital structure to one of predominantly equity, as well as increasing the free float and providing further liquidity, both of which we believe will further enhance the appeal of the Company to investors."

**ENDS**

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