Horizonte Minerals Plc, (AIM:HZM) (TSX:HZM)
(‘Horizonte’ or ‘the Company’) the nickel
development company focused in Brazil, announces its final results
for the year ended 31 December 2017.
Highlights
- Agreement with Vale SA to acquire 100% of the advanced Vermelho
nickel-cobalt project in Brazil
- Fundraise of £9.2 million completed in January 2018 (£7.0
million of which was raised in the United Kingdom and closed before
year end) – cash of £9.4 million as at year end
- Contracts awarded for Araguaia Feasibility Study
- Announcement of the limonite mineral resource at Araguaia of
20.7 million tonnes grading 1.13% Nickel and 0.12% Cobalt (0.9%
nickel cut off)
- Completed and filed the Mine Construction Licence for Araguaia
to SEMAS, the Pará State authority responsible for environmental
licensing, for the construction of the Project, including mine,
associated infrastructure and pyro-metallurgical processing
plant
- Improved nickel market fundamentals
- Feasibility study well advanced completion planned for mid-year
2018
Chairman’s Statement
Dear Shareholders
I am pleased to report on a transformational
year for Horizonte, as we continued to make excellent progress at
our tier 1 Araguaia Nickel Project in Brazil whilst in addition
acquiring a second major new asset with the acquisition of the
nearby Vermelho nickel-cobalt project.
The agreement to purchase Vermelho from Vale SA,
will allow the Company to fully take advantage of the electric
vehicle (EV) market by potentially supplying key battery
ingredients into the industry at a time when they are expected to
be most in demand.
Nickel prices have continued to show recovery
from the 13-year low of US$7,750/t in early 2016, touching
US$14,000/t in a recent rally before settling back to approximately
US$13,000/t at the date of this statement.
Sentiment towards nickel demand continues to be
positive, according to consultants Wood Mackenzie. This not only
reflects expected demand from the batteries/EV sector but also from
the current robust demand areas such as stainless steel, nickel
alloys and chemicals, especially from China.
Horizonte, with the advanced Araguaia
ferro-nickel project moving towards the development phase and
Vermelho’s potential to produce nickel sulphate and cobalt, is
uniquely positioned to take advantage of the current demand
forecast, in a space with little competition.
Araguaia
Throughout 2017, a number of key milestones were
achieved at Araguaia, positioning the Company well for the upcoming
completion of a Feasibility Study (“FS”) for the project.
The aim has always been to consolidate within
the Araguaia nickel belt and we have announced that we added to our
land position with the awarding of three new concessions totalling
1,748 ha, located in prospective locations containing ultramafic
intrusion of a similar type to those hosting the high grade nickel
resource at Araguaia’s Vale dos Sonhos deposit.
We also submitted the Mine Plan to Brazil’s
National Mining Agency as part of the process towards receipt of
the principal permits necessary to commence mine construction.
Alongside the Mine Plan was our submission of the Mine Construction
Licence.
In September 2017, we announced a nickel-cobalt
limonite resource at Araguaia with the potential to supply the
Electric Vehicle (“EV”) battery market. Limonite resources are
treated to produce products, such as nickel and cobalt hydroxides;
suitable for supplying the EV battery market. We are therefore
mindful of the future potential value of this resource in relation
to the current mine plan so that it will be mined and stockpiled
separately, with a view to extracting maximum value from the
resource in the future.
Community and social relationships remain a
vital part of Horizonte’s social licence as the communities close
to the project are some of the Company’s most important stakeholder
groups. A number of social investment activities were initiated,
including providing new libraries, education equipment and
furniture for selected schools within the project area. Araguaia
has the potential to create a number of jobs in a rural area where
the average family income ranges between US$2 - US$4 per day. As a
result, the Pará Government considers Araguaia to be a key economic
driver for the southern part of the State and we look forward to
working closely with the local and regional governments on
developing the project. We are focussed on building and maintaining
these strong partnerships as we progress Araguaia into Brazil’s
next major nickel producing mine.
Post the year end, we announced the completion
of the trial excavation programme with all our technical objectives
being met. This programme will allow us to confirm a number of key
variables within the FS, to be published in 2018.
Vermelho
In December 2017, we announced a major deal for
Horizonte with the acquisition of the nearby Vermelho nickel-cobalt
project from Vale, which completed post year end. This acquisition
has transformed Horizonte into a multi-asset company bringing
together two large, advanced nickel assets located in the
established mining region in the Para State in northern Brazil.
In becoming a multi-asset company, we have
started to de-risk our business fundamentals. The acquisition of a
project that benefits from extensive and costly previous
development will allow us to fast track to resource definition and
economic assessment.
The Vermelho nickel project is located in the
Carajas mining district, within trucking distance from the northern
part of Horizonte’s Araguaia project. The Carajas district is an
established mining region with well-developed infrastructure in
place, including rail, roads and hydro-electric power. An exciting
aspect of this acquisition is that the project also contains a
large cobalt resource which Vale planned to process alongside the
nickel. This gives us exposure to an additional commodity stream,
for which there is growing interest for use in the EV battery
market.
Alongside the acquisition, we successfully
raised £9.2m, which means the Company is fully funded for the next
two years, for the completion of the FS at Araguaia and a
Preliminary Economic Assessment for Vermelho.
Conclusion
We believe that with our continued progress at
Araguaia and becoming a multi-asset nickel and cobalt company we
are currently well placed to benefit from the improving nickel
market fundamentals, driven by the robust market for stainless
steel combined with the fast growing EV market.
On behalf of the Board, we would like to again
thank all our stakeholders for their continued hard work and
support as we build an exciting future for our Company.
David J Hall
Chairman 26 March 2018
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF HORIZONTE MINERALS PLC
OpinionWe have audited the financial statements
of Horizonte Minerals plc (the ‘parent company’) for the year ended
31 December 2017 which comprise the consolidated statements of
comprehensive income, the consolidated and company statements of
financial position, the consolidated and company statements of
changes in equity, the consolidated and company statements of cash
flows and notes to the financial statements including a summary of
significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the parent company
financial statements, as applied in accordance with the provisions
of the Companies Act 2006.In our opinion:
- the financial statements give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 31
December 2017 and of the group’s loss for the year then ended;
- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
- the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
Separate opinion in relation to IFRSs as
issued by the IASBAs explained in note 2.1 to the group
financial statements, the group in addition to complying with its
legal obligation to apply IFRSs as adopted by the European Union,
has also applied IFRSs as issued by the International Accounting
Standards Board (IASB).In our opinion the group financial
statements give a true and fair view of the consolidated financial
position of the group as at 31 December 2017 and of its
consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with IFRSs as issued by the
IASB.
Basis for OpinionWe conducted our audit in
accordance with International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities
for the audit of the financial statements section of our report. We
are independent of the company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other
purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the company
and the company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Conclusions relating to going concernWe have
nothing to report in respect of the following matters in relation
to which the ISAs (UK) require us to report to you where:
- the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is not appropriate;
or
- the directors have not disclosed in the financial statements
any identified material uncertainties that may cast significant
doubt about the group’s or the parent company’s ability to continue
to adopt the going concern basis of accounting for a period of at
least twelve months from the date when the financial statements are
authorised for issue.
Key audit mattersKey audit matters are those
matters that, in our professional judgment, were of most
significance in our audit of the financial statements of the
current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified,
including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit; and directing
the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
Carrying Value of Intangible Assets and Investments held by
Parent Company
Key Audit Matter |
As detailed in notes 10 and 25, the Group holds intangible assets
of £34.4m and £51.2m of investments held by the parent company in
subsidiaries.As detailed in note 2.5b, the Group’s intangible
assets represent the legal rights to explore for minerals together
with the expenditure incurred in its exploration and evaluation of
the mineral assets. The investments represent the funding provided
by the Parent Company to its Brazilian subsidiaries to use over the
course of the exploration stage and is the main source of funding
for the costs capitalised under intangible assets. Each year
management are required to assess whether there has been any
indication that the intangible assets may be impaired. This is in
accordance with the requirements of IFRS 6 - Exploration for and
evaluation of mineral resources. Management have carried out a
review for indicators of impairment and have not identified any
such indicators. Management have also concluded that no impairment
provision is required against the carrying value of investments in
subsidiaries.Reviewing indicators of impairment and assessment of
carrying values often require significant estimates and judgements
and therefore we identified this as a key audit matter. |
Audit Response |
Our audit work included, but was not restricted to the following:
We reviewed Management’s assessment of the impairment indicators
against IFRS 6. The indicators in IFRS 6 include but are not
limited to:
- The period for which the entity has the right to explore in the
specific area has expired during the period or will expire in the
near future, and is not expected to be renewed.
- Substantive expenditure on further exploration for and
evaluation of mineral resources in the specific area is neither
budgeted nor planned.
- Exploration for and evaluation of mineral resources in the
specific area have not led to the discovery of commercially viable
quantities of mineral resources and the entity has decided to
discontinue such activities in the specific area.
- Sufficient data exists to indicate that, although a development
in the specific area is likely to proceed, the carrying amount of
the exploration and evaluation asset is unlikely to be recovered in
full from successful development or by sale.
We considered Management’s assessment of the indicators of
impairment (as stated above) and we confirmed that there is an
ongoing plan to develop the licence areas. This assessment is
supported by a pre-feasibility study published in October 2016 and
a feasibility study which is currently in progress.We reviewed the
correspondence, contracts and other documents regarding the
licenses to confirm that the Group has the relevant contractual
rights for exploration in the stated areas such as Araguaia.We
agreed the validity of licences held by Horizonte Minerals Plc to
the Brazilian Government’s DNPM website.We considered whether there
were any additional matters requiring consideration when assessing
the carrying value of the parent company’s investment in
subsidiaries. |
Valuation of Contingent Consideration
Key Audit Matter |
In prior years, the Group acquired assets and licences relating to
the Araguaia nickel project gave rise to contingent consideration.
As at 31 December 2017, the contingent consideration was £3.9m and
details of this consideration and the related critical judgements
and estimates are disclosed in notes 17 and 4.3.The assessment of
the contingent consideration payable requires management to make
judgements and estimates in respect of a significant number of
factors which influence the anticipated timing and value of cash
flows arising from the Araguaia nickel project, which in turn
impact on the assessment of the estimated consideration payable.
Management are also required to reassess and adjust the contingent
consideration payable for any changes in the accounting estimates
as new information and events arises. |
Audit Response |
Our audit work included, but was not restricted to the following:
We have reviewed the terms and conditions of the acquisition
agreements relating to the contingent consideration amounts payable
and ensured that the calculation of contingent considerations is in
accordance with them.We have reviewed the contingent consideration
calculations and key judgements and estimates made by management
supporting these calculations. We have challenged the judgements
and estimates, referring to supporting documentation and considered
the sensitivity of the calculations to changes in the judgements
and estimates.We have checked the accounting adjustments for any
change in estimates, foreign exchange retranslation and the
unwinding of the discount factor.We have considered the adequacy of
the disclosures. |
Our application of materiality
We apply the concept of materiality both in
planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which
misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the
financial statements. In order to reduce to an appropriately
low level the probability that any misstatements exceed
materiality, we use a lower materiality level, performance
materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature of
identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial
statements as a whole.
Our basis for the determination of materiality
has remained unchanged from prior year. We consider total assets to
be the most significant determinant of the group’s financial
performance used by shareholders. The benchmark percentage for
calculating materiality has remained unchanged from the prior year
at 1.5%. We consider this to be one of the principal considerations
for members of the parent company in assessing the financial
performance of this asset based group. Whilst materiality for
the financial statements as a whole was £570,000 (based on 30
September 2017 total asset figure of £38.1m) (2016:£470,000), each
significant component of the group was audited to a lower level of
materiality. These materiality levels were used to
determine the financial statement areas that are included within
the scope of our audit work and the extent of sample sizes during
the audit.
Performance materiality is the application of
materiality at the individual account or balance level set at an
amount to reduce to an appropriately low level the probability that
the aggregate of uncorrected and undetected misstatements exceeds
materiality. Performance materiality was set at 75% (2016: 75%) of
the above materiality levels.
We agreed with the audit committee that we would
report to the committee all individual audit differences identified
during the course of our audit in excess of £28,500 (2016:
£10,000). We also agreed to report differences below these
thresholds that, in our view warranted reporting on qualitative
grounds.
Materiality levels are not significantly
different from those applied in the previous year.
No revisions were made to materiality levels
during the course of the audit.
An overview of the scope of our auditOur Group
audit was scoped by obtaining an understanding of the Group and its
environment, including the group’s system of internal control, and
assessing the risks of material misstatement in the financial
statements at the group level.
Whilst Horizonte Minerals plc is a Company
registered in England & Wales and its head office is located in
the UK the Group’s principal operations are located in
Brazil. In approaching the audit, we considered how the Group
is organised and managed. We assessed the activities of the
group as being principally a single project (the Araguaia
Nickel project) and primarily comprising a number of Brazilian
subsidiary entities each holding capitalised exploration and
evaluation costs and exploration licences and permits.
The Group audit team performed audit work in
respect of the assessed risks. One subsidiary was assessed as
significant due to size and risk and three subsidiaries were
classified as significant due to specific risks. The group audit
engagement team also engaged BDO’s network firm in Brazil to carry
out certain specific audit procedures.
The remaining non-significant subsidiaries of the group were
principally subject to analytical review procedures.
Other informationThe other information
comprises the information included in the annual report, other than
the financial statements and our auditor’s report thereon. The
directors are responsible for the other information. Our opinion on
the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act
2006In our opinion, based on the work undertaken in the
course of the audit:
- the information given in the strategic report and directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
- the strategic report and directors’ report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to
report by exceptionIn the light of the knowledge and
understanding of the group and the parent company and its
environment obtained in the course of the audit, we have not
identified material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the
following matters in which the Companies Act 2006 requires us to
report to you if, in our opinion:
- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
- the parent company financial statements are not in agreement
with the accounting records and returns; or
- certain disclosures of directors’ remuneration specified by law
are not made; or
- we have not received all the information and explanations we
require for our audit.
Responsibilities of directorsAs explained more
fully in the directors’ responsibilities statement, the directors
are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for
such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statementsOur objectives are to obtain
reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
Stuart Barnsdall (Senior Statutory Auditor)For
and on behalf of BDO LLP,London, UK
Consolidated Statement of Comprehensive
IncomeFor the year ended 31 December 2017
|
|
Year ended |
Year ended |
|
|
31 December |
31 December |
|
|
2017 |
2016 |
|
Notes |
£ |
£ |
Administrative
expenses |
|
(1,093,132 |
) |
(1,009,623 |
) |
Charge for share
options granted |
|
(678,652 |
) |
(324,890 |
) |
Changes in fair value
of contingent consideration |
17 |
621,545 |
|
(260,632 |
) |
(Loss)/Gain on foreign
exchange |
|
(299,834 |
) |
65,241 |
|
Operating loss |
6 |
(1,450,073 |
) |
(1,529,904 |
) |
Finance income |
8 |
15,854 |
|
4,387 |
|
Finance
costs |
8 |
(232,937 |
) |
(220,817 |
) |
Loss before
taxation |
|
(1,667,156 |
) |
(1,746,334 |
) |
Income
tax |
9 |
— |
|
— |
|
Loss for the year from continuing operations attributable
to owners of the parent |
|
(1,667,156 |
) |
(1,746,334 |
) |
Other
comprehensive income |
|
|
|
Items that may
be reclassified subsequently to profit or loss |
|
|
|
Currency
translation differences on translating foreign operations |
16 |
(3,479,050 |
) |
9,315,180 |
|
Other comprehensive income for the year, net of
tax |
|
(3,479,050 |
) |
9,315,180 |
|
Total comprehensive income for the year attributable to
owners of the parent |
|
(5,146,206 |
) |
7,568,846 |
|
Profit/(Loss) per share from continuing operations
attributable to owners of the parent |
|
|
|
Basic and
diluted (pence per share) |
19 |
(0.142 |
) |
(0.240 |
) |
The above Consolidated Statement of Comprehensive Income should
be read in conjunction with the accompanying notes.
Consolidated Statement of Financial
PositionCompany number: 05676866As at 31 December 2017
|
|
|
31 December |
31 December |
|
|
|
2017 |
2016 |
|
Notes |
|
£ |
£ |
Assets |
|
|
|
|
Non-current
assets |
|
|
|
|
Intangible assets |
10 |
|
34,308,278 |
|
32,017,796 |
|
Property, plant &
equipment |
|
|
2,051 |
|
862 |
|
|
|
|
34,310,329 |
|
32,018,658 |
|
Current
assets |
|
|
|
|
Trade and other
receivables |
|
|
153,105 |
|
35,493 |
|
Cash and
cash equivalents |
12 |
|
9,403,825 |
|
9,317,781 |
|
|
|
|
9,556,930 |
|
9,353,274 |
|
Total assets |
|
|
43,867,259 |
|
41,371,932 |
|
Equity and
liabilities |
|
|
|
|
Equity
attributable to owners of the parent |
|
|
|
|
Share capital |
13 |
|
13,719,343 |
|
11,719,343 |
|
Share premium |
14 |
|
40,422,258 |
|
35,767,344 |
|
Other reserves |
16 |
|
988,015 |
|
4,467,064 |
|
Retained
losses |
|
|
(15,887,801 |
) |
(14,899,297 |
) |
Total equity |
|
|
39,241,815 |
|
37,054,454 |
|
Liabilities |
|
|
|
|
Non-current
liabilities |
|
|
|
|
Contingent
consideration |
17 |
|
3,635,955 |
|
3,643,042 |
|
Deferred
tax liabilities |
9 |
|
253,205 |
|
282,450 |
|
|
|
|
3,889,160 |
|
3,925,492 |
|
Current
liabilities |
|
|
|
|
Trade and
other payables |
17 |
|
736,284 |
|
391,986 |
|
|
|
|
736,284 |
|
391,986 |
|
Total liabilities |
|
|
4,625,444 |
|
4,317,478 |
|
Total equity and liabilities |
|
|
43,867,259 |
|
41,371,932 |
|
The above Consolidated Statement of Financial Position should be
read in conjunction with the accompanying notes.
The Financial Statements were authorised for issue by the Board
of Directors on 26 March 2018 and were signed on its behalf.
David J
Hall |
|
|
|
Jeremy J
Martin |
Chairman |
|
|
|
Chief Executive
Officer |
Company Statement of Financial PositionCompany
number: 05676866As at 31 December 2017
|
|
|
31 December |
31 December |
|
Notes |
|
2017£ |
2016£ |
Assets |
|
|
|
|
Non-current
assets |
|
|
|
|
Property, plant &
equipment |
11 |
|
— |
|
283 |
|
Investment in subsidiaries |
25 |
|
51,238,055 |
|
43,670,347 |
|
|
|
|
51,238,055 |
|
43,670,630 |
|
Current
assets |
|
|
|
|
Trade and other
receivables |
|
|
41,773 |
|
35,423 |
|
Cash and
cash equivalents |
12 |
|
9,238,827 |
|
9,143,993 |
|
|
|
|
9,280,600 |
|
9,179,416 |
|
Total assets |
|
|
60,518,655 |
|
52,850,046 |
|
Equity and
liabilities |
|
|
|
|
Equity
attributable to equity shareholders |
|
|
|
|
Share capital |
13 |
|
13,719,343 |
|
11,719,343 |
|
Share premium |
14 |
|
40,422,258 |
|
35,767,344 |
|
Merger reserve |
16 |
|
10,888,760 |
|
10,888,760 |
|
Retained
losses |
|
|
(8,960,902 |
) |
(9,915,498 |
) |
Total equity |
|
|
56,069,459 |
|
48,459,949 |
|
Liabilities |
|
|
|
|
Non-current
liabilities |
|
|
|
|
Contingent consideration |
17 |
|
3,635,955 |
|
3,643,042 |
|
|
|
|
3,635,955 |
|
3,643,042 |
|
Current liabilities |
|
|
|
|
Trade and
other payables |
17 |
|
813,241 |
|
747,055 |
|
|
|
|
813,241 |
|
747,055 |
|
Total liabilities |
|
|
4,449,196 |
|
4,390,097 |
|
Total equity and liabilities |
|
|
60,518,655 |
|
52,850,046 |
|
The above Company Statement of Financial Position should be read
in conjunction with the accompanying notes, profit for the period
was £275,945 (2016:£602,827 loss). As permitted by section 408 of
the Companies Act 2006, the statement of comprehensive income of
the Parent Company is not presented as part of these Financial
Statements. The Financial Statements were authorised for issue by
the Board of Directors on 26 March 2018 and were signed on its
behalf.
David J
Hall |
|
|
|
Jeremy J
Martin |
Chairman |
|
|
|
Chief Executive
Officer |
Statements of Changes in EquityFor the year
ended 31 December 2017
|
|
Attributable to owners of the parent |
|
|
Share |
Share |
Retained |
Other |
|
|
capital |
premium |
losses |
reserves |
Total |
Consolidated |
£ |
£ |
£ |
£ |
£ |
As at 1 January 2016 |
6,712,044 |
31,252,708 |
|
(13,477,853 |
) |
(4,848,116 |
) |
19,638,783 |
|
Loss for the year |
— |
— |
|
(1,746,334 |
) |
— |
|
(1,746,334 |
) |
Other comprehensive
income: |
|
|
|
|
|
Currency
translation differences on translating foreign operations |
— |
— |
|
— |
|
9,315,180 |
|
9,315,180 |
|
Total
comprehensive income for the year |
— |
— |
|
(1,746,334 |
) |
9,315,180 |
|
7,568,846 |
|
Issue of ordinary
shares |
5,007,299 |
5,005,321 |
|
— |
|
— |
|
10,012,620 |
|
Issue costs |
— |
(490,685 |
) |
— |
|
— |
|
(490,685 |
) |
Share-based payments |
— |
— |
|
324,890 |
|
— |
|
324,890 |
|
Total
transactions with owners, recognised directly in equity |
5,007,299 |
4,514,636 |
|
324,890 |
|
— |
|
9,846,825 |
|
As at 31 December 2016 |
11,719,343 |
35,767,344 |
|
(14,899,297 |
) |
4,467,064 |
|
37,054,454 |
|
Loss for the year |
— |
— |
|
(1,667,156 |
) |
— |
|
(1,667,156 |
) |
Other comprehensive income: |
|
|
|
|
|
Currency translation
differences on translating foreign operations |
— |
— |
|
— |
|
(3,479,050 |
) |
(3,479,050 |
) |
Total comprehensive income for the year |
— |
— |
|
(1,667,156 |
) |
(3,479,050 |
) |
(5,146,206 |
) |
Issue of ordinary shares |
2,000,000 |
5,000,000 |
|
— |
|
— |
|
7,000,000 |
|
Issue costs |
— |
(345,086 |
) |
— |
|
— |
|
(345,086 |
) |
Share-based
payments |
— |
— |
|
678,652 |
|
— |
|
678,652 |
|
Total transactions with owners, recognised directly in equity |
2,000,000 |
4,654,914 |
|
678,652 |
|
— |
|
7,333,566 |
|
As at 31 December 2017 |
13,719,343 |
40,422,258 |
|
(15,887,801 |
) |
988,015 |
|
39,241,815 |
|
Statements of Changes in Equity (continued)
|
|
Attributable to equity shareholders |
|
|
Share |
Share |
Retained |
Merger |
|
|
capital |
premium |
losses |
reserves |
Total |
Company |
£ |
£ |
£ |
£ |
£ |
As at 1 January 2016 |
6,712,044 |
31,252,708 |
|
(9,637,561 |
) |
10,888,760 |
39,215,951 |
|
Loss and
total comprehensive income for the year |
— |
— |
|
(602,827 |
) |
— |
(602,827 |
) |
Issue of ordinary
shares |
5,007,299 |
5,005,321 |
|
— |
|
— |
10,012,620 |
|
Issue costs |
— |
(490,685 |
) |
— |
|
— |
(490,685 |
) |
Share-based payments |
— |
— |
|
324,890 |
|
— |
324,890 |
|
Total
transactions with owners, recognised directly in equity |
5,007,299 |
4,514,636 |
|
324,890 |
|
— |
9,846,825 |
|
As at 31 December 2016 |
11,719,343 |
35,767,344 |
|
(9,915,498 |
) |
10,888,760 |
48,459,949 |
|
Loss and
total comprehensive income for the year |
— |
— |
|
275,945 |
|
— |
275,945 |
|
Issue of ordinary
shares |
2,000,000 |
5,000,000 |
|
— |
|
— |
7,000,000 |
|
Issue costs |
— |
(345,086 |
) |
— |
|
— |
(345,086 |
) |
Share-based payments |
— |
— |
|
678,652 |
|
— |
678,652 |
|
Total
transactions with owners, recognised directly in equity |
2,000,000 |
4,654,914 |
|
678,652 |
|
— |
7,333,566 |
|
As at 31 December 2017 |
13,719,343 |
40,422,258 |
|
(8,960,902 |
) |
10,888,760 |
56,069,459 |
|
The above Statements of Changes in Equity should be read in
conjunction with the accompanying notes.
Consolidated Statement of Cash FlowsFor the
year ended 31 December 2017
|
|
31 December |
31 December |
|
|
2017 |
2016 |
|
Notes |
£ |
£ |
Cash flows from
operating activities |
|
|
|
Loss before
taxation |
|
(1,667,156 |
) |
(1,746,334 |
) |
Finance income |
|
(15,854 |
) |
(4,387 |
) |
Finance costs |
|
232,937 |
|
220,817 |
|
Charge for share
options granted |
|
678,652 |
|
324,890 |
|
Exchange
differences |
|
(117,606 |
) |
(177,940 |
) |
Change in fair value of
contingent consideration |
|
(621,545 |
) |
260,632 |
|
Depreciation |
|
283 |
|
1,084 |
|
Operating loss
before changes in working capital |
|
(1,510,298 |
) |
(1,121,238 |
) |
Decrease/(increase) in
trade and other receivables |
|
(117,612 |
) |
22,588 |
|
Increase/(decrease) in trade and other payables |
|
344,298 |
|
242,965 |
|
Net cash used in operating activities |
|
(1,283,612 |
) |
(855,685 |
) |
Cash flows from
investing activities |
|
|
|
Purchase of intangible
assets |
|
(5,102,852 |
) |
(1,253,212 |
) |
Purchase of property,
plant and equipment |
|
(2,236 |
) |
— |
|
Interest
received |
|
15,854 |
|
4,387 |
|
Net cash used in investing activities |
|
(5,089,234 |
) |
(1,248,825 |
) |
Cash flows from
financing activities |
|
|
|
Proceeds from issue of
ordinary shares |
|
7,000,000 |
|
9,000,000 |
|
Issue
costs |
|
(241,276 |
) |
(380,685 |
) |
Net cash generated from financing activities |
|
6,758,724 |
|
8,619,315 |
|
Net increase/(decrease) in cash and cash
equivalents |
|
385,878 |
|
6,514,805 |
|
Cash and cash
equivalents at beginning of year |
|
9,317,781 |
|
2,738,905 |
|
Exchange
gain/(loss) on cash and cash equivalents |
|
(299,834 |
) |
64,071 |
|
Cash and cash equivalents at end of the year |
12 |
9,403,825 |
|
9,317,781 |
|
The above Consolidated Statement of Cash Flows should be read in
conjunction with the accompanying notes.
Company Statement of Cash FlowsFor year ended
31 December 2017
|
|
31 December |
31 December |
|
|
2017 |
2016 |
|
Notes |
£ |
£ |
Cash flows from
operating activities |
|
|
|
(Loss)/profit before
taxation |
|
275,945 |
|
(602,827 |
) |
Finance costs |
|
232,937 |
|
220,817 |
|
Finance income |
|
(13,882 |
) |
(1,668 |
) |
Charge for share
options granted |
|
678,652 |
|
324,890 |
|
Exchange
differences |
|
(255,717 |
) |
283,555 |
|
Change in fair value of
contingent consideration |
|
(621,545 |
) |
260,632 |
|
Depreciation |
|
283 |
|
971 |
|
Operating
profit before changes in working capital |
|
296,673 |
|
486,370 |
|
Increase in trade and
other receivables |
|
(6,351 |
) |
(16,683 |
) |
Increase
in trade and other payables |
|
66,186 |
|
244,182 |
|
Net cash flows generated from operating
activities |
|
356,508 |
|
713,869 |
|
Cash flows from
investing activities |
|
|
|
Loans to subsidiary
undertakings |
|
(6,821,063 |
) |
(2,793,905 |
) |
Interest
received |
|
13,881 |
|
1,668 |
|
Net cash used in investing activities |
|
(6,807,182 |
) |
(2,792,237 |
) |
Cash flows from
financing activities |
|
|
|
Proceeds from issue of
ordinary shares |
|
7,000,000 |
|
9,000,000 |
|
Issue
costs |
|
(241,276 |
) |
(380,685 |
) |
Net cash generated from financing activities |
|
6,758,724 |
|
8,619,315 |
|
Net
increase/(decrease) in cash and cash equivalents |
|
308,050 |
|
6,540,947 |
|
Exchange gain/(loss) on
cash and cash equivalents |
|
(213,215 |
) |
34,779 |
|
Cash and cash
equivalents at beginning of year |
|
9,143,993 |
|
2,568,266 |
|
Cash and cash equivalents at end of the year |
12 |
9,238,827 |
|
9,143,993 |
|
The above Company Statement of Cash Flows should be read in
conjunction with the accompanying notes.
Notes to the Financial Statements
1 General information
The principal activity of Horizonte Minerals Plc (‘the Company’)
and its subsidiaries (together ‘the Group’) is the exploration and
development of base metals. The Company’s shares are listed on the
AIM market of the London Stock Exchange and on the Toronto Stock
Exchange. The Company is incorporated and domiciled in England and
Wales. The address of its registered office is Rex House, 4-12
Regents Street, London, SW1Y 4RG.
2 Summary of significant accounting
policies
The principal accounting policies applied in the preparation of
these Financial Statements are set out below. These policies have
been consistently applied to all the years presented.
2.1 Basis of preparation
These Financial Statements have been prepared in accordance with
International Financial Reporting Standards (‘IFRSs’) and IFRS
interpretations Committee (‘IFRS IC’) interpretations as adopted by
the European Union (‘EU’) and with IFRS and their Interpretations
issued by the IASB. The consolidated financial statements
have also been prepared in accordance with and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
The Financial Statements have been prepared under the historical
cost convention as modified by the revaluation of contingent
consideration and share based payment charges which are measured at
fair value.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group’s Accounting Policies. The areas involving a
higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the Financial
Statements, are disclosed in Note 4.
2.2 Changes in accounting policy and
disclosures
a) New and amended standards adopted by
the Group There are no IFRSs or IFRIC interpretations that
were effective for the first time for the financial year beginning
1 January 2017 that have had a material impact on the Group or
Company.
b) New and amended standards, and interpretations issued
but not yet effective for the financial year beginning 1 January
2017 and not early adoptedThe standards and
interpretations that are issued, but not yet effective, up to the
date of issuance of the financial statements are listed below. The
Group intends to adopt these standards, if applicable, when they
become effective. Unless stated below, there are no IFRSs or
IFRIC interpretations that are not yet effective that would be
expected to have a material impact on the Group.
Standard |
Effective Date |
IFRS 9 Financial
Instruments |
01-Jan-18 |
IFRS 16 Leases |
01-Jan-19 |
IFRS 15 Revenue from
contracts with Customers |
01-Jan-18 |
All endorsed by the EUThe only standard which is anticipated to
be significant or relevant to the Group is IFRS 9 “Financial
Instruments”, the Group is in the process of assessing the
quantitative implications of the standards on the Financial
Statements. It is expected that the contingent consideration
payable to both Glencore and following completion of the transfer
of legal title, Vermelho will be effected as well as the
intercompany loan receivable balance for the Company only.
Both IFRS 15 ‘Revenue from Contracts with Customers’ and IFRS 16
‘Leases’ are not expected to have a material impact on the Group at
this stage of the Group’s operations. The Group presently has no
revenue and the only leases that it holds relates to a short term
lease held for office space in both the United Kingdom and its
office in Brazil. These total approximately £80,000 per year and
are renewed for a maximum of 12 months at a time.
2.3 Basis of consolidation
Horizonte Minerals Plc was incorporated on 16 January 2006. On
23 March 2006 Horizonte Minerals Plc acquired the entire issued
share capital of Horizonte Exploration Limited (HEL) by way of a
share for share exchange. The transaction was treated as a group
reconstruction and was accounted for using the merger accounting
method as the entities were under common control before and after
the acquisition.
Subsidiaries are entities controlled by the
Group. Control is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee. The Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
- The contractual arrangement with the other vote holders of the
investee.
- Rights arising from other contractual arrangements.
- The Group’s voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in
the consolidated financial statements from the date the Group gains
control until the date the Group ceases to control the
subsidiary.
Other than for the acquisition of HEL as noted above, the Group
uses the acquisition method of accounting to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair value of the assets transferred, the
liabilities incurred and the equity interests issued by the Group.
The consideration transferred includes the fair value of any asset
or liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date.
Acquisition-related costs are expensed as incurred unless they
result from the issuance of shares, in which case they are offset
against the premium on those shares within equity.
If an acquisition is achieved in stages, the acquisition date
carrying value of the acquirer’s previously held equity interest in
the acquiree is remeasured to fair value at the acquisition date
through profit or loss.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or a liability is recognised in accordance
with IAS 39 either in profit or loss or as a change in other
comprehensive income. The unwinding of the discount on contingent
consideration liabilities is recognised as a finance charge within
profit or loss. Contingent consideration that is classified as
equity is not remeasured, and its subsequent settlement is
accounted for within equity.
The excess of the consideration transferred and the acquisition
date fair value of any previous equity interest in the acquiree
over the fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill. If this is less than the
fair value of the net assets of the subsidiary acquired in the case
of a bargain purchase, the difference is recognised directly in
profit or loss.
Inter-company transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Accounting
policies of subsidiaries have been changed where necessary to
ensure consistency with policies adopted by the Group.
Investments in subsidiaries are accounted for at cost less
impairment.
The following 100% owned subsidiaries have been included within
the consolidated Financial Statements:
Subsidiary undertaking |
Held |
Registered Address |
Country of incorporation |
Nature of business |
Horizonte Exploration
Ltd |
Directly |
Rex
House, 4-12 Regents Street, London SW1Y 4RG |
England |
Mineral
Exploration |
Horizonte Minerals
(IOM) Ltd |
Indirectly |
Devonshire House, 15 St Georges St, Douglas, Ilse of Man, |
Isle of
Man |
Holding
company |
HM Brazil (IOM)
Ltd |
Indirectly |
Devonshire House, 15 St Georges St, Douglas, Ilse of Man, |
Isle of
Man |
Holding
company |
Cluny (IOM) Ltd |
Indirectly |
Devonshire House, 15 St Georges St, Douglas, Ilse of Man, |
Isle of
Man |
Holding
company |
Champol (IOM) ltd |
Indirectly |
Devonshire House, 15 St Georges St, Douglas, Ilse of Man, |
Isle of
Man |
Holding
company |
Horizonte Nickel (IOM)
Ltd |
Indirectly |
Devonshire House, 15 St Georges St, Douglas, Ilse of Man, |
Isle of
Man |
Holding
company |
HM do Brasil Ltda |
Indirectly |
CNPJ
07.819.038/0001-30 com sede na Avenida Amazonas, 2904, loja 511,
Bairro Prado, Belo Horizonte – MG. CEP: 30.411-186 |
Brazil |
Mineral
Exploration |
Araguaia Niquel Metias
Ltda |
Indirectly |
CNPJ
97.515.035/0001-03 com sede na Avenida Amazonas, 2904, loja 511,
Bairro Prado, Belo Horizonte – MG. CEP: 30.411-186 |
Brazil |
Mineral
Exploration |
Lontra Empreendimentos
e Participações Ltda |
Indirectly |
CNPJ
11.928.960/0001-32 com sede na Avenida Amazonas, 2904, loja 511,
Bairro Prado, Belo Horizonte – MG. CEP: 30.411-186 |
Brazil |
Mineral
Exploration |
Typhon Brasil Mineração
Ltda |
Indirectly |
CNPJ
23.282.640/0001-37 com sede Alameda Ezequiel Dias, n. 427, 2º
andar, bairro Funcionários, Município de Belo Horizonte, Estado de
Minas Gerais, CEP 30.130-110. |
Brazil |
Mineral
Exploration |
Trias Brasil Mineração
Ltda |
Indirectly |
CNPJ
23.282.280/0001-73 com sede na Alameda Ezequiel Dias, n. 427, 2º
andar, bairro Funcionários, Município de Belo Horizonte, Estado de
Minas Gerais, CEP 30.130-110 |
Brazil |
Mineral
Exploration |
2.4 Going concern
The Group’s business activities together with the factors likely
to affect its future development, performance and position are set
out in the Chairman’s Statement on pages 4 and 5; in addition note
3 to the Financial Statements includes the Group’s objectives,
policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and its
exposure to credit and liquidity risk.
The Financial Statements have been prepared on a going concern
basis. Although the Group’s assets are not generating revenues and
an operating loss has been reported, the Directors consider that
the Group has sufficient funds to undertake its operating
activities for a period of at least the next 12 months including
any additional expenditure required in relation to its current
exploration projects. The Group has cash reserves which are
considered sufficient by the Directors to fund the Group’s
committed expenditure both operationally and on its exploration
projects for the foreseeable future. However, as additional
projects are identified and the Araguaia project moves towards
production, additional funding will be required.
As a result of considerations noted above, the Directors have a
reasonable expectation that the Group and Company have adequate
resources to continue in operational existence for the foreseeable
future. Thus they continue to adopt the going concern basis of
accounting in preparing these Financial Statements.
2.5 Intangible Assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition
over the fair value of the Group’s share of the net identifiable
assets, liabilities and contingent liabilities of the acquired
subsidiary at the date of acquisition. Goodwill arising on the
acquisition of subsidiaries is included in ‘intangible assets’.
Goodwill is tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on goodwill are
not reversed. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash generating units for the purpose
of impairment testing. The allocation is made to those
cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the
goodwill arose, identified according to operating segment.
(b) Exploration and evaluation assets
The Group capitalises expenditure in relation to exploration and
evaluation of mineral assets when the legal rights are obtained.
Expenditure included in the initial measurement of exploration and
evaluation assets and which are classified as intangible assets
relate to the acquisition of rights to explore, topographical,
geological, geochemical and geophysical studies, exploratory
drilling, trenching, sampling and activities to evaluate the
technical feasibility and commercial viability of extracting a
mineral resource.
Exploration and evaluation assets arising on business
combinations are included at their acquisition-date fair value in
accordance with IFRS 3 (revised) ‘Business combinations’. Other
exploration and evaluation assets and all subsequent expenditure on
assets acquired as part of a business combination are recorded and
held at cost.
Exploration and evaluation assets are assessed for impairment
when facts and circumstances suggest that the carrying amount of an
asset may exceed its recoverable amount. The assessment is carried
out by allocating exploration and evaluation assets to cash
generating units, which are based on specific projects or
geographical areas.
Whenever the exploration for and evaluation of mineral resources
does not lead to the discovery of commercially viable quantities of
mineral resources or the Group has decided to discontinue such
activities of that unit, the associated expenditures are written
off to profit or loss.
2.6 Property, plant and equipment
All property, plant and equipment is stated at historic cost
less accumulated depreciation. Historic cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All repairs and maintenance costs are charged to profit
or loss during the financial period in which they are incurred.
Depreciation is charged on a straight-line basis so as to write
off the cost of assets, over their estimated useful lives, using
the straight-line method, on the following bases:
Office equipment |
25% |
Vehicles and other
field equipment |
25% –
33% |
The asset’s residual values and useful lives are reviewed, and
adjusted if appropriate, at the end of each reporting
period.
An asset’s carrying amount is written down immediately to its
recoverable amount if the assets carrying amount is greater than
its estimated recoverable amount.
2.7 Impairment of non-financial assets
Assets that have an indefinite useful life, such as goodwill or
intangible exploration assets not ready to use, are not subject to
amortisation and are tested annually for impairment. Intangible
assets that are subject to amortisation and property, plant and
equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by
which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units).
Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at
each reporting date.
2.8 Foreign currency translation
(a) Functional and presentation currency
Items included in the Financial Statements of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (the ‘functional
currency’). The functional currency of the UK and Isle of Man
entities is Pounds Sterling and the functional currency of the
Brazilian entities is Brazilian Real. The Consolidated Financial
Statements are presented in Pounds Sterling, rounded to the nearest
pound, which is the Company’s functional and Group’s presentation
currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions or valuation where such items are re-measured. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
(c) Group companies
The results and financial position of all the Group’s entities
(none of which has the currency of a hyperinflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
- assets and liabilities for each statement of financial position
presented are translated at the closing rate at the date of that
statement of financial position;
- each component of profit or loss is translated at average
exchange rates during the accounting period (unless this average is
not a reasonable approximation of the cumulative effect of the
rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
- all resulting exchange differences are recognised in other
comprehensive income.
On consolidation, exchange differences arising from the
translation of the net investment in foreign entities, and of
monetary items receivable from foreign subsidiaries for which
settlement is neither planned nor likely to occur in the
foreseeable future are taken to other comprehensive income. When a
foreign operation is sold, such exchange differences are recognised
in profit or loss as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and retranslated at the end of each reporting
period.
2.9 Financial assets
The Group classifies its financial assets as loans and
receivables.
(a) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. After initial measurement, such financial assets are
subsequently measured at amortised cost using the effective
interest rate method, less impairment. The Group’s loans and
receivables comprise ‘trade and other receivables’ and ‘cash and
cash equivalents’ in the Consolidated Statement of Financial
Position and loans to group undertakings in the Company Statement
of Financial Position.
Derecognition
A financial asset is derecognised when the rights to receive
cash flows from the asset have expired.
2.10 Cash and cash
equivalents
In the Statement of Financial Position and Statement of Cash
Flows, cash and cash equivalents comprise cash at bank and in hand
and demand deposits with banks and other financial institutions,
that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value.
2.11 Impairment of financial assets
(a) Assets carried at amortised cost
The Group assesses at the end of each reporting
period whether there is objective evidence that a financial asset
or group of financial assets is impaired. A financial asset or a
group of financial assets is impaired and impairment losses are
incurred only if there is objective evidence of impairment as a
result of one or more events that occurred after the initial
recognition of the asset (a ‘loss event’) and that
loss event (or events) has an impact on the estimated future cash
flows of the financial asset or group of financial assets that can
be reliably estimated.
For loans and receivables category, the amount
of the loss is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash
flows (excluding future credit losses that have not been incurred)
discounted at the financial asset’s original effective interest
rate. The carrying amount of the asset is reduced and the amount of
the loss is recognised in the Consolidated Income Statement.
If, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be related
objectively to an event occurring after the impairment was
recognised (such as an improvement in the debtor’s credit rating),
the reversal of the previously recognised impairment loss is
recognised in the Consolidated Income Statement.
2.12 Taxation
The tax credit or expense for the period comprises current and
deferred tax. Tax is recognised in the Income Statement, except to
the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in
equity, respectively.
The charge for current tax is calculated on the basis of the tax
laws enacted or substantively enacted by the end of the reporting
period in the countries where the company and its subsidiaries
operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations
in which applicable tax regulation is subject to interpretation. It
establishes provisions where appropriate on the basis of amounts
expected to be paid to the tax authorities.
Deferred tax is accounted for using the liability method in
respect of temporary differences arising from differences between
the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation
of taxable profit. However, deferred tax liabilities are not
recognised if they arise from the initial recognition of goodwill;
deferred tax is not accounted for if it arises from initial
recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss.
Deferred tax liabilities are recognised for all taxable
temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised.
Deferred tax assets are recognised on tax losses carried forward to
the extent that the realisation of the related tax benefit through
future taxable profits is probable.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates,
and interests in joint ventures, except where the Company is able
to control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and
liabilities relate to taxes levied by the same taxation authority
on either the same taxable entity or different taxable entities
where there is an intention to settle the balances on a net
basis.
Deferred tax is calculated at the tax rates (and laws) that have
been enacted or substantively enacted by the Statement of Financial
Position date and are expected to apply to the period when the
asset is realised or the liability is settled.
Deferred tax assets and liabilities are not discounted.
2.13 Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new ordinary shares or
options are shown in equity as a deduction, net of tax, from the
proceeds.
2.14 Financial liabilities
The Group classifies its financial liabilities into one of two
categories, depending on the purpose for which the liability was
acquired.
Fair value through profit or loss
This category comprises the contingent consideration which are
carried in the consolidated statement of financial position atfair
value with changes in fair value recognised in the consolidated
statement of comprehensive income.
Other financial liabilities
Trade payables and other short-term monetary liabilities, which
are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
2.15 Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities
if payment is due within one year or less. If not, they are
presented as non-current liabilities.
Trade payables are initially recognised at fair value and
subsequently measured at amortised cost using the effective
interest method.
2.16 Operating leases
Leases of assets under which a significant amount of the risks
and benefits of ownership are effectively retained by the lessor
are classified as operating leases. Operating lease payments are
charged to the Income Statement on a straight-line basis over the
period of the respective leases.
2.17 Share-based payments and incentives
The Group operates equity-settled, share-based compensation
plans, under which the entity receives services from employees as
consideration for equity instruments (options) of the Group. The
fair value of employee services received in exchange for the grant
of share options are recognised as an expense. The total expense to
be apportioned over the vesting period is determined by reference
to the fair value of the options granted:
> including
any market performance conditions;
> excluding
the impact of any service and non-market performance vesting
conditions; and
> including
the impact of any non-vesting conditions.
Non-market performance and service conditions are included in
assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is
the period over which all of the specified vesting conditions are
to be satisfied. At the end of each reporting period the Group
revises its estimate of the number of options that are expected to
vest.
It recognises the impact of the revision of original estimates,
if any, in profit or loss, with a corresponding adjustment to
equity.
When options are exercised, the Company issues new shares. The
proceeds received net of any directly attributable transaction
costs are credited to share capital (nominal value) and share
premium.
The fair value of goods or services received in exchange for
shares is recognised as an expense.
2.18 Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Executive Officer, the
Company’s chief operating decision-maker (“CODM”).
2.19 Finance income
Interest income is recognised using the effective interest
method, taking into account the principal amounts outstanding and
the interest rates applicable.
2.20 Provisions and Contingent Liabilities
Provisions are recognised when the Group has a
present legal or constructive obligation as a result of past
events; it is probable that an outflow of resources will be
required to settle the obligation; and the amount can be reliably
estimated.
Provisions are measured at the present value of
the expenditures expected to be required to settle the obligation
using a pre-tax rate that reflects current market assessments of
the time value of money and the risks specific to the obligation.
The increase in the provision due to passage of time is recognised
as finance cost.
Contingent liabilities are potential obligations that arise from
past events and whose existence will only be confirmed by the
occurrence of one or more uncertain future events that, however,
are beyond the control of the Group. Furthermore, present
obligations may constitute contingent liabilities if it is not
probable that an outflow of resources will be required to settle
the obligation, or a sufficiently reliable estimate of the amount
of the obligation cannot be made.
3 Financial risk management
3.1 Financial risk factors
The main financial risks to which the Group’s activities are
exposed are liquidity and fluctuations on foreign currency. The
Group’s overall risk management programme focusses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance.
Risk management is carried out by the Board of Directors under
policies approved at the quarterly Board meetings. The Board
frequently discusses principles for overall risk management
including policies for specific areas such as foreign exchange.
(a) Liquidity risks
In keeping with similar sized mineral exploration groups, the
Group’s continued future operations depend on the ability to raise
sufficient working capital through the issue of equity share
capital. The Group monitors its cash and future funding
requirements through the use of cash flow forecasts.
All cash, with the exception of that required for immediate
working capital requirements, is held on short-term deposit.
(b) Foreign currency risks
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the Brazilian Real, US Dollar and the Pound
Sterling.
Foreign exchange risk arises from future commercial
transactions, recognised assets and liabilities and net investments
in foreign operations that are denominated in a foreign currency.
The Group holds a proportion of its cash in US Dollars and
Brazilian Reals to hedge its exposure to foreign currency
fluctuations and recognises the profits and losses resulting from
currency fluctuations as and when they arise. The volume of
transactions is not deemed sufficient to enter into forward
contracts.
At 31 December 2017, if the Brazilian Real had
weakened/strengthened by 20% against Pound Sterling and US Dollar
with all other variables held constant, post tax loss for the year
would have been approximately £17,287 lower/higher mainly as a
result of foreign exchange losses/gains on translation of Brazilian
Real expenditure and denominated bank balances.
(c) Interest rate risk
As the Group has no borrowings, it is not exposed to interest
rate risk on financial liabilities. The Group’s interest rate risk
arises from its cash held on short-term deposit for which the
Directors use a mixture of fixed and variable rate deposits. As a
result, fluctuations in interest rates are not expected to have a
significant impact on profit or loss or equity.
(d) Price risk
Given the size and stage of the Group’s operations, the costs of
managing exposure to commodity price risk exceed any potential
benefits. The Directors will revisit the appropriateness of this
policy should the Group’s operations change in size or nature.
(e) Credit risk
Credit risk arises from cash and cash equivalents and
outstanding receivables. The Group maintains cash and short-term
deposits with a variety of credit worthy financial institutions and
considers the credit ratings of these institutions before investing
in order to mitigate against the associated credit risk.
The Company’s exposure to credit risk amounted to £58,128,840
(2016: £50,476,298). Of this amount £48,890,013 (2016: £41,332,305)
is due from subsidiary companies, £9,238,827 represents cash
holdings (2016: £9,143,993)
3.2 Capital risk management
The Group’s objectives when managing capital are to safeguard
the Group’s ability to continue as a going concern, in order to
provide returns for shareholders and to enable the Group to
continue its exploration and evaluation activities. The Group has
no debt at 31 December 2017 and defines capital based on the total
equity of the Group. The Group monitors its level of cash resources
available against future planned exploration and evaluation
activities and may issue new shares in order to raise further funds
from time to time.
As indicated above, the Group holds cash reserves on deposit at
several banks and in different currencies until they are required
and in order to match where possible with the corresponding
liabilities in that currency.
3.3 Fair value estimation
The carrying values of trade receivables and payables are
assumed to be approximate to their fair values, due to their
short-term nature. The fair value of contingent consideration is
estimated by discounting the future expected contractual cash flows
at the Group’s current cost of capital of 7% based on the interest
rate available to the Group for a similar financial instrument.
4 Critical accounting estimates and
judgements
The preparation of the Financial Statements in conformity with
IFRSs requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the end of the
reporting period and the reported amount of expenses during the
year. Actual results may vary from the estimates used to produce
these Financial Statements.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
Significant items subject to such judgements include, but are
not limited to:
4.1 Impairment of exploration and evaluation
costs
Exploration and evaluation costs have a carrying value at 31
December 2017 of £34,057,215 (2016: £31,737,737 ). Each exploration
project is subject to an annual review by either a consultant or
senior company geologist to determine if the exploration results
returned to date warrant further exploration expenditure and have
the potential to result in an economic discovery. This review takes
into consideration long-term metal prices, anticipated resource
volumes and grades, permitting and infrastructure. In the event
that a project does not represent an economic exploration target
and results indicate there is no additional upside, a decision will
be made to discontinue exploration. The judgement exercised by
management relates to whether there is perceived to be an indicator
of impairment and that management have concluded that there is not,
due to the recovery in the Nickel prices, favourable economics of
the PFS as well as ongoing support from the equity markets to
advance the project by way of closing a fund raise at the end of
2017.
4.2 Estimated impairment of goodwill
Goodwill has a carrying value at 31 December 2017 of £251,063
(2016: £280,059 ) which is included in intangible assets. The Group
tests annually whether goodwill has suffered any impairment, in
accordance with the accounting policy stated in note 2.7.
Management has concluded that there is no impairment charge
necessary to the carrying value of goodwill. The judgements
exercised in arriving at this decision are the same as described in
4.1 above. See also note 10 to the Financial Statements.
Estimates and assumptions include, but are not limited to:
4.3 Contingent consideration
Contingent consideration has a carrying value of £3,635,955, at
31 December 2017 (2016: £3,643,042). there are two contingent
consideration arrangements in place as at 31 December 2017:
- A contingent consideration arrangement that requires the Group
to pay the former owners of Teck Cominco Brasil S.A (subsequently
renamed Araguaia Niquel Mineração Ltda) 50% of the tax saving upon
utilisation of the tax losses existing in Teck Cominco Brasil S.A
at the date of acquisition. Under the terms of the acquisition
agreement, tax losses that existed at the date of acquisition and
which are subsequently utilised in a period greater than 10 years
from that date are not subject to the contingent consideration
arrangement.
This acquisition was accounted for as a business combination and
an assessment of the fair value of the contingent consideration was
made at the date of acquisition. This fair value is reassessed in
each subsequent accounting period. In arriving at an estimate of
the fair value management make an assessment of the probability of
utilisation of all or part of the tax losses by the end of the 10
year period which is August 2020. The Group has used
discounted cash flow analysis to determine when it is anticipated
that the tax losses will be utilised and any potential contingent
consideration paid. These cash flows could be affected by movements
in a number of factors including the timing of the development and
commissioning of the project, commodity prices, operating costs,
capital expenditure, production levels, grades, recoveries and
interest rates. Because of the condition of the acquisition
agreement to utilise tax losses prior to August 2020 a critical
assumption in the assessment of value of the contingent
consideration is the timing of commencement of profitable
production, which for the financial year ending 31 December 2017
has been re-assessed as taking place after August 2020.
- A contingent consideration arrangement that requires the Group
to pay Xstrata Brasil Mineração Ltda US$1,000,000 after the date of
issuance of a Feasibility Study comprising the Araguaia project and
the Vale dos Sonhos (‘VdS’) and Serra do Tapa (‘SdT’) project areas
(‘GAP’) (together the ‘Enlarged Project’), to be satisfied in
shares in the Company (at the 5 day volume weighted average price
taken on the tenth business day after the date of such
issuance) or cash, at the election of the Company; and remaining
consideration of US$5,000,000 to be paid in cash, as at the date of
first commercial production from any of the resource areas within
the Enlarged Project area. Although a number of the critical
assumptions relating to the assessment of the contingent
consideration of US$5,000,000 are similar to those described above
for the contingent consideration payable to the former owners of
Teck Cominco Brasil S.A there is no linkage to utilisation of tax
losses by a fixed date.
The Contingent consideration is considered to be a level 3
hierarchy valuation, the following are unobservable inputs for the
valuation model: Discount rate and probability factor. In addition,
the model includes the foreign exchange rate.
Management have sensitized the fair value calculation to
reasonable changes in the unobservable inputs and note that if the
discount rate were to increase from 7% to 10% then the FV would
decrease by £269,255 to £3,366,700.
There has been no change in valuation technique during the
period.
4.4 Current and deferred taxation
The Group is subject to income taxes in numerous jurisdictions.
Judgment is required in determining the worldwide provision for
such taxes. The Group recognises liabilities for anticipated tax
issues based on estimates of whether additional taxes will be due.
Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will affect
the current and deferred income tax assets and liabilities in the
period in which such determination is made.
Deferred tax liabilities have been recognised on the fair value
gains in exploration assets arising on the acquisitions of Araguaia
Niquel Mineração Ltda (formerly Teck Cominco Brasil S.A) and Lontra
Empreendimentos e Participações Ltda. A deferred tax asset in
respect of the losses has been recognised on acquisition of
Araguaia Niquel Mineração Ltda to the extent that it can be set
against the deferred tax liability arising on the fair value gains.
In determining whether a deferred tax asset in excess of this
amount should be recognized management must make an assessment of
the probability that the tax losses will be utilized and a deferred
tax asset is only recognised if it is considered probable that the
tax losses will be utilized.
Other estimates include but are not limited to future cash flows
associated with assets, useful lives for depreciation and fair
value of financial instruments.
5 Segmental reporting
The Group operates principally in the UK and Brazil, with
operations managed on a project by project basis within each
geographical area. Activities in the UK are mainly administrative
in nature whilst the activities in Brazil relate to exploration and
evaluation work. The reports used by the chief operating
decision-maker are based on these geographical segments.
2017 |
UK 2017 £ |
|
Brazil 2017 £ |
|
Other 2017 £ |
Total 2017 £ |
|
Administrative
expenses |
(1,093,132 |
) |
— |
|
— |
(1,093,132 |
) |
Loss on foreign
exchange |
(261,218 |
) |
(38,616 |
) |
— |
(299,834 |
) |
Loss from operations per reportable segment |
(1,354,350 |
) |
(38,616 |
) |
— |
(1,392,966 |
) |
Depreciation
charges |
(283 |
) |
— |
|
— |
(283 |
) |
Additions to
non-current assets |
— |
|
2,319,479 |
|
— |
2,319,479 |
|
Reportable segment
assets |
9,359,155 |
|
34,508,104 |
|
— |
43,867,259 |
|
Reportable segment
non-current assets |
— |
|
34,308,278 |
|
— |
34,308,278 |
|
Reportable segment liabilities |
4,029,066 |
|
596,378 |
|
— |
4,625,444 |
|
2016 |
UK 2016 £ |
|
Brazil 2016 £ |
|
Other 2016 £ |
Total 2016 £ |
|
Administrative
expenses |
(802,409 |
) |
(207,214 |
) |
— |
(1,009,623 |
) |
Loss on foreign
exchange |
46,454 |
|
18,787 |
|
— |
65,241 |
|
Loss from operations per reportable segment |
(755,955 |
) |
(188,427 |
) |
— |
(944,382 |
) |
Depreciation
charges |
(970 |
) |
(114 |
) |
— |
(1,084 |
) |
Additions to
non-current assets |
— |
|
11,578,410 |
|
— |
11,578,410 |
|
Reportable segment
assets |
9,309,132 |
|
32,062,800 |
|
— |
41,371,932 |
|
Reportable segment
non-current assets |
— |
|
32,018,658 |
|
— |
32,018,658 |
|
Reportable segment liabilities |
3,969,966 |
|
347,511 |
|
— |
4,317,477 |
|
Inter segment revenues are calculated and recorded in accordance
with the underlying intra group service agreements.
A reconciliation of adjusted loss from operations per reportable
segment to loss before tax is provided as follows:
|
2017£ |
|
2016 £ |
|
Loss from operations
per reportable segment |
(1,392,966 |
) |
(944,382 |
) |
Changes in fair value
of contingent consideration (refer note 17) |
621,545 |
|
(260,632 |
) |
Charge for share
options granted |
(678,652 |
) |
(324,890 |
) |
Finance income |
15,854 |
|
4,387 |
|
Finance
costs |
(232,938 |
) |
(220,817 |
) |
Loss for
the year from continuing operations |
(1,667,156 |
) |
(1,746,334 |
) |
6 Expenses by nature
|
2017 |
2016 |
Group |
£ |
£ |
Charge for share
options granted |
678,652 |
324,890 |
Depreciation (note
11) |
283 |
1,084 |
Operating lease
charges |
55,421 |
36,053 |
Profit on
disposal of property, plant and equipment |
— |
— |
7 Auditor remuneration
During the year the Group (including its overseas subsidiaries)
obtained the following services from the Company’s auditor and its
associates:
Group |
2017 £ |
2016 £ |
Fees payable to the
Company’s auditor and its associates for the audit of the parent
company and consolidated financial statements |
35,350 |
32,000 |
Fees payable to the
Company’s auditor and its associates for other services: |
|
|
– Audit related
assurance services |
11,250 |
5,000 |
–Tax
compliance services |
4,850 |
2,000 |
8 Finance income and costs
Group |
2017 £ |
|
2016 £ |
|
Finance
income: |
|
|
– Interest income on
cash and short-term bank deposits |
15,854 |
|
4,387 |
|
Finance
costs: |
|
|
–
Contingent consideration: unwinding of discount |
(232,938 |
) |
(220,817 |
) |
Net finance costs |
(217,084 |
) |
(216,430 |
) |
9 Income Tax
Group |
2017 £ |
2016 £ |
Tax
charge: |
|
|
Current
tax charge for the year |
— |
— |
Deferred
tax charge for the year |
— |
— |
Tax on loss for the year |
— |
— |
Reconciliation of current tax
Group |
2017 £ |
|
2016 £ |
|
Loss before income
tax |
(1,667,156 |
) |
(1,746,334 |
) |
Current tax at 19.25%
(2016: 22.87%) |
(320,928 |
) |
(399,387 |
) |
Effects of: |
|
|
Expenses not deducted
for tax purposes |
— |
|
9,080 |
|
Utilisation of tax
losses brought forward |
— |
|
— |
|
Tax losses carried
forward for which no deferred income tax asset was recognised |
320,928 |
|
408,466 |
|
Total tax |
— |
|
— |
|
No tax charge or credit arises on the loss for the year.
The weighted average applicable tax rate of 19.25% used is the
effective standard rate of corporation tax in the UK, where all of
the current year losses originated. The corporation tax rate in
Brazil is 34%. The weighted average applicable tax rate has
decreased from 22.87% to 19.25% as all of the losses arose in the
UK.
Deferred income tax
An analysis of deferred tax assets and liabilities is set out
below.
Group |
2017 £ |
|
2016 £ |
|
Deferred tax assets |
4,255,615 |
|
4,744,885 |
|
|
|
|
Deferred tax
liabilities |
|
|
–
Deferred tax liability to be settled after more than 12 months |
(4,508,820 |
) |
(5,027,335 |
) |
|
|
|
Deferred tax liabilities (net) |
(253,205 |
) |
(282,450 |
) |
The movement on the net deferred tax liabilities is as
follows:
Group |
2017 £ |
|
2016 £ |
|
At 1 January |
(282,450 |
) |
(193,665 |
) |
Exchange
differences |
29,245 |
|
(88,785 |
) |
At 31 December |
(253,205 |
) |
(282,450 |
) |
Deferred tax assets are recognised on tax losses carried forward
to the extent that the realisation of the related tax benefit
through future taxable profits is probable.
Deferred tax liabilities are recognised in respect of fair value
adjustments to the carrying value of intangible assets as a result
of the acquisition of such assets.
The Group has tax losses of approximately £19,707,869 (2016:
£18,132,502) in Brazil and excess management charges of
approximately £3,779,062 (2016: £2,492,408) in the UK available to
carry forward against future taxable profits. Deferred tax asset
have been recognised up to the amount of the deferred tax liability
arising on the fair value adjustments potential deferred tax assets
of £6,700,675 have not been recognised.
10 Intangible assets
Intangible assets comprise exploration licenses, exploration and
evaluation costs and goodwill. Exploration and evaluation costs
comprise acquired and internally generated assets.
Group |
Goodwill £ |
ExplorationLicenses £ |
Exploration and evaluation costs £ |
Total £ |
Cost |
|
|
|
|
At 1 January 2016 |
192,028 |
|
3,174,275 |
|
16,985,052 |
|
20,351,355 |
|
Additions |
— |
|
1,012,620 |
|
1,253,212 |
|
2,265,831 |
|
Exchange
rate movements |
88,032 |
|
1,458,290 |
|
7,854,288 |
|
9,400,610 |
|
Net book
amount at 31 December 2016 |
280,060 |
|
5,645,185 |
|
26,092,551 |
|
32,017,796 |
|
Additions |
— |
|
— |
|
5,740,740 |
|
5,740,740 |
|
Exchange
rate movements |
(28,997 |
) |
(479,656 |
) |
(2,941,605 |
) |
(3,450,258 |
) |
Net book amount at 31 December 2017 |
251,063 |
|
5,165,529 |
|
28,891,686 |
|
34,308,278 |
|
(a) Exploration and evaluation assets
No indicators of impairment were identified during the year.
In October 2016, a Canadian NI 43-101 compliant Pre-Feasibility
Study (‘PFS’) was published by the Company regarding the enlarged
Araguaia Project which included the areas recently acquired from
Glencore Xstrata. The financial results and conclusions of the PFS
clearly indicate the economic viability of the Araguaia Project.
Nothing material had changed with the economics of the PFS as at
the end of 2017 and the Directors undertook an assessment of
impairment through evaluating the results of the PFS along with
recent market information relating to capital markets and nickel
prices and judged that no impairment was required with regards to
the Araguaia Project.
(b) Goodwill
Goodwill arose on the acquisition of Lontra Empreendimentos e
Participações Ltda in 2010. The Directors have determined the
recoverable amount of goodwill based on the same assumptions used
for the assessment of the Lontra exploration project detailed
above. As a result of this assessment, the Directors have concluded
that no impairment charge is necessary against the carrying value
of goodwill.
Impairment reviews for exploration and evaluation assets are
carried out either on a project by project basis or by geographical
area.
The adjacent Araguaia/Lontra/Vila Oito and Floresta exploration
sites (‘the Araguaia Project’), together with the Vale dos Sonhos
deposit acquired from Xstrata Brasil Mineração Ltda comprise a
resource of a sufficient size and scale to allow the Company to
create a significant single nickel project. For this reason, at the
current stage of development, these two projects are viewed and
assessed for impairment by management as a single cash generating
unit.
The mineral concession for the Vale dos Sonhos deposit was
acquired from Xstrata Brasil Mineração Ltda, a subsidiary of
Glencore Canada Corporation, in November 2015.
The recoverable amount has been determined by reference to the
PFS undertaken during the year on the Araguaia Project. The key
inputs and assumptions in deriving the value in use were, the
discount rate of 8%, Nickel price of US$12,000/t and a life of mine
of 28 years.
Sensitivity to changes in assumptions
For the base case NPV8 of the Araguaia Project of US$581 million
using a nickel price of US$14,000/t and US$328 million using
US$12,000/t as per the PFS to be reduced to the book value of the
Araguaia Project as at 31 December 2017, the discount rate applied
to the cash flow model would need to be increased from 8% to
21%.
11 Property, plant and equipment
Group |
Vehicles and other field equipment £ |
Office equipment £ |
Total £ |
Cost |
|
|
|
At 1 January 2016 |
74,647 |
|
12,596 |
|
87,243 |
|
Foreign
exchange movements |
31,657 |
|
1,802 |
|
33,459 |
|
At 31 December 2016 |
106,304 |
|
14,398 |
|
120,702 |
|
Foreign exchange
movements |
(10,630 |
) |
(796) |
(11,426 |
) |
Additions |
2,236 |
|
— |
|
2,236 |
|
At 31 December 2017 |
97,910 |
|
13,602 |
|
111,512 |
|
Accumulated
depreciation |
|
|
|
At I January 2016 |
65,639 |
|
9,716 |
|
75,355 |
|
Charge for the
year |
11,766 |
|
2,614 |
|
14,380 |
|
Foreign
exchange movements |
28,320 |
|
1,785 |
|
30,105 |
|
At 31 December 2016 |
105,725 |
|
14,115 |
|
119,840 |
|
Charge for the
year |
358 |
|
283 |
|
641 |
|
Foreign
exchange movements |
(10,224 |
) |
(796 |
) |
(11,020 |
) |
At 31 December 2017 |
95,859 |
|
13,602 |
|
109,461 |
|
Net book amount as at 31 December 2017 |
2,051 |
|
— |
|
2,051 |
|
Net book
amount as at 31 December 2016 |
579 |
|
283 |
|
862 |
|
Net book
amount as at 1 January 2016 |
9,008 |
|
2,880 |
|
11,888 |
|
Depreciation charges of £358 (2016: £13,296) have been
capitalised and included within intangible exploration and
evaluation asset additions for the year. The remaining depreciation
expense for the year ended 31 December 2017 of £283 (2016: £1,084)
has been charged in ‘administrative expenses’ under
‘Depreciation.’
Company |
|
Field equipment £ |
Office equipment £ |
Total £ |
Cost |
|
|
|
|
At 1 January 2016 |
|
4,208 |
7,403 |
11,611 |
Additions |
|
— |
— |
— |
At 31 December 2016 and 2017 |
|
4,208 |
7,403 |
11,611 |
Accumulated
depreciation |
|
|
|
|
At 1 January 2016 |
|
4,208 |
6,149 |
10,357 |
Charge for the
year |
|
— |
971 |
971 |
At 31 December 2016 |
|
4,208 |
7,120 |
11,328 |
Charge for the
year |
|
— |
283 |
283 |
At 31 December 2017 |
|
4,208 |
7,403 |
11,611 |
Net book amount as at 31 December 2017 |
|
— |
— |
— |
Net book amount as at 31 December 2016 |
|
— |
283 |
283 |
Net book
amount as at 1 December 2016 |
|
— |
1,254 |
1,254 |
12 Cash and cash equivalents
|
Group |
Company |
|
2017 £ |
2016 £ |
2017 £ |
2016 £ |
Cash at bank and on
hand |
7,903,861 |
9,250,281 |
7,738,863 |
9,094,308 |
Short-term deposits |
1,499,964 |
67,500 |
1,499,964 |
49,685 |
|
9,403,825 |
9,317,781 |
9,238,827 |
9,143,993 |
The Group’s cash at bank and short-term deposits are held with
institutions with the following credit ratings (Fitch):
|
Group |
Company |
|
2017 £ |
2016 £ |
2017 £ |
2016 £ |
A |
9,267,418 |
9,217,380 |
9,188,864 |
9,094,308 |
BBB- |
136,407 |
100,401 |
49,963 |
49,685 |
|
9,403,825 |
9,317,781 |
9,238,827 |
9,143,993 |
13 Share capital
Group and
Company |
2017 Number |
2017 £ |
2016 Number |
2016 £ |
Issued and
fully paid |
|
|
|
|
Ordinary shares of 1p
each |
|
|
|
|
At 1 January |
1,171,934,300 |
11,719,343 |
671,204,378 |
6,712,044 |
Issue of
ordinary shares |
200,000,000 |
2,000,000 |
500,729,922 |
5,007,299 |
At 31
December |
1,371,934,300 |
13,719,343 |
1,171,934,300 |
11,719,343 |
Share capital comprises amount subscribed for shares at the
nominal value.
2017
On 22 December 2017, a total of 200,000,000 shares were issued
through a private placement at a price of £0.035 per share to raise
£7,000,000 before expenses.
2016
On 8 August 2016, a total of 50,729,922 new ordinary shares were
issued at the prevailing market price of £0.0199 per share in
consideration for the purchase of the Vale dos Sonhos mineral
concession from Xstrata Brasil Mineração Ltda.
On 30 November 2016, a total of 374,000,000 shares were issued
through a private placement at a price of £0.02 per share to raise
£7,480,000 before expenses.
On 2 December 2016, a total of 76,000,000 shares were issued
through a private placement at a price of £0.02 per share to raise
£1,520,000 before expenses.
14 Share premium
Group and
Company |
2017 £ |
|
2016 £ |
|
At 1 January |
35,767,344 |
|
31,252,708 |
|
Premium arising on
issue of ordinary shares |
5,000,000 |
|
5,005,662 |
|
Issue
costs |
(345,086 |
) |
(490,685 |
) |
At 31
December |
40,422,258 |
|
35,767,344 |
|
Share premium comprises the amount subscribed for share capital
in excess of nominal value.
15 Share-based payments
The Directors have discretion to grant options to the Group
employees to subscribe for Ordinary shares up to a maximum of 10%
of the Company’s issued share capital. One third of options are
exercisable at each six month’s anniversary from the date of grant,
such that all options are exercisable 18 months after the date of
grant and all lapse on the tenth anniversary of the date of grant
or the holder ceasing to be an employee of the Group. Should
holders cease employment then the options remain valid for a period
of 3 months after cessation of employment, following which they
will lapse. Neither the Company nor the Group has any legal or
constructive obligation to settle or repurchase the options in
cash.
Movements on number of share options and their related exercise
price are as follows:
|
Number of options 2017 £ |
|
Weighted average exercise price 2017 £ |
Number of options 2016 £ |
|
Weighted average exercise price 2016 £ |
Outstanding at 1
January |
55,310,000 |
|
0.079 |
48,760,000 |
|
0.124 |
Forfeited |
(1,660,000 |
) |
0.065 |
(8,450,000 |
) |
0.092 |
Granted |
41,000,000 |
|
0.03 |
15,000,000 |
|
0.030 |
Outstanding at 31 December |
94,650,000 |
|
0.059 |
55,310,000 |
|
0.079 |
Exercisable at 31 December |
62,483,333 |
|
0.072 |
36,760,000 |
|
0.102 |
The options outstanding at 31 December 2017 had a weighted
average remaining contractual life of 7.56 years (2016: 7.28
years).
The fair value of the share options was determined using the
Black-Scholes valuation model.
The parameters used are detailed below.
Group and
Company |
2017 options |
2016 options |
Date of grant or
reissue |
31/03/2017 |
01/09/2016 |
Weighted average share
price |
3.07 pence |
2.03 pence |
Weighted average
exercise price |
3.20 pence |
3.00 pence |
Weighted average fair
value at the measurement date |
2.02 pence |
1.36 pence |
Expiry date |
31/3/2027 |
31/08/2026 |
Options granted |
41,000,000 |
15,000,000 |
Volatility |
68 |
% |
64 |
% |
Dividend yield |
Nil |
Nil |
Option life |
10 years |
10 years |
Annual
risk free interest rate |
1.19 |
% |
2.83 |
% |
The expected volatility is based on historical volatility for
the six months prior to the date of grant. The risk free rate of
return is based on zero yield government bonds for a term
consistent with the option life.
The range of option exercise prices is as follows:
Range of
exercise prices (£) |
2017 Weighted
average exercise price
(£) |
2017 Number of
shares |
2017 Weighted
average remaining life
expected (years) |
2017 Weighted
average remaining life
contracted (years) |
2016 Weighted average exercise price (£) |
2016 Number of shares |
2016 Weighted average remaining life expected (years) |
2016 Weighted average remaining life contracted (years) |
0–0.1 |
0.04 |
79,500,000 |
8.32 |
8.32 |
0.049 |
39,850,000 |
8.34 |
8.34 |
0.1–0.2 |
0.16 |
15,150,000 |
3.55 |
3.55 |
0.154 |
15,460,000 |
4.57 |
4.57 |
16 Other reserves
|
|
Merger |
Translation |
Other |
|
|
|
reserve |
reserve |
reserve |
Total |
Group |
|
£ |
£ |
£ |
£ |
At 1
January 2016 |
|
10,888,760 |
(14,688,776 |
) |
(1,048,100 |
) |
(4,848,116 |
) |
Other comprehensive
income |
|
— |
— |
|
— |
|
— |
|
Currency
translation differences |
|
— |
9,315,180 |
|
— |
|
9,315,180 |
|
At 31 December 2016 |
|
10,888,760 |
(5,373,596 |
) |
(1,048,100 |
) |
4,467,064 |
|
Other comprehensive
income |
|
— |
— |
|
— |
|
— |
|
Currency
translation differences |
|
— |
(3,479,050 |
) |
— |
|
(3,479,050 |
) |
At 31 December 2017 |
|
10,888,760 |
(8,852,646 |
) |
(1,048,100 |
) |
998,014 |
|
Company |
Merger reserve £ |
Total £ |
At 1
January 2016 and 31 December 2016 |
10,888,760 |
10,888,760 |
At 1 January 2017 and 31 December 2017 |
10,888,760 |
10,888,760 |
The merger and other reserve as at 31 December 2017 arose on
consolidation as a result of merger accounting for the acquisition
of the entire issued share capital of Horizonte Exploration Limited
during 2006 and represents the difference between the value of the
share capital and premium issued for the acquisition and that of
the acquired share capital and premium of Horizonte Exploration
Limited.
Currency translation differences relate to the translation of
Group entities that have a functional currency different from the
presentation currency (refer note 2.8). Movements in the
translation reserve are linked to the changes in the value of the
Brazilian Real against the Pound Sterling: the intangible assets of
the Group are located in Brazil, and their functional currency is
the Brazilian Real, which decreased in value against Sterling
during the year.
The available for sale reserve represents changes in the fair
value of assets that are held available for sale.
17 Trade and other payables
|
Group |
Company |
|
2017 |
2016 |
2017 |
2016 |
|
£ |
£ |
£ |
£ |
Non-current |
|
|
|
|
Contingent consideration payable to former owners of Teck Cominco
Brasil S.A. |
— |
115,100 |
— |
115,100 |
Contingent consideration payable to Xstrata Brasil Mineração Ltda
(refer note 26) |
3,635,955 |
3,527,942 |
3,635,955 |
3,527,942 |
Total
contingent consideration |
3,635,955 |
3,643,042 |
3,635,955 |
3,643,042 |
Current |
|
|
|
|
Trade and other
payables |
271,967 |
229,046 |
99,486 |
148,985 |
Amounts due to related
parties (refer note 20) |
— |
— |
413,930 |
413,930 |
Social security and
other taxes |
15,804 |
19,088 |
15,804 |
19,088 |
Accrued
expenses |
448,513 |
143,851 |
284,021 |
165,052 |
|
736,284 |
391,985 |
813,241 |
747,055 |
Total
trade and other payables |
4,372,239 |
4,035,027 |
4,449,196 |
4,390,097 |
Trade and other payables include amounts due of £222,925 (2016:
£65,053) in relation to exploration and evaluation activities.
Contingent Consideration payable to the former owners of
Teck Cominco Brasil S.A.
The fair value of the contingent consideration arrangement with
the former owners of Teck Cominco Brasil S.A. was estimated at the
acquisition date according to the probability and timing of when
future taxable profits will arise against which the tax losses may
be utilised in accordance with the terms of the acquisition
agreement.
The estimate of fair value has been restated and is now assessed
to be £nil (2016 £115,100). The critical assumptions underlying the
fair value estimate are set out in note 4.3. Estimates were also
based on the current rates of tax on profits in Brazil of 34% and a
discount factor of 7.0% was applied to the future dates at which
the tax losses will be utilised and consideration paid.
Contingent Consideration payable to Xstrata Brasil
Mineração Ltda
On 28 September 2015, the Company announced that it had reached
agreement to indirectly acquire through wholly owned subsidiaries
in Brazil the advanced high-grade Glencore Araguaia nickel project
(‘GAP’) in north central Brazil. GAP is
located in the vicinity of the Company’s Araguaia Project.
Pursuant to a conditional asset purchase agreement
(‘Asset Purchase Agreement’) between, amongst
others, the Company and Xstrata Brasil Exploraçâo Mineral Ltda
('Xstrata'), a wholly-owned subsidiary of Glencore
Canada Corporation ('Glencore'), the Company has
agreed to pay a total consideration of US$8 million to Xstrata,
which holds the title to GAP. The consideration is to be paid
according the following schedule;
- US$2,000,000 in ordinary shares in the capital of the Company
which as at 31 December 2017 had been settled by way of issuing new
shares in the Company.
- US$1,000,000 after the date of issuance of a joint Feasibility
Study for the combined Araguaia & GAP project areas, to be
satisfied in HZM Shares (at the 5 day volume weighted average price
taken on the tenth business day after the date of such issuance) or
cash, at the election of the Company; and
- The remaining US$5,000,000 consideration will be paid in cash,
as at the date of first commercial production from any of the
resource areas within the Enlarged Project area. Following transfer
of the concession for the VdS deposit area to a subsidiary of the
Company, this has been included in contingent consideration
payable.
The critical assumptions underlying the treatment of the
contingent consideration are set out in note 4.3.
As at 31 December 2017, there was a finance expense of £222,836
(2016: £193,868) recognised in finance costs within the Statement
of Comprehensive Income in respect of the contingent consideration
arrangement, as the discount applied to the contingent
consideration at the date of acquisition was
unwound.
18 Dividends
No dividend has been declared or paid by the Company during the
year ended 31 December 2017 (2016: nil).
19 Earnings per share
(a) Basic
The basic loss per share of 0.142p loss per share (2016 loss per
share: 0.240p) is calculated by dividing the loss attributable to
owners of the parent by the weighted average number of ordinary
shares in issue during the year.
|
2017 |
|
2016 |
|
Group |
£ |
|
£ |
|
Loss attributable to
owners of the parent |
(1,667,156 |
) |
(1,746,334 |
) |
Weighted
average number of ordinary shares in issue |
1,177,413,752 |
|
727,096,642 |
|
(b) Diluted
The basic and diluted loss per share for the years ended 31
December 2017 and 31 December 2016 are the same as the effect of
the exercise of share options would be anti-dilutive.
In January 2018 the Group issued a further 60,587,500 new
ordinary shares raising gross cash proceeds of £2.2 million, had
this occurred prior to the end of the year this would have impacted
the basic and diluted earnings per share figures.
Details of share options that could potentially dilute earnings
per share in future periods are set out in note 15.
20 Related party transactions
The following transactions took place with subsidiaries in the
year:
A fee totaling £350,652 (2016: £312,043) was charged to HM do
Brazil Ltda, £980,108 (2016: £872,784) to Araguaia Niquel Mineração
Ltda and £55,894 (2016: £58,806) to Typhon Brasil Mineração Ltda by
Horizonte Minerals Plc in respect of consultancy services provided
and funding costs.
Amounts totaling £2,243,832 (2016: £782,926) were lent to HM
Brazil (IOM) Ltd, HM do Brasil Ltda, Araguaia Niquel Mineraçao Ltda
and Typhon Brasil Mineração Ltda to finance exploration work during
2017, by Horizonte Minerals Plc. Interest is charged at an annual
rate of 6% on balances outstanding during the year. The amounts are
repayable on demand.
Balances with subsidiaries at the year end were:
|
2017 |
2017 |
2016 |
2016 |
|
Assets |
Liabilities |
Assets |
Liabilities |
Company |
£ |
£ |
£ |
£ |
HM do Brasil Ltda |
1,263,644 |
— |
792,301 |
— |
HM Brazil (IOM)
Ltd |
5,405,662 |
— |
4,933,377 |
— |
Horizonte Nickel (IOM)
Ltd |
31,021,684 |
— |
26,070,923 |
— |
Araguaia Niquel
Mineração Ltda |
6,594,120 |
— |
6,074,517 |
— |
Horizonte Minerals
(IOM) Ltd |
253,004 |
— |
253,004 |
— |
Horizonte Exploration
Ltd |
— |
413,930 |
— |
413,930 |
Typhon Brasil Mineração
Ltda |
3,224,179 |
— |
3,198,183 |
— |
Trias
Brasil Mineração Ltda |
1,012,620 |
— |
— |
— |
Total |
48,890,013 |
413,930 |
41,322,305 |
413,930 |
All Group transactions were eliminated on consolidation.
21 Ultimate controlling party
The Directors believe there to be no ultimate controlling
party.
22 Directors’ remuneration (including Key
Management)
|
Short
term benefits |
|
Post
employment benefits |
|
Cost to
Company |
Non-Cash |
|
|
Aggregate emoluments |
Otheremoluments |
Pensioncosts |
Total |
Social Securitycosts |
Share
Based Payment Charge |
Grand
Total |
Group
2017 |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
Non-Executive
Directors |
|
|
|
|
|
|
|
Alexander
Christopher |
— |
— |
— |
— |
— |
— |
— |
David Hall |
31,200 |
— |
— |
31,200 |
3,203 |
90,395 |
124,798 |
William Fisher |
26,400 |
— |
— |
26,400 |
— |
75,919 |
102,319 |
Allan Walker |
26,400 |
— |
— |
26,400 |
3,163 |
75,919 |
105,482 |
Owen Bavinton |
— |
— |
29,332 |
29,332 |
— |
75,919 |
105,251 |
Executive
Directors |
|
|
|
|
|
|
|
Jeremy Martin |
190,400 |
68,876 |
— |
259,276 |
34,055 |
119,293 |
412,624 |
Key
Management |
|
|
|
|
|
|
|
Simon Retter |
39,997 |
54,250 |
23,999 |
118,246 |
5,290 |
43,428 |
166,964 |
|
314,397 |
123,126 |
53,331 |
490,854 |
45,711 |
480,873 |
1,017,438 |
There are no other long term or termination benefits granted to
key management.
|
|
|
|
|
|
|
|
|
Aggregate emoluments |
Other
emoluments |
Pensioncosts |
Total |
Social Security costs |
Share
Based Payment Charge |
Grand Total |
Group
2016 |
£ |
£ |
£ |
£ |
£ |
£ |
£ |
Non-Executive
Directors |
|
|
|
|
|
|
|
Alexander
Christopher |
— |
— |
— |
— |
— |
— |
— |
David Hall |
29,000 |
— |
— |
29,000 |
3,312 |
24,520 |
56,832 |
William Fisher |
29,000 |
— |
— |
29,000 |
— |
24,520 |
53.520 |
Allan Walker |
29,000 |
— |
— |
29,000 |
4,002 |
24,520 |
57,522 |
Owen Bavinton |
— |
— |
32,167 |
32,167 |
|
24,520 |
56,687 |
Executive
Directors |
|
|
|
|
|
|
|
Jeremy Martin |
170,000 |
59,236 |
17,000 |
246,236 |
31,326 |
67,430 |
344,992 |
Key
Management |
|
|
|
|
|
|
|
Jeffrey Karoly |
128,000 |
9,600 |
15,553 |
153,153 |
13,524 |
61,300 |
227,977 |
Simon Retter |
15,541 |
8,000 |
— |
23,541 |
2,154 |
— |
25,695 |
|
400,541 |
76,836 |
64,720 |
542,097 |
54,309 |
226,810 |
823,216 |
The Company does not operate a pension scheme. Pension costs
comprise contributions to Defined Contribution pension plans held
by the relevant Director or Key Management.
23 Employee benefit expense (including Directors and Key
Management)
|
Group |
|
Company |
|
|
2017 |
2016 |
2017 |
2016 |
Group |
£ |
£ |
£ |
£ |
Wages and salaries |
1,144,253 |
809,954 |
588,498 |
627,155 |
Social security
costs |
216,242 |
134,096 |
63,979 |
49,463 |
Indemnity for loss of
office |
49,817 |
50,519 |
- |
30,000 |
Share
options granted to Directors and employees (note 15) |
678,652 |
324,890 |
678,652 |
324,890 |
|
2,088,964 |
1,319,459 |
1,331,129 |
1,031,508 |
|
|
|
|
|
Management |
10 |
6 |
6 |
6 |
Field staff |
15 |
12 |
— |
— |
Average
number of employees including Directors and Key Management |
25 |
18 |
6 |
6 |
Employee benefit expenses includes £1,062,396 (2016: £393,712)
of costs capitalised and included within intangible non-current
assets.
Share options granted include costs of £437,445 (2016: £165,510)
relating to Directors.
24 Investment in subsidiaries
|
2017 |
2016 |
Company |
£ |
£ |
Shares in Group
undertakings |
2,348,042 |
2,348,042 |
Loans to
Group undertakings |
48,890,013 |
41,332,305 |
|
51,238,055 |
43,670,347 |
Investments in Group undertakings are stated at cost. The loans
to Group undertakings are repayable on demand and currently carry
interest at 6%, however there is currently no expectation of
repayment within the next twelve months and therefore loans are
treated as non-current.
On 23 March 2006 the Company acquired the entire issued share
capital of Horizonte Exploration Limited by means of a share for
share exchange; the consideration for the acquisition was
21,841,000 ordinary shares of 1 penny each, issued at a premium of
9 pence per share. The difference between the total consideration
and the assets acquired has been credited to other reserves.
25 Commitments
Operating lease commitments
The Group leases office premises under cancellable and
non-cancellable operating lease agreements. The cancellable lease
terms are up to one year and are renewable at the end of the lease
period at market rate. The leases can be cancelled by payment of up
to one month’s rental as a cancellation fee. The lease payments
charged to profit or loss during the year are disclosed in note
6.
The future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
|
2017 |
2016 |
Group |
£ |
£ |
Not later than one
year |
54,444 |
11,996 |
Between 1 – 5
years |
- |
- |
Greater
than 5 years |
- |
- |
Total |
54,444 |
11,996 |
Capital Commitments
Capital expenditure contracted for at the end of the reporting
period but not yet incurred is as follows:
|
2017 |
2016 |
Group |
£ |
£ |
Intangible assets |
— |
— |
Capital commitments relate to contractual commitments for
metallurgical, economic and environmental evaluations by third
parties. Once incurred these costs will be capitalised as
intangible exploration asset additions.
26 Contingent Liabilities
(a) Glencore Araguaia
Project
The SdT deposit area concessions are subject to on-going
litigation with a Brazilian third party. Glencore has
disputed these claims. The parties have agreed certain
protections including the receipt by HZM from Glencore of certain
indemnities in respect of such litigation.
The Asset Purchase Agreement contains customary warranties
regarding the GAP project and the parties' ability to enter into
the Proposed Transaction and is subject to customary termination
rights and confidentiality obligations.
(b) Other Contingencies
The Group has received a claim from various trade union
organisations in Brazil regarding outstanding membership fees due
in relation to various subsidiaries within the Group. Some of these
claims relate to periods prior to the acquisition of the relevant
subsidiary and would be covered by warranties granted by the
previous owners at the date of sale. The Directors are confident
that no amounts are due in relation to these proposed membership
fees and that the claims will be unsuccessful. No subsequent
actions, claims or communications from the various trade union
organisations have been received subsequent to the requests for
payment. As a result, no provision has been made in the Financial
Statements for the year ended 31 December 2017 for amounts claimed.
Should the claim be successful, the maximum amount payable in
relation to fees not subject to the warranty agreement would be
approximately £64,000.
In 2013 the Group received an infraction notice from the
Brazilian Environmental Agency’s (‘IBAMA’) district office in
Conceição do Araguaia in connection with carrying out
drilling activities in 2011 without the relevant permits. Drilling
equipment was furthermore impounded. The Group strongly believes
that it operated with all necessary permits and has initiated legal
proceedings to overturn the infraction notice. The Group has
secured cancellation of the injunction and has appealed the
associated fine and infraction notices of approximately £68,000
which has not been recognised in these financial statements.
In December 2014, the Group received a writ from the State
Attorney in Conceiçao do Araguaia regarding alleged environmental
damages caused by drilling activities in 2011. To ensure proper
environmental stewardship, the Group conducts certified baseline
studies prior to all drill programmes and ensures that areas
explored are properly maintained and conserved in accordance with
local environmental legislation. After drilling has occurred, drill
sites and access routes are rehabilitated to equal or better
conditions and evidence is retained to demonstrate that such
rehabilitation work has been completed. In January 2015 the Group
filed a robust defence against the writ. A court hearing was held
in May 2015 at which documents were requested to confirm that valid
environmental authorisations were in place. These were subsequently
submitted as requested. No substantive financial claim continues to
be made against the Group under the terms of the writ. The Group
continues to believe that the writ is flawed and is working towards
having it withdrawn in due course. As a result no provision
has been made in the Financial Statements for the year ended 31
December 2017.
27 Events after the reporting date
On 11 January 2018, the Company issued 60,587,500 new ordinary
shares at a price of CAD$0.06 raising gross cash proceeds of
$3,635,250 (£2,163,839).
Agreement to acquire the Vermelho project
On 19 December 2017 the Company announced that it had reached
agreement with Vale S.A (“Vale”) to indirectly acquire through
wholly owned subsidiaries in Brazil, 100% of the advanced Vermelho
nickel-cobalt project in Brazil (“Vermelho”).
The terms of the Acquisition require Horizonte to pay an initial
cash payment of US$150,000 with a further US$1,850,000 in cash
payable on the second anniversary of the signing of the asset
purchase agreement.
A final payment of US$6,000,000 in cash is payable by Horizonte
within 30 days of first commercial sale of product from
Vermelho.
In addition to the purchase price, the Company has granted a 1%
Net Smelter Royalty (“NSR”) to Vale on any nickel produced during
the first 10 years of commercial production up to a maximum of
15,000 t/a, which then reduces to a 0.5% NSR thereafter.
As part of the acquisition of the Vermelho project, the Company
will acquire Vale’s rights under a mining licence application in
respect of the project comprising an area covering 2,000 hectares.
Further development of the Vermelho project will be subject,
amongst other things, to the Company being granted the required
mining licence and other customary licences and permits.
As at the date of this report the transfer of legal title had
been completed and the agreement is therefore
unconditional.
This announcement contains inside information
for the purposes of Article 7 of EU Regulation 596/2014.
For further information visit www.horizonteminerals.com or
contact:
Horizonte
Minerals plc |
|
Jeremy Martin (CEO) /
David Hall (Chairman) |
+44 (0) 20 7763
7157 |
|
|
finnCap Ltd
(NOMAD & Joint Broker) |
|
Christopher Raggett/
James Thompson / Anthony Adams / Emily Morris |
+44 (0) 20 7220
0500 |
|
|
Numis
Securities Ltd (Joint Broker) |
|
John Prior / Alamgir
Ahmed |
+44 (0) 207 260
1000 |
|
|
Shard Capital
(Joint Broker) |
|
Damon Heath / Erik
Woolgar |
+44 (0) 20 7186
9952 |
|
|
Tavistock
(Financial PR) |
|
Jos Simson / Barney
Hayward |
+44 (0) 20 7920
3150 |
About Horizonte Minerals:Horizonte Minerals plc
is an AIM and TSX-listed nickel development company. The Company is
developing Araguaia as the next major ferronickel mine in
Brazil.
Horizonte has a strong shareholder structure
including; Teck Resources Limited 14.7%, Canaccord Genuity Group
10.5%, JP Morgan 8.3%, Lombard Odier Asset Management (Europe)
Limited 8.1%, City Financial 7.6%, Richard Griffiths 6.7% and
Glencore 5.2%.
CAUTIONARY STATEMENT REGARDING
FORWARD LOOKING INFORMATIONExcept for statements
of historical fact relating to the Company, certain information
contained in this press release constitutes “forward-looking
information” under Canadian securities legislation. Forward-looking
information includes, but is not limited to, statements with
respect to the potential of the Company’s current or future
property mineral projects; the success of exploration and mining
activities; cost and timing of future exploration, production and
development; the estimation of mineral resources and reserves and
the ability of the Company to achieve its goals in respect of
growing its mineral resources; and the realization of mineral
resource and reserve estimates. Generally, forward-looking
information can be identified by the use of forward-looking
terminology such as “plans”, “expects” or “does not expect”, “is
expected”, “budget”, “scheduled”, “estimates”, “forecasts”,
“intends”, “anticipates” or “does not anticipate”, or “believes”,
or variations of such words and phrases or statements that certain
actions, events or results “may”, “could”, “would”, “might” or
“will be taken”, “occur” or “be achieved”. Forward-looking
information is based on the reasonable assumptions, estimates,
analysis and opinions of management made in light of its experience
and its perception of trends, current conditions and expected
developments, as well as other factors that management believes to
be relevant and reasonable in the circumstances at the date that
such statements are made, and are inherently subject to known and
unknown risks, uncertainties and other factors that may cause the
actual results, level of activity, performance or achievements of
the Company to be materially different from those expressed or
implied by such forward-looking information, including but not
limited to risks related to: exploration and mining risks,
competition from competitors with greater capital; the Company’s
lack of experience with respect to development-stage mining
operations; fluctuations in metal prices; uninsured risks;
environmental and other regulatory requirements; exploration,
mining and other licences; the Company’s future payment
obligations; potential disputes with respect to the Company’s title
to, and the area of, its mining concessions; the Company’s
dependence on its ability to obtain sufficient financing in the
future; the Company’s dependence on its relationships with third
parties; the Company’s joint ventures; the potential of currency
fluctuations and political or economic instability in
countries in which the Company operates; currency exchange
fluctuations; the Company’s ability to manage its growth
effectively; the trading market for the ordinary shares of the
Company; uncertainty with respect to the Company’s plans to
continue to develop its operations and new projects; the Company’s
dependence on key personnel; possible conflicts of interest of
directors and officers of the Company, and various risks associated
with the legal and regulatory framework within which the Company
operates.
Although management of the Company has attempted
to identify important factors that could cause actual results to
differ materially from those contained in forward-looking
information, there may be other factors that cause results not to
be as anticipated, estimated or intended. There can be no assurance
that such statements will prove to be accurate, as actual results
and future events could differ materially from those anticipated in
such statements.
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