Horizonte Minerals PLC Annual Report 2014
Horizonte Minerals
is an AIM and TSX quoted
nickel development company
focussed in Brazil.
Company Overview
01 2014 Highlights
02 Horizonte Minerals at a Glance
03 Araguaia Project Overview
03 Our Year in Review
04 Chairman’s Statement
Business Review
06 Operations Review
– Araguaia Nickel Project
11 Strategic Report
13 Financial Report
15 Nickel Overview
16 Board of Directors
and Key Management
18 Directors’ Report
20 Statement of Directors’
Responsibilities
21 Corporate Governance Report
Financial Statements
22 Independent Auditor’s Report
23 Consolidated Statement
of Comprehensive Income
24 Consolidated Statement
of Financial Position
25 Company Statement
of Financial Position
26 Statements of Changes in Equity
27 Consolidated Statement
of Cash Flows
28 Company Statement of Cash Flows
29 Notes to the Financial Statements
55 Statutory Information
1
O
O
V
V
E
E
R
R
V
V
E
E
W
W
I
I
C
C
O
O
M
M
P
P
A
A
N
N
Y
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
2014 Highlights
> Completion of NI 43-101 compliant Pre-Feasibility Study (‘PFS’) on the 100% owned
Araguaia Nickel Project in Brazil (‘Araguaia’), demonstrating robust project economics for
a 15,000 tpa nickel in Fe-Ni product with post-tax Net Present Value at 8% discount rate
(NPV8) of USD 519 million and IRR of 20% for total initial capex of USD 582 million
> PFS confirmed that Araguaia ore is amenable for utilisation of the proven Rotary Kiln
Electric Furnace processing route, a 60 year old technology which is used by circa 20
operations worldwide today
> Current NI 43-101 compliant Mineral Resource, comprising of 71.98 Mt grading
1.33% Ni (Indicated) and 25.35 Mt at 1.21% Ni (Inferred)
> Araguaia received ‘Seal of Priority’ from SEICOM, the State of Parà’s Department
of Industry, Commerce and Mining, to assist fast track the development of Araguaia
demonstrating support for the project by the Brazilian authorities
> Social Environmental Impact Assessment (‘SEIA’) for Araguaia filed Q3 2014, a key
milestone towards receiving the Preliminary Licence, anticipated for 2015
> Araguaia SEIA received positive support from local community and government
authorities at the Public Hearing in January 2015 for the Aragauia Environmental
Impact Assessment; the final step in the award of the Preliminary Licence (‘LP’)
> Commenced Phase 4 Resource infill drilling campaign utilising 8 diamond drill rigs as
part of preparatory work for the Feasibility Study planned for 2015; initial results over
the bulk sample sites have returned high nickel grades
> Successful placing resulting in strong year-end cash position of £5 million, providing
a solid platform for commencement of the Feasibility Study at Araguaia
‘The Pre-Feasibility Study proved a key
milestone as the project continues to advance
through permitting and onto the Feasibility
Study in 2015’
Jeremy Martin CEO
2
Horizonte Minerals at a Glance
Horizonte Minerals at a Glance
Horizonte Minerals wholly owns the advanced Araguaia nickel project, located south of the
Carajàs mineral district in northern Brazil. In 2014 the Company completed a NI 43-101 compliant
Pre-Feasibility Study which demonstrated the robust economics of Araguaia, with Base Case post
tax NPV8 of USD 519 million and IRR of 20% for an initial capital investment of USD 582 million.
The Araguaia project will use the tried and tested Rotary Kiln Electric Furnace process to produce
15,000 tonnes per annum of nickel in a 20% grade ferronickel product.
In June 2014 a key milestone in the permitting process was achieved with the filing of the Social
Environmental Impact Assessment and in late 2014 the Group commenced the 4th Phase infill
drilling programme, a precursor to the Feasibility Study planned for 2015.
Project Location
Why Brazil…
> In top 10 of world economies with
strong degree of economic and
political stability
> USD 321 million spent annually
on exploration: just 3% of world
spend — Brazil is underexplored
> Brazilian mineral exports totalled
USD 40 billion in 2013
> 175,000 employed in the mining sector
> World’s second largest exporter of seaborne iron ore
> Significant producer of bauxite, nickel, copper, gold, niobium
and phosphate
> Investment in Brazilian mining sector expected to reach
USD 54 billion 2014–2018
Source: Instituto Brasileiro de Mineração
Rio Araguaia January 2015
Araguaia
Araguaia Project Overview
Araguaia Project Overview
3
O
O
V
V
E
E
R
R
V
V
I
I
E
E
W
W
C
C
O
O
M
M
P
P
A
A
N
N
Y
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
Araguaia is an advanced nickel laterite project being developed by Horizonte Minerals as the next major nickel project in Brazil.
In March 2014 a NI 43-101 compliant Pre-Feasibility Study was released for the project.
> 100% owned by Horizonte Minerals plc
> Located in established mining district in northern Brazil, with good access to infrastructure
> 85 km2 total licence area
> Pre-Feasibility Study (‘PFS’) demonstrated robust economics: NPV8 USD 519 million; IRR 20% in Base Case
(cid:129) Delivered NI 43-101 Resource upgrade: 71.98 Mt grading 1.33% Ni (Indicated) and 25.35 Mt at 1.21% Ni (Inferred)
(cid:129) PFS confirmed project suitable for tried and tested Rotary Kiln Electric Furnace processing route: used by circa 20
plants worldwide
(cid:129) Project Base Case to deliver 15 Ktpa nickel in ferronickel over the 25 year mine life
> Social and Environmental Impact Assessment formally filed in June 2014 — key milestone towards awarding of Preliminary Licence
> Seal of approval awarded by Parà State for fast tracking of project with the authorities
> Phase 4 Resource infill drilling campaign underway as precursor to Feasibility Study planned for 2015
High Grade Nickel Mineralisation
in Drill Core
Our Year in Review
March 2014
NI 43-101 Pre-Feasibility Study released
for Araguaia — robust economics
demonstrated
June 2014
Received Priority Seal of Approval from
Parà State authorities
June 2014
SEIA formally filed
July 2014
Completed £5.5 million financing
November 2014
Commenced Phase 4 infill
drilling programme as precursor
to Feasibility Study
4
Chairman’s Statement
Chairman’s Statement David J Hall
‘Despite the
challenging
market conditions
for the resource
sector in 2014 and
continuing into 2015,
Horizonte has made
solid progress as it
develops the next
major nickel project
in Brazil.’
Despite the challenging market conditions
for the resource sector in 2014 and
continuing into 2015, exemplary progress
has been made by Horizonte throughout
the year at its wholly owned Araguaia
nickel project in Parà State, north central
Brazil (‘Araguaia’), as it moves to develop
the next major nickel project in Brazil.
Your Company announced the completed
Pre-Feasibility Study (‘PFS’)
in March
2014, on time, within a tightly constrained
budget and importantly demonstrated
robust economics of Araguaia
the
as
leading nickel development
a
project globally. In line with the wider
macroeconomic environment, the PFS
returns
on maximising
focussed
and
while
technical
two
operational scenarios were evaluated
which demonstrated that Araguaia offers
flexibility to be developed at multiple
scales.
minimising
and as
financial
such
risk
Our selected route to take to the Feasibility
Stage is a smaller ‘Base Case’ scenario
utilising a single
line Rotary Kiln
Electric Furnace (‘RKEF’) plant, running
at 900,000 tpa ore throughput, with
15,000 t targeted annual production
of nickel in Fe-Ni product that offers
an after tax NPV8 of USD 519 million and
a IRR of 20%. The large scale ‘Option’,
which would also utilise the proven
process of RKEF, offers production upside
with an NPV8 of USD 1.2 billion and 21%
IRR based on 2.7 Mtpa twin line 40,000 tpa
nickel in Fe-Ni product. However, the Base
Case option importantly brings the project
to a capital level which is within reach
of a junior mining company such as ours,
whilst demonstrating the considerable
upside that future expansion could bring.
The strong project economics of Araguaia
are also supported by the high nickel
grades demonstrated at Araguaia, with
an average feed grade for the first
10 years of 1.76% Ni, placing the deposit
in the upper quartile for grade globally.
Add to this the extremely low C1 cash costs
of USD 4.16/lb (USD 9,166/t) together
with significant free cash flow generated
life of mine of approximately
over
USD 1.8 billion post tax on the Base Case
Scenario, and it is clear that Araguaia
offers a compelling investment case.
With the PFS completed, and despite
poor market sentiment overall during
closed
2014, Horizonte successfully
a £5.5 million placing before costs in July
2014, which further strengthened the
balance sheet.
Importantly Horizonte
has a supportive shareholder base led
by Teck Resources, and Henderson
Global Investors. With this and a solid
cash position, we are well positioned
to deliver on Araguaia’s next development
milestones as we take it through to the
Feasibility Study (‘FS’) stage during 2015.
is the next major milestone
The FS
on
further de-risk
to
the
the project, leading into the financing
to the construction and production stage.
journey
in
this
(‘SEIA’)
With
in mind we successfully
filed our Social and Environmental
Impact Assessment
June
2014. The completion and filing marked
a significant de-risking step for Araguaia,
as we worked with local stakeholders,
communities and government agencies.
The report is currently being reviewed by the
Pará State Environmental Agency and, post
the public hearing, we should receive the
Preliminary Licence later in 2015.
The FS will also aim to deliver a Proven
Reserve to cover the earlier part of the
mine life, as well as defining the balance
of the mine life in the Probable Reserve
category
for the Base Case option
of the PFS. To this extent drilling has been
underway since Q4 2014.
The current market sentiment towards
resource companies is focussed on the
perception of falling demand for many
metals, with associated price falls. What
needs to be made clear is that even with
moderate growth, the supply pipeline
is lean. It will be a lack of supply that
will be responsible for increasing prices
and a resurgence of the resource sector.
is that bad really
Not that demand
— Wood Mackenzie predicts a 3.4% annual
increase in nickel consumption through
to 2018. They see a nickel shortage after
the overhang is consumed by 2018 with
some 778,000 t of new nickel needed
by 2030 and 300,000 t by 2018.
The
Indonesian ban on raw material
exports is influential in this future picture.
The potential building of nickel pig iron
smelters within Indonesia could supply
new nickel currently off market but the high
costs of construction, plus problems with
permitting etc. may restrict this new supply.
Chairman’s Statement
5
O
O
V
V
E
E
R
R
V
V
E
E
W
W
I
I
C
C
O
O
M
M
P
P
A
A
N
N
Y
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
While new nickel pig iron may come from
the Philippines, due to lower overall nickel
grades in the Philippines as compared
to Indonesia, this will be insufficient to fill
that large and increasing supply gap.
As a result there are bullish views on the
future nickel price; the Bank of America
Merrill Lynch forecast prices potentially
reaching USD 25,000/t in 2015 and Wood
MacKenzie support this view with a long
term price of USD 25,350 to USD 26,460/t.
The PFS was modelled on a USD 19,000/t
nickel price and we believe the timing
of the mine start up fits well with these
pricing forecasts.
With the above
in mind, Araguaia
is developing into a leading nickel project
globally
in terms of size and grade
which offers strong economics, a proven
process route, and good infrastructure.
Your Company is led by an experienced
Board and expanding management
team with significant experience in both
South America and the nickel resource
space, and has positioned Araguaia for
development at a crucial time for the
nickel market when demand will outstrip
supply and nickel prices will ensure
massive value creation from the project.
I am delighted that Horizonte has a solid
track record of delivering milestones
on time and on budget; for this much
credit must go to Jeremy Martin, C.E.O.,
and having already completed
the
PFS
this year which demonstrated
robust economics, we are well funded
following our recent placing to move
into the Feasibility stage. I would like
to take this opportunity to thank the
dedicated Horizonte Board of Directors,
Management team and shareholders
for your continued support and I look
forward to providing further updates
as we continue to develop Brazil’s next
major nickel project.
David J Hall
Chairman
25 February 2015
6
Operations Review
Operations Review Jeremy Martin
Araguaia Nickel Project
Pre-Feasibility Study
In March 2014 the Company completed a major milestone with the announcement
of the results of the NI 43-101 compliant Pre-Feasibility Study (‘PFS’) on the 100% owned
Araguaia Nickel Project.
The PFS demonstrated the strong economics, long term life of mine and low cost
of operation and was based on production of ferronickel via the proven pyro-metallurgical
process using Rotary Kiln Electric Furnace technology (‘RKEF’) — circa 60 year old
technology utilised by around 20 plants worldwide.
Horizonte Team Working With The
Drill Core Samples
PFS highlights
NPV8 post tax
IRR post tax
Nickel price
Initial mine life
Capital Costs — pre-production
C1 costs
Free cash flow over LOM (after capital payback)
Payback period (after taxation)
Breakeven Ni price on NPV8 post tax
Targeted Production per annum
Average Ni grade — Year 1 to 10
Product grade quality
Base Case
900 kpta
Single line
Option Case
2.7 Mtpa
Twin line
USD 519 M USD 1.204 Bn
20%
USD 19,000 /t
25 years
21%
USD 19,000 /t
22 years
USD 582 M USD 1.436 Bn
USD 4.16/Ib
USD 4.24/Ib
(USD 9,166/t)
(USD 9,380/t)
USD 1.766 Bn USD 3.470 Bn
3.9 years
USD 14,060/t
4.4 years
USD 13,977/t
15,000 tpa Ni
1.76% Ni
20% Fe-Ni
40,000 tpa Ni
1.57% Ni
20% Fe-Ni
Two operational scenarios were evaluated as part of the PFS to demonstrate that
Araguaia offers flexibility to be developed at multiple scales. The Company’s preferred
route to production is the smaller Base Case which utilises a single line RKEF process
plant running at 900,000 tpa with 15,000 t targeted annual production of nickel
in ferronickel product.
The Base Case was selected as it maintains financial returns whilst minimising both
technical risks and capital exposure. The lower capital required is at a level that the
Company has the ability to finance and is more in line with current market trends (low
capex: high returns). The Option Case demonstrates that the project is also viable at a much
larger production capacity should the Company bring in a partner to develop the project.
Not only has Araguaia been demonstrated to be economically and technically robust,
it is also worth noting that the project is located in an established mining district.
The region offers good road and rail networks with accessible transportation routes
to port, access to low cost hydroelectric power and support from regional authorities.
In addition, the use of the RKEF is a tried and tested method of producing ferronickel
in this district.
In terms of the nickel market, the ban on direct shipping nickel ore from Indonesia
has seen the commodity in the spotlight since the beginning of 2014 and has already
had a significant positive impact on the nickel price, with nickel being one of the better
performing metals in 2014. However, with the sharp decline seen in the overall mining
sector late in 2014 and into 2015, nickel prices have decreased and we believe the year
ahead will be volatile for the metal.
Phase 4 Diamond Drilling On The
Pequizeiro Target
Operations Review
7
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
R
E
E
V
V
I
I
E
E
W
W
B
B
U
U
S
S
I
I
N
N
E
E
S
S
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
Going forwards there is anticipation of tightening on the supply side, with limited new projects resulting in increased nickel prices in
the mid to longer-term, at the time when we anticipate Araguaia being brought into production. Market consensus indicates a belief
that it will take several years for companies to build and commission process facilities in Indonesia. This, together with the required
supporting infrastructure, means the overall cost of production from such plants is not yet known, but likely to be higher than the
current cost in China. Horizonte is well positioned to benefit from this with the positive PFS completed — we are one of the few junior
companies developing a significant nickel project with a proven process route.
NI 43-101 compliant Mineral Resources for the Araguaia Nickel Project, as published in the PFS (0.95% Ni cut-off grade)
High nickel grades were also confirmed in the PFS, with 1.76% Ni average feed grade for the first 10 years of production in the
Base Case, drawing on the substantial NI 43-101 resource base consisting of 71.98 Mt grading 1.33% Ni (Indicated) and 25.35 Mt
at 1.21% Ni (Inferred) and allowing operational flexibility, with the Base Case designed to allow for the addition of a second process
line to increase overall nickel production.
Araguaia
Sub-total
Sub-total
Sub-total
Sub-total
Sub-total
Sub-total
TOTAL
TOTAL
Category
Material type
Indicated
Indicated
Indicated
Inferred
Inferred
Inferred
Indicated
Inferred
Limonite
Transition
Saprolite
Limonite
Transition
Saprolite
All
All
Tonnage
(kT)
11,560
24,110
36,310
8,830
9,340
7,190
71,980
25,350
Density
(t/m3)
Contained Ni metal
(t)
1.35
1.19
1.32
1.34
1.28
1.41
1.28
1.34
137,790
346,920
473,960
100,310
122,040
84,370
958,660
306,730
Ni (%)
1.19
1.44
1.31
1.14
1.31
1.18
1.33
1.21
Co (%)
0.127
0.060
0.034
0.097
0.053
0.033
0.058
0.063
Fe (%)
36.50
19.87
11.82
35.85
20.34
12.07
18.48
23.40
Note: Totals may not add due to rounding. Mineral resources are inclusive of mineral reserves.
Dryer Commissioning Trials at the
IGEO Pilot Facility January 2015
It should be noted that with the release
of the PFS, 35,200 m of core drilling
(HQ) (1,412 holes) had been completed
to date at Araguaia and that the
Mineral Resource statement above
does not include estimates for other
prospects within the Project area (Morro,
Southern, Oito West and Pequizeiro
East) due to insufficient drill information
at this stage.
Mining
In terms of mining, Araguaia would utilise
typical open pit truck and excavator
mining methods across seven pits with
Base Case production scheduled to mine
on average 3.3 Mtpa in order to deliver
900 Ktpa of ore to the plant for 25 years.
in
pyrometallurgical
Processing
Araguaia is planned to produce a 20%
ferronickel product via the
nickel
proven
of
RKEF, a circa 60 year old technology with
20 plants operating worldwide today.
The Base Case assumes a single
line
RKEF installation for 900 ktpa (dry) ore,
producing approximately 15,000 tpa nickel
in ferronickel.
process
8
Operations Review
Operations Review continued
After mining, ore preparation and blending,
the initial process stage encompasses
ore preparation, where the ore is sized
to match the subsequent metallurgical
process requirements. The ore is then
homogenised and partially dried to around
18% moisture content in the coal-fired
27 m dryer treating ore at a nominal rate
of 121 t/hr (dry ore basis). The dried ore
product is then processed in the 120 m
long rotary kiln similarly based on coal-
firing. In the kiln, the ore is completely
dried and calcined to remove chemically
combined moisture, and partially pre-
reduced. Calcined material is transferred
into a single 63 MVA / 50 MW electric
furnace for the separation of the metal
and slag at high temperatures. The metal
is conveyed in ladles to the refining stage.
The refined oxidised slag is granulated
with water, while the reduced slag
is transported molten and safely disposed
of. The final Fe-Ni product is granulated
with water, screened, dried and stockpiled
prior to dispatch to the market.
The laboratory scale metallurgical testwork
carried out for the PFS showed excellent
results. It confirmed the suitability of the
RKEF process for the treatment of Araguaia
nickel ore to produce ferronickel and
included the following:
> A series of laboratory-scale tests carried
out by FLSmidth at their Bethlehem, PA,
USA laboratories which established the
suitability of Araguaia ore for rotary
kiln processing;
> Testwork on agglomeration performance
in a rotary unit by Feeco International Inc.
of Green Bay, WI, USA, plus additional
bench scale test work on briquette
testing at K.R. Komarek of Wood Dale,
Illinois, USA; and
> Smelting
completed
testing was
at the laboratories of Xstrata Process
Support
in Sudbury, Ontario, Canada,
supplemented by additional work on the
characteristics of the slag produced by
smelting Araguaia laterite and the slag
melting temperature at Kingston Process
Metallurgy of Kingston, Ontario, Canada.
Photos Showing Large Diameter Auger Drill Rig In Use Collecting The 200 Tonne Bulk Sample
For Metallurgical Pilot Testing
Operations Review
9
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
R
E
E
V
V
I
I
E
E
W
W
B
B
U
U
S
S
I
I
N
N
E
E
S
S
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
Social, Environmental and Permitting
2014 Highlights:
> The Social and Environmental Impact Assessment (‘SEIA’) was finalised and the report
submitted to the Brazilian State licensing authority (’SEMA‘) in June 2014 for the
Araguaia Project’s preliminary license evaluation.
> In December 2014, the State Environment Agency published the Public Hearing date
of 30 January 2015, a positive step towards obtaining the preliminary license. The
Public Hearing was undertaken in January and the Company received positive support
at this event from the local community and government authorities due to the strong
demand for economic development in the region.
> Local community members were widely consulted by the Company’s employees
to ensure the future Araguaia Project can deliver value for the local community
by including local stakeholder feedback into socio-economic and environmental
management plans.
Managing our Impact
The environment and social baseline data collection programme commenced
in November 2011 and was completed in 2013, with the exception of the archaeological
investigation, which was completed in February 2014. The archaeological report was
submitted to the Instituto do Patrimonio, Historico e Artistico Nacional (’IPHAN‘), who
granted approval of the study in October 2014.
The environmental baseline programme included information on: climate, particulate
matter, groundwater composition and depth, soils, surface water composition and flow,
spring locations, fauna and flora.
The social baseline data collection programme included information on: regional
demographics, stakeholders, livelihoods, community infrastructure, cultural heritage,
natural resource use, labour and working conditions, vulnerable groups, land rights,
regional medical and emergency services, public safety/security, and traffic volume.
The baseline studies included independent research and investigations undertaken
by third party specialists:
> Environmental baseline studies and Social and Environmental Impact Assessment (‘SEIA’)
— WALM Engenharia e Tecnologia Ambiental
> Biodiversity (flora and fauna) surveys — DBO Engenharia Ambiental
> Social and community surveys, stakeholder mapping, scenario assessment, risk analysis,
and communication programme — Integratio Mediação Social e Sustentabilidade.
The results of these studies were fed into the completed PFS and influence Horizonte’s
day-to-day social and environmental activities.
A significant milestone was reached when SEMA published the public hearing (‘Hearing’)
date in December 2014, held in January 2015. The primary aim of the Hearing was
to inform, clarify and encourage further community participation in project planning
and it was attended by over 1,000 people including representatives of the local and
State authorities. The outcome was positive. The Hearing is a part of the environmental
licence process and necessary for the awarding of the Preliminary Licence (‘LP’).
Another key highlight in the social and environmental programme for 2014 was the
successful consultation of a wide number of local community members, particularly
rural residents and landowners, within the impact area of the project. As a result
of consultations we have developed an excellent understanding of the needs of the
community and their relationship with the environment. Therefore the Araguaia Nickel
Project has put in place carefully constructed plans to both mitigate risks and deliver
net positive value for society. One example of this is the planned economic development
programme for the future mine construction and operation which will include:
> maximising local employment through partnerships with training institutions
> developing local suppliers to the future Araguaia Nickel mine
> improving small and medium businesses in the region — particularly rural producers.
10
Operations Review
Operations Review continued
Next Phase of Project Development
Completion of the PFS in March 2014 paved the way for further work for the rest of year in preparation for the Feasibility Study (‘FS’)
on the Araguaia Nickel Project. This included the following:
Infill drilling to define a Measured Resource
The Phase 4 HQ3 diamond infill drilling commenced in early November 2014 on selected areas from the principal deposits. This has several
objectives including: upgrading a portion of the current Indicated Mineral Resources to the Measured category; additional geotechnical
drilling and hydrogeological investigations of the proposed open pit sites; the proposed process plant site and slag dump. The drilling
campaign also assisted in selection of sites for the collection of bulk sample material to feed into a continuous pilot plant. This work will
include close spaced drilling to confirm grade continuity in the selected sites.
Partial results have been received in January 2015 for the initial holes. The following high grade mineralised intersections from the
bulk sample site drilling results include:
Borehole
PDA-DD-1435B
PDA-DD-1423B
PDA-DD-1421B
PDA-DD-1431B
Additional metallurgical test work
to include large scale piloting
Pilot scale process testing in Brazil is
planned for the first and second quarters
of 2015 at the Morro Azul pilot plant
located at Pratapolis, Minas Gerais.
The pilot campaign will treat a 200 tonne
bulk sample of Araguaia ore.
The Morro Azul pilot plant includes the
following facilities:
> A fuel-fired dryer rated at between 600
to 1,200 kg/hr of laterite ore (wet basis);
> A fuel-fired rotary kiln for processing
500 kg/hr of dried ore for calcining and
reduction using coal as the reducing
agent; and
> A 1 MVA electric furnace for smelting
calcine producing a 20% Ni ferronickel
metal and slag.
The pilot plant
laboratory facilities.
is supported by full
Evaluation of possible contractors
to undertake the FS
An exhaustive selection and tender
process has been underway to select
the various FS contractors and design
the detailed framework for execution
of the FS later in 2015.
Permitting
The Group undertook a public hearing
process for the Araguaia Project LP
on 30 January 2015. At this event the
SEIA was presented to members of
the local community as well as local,
state and federal officials and elected
representatives. The SEIA was well
received and it is anticipated that the LP
will be awarded for Araguaia in 2015.
The Group will undertake further studies in
2015, including an environmental control
plan, as part of the process to obtain the
Installation License (‘LI’). The LI is expected
to be granted by authorities later in 2016.
This LI, together with an approved Mine
Plan, will enable Horizonte Minerals
to start construction of the Araguaia
Project’s mine and plant infrastructure.
The Group has planned a robust chronogram
in the social and environmental area for
2015, including the delivery of an integrated
Social, Safety, Health & Environmental
impact study to meet IFC standards.
This will involve the collection of new
environmental baseline data focussing
on detailed water and air characteristics
The team will also
of the region.
collect social household survey data
form a Resettlement Framework
to
for a small number of
landowners
in the direct area of influence of the future
project infrastructure.
Width (m)
12.47
12.45
13.35
13.95
Ni%
2.17
2.13
2.07
1.99
Furthermore, the Group will be setting new
performance goals aimed at delivering
including our
value to stakeholders,
shareholders,
local
employees
community in the areas of:
> Health & safety
> Environment
> Society
> Employees & contractors
and
Groundwater Monitoring Programme
Strategic Report
the Company and
The Directors of
its subsidiary undertakings (which together
comprise ‘the Group’) present their Strategic
Report for the year ended 31 December 2014.
Review of the Business
The Group is focussed on the development
of the Araguaia nickel project, in Brazil.
A detailed review of the activities together
with future developments of the Group
is provided in the Chairman’s Statement
and the Operations Review.
Organisation Overview
The Group’s business is directed by the
Board and
is managed on a day-to-
day basis by the Chief Executive Officer,
based at the Company’s offices in London,
United Kingdom. The corporate structure
reflects
the historical development
of the Group, together with various project
holdings of the Group, with relevant
licences and permits held through locally
domiciled subsidiaries. Where there is an
appropriate requirement, for fiscal and
other reasons, incorporated entities are
also located in other particular territories.
The Group’s exploration activities in Brazil
are undertaken through HM do Brazil Ltda,
Araguaia Niquel Mineração Ltda and Lontra
Empreendimentos e Participaçoes Ltda.
The Board of Directors comprises the
Chief Executive Officer and five Non-
Executive Directors.
Aims, Strategy & Business Plan
The Group’s aim is to create value for
shareholders through the discovery and
development of economic mineral deposits.
The Group’s strategy
is to continue
to progress the development of the
100% owned Araguaia project and
to consolidate
the Group’s existing
landholdings in the Araguaia area.
The Group also evaluates on an ad hoc
basis with a view to eventual acquisition,
exploration and development, mineral
projects in jurisdictions in which it holds
a presence, and/or in sectors in which
management has expertise.
The Group’s business plan is to initiate
a Feasibility Study on Araguaia in 2015,
which will be a further milestone in its
progressive development and de-risking.
This has been the core focus of the
Group since the acquisition of Araguaia in
August 2010. A Pre-Feasibility Study was
completed in March 2014 and showed
that further analysis and development
of the project is fully justified.
Strategic Report
11
of all licenses in order to ensure good
title is maintained. They are also subject
to legislation defined by the government
in Brazil; if this legislation is changed
it could adversely affect the value of the
Group’s assets.
Resource estimates
The Group’s reported resources are only
estimates. No assurance can be given that
the estimated resources will be recovered
or that they will be recovered at the rates
estimated. Mineral reserve and resource
estimates are based on limited sampling
and as a result are uncertain because the
samples may not be fully representative
of the full resource. Mineral resource
estimates may require revision (either up
or down) in future periods based on further
drilling or actual production experience.
Any future resource figures will be esti-
mates and there can be no assurance that
the minerals are present, will be recovered
or that they can be brought into profitable
production. Furthermore, a decline in the
market price for natural resources, particu-
larly nickel, could render reserves containing
relatively lower grades of these resources
uneconomic to recover.
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
R
E
E
V
V
I
I
E
E
W
W
B
B
U
U
S
S
I
I
N
N
E
E
S
S
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
other
uncertainties,
Country risk
The Group’s licences and operations are
located in foreign jurisdictions. As a result,
the Group is subject to political, economic
and
including
but not limited to, changes in policies
or the personnel administering them,
appropriation of property without fair
compensation, cancellation or modification
of contract rights, royalty and tax increases
and other risks arising out of foreign
governmental sovereignty over the area
in which these operations are conducted.
Brazil is the current focus of the Group’s
activity and offers stable political frameworks
and actively supports foreign investment.
The Board seeks to run the Group with
a low cost base in order to maximise the
amount that is spent on exploration and
development as this is where value can be
added. To this extent, the corporate office
is run on a streamlined basis by a core
team, and specialist skills and activities
are outsourced as appropriate, both in the
United Kingdom and in Brazil.
The Group finances its activities through
periodic capital raisings with share placings.
As the Group continues to develop its
projects, there may be opportunities to
obtain funding through other financial
instruments, including royalty, debt or other
arrangements with strategic parties.
Principal Risks and Uncertainties
Set out below are the principal risks and
uncertainties facing the Group:
Exploration risks
The exploration and mining business
is controlled by a number of global factors,
principally supply and demand which
in turn is a key driver in global metal prices;
these factors are beyond the control
of the Group. Exploration is a high-risk
business and there can be no guarantee
that any mineralisation discovered will
result in proven and probable reserves
or go on to be an operating mine. At every
stage of the exploration process the
projects are rigorously reviewed, both
internally and by qualified third party
consultants to determine if the results
justify the next stage of exploration
expenditure, ensuring that funds are only
applied to high priority targets.
legal
the Group,
The principal assets of
comprising
the mineral exploration
licences are subject to certain financial
these
and
commitments.
the
commitments are not
licences could be revoked. The Group
closely monitors on an ongoing basis
its commitments and the expiry terms
If
fulfilled
Drill Hole Planning on the Pequizeiro Target
12
Strategic Report
Strategic Report continued
centre-left
2014 saw a general election in the country
which resulted in the reelection of the
incumbent
administration.
Brazil has a well developed exploration
and mining code with proactive support for
foreign companies. Economic growth has
however faltered to close to zero in 2014, as
compared to circa 2.0% for 2013.
Volatility of commodity prices
Historically, commodity prices (including
in particular the price of nickel) have
fluctuated and are affected by numerous
factors beyond the Group’s control.
The aggregate effect of these factors
is
impossible to predict. Fluctuations
in commodity prices in the long-term
may adversely affect the returns of the
Group’s exploration projects.
in the global
A significant reduction
demand for nickel,
leading to a fall
in nickel prices, could lead to a significant
fall in the cash flow of the Group in future
periods and/or delay in exploration and
production, which may have a material
adverse impact on the operating results
and financial position of the Group.
Financing
The successful exploration of natural
resources on any project
requires
significant capital investment. The Group
currently sources finance through the
capital.
issue of additional equity
The Group’s ability to raise
further
funds will depend on the success
of its investment strategy and acquired
operations.
not
be successful in procuring the requisite
funds on terms which are acceptable and,
if such funding is unavailable, the Group
may be required to reduce the scope of its
investments or anticipated expansion.
The Group may
Dependence on key personnel
The Group is dependent upon its executive
management team. Whilst it has entered
into contractual agreements with the
aim of securing the services of these
personnel, the retention of their services
cannot be guaranteed. The development
and success of the Group depends on the
ability to recruit and retain high quality
and experienced staff. The loss of the
service of key personnel or the inability
to attract additional qualified personnel
as the Group grows could have an adverse
effect on future business and financial
conditions. To date the Group has been
successful in recruiting and retaining high
quality staff.
Uninsured risk
The Group, as a participant in exploration and development programmes, may become
subject to liability for hazards that cannot be insured against or third party claims
that exceed the insurance cover. The Group may also be disrupted by a variety of risks
and hazards that are beyond its control, including geological, geotechnical and seismic
factors, environmental hazards, industrial accidents, occupation and health hazards
and weather conditions or other acts of God.
Financial risks
The Group’s operations expose it to a variety of financial risks, particularly relating to foreign
currency exchange rates as a result of the Group’s foreign operations. The Group has a risk
management programme in place that seeks to limit the adverse effects of these risks
on the financial performance of the Group.
Details of the Group’s financial risk management objectives and policies are set out
in note 3 to the Financial Statements.
Financial Performance Review
The Group is not yet producing minerals and so has no income other than bank interest.
Consequently the Group is not expected to report profits until it disposes of or is able
to profitably develop or otherwise turn to account its exploration and development projects.
The principal financial key performance indicators (‘KPIs’) monitored by the Board concern
levels and usage of cash.
The three main financial KPIs for the Group allow it to monitor costs and plan future
exploration and development activities and are as follows:
Cash and cash equivalents
Administrative expenses as a percentage of Total assets
Exploration costs capitalised as intangible assets
2014
£5,030,968
4.2%
£2,018,658
2013
£3,091,880
4.4%
£4,241,762
Administrative expenses as a percentage of total assets has remained stable as there
has been no change in corporate activity following its streamlining in 2013, owing to the
constrained financing environment prevalent in the sector in which the Group operates.
Exploration costs capitalised as intangible assets relate to expenditure on the
Araguaia project. Expenditure in 2013 was higher than in 2014; this was driven
by the Pre-Feasibility study which was completed in March 2014 and included a 3rd
Phase 9,309 metre drilling programme. Development activity at Araguaia in 2014 has
focused on advancing permitting on the project and planning for the Feasibility Study.
Furthermore a 4th Phase infill drilling campaign commenced in early November 2014.
At 31 December 2014 the Group’s intangible assets had a carrying value of £20,770,312.
Non-Financial Key Performance Indicators (‘KPIs’)
The Board monitors the following key non-financial KPIs on a regular basis:
Health and Safety — number of reported incidents
There were no reportable incidents in the current or prior year.
Operational performance
Resource size and grade: A Canadian National Instrument (’NI‘) 43-101 Technical Report
was released in March 2014 for the Araguaia Project and included 71.98 Mt grading
1.33% Ni (Indicated) and 25.35 Mt at 1.21% Ni (Inferred). This represents an increase
on previous estimates.
Fundraising
On 31 July 2014 a total of 50,000,000 shares were issued through a public offering in
Canada, at a price of CAD 0.11 per share and a private placement was closed for a total
of 41,287,608 shares, at a price of £0.06 per share, to raise a total of £5,447,265 before
expenses.
Details of the Group’s financial risk management objectives and policies are set out in note
3 to the Financial Statements.
By order of the Board
Jeffrey Karoly, Company Secretary. 25 February 2015
Financial Report Jeffrey Karoly
‘The Brazilian Real and
a strong balance sheet
continue to work in the
Group’s favour, helping
to hold down the
cost base’
Loss before taxation
Cash and cash equivalents
Exploration assets
Net assets
Loss per share (pence)
Loss for the year
The loss for the year reduced by £1,471,285
to £1,241,936 due to a number of non-
recurring charges in 2013 which did not
flow through into the following year.
These included:
> A
impairment
charge
in 2013 of £1,033,240 due
to the writing off of the El Aguila and
Falcao projects in 2013. This compared
to a £31,989 impairment in 2014 on the
Rio Maria project.
one-off non-cash
the cash
> A non-cash credit of £415,702 compared
to £46,940 in 2013. The 2014 credit
flow model
arose as
used
the contingent
consideration was adjusted, to take into
account changed assumptions in the
timing of cash flows, as derived from the
to estimate
Financial Report
13
Year ended
31 December
2014
£
Year ended
31 December
2013
£
(1,241,936)
(2,713,221)
5,030,968
3,091,880
20,499,387
19,754,559
26,171,171
23,738,903
(0.283)
(0.709)
Pre-Feasibility Study, published by the
Group in March 2014. The changed
assumptions included the estimated
timing of the eventual payment of
the contingent consideration, as well
as exchange rate.
The Group has continued to keep a tight
control on its administrative costs, which
amounted in the year to £1,311,688 and
remain at a similar level to 2013, when
they totalled £1,288,758.
Furthermore, total comprehensive income
attributable to equity holders of £(2,703,087)
included currency translation differences
of £(1,438,422). This was due to the
Brazilian real continuing to weaken
against Sterling as at 31 December 2014,
as compared to 31 December 2013.
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
R
E
E
V
V
I
I
E
E
W
W
B
B
U
U
S
S
I
I
N
N
E
E
S
S
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
Fazenda Araguaia
One of the Operational Bases on the Project
14
Financial Report
Financial Report continued
Cash and Cash Equivalents
The closing cash balance for the Group
of £5,030,968
is net of £2,018,658
of direct exploration expenditure in the
year, as compared to £4,241,762 in 2013.
Expenditure in 2014 was lower than
in 2013 as most of the costs of the Pre-
Feasibility Study and associated 3rd Phase
9,309 metre drill programme were
incurred in 2013. Activities since the
release of the Pre-Feasibility in March
2014 have focussed on advancing
the permitting and planning for the
Feasibility Study, with a 4th Phase drill
programme commencing in November
2014.
Exploration Assets
comprise
Exploration assets, which
the Araguaia project, have
increased
to £20,499,387 as at 31 December
2014 as compared
to £19,754,559
as at 31 December 2013. The expenditure
in 2014 was offset
of £2,018,658
by a negative
foreign exchange
revaluation of £1,241,841 as the Brazilian
to devalue against
Real continued
Sterling, together with an impairment
of the Rio Maria Project of £31,989.
The Araguaia assets of the business are
valued in the functional currency of the
country in which they are located.
Local Power Sub-Station at Colinas
Company Geologist Inspecting Drill Core
Project Manager Steve Heim
and Operations Director Luciano Lima
Financial Report
15
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
R
E
E
V
V
I
I
E
E
W
W
B
B
U
U
S
S
I
I
N
N
E
E
S
S
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
Annual global demand growth of circa
4% translates into circa 75,000 tonnes
Implementation of new
per annum.
Indonesian nickel pig
iron capacity
to address the ore export ban is likely
to be challenging for a number of reasons,
including the lack of infrastructure and
the track record of Chinese companies
investing and building mining projects
outside of China, and it is likely that the
market will be reliant on new projects
outside Indonesia to fill the supply gap.
However the nickel industry is facing
the issue of a reduced ‘project cupboard,’
most of the projects from the early 2000’s
have either been developed or are still
struggling to ramp up. There is no clear
new major source of supply in the industry
— HPAL projects have suffered large
capital cost over-runs and further new
projects are unlikely; nickel sulphide
discovery rate is in decline and nickel
pig iron was highly dependent on higher
grade Indonesian ore to maintain the
low cost of production. Therefore there
is room in the market place for quality,
low C1 cost projects such as Araguaia
to come on stream as the expected
structural supply deficit widens in the
next 5 to 10 years.
Nickel Overview
Industry Summary
Nickel
is most often combined with
other materials to produce alloys such
as stainless steel, which consumes circa
two-thirds of global production, as well
as other alloys with distinct performance
characteristics which represent a further
circa 20% of annual demand. It is also
used as a plating material and to produce
special chemical products for batteries
and catalysts. Together these represent
the ‘first use’ applications of nickel.
Markets
Around 45% of global nickel consumption
occurs
in China, with a further 20%
in Europe and 10% in the United States,
according to the Nickel Institute. Despite
huge historic growth in demand, Chinese
per capita consumption is still only just
half of more
industrially-developed
economies such as Japan and Germany.
With Chinese domestic mine supply
representing around one-tenth of total
nickel demand, the country will remain
a heavy net importer of the metal.
Global demand for nickel has remained
robust, according to Glencore, growing
at an average rate of over 7% per annum
in the period 2008–2013, driven by growth
in China, India and the U.S. Although the
days of double digit demand growth
in China have passed, the greater size
of the economy still results in healthy
growth in the absolute demand for nickel,
forecast by various observers to remain
globally at over 4% per annum over the
next 5–10 years.
58% Primary nickel in stainless
12% Nickel based alloys
11% Plating
9% Non-ferrous alloys
6% Chemicals
4% Other
* Data from the Nickel Institute
a
structural
Furthermore,
change
occurred in the nickel market in 2014,
with the ban on exports of raw materials
Indonesia. Through the export
from
lateritic nickel ore
of unbeneficiated
to China,
Indonesia had grown over
7 or so years into the largest net exporter
of contained nickel in the world and the
Indonesian government,
move by the
domestic
encouraging
at
aimed
investment
in downstream value-add
activities, has removed from the market
circa 300,000 annual tonnes of nickel,
which had been feeding primarily into the
nickel pig iron industry in China. Based
on the composition of replacement ore
supply from the Philippines, Chinese
nickel pig iron production, which had
three
been sourcing approximately
quarters of its supply from Indonesia, will
nonetheless likely fall by over 100 Ktpa.
16
Board of Directors and Key Management
Board of Directors and Key Management
A wealth of experience
David J Hall BA (hons), MSc, Fellow SEG P.Geo
Non-Executive Chairman
Mr Hall is a graduate in geology from
Trinity College Dublin and holds a Masters
Degree in mineral exploration from Queen’s
University, Kingston, Ontario. He has over
30 years of experience in the exploration
and mining sector and has worked
on and assessed exploration projects and
mines in over 40 countries. From 1992,
Mr Hall was Chief Geologist for Minorco SA,
responsible for Central and Eastern Europe,
Central Asia and the Middle East. He moved
to South America in 1997 as a consultant
geologist for Minorco South America and
subsequently became exploration manager
for AngloGold South America in 1999, where
he was responsible for exploration around
the Cerro Vanguardia gold mine in Argentina,
around the Morro Velho and Crixas mines
in Brazil and establishing the exploration
programme that resulted in the discovery
of the La Recantada gold deposit in Peru
as well as certain joint ventures in Ecuador
In April 2002, Mr Hall
and Colombia.
became an executive director of Minmet
and operations director
in September
the divestment
2002. Mr Hall
of Minmet’s exploration assets
in the
Dominican Republic into GoldQuest Mining
Corporation, which is listed on the TSX
Venture Exchange. Mr Hall is also founder
of Stratex International Plc, an AIM traded
company with exploration assets in Turkey
and in which Teck is an equity shareholder.
Mr Hall is a fellow of the Society of Economic
Geologists and EuroGeol.
led
Jeremy J Martin MSc, ASCM
Director and Chief Executive Officer
Mr Martin holds a degree in Mining Geology
from the Camborne School of Mines, and
an MSc in mineral exploration from the
University of Leicester. He has worked
in South America, Central America and
Europe, where he was
responsible
for grassroots regional metalliferous
exploration
through
programmes
resources definition and mine
to
development. Mr Martin has established
a number of
JV partnerships with
major mining companies and has been
involved in the formation of four AIM
and TSX traded companies. He has
served on a number of public company
boards and is a member of the Society
of Economic Geologists and the Institute
of Mining Analysts.
Jeffrey L Karoly BSc (hons), ACA
Chief Financial Officer and
Company Secretary
in Geology
Mr Karoly has degree
from the University of Bristol and
is a Chartered Accountant with over
15 years of experience in the mining
industry. He was with Minorco/Anglo
American from 1997 to 2007 in a variety
of finance/corporate finance functions
in the UK, Brazil, South Africa and
France and from 2008 to 2010 was Chief
Financial Officer of South American Ferro
Metals, a private company that acquired,
explored and developed an
iron ore
property in Brazil and which in 2010 listed
on the ASX. Mr Karoly started his career
at Coopers & Lybrand and speaks French
and Portuguese.
Owen A Bavinton BSc (hons), MSc, DIC, PhD
Non-Executive Director
from
the
Dr Bavinton graduated
University of Queensland
in Geology
in 1969 and holds a Masters Degree
in Mineral Exploration from
Imperial
College, London and a PhD in Economic
Geology from ANU, Canberra, Australia.
He has over 40 years of varied international
experience in the mineral exploration and
mining sectors in several commodities.
After brief periods as a junior consultant
and an underground mine geologist
on a Witwatersrand gold mine, from
1974 to 1985 he had several positions
with Western Mining Corporation (‘WMC’),
finally as director of WMC’s activities
in Brazil. From 1986 to 1992 he was
Chief Executive Officer of Aredor Guinea
SA. In 1992 he joined the Anglo American
Group where he stayed until his retirement
in 2010. Based initially in Turkey and
then in Budapest, he was responsible for
Anglo American’s exploration and project
evaluation activities in the FSU, Central
Europe and the Middle East. He moved
initially as Head
to London
in 1998,
of Exploration for Minorco, and
later
Group Head of Exploration and Geology
for the Anglo American Group. In those
roles he was responsible for worldwide
exploration and geosciences covering
a range of exploration projects through
including
all stages of development,
advanced projects and feasibility studies,
as well as providing geoscience input into
numerous acquisitions. He is a fellow
of the Society of Economic Geologists,
the Association of Applied Geochemists
and the Institute of Materials, Mining
and Metallurgy. Dr Bavinton is currently
an independent consultant.
Board of Directors and Key Management
17
Dr Philip Mackey P.Eng, PhD, FCIM
Senior Metallurgical Advisor
Dr Mackey is a consulting metallurgical
engineer with over forty years’ experience
in non-ferrous metals processing with
a particular focus on nickel and copper
laterite
sulphide smelting and nickel
processing. He has worked for leading
producers of nickel including Falconbridge
and Xstrata and throughout his career he
has been involved in a number of nickel
sulphide projects and later on, nickel
laterite projects at various stages
of the development cycle. Dr Mackey’s
extensive experience has seen him
take projects from the start-up stage,
through the feasibility stages and into
the processing and production of non-
ferrous metals. Dr Mackey is a Member
and Fellow of the Canadian Institute
of Mining and Metallurgy as well as the
Metals and Minerals Society USA. He has
also authored or co-authored over 100
publications regarding metallurgy with
a particular focus on nickel and copper.
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
G
O
O
V
V
E
E
R
R
N
N
A
A
N
N
C
C
E
E
C
C
O
O
R
R
P
P
O
O
R
R
A
A
T
T
E
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
William J Fisher P.Geo
Non-Executive Director
Mr Fisher graduated as a geologist in 1979
and has extensive industry experience
which has included a number of residential
posts in Africa, Australia, Europe and
Canada in both exploration and mining
positions. Under his leadership, Karmin
Exploration discovered the Aripuanã base
metal sulphide deposits in Brazil. From
1997 to 2001 Mr Fisher was Vice President,
Exploration for Boliden AB, a major
European mining and smelting company
where he was responsible for thirty five
projects in nine countries. From 2001
to 2008, Mr Fisher led GlobeStar Mining
Corp.
from an exploration company
to an emerging base metal producer in the
Dominican Republic which developed
and operated the Cerro de Maimon mine
until it was sold to Perilya for USD 186
million. Mr Fisher was also Chairman
of Aurelian Resources which was acquired
by Kinross in 2008 for USD 1.2 Billion
after the discovery of the Fruta del
Norte gold deposit in Ecuador. Mr Fisher
currently serves as Executive Chairman
of Goldquest Mining Corp. (TSX: GCQ),
independent director of Treasury Metals
Inc. (TSX: TML) and Chairman of Rame
Energy (AIM: RAME).
Roger Billington P.Geo
Technical Manager
Mr Billington is the former head of Falcon-
bridge nickel laterite exploration world-
wide. He has project development
experience including senior roles in the
discovery and evaluation of the Tou-
ba-Biankouma nickel
laterite deposits
(Côte d’Ivoire), the Koniambo nickel lat-
erite deposit (New Caledonia), the Sechol
nickel laterite deposit (Guatemala) and
laterite deposit
the GlobeStar nickel
(Dominican Republic).
in the energy and
in these sectors worldwide
Allan M Walker MA
Non-Executive Director
Mr Walker has over 30 years of experience
in investment banking, primarily
focussed on project finance and
private equity
natural resource sectors particularly in
emerging markets. He has extensive
contacts
as well as with governments,
multilateral agencies and regional
development banks. He has most recently
been with Masdar Capital in Abu Dhabi,
as Executive Director, responsible for
managing the third party private equity
funds management business for Masdar,
the Abu Dhabi government’s clean energy
and sustainability company. Previously
he founded and ran a similar fund for
Black River Asset Management Limited,
an
indirectly held subsidiary of Cargill
Inc. Prior to Black River, Mr Walker, from
2002 until 2005, was head of power and
infrastructure in London for Standard Bank
Plc, a world leader in emerging markets
resource banking. He was also previously
a Director in the Global Energy and Project
Finance Group of Credit Suisse First Boston
in London and ran the energy company
at CSFB Garantia in Sao Paulo, Brazil
from 1998 to 2001. Mr Walker graduated
with an MA in economic geography from
Cambridge University in 1982 and speaks
Portuguese and Spanish.
the mining
Alexander N Christopher BSc (Hons), P.Geo (BC)
Non-Executive Director
Mr Christopher, a professional geologist,
has over 30 years of experience in mineral
exploration and
industry.
He
is a member of the Association
of Professional Engineers and Geoscientists
BC and possesses an Honours B.Sc.
in Geology from McMaster University and an
Environmental Biology Technology diploma
from Canadore College. Mr Christopher
currently holds the position of Vice President
Exploration at Teck. Mr Christopher has
been with Teck since the mid 1980’s
holding a number of positions within the
company and has spent much of his time
over the past 15 years focusing on the
junior mining sector, partnerships, property
transactions and Teck’s junior mining equity
investments. He is also currently a member
of the Board of Directors of the Prospectors
and Developers Association of Canada and
a member of the Association of Mineral
Exploration BC where Mr Christopher
was previously a member of the Board
of Directors and has served on a number
including the Finance
of committees
Committee which he continues to serve
on at this time.
18
Directors’ Report
Directors’ Report
The Directors present their annual report on the affairs of Horizonte
Minerals Plc, together with the audited Financial Statements for the
year ended 31 December 2014.
Principal activities
The principal activity of the Company and the Group is the
identification, acquisition, exploration and development
of mineral projects. The main area of activity comprises the
development of the Araguaia nickel project, located in Parà State
in north-eastern Brazil.
Financial review
The Group recorded a loss for the year of £1,241,936 (2013: loss
£2,713,221). The Group is currently involved in exploration and
evaluation activities and not actively mining. As a result, the
Group is not revenue generative.
On 31 July 2014 a total of 50,000,000 shares were issued through
a public offering in Canada, at a price of CAD 0.11 per share
and a private placement was closed for a total of 41,287,608
shares, at a price of £0.06 per share, to raise a total of £5,447,265
before expenses.
At 31 December 2014 the Group had cash and cash equivalents
of £5,030,968 (2013: £3,091,880). The Directors have prepared cash
flow forecasts for the 12 months from the date of signing of these
Financial Statements. The Directors have formed a judgement
at the time of approving the Financial Statements that there
is a reasonable expectation that the Company and Group have
adequate resources to continue operations for the foreseeable
future. For this reason, the Directors continue to adopt the going
concern basis in preparing the Financial Statements. Further
details of the Directors’ conclusions regarding going concern are
detailed in note 2.4 to the Financial Statements.
The Directors do not recommend payment of a dividend (2013: £Nil).
Corporate and Social Responsibility
People
As a Group we understand the importance of the team
in developing and growing the Group for the future. We aim
to create an environment that will attract, retain and motivate
people so they can maximise their potential.
Social
Horizonte currently conducts exploration in Brazil and recognises
that there is a vital social dimension to all exploration and mining
activities. We are fortunate to maintain excellent relationships
with all communities and landholders located close to, or on, our
projects. This is largely as a result of our policy to prioritise local
labour and regularly consult community members about the
Araguaia Project. Wherever possible, the Group tries to support
local economic development by using local suppliers and over
60% of the Group’s workforce originate from the Brazilian state
of Parà, where the project is located. The year 2015 will see
an advancement of the social development agenda for the Group
with a household survey programme planned for landowners
likely to be affected by the upcoming Araguaia Project and official
public consultations on the Project’s Social & Environmental
Impact Assessment.
Environmental
Horizonte undertakes its exploration activities in a manner that
aims to minimise or eliminate negative environmental impacts and
strives wherever possible to make that impact positive. Horizonte
is currently at the pre-production stage, hence, the environmental
impact associated with its activities is minimal. To ensure proper
environmental stewardship on its projects, Horizonte 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, where
practical, improvements carried out on local roads and infrastructure.
The Group also provides in-kind support through our employees
to assist local landowners partake in good environmental stewardship
practices, for example, the rehabilitation of natural springs.
integrated Social and Environmental
SEIA
As the project moves into the Feasibility Stage, the focus is now
Impact
on creating one
Assessment based on International Finance Corporation/World Bank
standards. Additional data collection will be undertaken throughout
2015, including social resettlement data, water, air and other data
required to place the Group in good stance with strong baseline studies
before commencing construction of the Araguaia Project.
Health and safety
Horizonte operates a comprehensive health and safety
programme to ensure the wellness and security of its employees.
The control and eventual elimination of all work related hazards
requires dedicated team effort involving the active participation
of all employees. A comprehensive health and safety programme
is the primary means for delivering best practices in health
and safety management. This programme is regularly updated
to incorporate employee feedback, lessons learned from past
incidents and new guidelines related to new projects. Through
this we aim to identify areas for further improvement of health
and safety management, resulting in continuous improvement of
the health and safety programme. Employee involvement is seen
as fundamental in recognising and reporting unsafe conditions
and avoiding events that may result in injuries and accidents.
The Group operates using 6 ’golden rules‘ aimed at mitigating the
majority of health and safety risks. Annually Horizonte management
provides a detailed in house review of the Company’s health and safety
programme hand in hand with all members of the Brazil exploration
team. In addition, Brazil exploration personnel attend accredited
independent courses in first-aid, risk assessment, fire combatting and
defensive driving.
Substantial shareholdings
The Directors are aware of the following substantial interests
or holdings in 3% or more of the Company’s ordinary called up share
capital as at 25 February 2015.
Major shareholders
Number of shares
% of issued capital
Teck Resources Limited
188,689,929
Henderson Global Investors
Anglo Pacific Group Plc
Quantom Holdings Ltd
Richard Griffiths
69,052,667
34,228,821
30,000,000
24,536,192
38.3
14.0
7.0
6.1
4.4
Directors’ Report
19
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
G
O
O
V
V
E
E
R
R
N
N
A
A
N
N
C
C
E
E
C
C
O
O
R
R
P
P
O
O
R
R
A
A
T
T
E
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
Share capital
A statement of the changes in the share capital of the Company is set out in note 14 of the Financial Statements.
Directors and their interests
The names of the Directors of the Company at the date of this report are shown in the Statutory Information.
The Directors who served during the year, together with all their beneficial interests in the shares of the Company
as at 31 December 2014 are as follows:
Director
David Hall
Jeremy Martin
Owen Bavinton
Allan Walker
William Fisher
Alex Christopher
31 December 2014
31 December 2013
Shares
765,908
1,083,908
—
—
—
—
Options
4,000,000
8,250,000
2,500,000
3,400,000
2,500,000
—
Shares
765,908
853,908
—
—
—
—
Options
3,000,000
5,250,000
1,500,000
2,400,000
1,500,000
—
None of the Directors exercised any share options during the year.
There has been no change in the interests set out above between 31 December 2014 and 25 February 2015.
Directors’ statement as to disclosure of information to auditor
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are individually aware,
there is no relevant audit information of which the Company’s auditor is unaware and the Directors have taken all the steps that
they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware
of the information.
Events after the reporting date
The events after the reporting date are set out in note 30 to the Financial Statements.
Annual General Meeting
The Notice of the Annual General Meeting of the Company and the Management Information Circular together with Management
Discussion and Analysis as at 31 December 2014 will be distributed to shareholders together with the Annual Report. Full details
of the business to be considered at that meeting can be found in the Notice.
Future developments
In 2015 the Group will be completing a 4th Phase infill drilling programme, together with a pilot plant test on a 200 tonne bulk sample.
These are precursors for the Feasibility Study. Furthermore the permitting for the Araguaia project will continue to be advanced.
Independent auditor
The auditor, PKF Littlejohn LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
PKF Littlejohn LLP has signified its willingness to continue in office as auditor.
By Order of the Board
Jeffrey Karoly
Company Secretary
25 February 2015
20
Statement of Directors’ Responsibilities
Statement of Directors’ Responsibilities
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any
time the financial position of the Company and the Group, and
enable them to ensure that the Financial Statements comply
with the requirements of the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company
and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
in
the Company’s website, www.horizonteminerals.com.
Legislation in the United Kingdom governing the preparation
and dissemination of the Financial Statements may differ from
legislation in other jurisdictions.
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that
law the
Directors have prepared the Group and Parent Company
Financial Statements in accordance with International Financial
Reporting Standards ('IFRSs') as adopted by the European Union.
Under company law the Directors must not approve the
Financial Statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and the
Company, and of the profit or loss of the Group for that period.
In preparing these Financial Statements, the Directors are
required to:
> select suitable accounting policies and then apply
them consistently;
> make judgements and accounting estimates that are
reasonable and prudent;
> state whether applicable IFRSs as adopted by the European
Union have been followed, subject to any material departures
disclosed and explained in the Financial Statements;
> prepare the Financial Statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
Public Hearing January 2015
Corporate Governance Report
Corporate Governance Report
21
the
including
The Board of Directors
As at 31 December 2014, the Board
of Directors comprised six members: one
Executive Director and five Non-Executive
Directors
Chairman,
Mr David Hall. The Executive Director
has a wealth of minerals exploration and
development experience. Similarly the
Non-Executive Directors have extensive
mineral and financial experience. Three
of
the Non-Executive Directors are
classified as Independent by the Toronto
Stock Exchange.
reserved
those matters
Board meetings
The Board ordinarily meets approximately
on a quarterly basis and as and when
required, providing effective
further
leadership and overall management
of the Company’s affairs by reference
to
for
its decision. This includes the approval
of the budget and business plan, major
capital expenditure, acquisitions and
risk management policies
disposals,
and
financial
statements. Formal agendas, papers
and reports are sent to the Directors
in a timely manner, prior to the Board
meetings. The Board delegates certain
aspects of
its responsibilities to the
Board committees which have terms
of reference as listed below.
the approval of
the
Corporate governance practices
The Board recognises the importance
of sound corporate governance com-
mensurate with the size of the Company
and the interests of Shareholders. As the
Company grows, the Directors will seek
to develop policies and procedures in line
with the requirements of the Code of Best
Practice (commonly known as the ‘UK Cor-
porate Governance Code'), as published
by the Financial Reporting Council so far
as is practicable and considers them to be
appropriate taking into account the size
and nature of the Company.
Risk management
The Board considers risk assessment
to be important in achieving its strategic
objectives. There is a process of evaluation
of
through
regular reviews by senior management
of forecasts. Project milestones and
timelines are regularly reviewed.
performance
targets
Securities trading
The Company has adopted a share
dealing code for dealings
in shares
by Directors and senior employees
which is appropriate for an AIM and TSX
listed company. The Directors comply
with relevant AIM and TSX rules relating
to Directors’ dealings and take reasonable
steps to ensure compliance by the Group’s
applicable employees.
communication with
Relations with shareholders
The Board is committed to providing
the
effective
shareholders of the Company. Significant
developments are disseminated through
stock exchange announcements and
the Company
regular updates on
website. The Board views the Annual
General Meeting as a
for
communication between the Company
and
its shareholders and encourages
their participation in its agenda.
forum
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
G
O
O
V
V
E
E
R
R
N
N
A
A
N
N
C
C
E
E
C
C
O
O
R
R
P
P
O
O
R
R
A
A
T
T
E
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
Remuneration and audit committees
The remuneration committee comprises
David Hall, William Fisher and Allan
Walker and is responsible for reviewing
the performance of the Executive Director
and senior management and for setting
the framework and broad policy for the
scale and structure of their remuneration,
taking into account all factors which
it shall deem necessary. The remuneration
committee also determines the allocation
of share options and
is responsible
for setting up any performance criteria
in relation to the exercise of options
granted under any share options schemes
adopted by the Company.
The audit committee, comprising Owen
Bavinton, David Hall, William Fisher and
Allan Walker, has primary responsibility for
monitoring the quality of internal controls,
ensuring that the financial performance
of the Company is properly measured
and reported on and for reviewing
reports from the Company’s auditors
relating to the Group’s accounting and
internal controls.
Internal controls
The Board recognises the importance
of both
financial and non-financial
controls and has reviewed the Company’s
control environment and any related
shortfalls during the year. Since the
Company was established, the Directors
are satisfied that, given the current size
and activities of the Company, adequate
internal controls have been implemented.
Whilst they are aware that no system
can provide absolute assurance against
material misstatement or loss, in light
of the current activity and proposed
future developments of the Company,
continuing reviews of internal controls
will be undertaken to ensure that they are
adequate and effective.
Matters on which we are required
to report by exception
We have nothing to report in respect
of the following matters where 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.
Alistair Roberts (Senior statutory auditor)
For and on behalf of PKF Littlejohn LLP
Statutory auditor
25 February 2015
1 Westferry Circus
Canary Wharf
London E14 4HD
22
Independent Auditor’s Report
Independent Auditor’s Report to the Members
of Horizonte Minerals Plc
Parent
We have audited the Financial Statements
of Horizonte Minerals Plc for the year ended
31 December 2014 which comprise the
Consolidated Statement of Comprehensive
Income, the Consolidated and Parent
Company Statements of Financial Position,
the Consolidated and Parent Company
Statements of Cash Flows, the Consolidated
Statements
Company
and
of Changes in Equity and the related notes.
The financial reporting framework that
has been applied in their preparation
is applicable
International
law and
(IFRSs)
Financial Reporting Standards
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.
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.
Respective responsibilities of Directors
and Auditor
As explained more fully in the Statement
of Directors’ Responsibilities, the Directors
are responsible
for the preparation
of the Financial Statements and for being
satisfied that they give a true and fair view.
Our responsibility is to audit and express
an opinion on the Financial Statements
in accordance with applicable law and
International Standards on Auditing
(UK and Ireland). Those standards require
us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
Company’s
Scope of the audit of the Financial
Statements
An audit
involves obtaining evidence
about the amounts and disclosures in the
Financial Statements sufficient to give
reasonable assurance that the Financial
Statements are
from material
free
misstatement, whether caused by fraud
or error. This includes an assessment
of: whether the accounting policies
are appropriate to the Group and the
Parent
circumstances
and have been consistently applied and
adequately disclosed; the reasonableness
of significant accounting estimates made
by Directors; and the overall presentation
of the Financial Statements. In addition,
we read all the financial and non-financial
the Annual Report
information
to
inconsistencies
with the audited Financial Statements
and to
information that
is apparently materially incorrect based
on, or materially inconsistent with, the
knowledge acquired by us in the course
of performing the audit. If we become
apparent material
aware of
misstatements or
inconsistencies we
consider the implications for our report.
identify material
identify any
any
in
Opinion on Financial Statements
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 2014 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.
Opinion on other matters prescribed
by the Companies Act 2006
In our opinion 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.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2014
Consolidated Statement of Comprehensive Income
23
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses
Charge for share options granted
Changes in fair value of contingent consideration
Project and intangible fixed asset impairment
Loss on foreign exchange
Operating loss
Finance income
Finance costs
Loss before taxation
Taxation
Loss for the year from continuing operations attributable to owners of the parent
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Changes in value of available for sale financial assets
Currency translation differences on translating foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to owners of the parent
Earnings per share from continuing operations attributable to owners of the parent
Basic (pence per share)
Diluted (pence per share)
The notes on pages 29 to 53 form part of these financial statements.
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
I
I
F
F
N
N
A
A
N
N
C
C
I
I
A
A
L
L
Year ended
31 December
2014
£
Year ended
31 December
2013
£
Notes
—
—
—
—
—
—
(1,311,688)
(1,288,758)
(125,107)
(171,277)
415,702
(31,989)
(46,364)
46,940
(1,033,240)
(149,199)
(1,099,446)
(2,595,534)
31,413
47,451
(173,903)
(165,138)
(1,241,936)
(2,713,221)
—
—
(1,241,936)
(2,713,221)
(22,729)
(174,985)
(1,438,422)
(4,124,364)
(1,461,151)
(4,299,349)
(2,703,087)
(7,012,570)
(0.283)
(0.283)
(0.709)
(0.709)
18
6
6
7
7
8
12
17
20
20
24
Consolidated Statement of Financial Position
Consolidated Statement of Financial Position
Company number: 05676866
As at 31 December 2014
Assets
Non-current assets
Intangible assets
Property, plant & equipment
Deferred tax assets
Current assets
Trade and other receivables
Available for sale financial assets
Cash and cash equivalents
Total assets
Equity and liabilities
Equity attributable to owners of the parent
Share capital
Share premium
Other reserves
Retained losses
Total equity
Liabilities
Non-current liabilities
Contingent consideration
Deferred tax liabilities
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
31 December
2014
£
31 December
2013
£
Notes
9
10
8
11
12
13
14
15
17
18
8
18
20,770,312
20,041,937
54,390
107,451
5,065,976
5,373,634
25,890,678
25,523,022
22,709
—
5,030,968
5,053,677
62,127
22,729
3,091,880
3,176,736
30,944,355
28,699,758
4,924,271
4,011,395
31,095,370
26,997,998
(321,601)
1,139,550
(9,526,869)
(8,410,040)
26,171,171
23,738,903
2,235,512
2,201,778
4,437,290
2,477,310
2,335,492
4,812,802
335,894
335,894
148,053
148,053
4,773,184
4,960,855
30,944,355
28,699,758
The notes on pages 29 to 53 form part of these financial statements.
The financial statements were authorised for issue by the Board of Directors on 25 February 2015 and were signed on its behalf.
David J Hall
Chairman
Jeremy J Martin
Chief Executive Officer
Company Statement of Financial Position
Company number: 05676866
As at 31 December 2014
Assets
Non-current assets
Property, plant & equipment
Investment in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Equity attributable to owners of the parent
Share capital
Share premium
Merger reserve
Retained losses
Total equity
Liabilities
Non-current liabilities
Contingent consideration
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Company Statement of Financial Position
25
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
I
I
F
F
N
N
A
A
N
N
C
C
I
I
A
A
L
L
31 December
2014
£
31 December
2013
£
Notes
10
26
11
13
14
15
17
18
18
2,291
37,768,225
37,770,516
13,818
4,208,984
4,222,802
5,137
34,525,339
35,530,476
12,035
2,756,368
2,768,403
41,993,318
37,298,879
4,924,271
31,095,370
10,888,760
(7,652,755)
39,255,646
4,011,395
26,997,998
10,888,760
(7,551,817)
34,346,336
2,235,512
2,477,310
502,160
2,737,672
41,993,318
475,233
2,952,543
37,298,879
The notes on pages 29 to 53 form part of these financial statements.
The financial statements were authorised for issue by the Board of Directors on 25 February 2015 and were signed on its behalf.
David J Hall
Chairman
Jeremy J Martin
Chief Executive Officer
26
Statements of Changes in Equity
Statements of Changes in Equity
For the year ended 31 December 2014
Consolidated
As at 1 January 2013
Loss for the year
Other comprehensive income:
Changes in value of available for sale financial assets
Currency translation differences on translating
foreign operations
Total comprehensive income for the year
Issue of ordinary shares
Issue costs
Share-based payments
Total transactions with owners, recognised directly
in equity
As at 31 December 2013
Loss for the year
Other comprehensive income:
Changes in value of available for sale financial assets
Currency translation differences on translating foreign
operations
Total comprehensive income for the year
Issue of ordinary shares
Issue costs
Share-based payments
Total transactions with owners , recognised directly
in equity
As at 31 December 2014
Company
As at 31 January 2013
Loss for the year
Total comprehensive income for the year
Issue of ordinary shares
Issue costs
Share-based payments
Total transactions with owners, recognised directly in equity
As at 31 December 2013
Loss for the year
Total comprehensive income for the year
Issue of ordinary shares
Issue costs
Share-based payments
Total transactions with owners, recognised directly in equity
As at 31 December 2014
Attributable to owners of the parent
Share
capital
£
Share
premium
£
Retained
losses
£
Other
reserves
£
Total
£
3,600,462
—
24,384,527
—
(5,868,096)
(2,713,221)
5,438,899
—
27,555,792
(2,713,221)
—
—
—
410,933
—
—
410,933
—
—
—
2,671,066
(57,595)
—
2,613,471
—
—
(174,985)
(4,124,364)
(174,985)
(4,124,364)
(2,713,221)
—
—
171,277
171,277
(4,299,349)
—
—
—
—
(7,012,570)
3,081,999
(57,595)
171,277
3,195,681
4,011,395
—
26,997,998
—
(8,410,040)
(1,241,936)
1,139,550
—
23,738,903
(1,241,936)
—
—
—
912,876
—
—
912,876
—
—
—
4,564,389
(467,017)
—
4,097,372
—
—
(22,729)
(1,438,422)
(22,729)
(1,438,422)
(1,241,936)
—
—
125,107
125,107
(1,461,151)
—
—
—
—
(2,703,087)
5,477,265
(467,017)
125,107
5,135,355
4,924,271
31,095,370
(9,526,869)
(321,601)
26,171,171
Attributable to equity shareholders
Share
capital
£
Share
premium
£
Retained
losses
£
Merger
reserves
£
3,600,462
—
—
410,933
—
—
410,933
4,011,395
—
—
912,876
—
—
912,876
4,924,271
24,384,527
—
—
2,671,066
(57,595)
—
2,613,471
26,997,998
—
—
4,564,389
(467,017)
—
4,097,372
31,095,370
(3,344,872)
(4,378,222)
(4,378,222)
—
—
171,277
171,277
(7,551,817)
(226,045)
(226,045)
—
—
125,107
125,107
(7,652,755)
10,888,760
—
—
—
—
—
—
10,888,760
—
—
—
—
—
—
10,888,760
Total
£
35,528,877
(4,378,222)
(4,378,222)
3,081,999
(57,595)
171,277
3,195,681
34,346,336
(226,045)
(226,045)
5,477,265
(467,017)
125,107
5,135,355
39,255,646
The notes on pages 29 to 53 form part of these financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2014
Cash flows from operating activities
Loss before taxation
Finance income
Finance costs
Charge for share options granted
Impairment of intangible assets
Exchange differences
Change in fair value of contingent consideration
Depreciation
Operating loss before changes in working capital
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Issue costs
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange loss on cash and cash equivalents
Cash and cash equivalents at end of the year
Consolidated Statement of Cash Flows
27
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
I
I
F
F
N
N
A
A
N
N
C
C
I
I
A
A
L
L
31 December
2014
£
31 December
2013
£
Notes
(1,241,936)
(2,713,221)
(31,413)
173,903
125,107
31,989
46,364
(415,702)
3,666
(47,451)
165,138
171,277
1,048,282
(27,424)
(46,940)
4,370
(1,308,022)
(1,445,969)
39,417
55,558
(17,285)
(177,040)
(1,213,047)
(1,640,294)
(1,843,161)
(4,199,863)
—
—
31,413
(100,037)
91,247
47,451
(1,811,748)
(4,161,202)
5,477,265
(467,017)
5,010,248
3,081,999
(57,595)
3,024,404
1,985,453
(2,777,092)
3,091,880
5,887,174
(46,365)
(18,202)
13
5,030,968
3,091,880
Major non-cash transactions
During the year ended 31 December 2014 additions to intangible exploration assets included £46,261 (2013: £80,109) in relation
to depreciation charges on property, plant and equipment used for exploration activities.
The notes on pages 29 to 53 form part of these financial statements.
28
Company Statement of Cash Flows
Company Statement of Cash Flows
For the year ended 31 December 2014
Cash flows from operating activities
Loss before taxation
Finance income
Charge for share options granted
Impairment of investment in subsidiaries
Depreciation
Operating (loss)/profit before changes in working capital
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash flows used in operating activities
Cash flows from investing activities
Loans to subsidiary undertakings
Purchase of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Issue costs
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the year
The notes on pages 29 to 53 form part of these financial statements.
31 December
2014
£
31 December
2013
£
Notes
(226,045)
(4,378,222)
(14,006)
125,107
(45,075)
171,277
—
4,264,167
2,846
(112,098)
(1,783)
26,929
(86,952)
2,868
15,015
13,707
(179,324)
(150,602)
(3,484,684)
(5,314,945)
—
14,006
(2,550)
45,075
(3,470,678)
(5,272,420)
5,477,265
(467,017)
5,010,248
1,452,616
2,756,368
4,208,984
3,081,999
(57,595)
3,024,404
(2,398,618)
5,154,986
2,756,368
13
Notes on the Financial Statements
29
Notes to the Financial Statements
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
F
F
I
I
N
N
A
A
N
N
C
C
I
I
A
A
L
L
1 General information
The principal activity of Horizonte Minerals Plc (‘the Company’) and its subsidiaries (together ‘the Group’) is the exploration and
development of precious and base metals. The Company’s shares are listed on the Alternative Investment Market of the London
Stock Exchange and on the Toronto Stock Exchange. The Company is incorporated and domiciled in the UK.
The address of its registered office is 26 Dover Street, London W1S 4LY.
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 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 certain subsidiaries’ assets and liabilities to fair value for consolidation purposes.
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
A number of new standards and amendments to standards and interpretations are effective for the annual period beginning after
1 January 2014 and have been applied in preparing these financial statements.
IFRS 10, ‘Consolidated financial statements’, builds on existing principles by identifying the concept of control as the determining
factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard
provides additional guidance to assist in the determination of control where this is difficult to assess.
IFRS 12, ‘Disclosures of interests in other entities’, includes the disclosure requirements for all forms of interests in entities, including
joint arrangements, associates, special purpose vehicles and other off Statement of Financial Position vehicles.
IAS 27, ‘Separate Financial Statements’, replaces the current version of IAS 27, ‘Consolidated and Separate Financial Statements’
as a result of the issue of IFRS 10. The revised standard includes the requirements relating to separate financial statements.
IAS 28, ‘Investments in Associates and Joint Ventures’, replaces the current version of IAS 28, ’Investments in Associates’, as a result
of the issue of IFRS 11. The revised standard includes the requirements for associates and joint ventures that have to be equity
accounted following the issue of IFRS 11.
b. New and amended standards, and interpretations mandatory for the first time for the financial year beginning 1 January 2014,
but not currently relevant to the Group
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after
1 January 2014, and have not been applied in preparing these financial statements. None of these is expected to have a significant
effect on the financial statements of the Company or Group.
Amendment to IAS 32, ‘Financial Instruments: Presentation’, add application guidance to address inconsistencies identified in applying
some of the criteria when offsetting financial assets and financial liabilities. This includes clarifying the meaning of ‘currently has
a legally enforceable right of set-off’ and that some gross settlement systems may be considered equivalent to net settlement.
Amendment to IAS 36, ‘Impairment of Assets’, require additional information about the fair value measurement when the recoverable
amount of impaired assets is based on fair value less costs of disposal. The amendments also incorporate the requirement to
disclose the discount rate used in determining impairment (or reversals) where recoverable amount (based on fair value less costs
of disposal) is determined using a present value technique.
Amendment to IAS 39, ‘Financial Instruments: Novation of Derivatives and Continuation of Hedge Accounting’, make it clear that
there is no need to discontinue hedge accounting if a hedging derivative is novated, provided certain criteria are met. This relief
has been introduced in response to legislative change across many jurisdictions that would lead to the widespread novation
of over-the-counter derivatives.
30
Notes on the Financial Statements
IFRS 11, ’Joint Arrangements’ provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations
of the arrangement, rather than its legal form. There are two types of joint arrangement; joint operations and joint ventures. Joint
operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts
for its share of assets, liabilities, revenue and expenses. Joint ventures arise where the joint venture has rights to the net assets of the
arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed.
Amendments to IFRS 10, ‘Consolidated Financial Statements’, IFRS 11 ‘Joint Arrangements’ and IFRS 12, ‘Disclosure of Interests in
Other Entities’ clarify the IASB’s intention when first issuing the transition guidance in IFRS 10, provide similar relief in IFRS 11 and
IFRS 12 from the presentation or adjustment of comparative information for periods prior to the immediately preceding period,
and provide additional transition relief by eliminating the requirement to present comparatives for the disclosures relating
to unconsolidated structured entities for any period before the first annual period for which IFRS 12 is applied.
Amendments to IFRS 10, ‘Consolidated Financial Statements’, IFRS 12, ‘Disclosure of Interests in Other Entities’ and IAS 27, ‘Separate
Financial Statements’, define an investment entity and introduce an exception to consolidating particular subsidiaries for investment
entities. These amendments require an investment entity to measure those subsidiaries at fair value through profit or loss in
accordance with IFRS 9 ‘Financial Instruments’, in its consolidated and separate financial statements. The amendments also
introduce new disclosure requirements for investment entities in IFRS 12 and IAS 27. IFRIC 21, ‘Levies’, addresses the accounting
for a liability to pay a levy if that liability is within the scope of IAS 37. The interpretation also addresses the accounting for a liability
to pay a levy whose timing and amount is certain.
c. New and amended standards and interpretations issued but not yet effective for the financial year beginning 1 January 2014 and
not early adopted
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the financial statements are
disclosed below. The Company and Group intend to adopt these standards, if applicable, when they become effective.
Amendments to IAS 1 ‘Presentation of Financial Statements’: Disclosure Initiative. The amendments to IAS 1 address perceived
impediments to preparers exercising their judgment in presenting their financial reports by making the following changes:
> clarification that information should not be obscured by aggregating or by providing immaterial information, materiality
considerations apply to all parts of the financial statements, and even when a standard requires a specific disclosure, materiality
considerations do apply;
> clarification that the list of line items to be presented in these statements can be disaggregated and aggregated as relevant
and additional guidance on subtotals in these statements and clarification that an entity's share of OCI of equity-accounted
associates and joint ventures should be presented in aggregate as single line items based on whether or not it will subsequently
be reclassified to profit or loss;
> additional examples of possible ways of ordering the notes to clarify that understandability and comparability should be considered
when determining the order of the notes and to demonstrate that the notes need not be presented in the order so far listed
in paragraph 114 of IAS 1.
The Group intends to adopt the amended standard no later than the annual period beginning on or after 1 January 2016, subject
to EU endorsement.
Amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 38 ‘Intangible Assets’: Clarification of Acceptable Methods
of Depreciation and Amortisation. The amendments clarify that a depreciation method which is based on revenue that is generated
by an activity which includes the use of an asset is not appropriate for property, plant and equipment. The amendments also
introduce a rebuttable presumption that an amortisation method that is based on the revenue generated by an activity that includes
the use of an intangible asset is inappropriate, which can only be overcome in limited circumstances. The Group intends to adopt the
amended standard no later than the annual period beginning on or after 1 January 2016, subject to EU endorsement.
Amendments to IAS 16 ‘Property, Plant and Equipment’ and IAS 41 ‘Agriculture’: Bearer Plants. The amendments include ‘bearer
plants’ within the scope of IAS 16 instead of IAS 41, allowing such assets to be accounted for as property, plant and equipment
and measured after initial recognition on a cost or revaluation basis in accordance with IAS 16. The amendments also introduce
a definition of ‘bearer plants’ as a living plant that is used in the production or supply of agricultural produce, is expected to bear
produce for more than one period and has a remote likelihood of being sold as agricultural produce, except for incidental scrap sales.
The amendments also clarify that produce growing on bearer plants remains within the scope of IAS 41. The Group has yet to assess
the amendments‘ full impact but intends to adopt no later than accounting periods beginning on or after 1 January 2016, subject
to EU endorsement.
Amendment to IAS 19, ‘Defined Benefit Plans: Employee Contributions’, provides guidance added to IAS 19 Employee Benefits
on accounting for contributions from employees or third parties set out in the formal terms of a defined benefit plan. The Directors
do not believe that this will have an impact on the Group, however will be adopted no later than accounting period beginning
on or after 1 July 2014, subject to endorsement by the EU.
Notes on the Financial Statements
31
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
I
I
F
F
N
N
A
A
N
N
C
C
I
I
A
A
L
L
Amendments to IAS 27 ‘Separate Financial Statements’: Equity Method in Separate Financial Statements. The amendments to IAS
27 permit investments in subsidiaries, joint ventures and associates to be optionally accounted for using the equity method in the
separate financial statements. The Group intends to adopt the amended standard no later than the annual period beginning
on or after 1 January 2016, subject to EU endorsement.
IFRS 9 (2014) ‘Financial Instruments’ supersedes IFRS 9 (2009), IFRS 9 (2010) and IFRS 9 (2013). The finalised version of IFRS 9
contains accounting requirements for financial instruments, replacing IAS 39 ‘Financial Instruments: Recognition and Measurement.’
The content of IFRS 9 (2014) includes:
> Classification and measurement — financial assets are classified by reference to the business model within which they are
held and their contractual cash flow characteristics. The standard introduces a fair value through other comprehensive income
category for certain debt instruments. Financial liabilities are classified in a similar manner to that under IAS 39 however there are
differences in the requirements applying to the measurement of an entity’s own risk.
> Impairment — The standard introduces an expected credit loss model for the measurement of the impairment of financial assets.
so it is no longer necessary for a credit event to have occurred before a credit loss is recognised.
> Hedge accounting — The standard introduces a new hedge accounting model that is designed to be more closely aligned with how
entities undertake risk management activities when hedging financial and non-financial risk exposures.
> Derecognition — the requirements for the derecognition of financial assets and liabilities are carried forward from IAS 39.
> The Group intends to adopt the amended standards no later than the annual period beginning on or after 1 January 2018, subject
to EU endorsement.
Amendments to IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 ‘Investments in Associates and Joint Ventures’ (2011)
in order to clarify the treatment of the sale or contribution of assets from an investor to its associate or joint venture, as follows:
> require full recognition in the investor’s financial statements of gains and losses arising on the sale or contribution of assets that
constitute a business (as defined in IFRS 3 Business Combinations.)
> require the partial recognition of gains and losses where the assets do not constitute a business, i.e. a gain or loss is recognised
only to the extent of the unrelated investors’ interests in that associate or joint venture.
These requirements apply regardless of the legal form of the transaction, e.g. whether the sale or contribution of assets occurs
by an investor transferring shares in a subsidiary that holds the assets (resulting in loss of control of the subsidiary), or by the
direct sale of the assets themselves. The Group intends to adopt the amended standard no later than the annual period beginning
on or after 1 January 2016, subject to EU endorsement.
Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception. Amends IFRS 10 Consolidated
Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures (2011)
to address issues that have arisen in the context of applying the consolidation exception for investment entities by clarifying the
following points:
> The exemption from preparing consolidated financial statements for an intermediate parent entity is available to a parent entity
that is a subsidiary of an investment entity, even if the investment entity measures all of its subsidiaries at fair value.
> A subsidiary that provides services related to the parent's investment activities should not be consolidated if the subsidiary itself
is an investment entity.
> When applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may
retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.
> An investment entity measuring all of its subsidiaries at fair value provides the disclosures relating to investment entities required
by IFRS 12.
The Group intends to adopt the amended standard no later than the annual period beginning on or after 1 January 2016, subject
to EU endorsement.
Amendments to IFRS 11 ‘Joint Arrangements: Accounting for Acquisitions of Interests in Joint Operations’ require an acquirer
of an interest in a joint operation in which the activity constitutes a business as defined in IFRS 3. The amendments apply both
to the initial acquisition of an interest in a joint operation, and the acquisition of an additional interest in a joint operation. The Group
has yet to assess the full impact of this amendment and intends to adopt no later than accounting period beginning on or after
1 January 2016, subject to EU endorsement.
IFRS 14 ‘Regulatory Deferral Accounts’ permits an entity which is a first time adopter of International Financial Reporting Standards
to continue to account, with some limited changes for ‘regulatory deferral account balances’ in accordance with its previous GAAP,
both on initial adoption of IFRS and in subsequent financial statements. The Group is yet to assess the full impact of this amendment
and intends to adopt no later than the accounting period beginning on or after 1 January 2016, subject to EU endorsement.
32
Notes on the Financial Statements
IFRS 15 ‘Revenue from Contracts with Customers’ provides a single, principles based five-step model to be applied to all contracts
with customers. The standard includes guidance on the point in which revenue is recognised, accounting for variable consideration,
costs of fulfilling and obtaining a contract and various related matters. IFRS 15 also introduces new disclosures about revenue.
The Group is yet to assess the full impact of this amendment and intends to adopt no later than the accounting period beginning
on or after 1 January 2017, subject to EU endorsement.
‘Annual Improvements 2010–2012 Cycle’ sets out amendments to various IFRSs and provides a vehicle for making non-urgent but
necessary amendments to IFRSs:
> IFRS 2 ‘Share-based Payment’: amendment to the definition of a vesting condition.
> IFRS 3 ‘Business Combinations’: amendments to the accounting for contingent consideration in a business combination.
> IFRS 8 ‘Operating Segments’: amends to the aggregation of operating segments and the reconciliation of the total of the reportable
segments’ assets to the entity’s assets.
> IFRS 13 ‘Fair Value Measurement’: amendments to short-term receivables and payables.
> IAS 16 ‘Property, Plant and Equipment’: amendments to the revaluation method in relation to the proportionate restatement
of accumulated depreciation.
> IAS 24 ‘Related Party Disclosures’: amendments regarding key management personnel.
> IAS 38 ‘Intangible Assets’: amendments to the revaluation method in relation to the proportionate restatement of accumulated depreciation.
The Group intends to adopt the amended standards no later than the annual period beginning on or after 1 July 2014, subject
to EU endorsement.
‘Annual Improvements 2011–2013 Cycle’ sets out amendments to various IFRSs and provides a vehicle for making non-urgent but
necessary amendments to IFRSs:
> IFRS 1 ‘First-time Adoption of International Financial Reporting Standards’: amendment to the meaning of ‘effective IFRSs'.
> IFRS 3 ‘Business Combinations’: amendments to the scope exceptions for joint ventures.
> IFRS 13 ‘Fair Value Measurement’: amendments to the scope of paragraph 52 (portfolio exception).
> IAS 40 ‘Investment Property’: amendments clarifying the interrelationship between IFRS 3 and IAS 40 when classifying property
as investment property or owner-occupied property.
The Group intends to adopt the amended standards no later than the annual period beginning on or after 1 July 2014, subject
to EU endorsement.
’Annual Improvements 2012–2014 Cycle‘ sets out additional amendments to the following IFRSs:
> IFRS 5 — Adds specific guidance in IFRS 5 for cases in which an entity reclassifies an asset from held for sale to held for distribution
or vice versa and cases in which held-for-distribution accounting is discontinued.
> IFRS 7 — Additional guidance to clarify whether a servicing contract is continuing involvement in a transferred asset, and
clarification on offsetting disclosures in condensed interim financial statements.
> IAS 9 — Clarify that the high quality corporate bonds used in estimating the discount rate for post-employment benefits should
be denominated in the same currency as the benefits to be paid.
> IAS 34 — Clarify the meaning of ‘elsewhere in the interim report’ and require a cross-reference.
The Group intends to adopt the amended standards no later than the annual periods beginning on or after 1 July 2016, subject
to EU endorsement.
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. Specifically,
the Group controls an investee if, and only if, the Group has:
> Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee).
> Exposure, or rights, to variable returns from its involvement with the investee.
> The ability to use its power over the investee to affect its returns.
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
Notes on the Financial Statements
33
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
F
F
I
I
N
N
A
A
N
N
C
C
I
I
A
A
L
L
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
Parent company
Country of incorporation
Nature of business
Horizonte Exploration Ltd
Horizonte Minerals (IOM) Ltd
HM Brazil (IOM) Ltd
HM Peru (IOM) Ltd
Horizonte Nickel (IOM) Ltd
HM do Brasil Ltda
Araguaia Niquel Mineração Ltda
Lontra Empreendimentos e Participações Ltda
Mineira El Aguila SAC
Mineira Cotahusi SAC
Horizonte Minerals Plc
Horizonte Exploration Ltd
Horizonte Minerals (IOM) Ltd
Horizonte Minerals (IOM) Ltd
Horizonte Minerals (IOM) Ltd
HM Brazil (IOM) Ltd
Horizonte Nickel (IOM) Ltd
Araguaia Niquel Mineração Ltda/
Horizonte Nickel (IOM) Ltd
HM Peru (IOM) Ltd
England
Isle of Man
Isle of Man
Isle of Man
Isle of Man
Brazil
Brazil
Mineral Exploration
Holding company
Holding company
Holding company
Holding company
Mineral Exploration
Mineral Exploration
Brazil
Peru
Mineral Exploration
Mineral Exploration
Mineira El Aguila SAC
Peru
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 payments required in relation to its current exploration projects.
The Group has considerable financial resources which will be sufficient 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. The amount of additional funding is estimated without any certainty
at the point of approval of these Financial Statements and the Group will be required to raise additional funds either via an issue
of equity or through the issuance of debt. The Directors are confident that funds will be forthcoming if and when they are required.
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.
34
Notes on the 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 recognises expenditure as exploration and evaluation assets when it determines that those assets will be successful
in finding specific mineral resources. 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. Capitalisation of pre-production expenditure ceases when the mining property is capable
of commercial production.
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 in cash generating units does not lead to the discovery
of commercially viable quantities of mineral resources or the Company 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
Vehicles and other field equipment 25–33%
25%
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.
Gains and losses on disposal are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other
(losses)/gains’ in the Statement of Comprehensive Income.
Notes on the Financial Statements
35
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
I
I
F
F
N
N
A
A
N
N
C
C
I
I
A
A
L
L
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 Sterling and the functional currency of the Brazilian and Peruvian entities is Brazilian Real and Peruvian Nuevo Sol respectively.
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:
1. 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;
2. 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
3. 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 translated at the closing rate.
2.9 Financial assets
The Group classifies its financial assets in the foregoing categories: loans and receivables; and available-for-sale financial assets, as
appropriate. The Group determines the classification of its financial assets at initial recognition, depending on the purpose for which
the financial assets were acquired.
a. Available-for-sale financial assets
Available-for-sale financial assets consist of equity investments that are neither classified as held for trading nor designated at fair value
through profit or loss. After initial recognition, available-for-sale financial assets are subsequently measured at fair value with unrealised
gains or losses recognised as other comprehensive income in the available-for-sale reserve until the investment is derecognised, at
which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when
the cumulative loss is reclassified from the available-for-sale reserve to the Income Statement in finance costs. The fair value of financial
instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices.
b. 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’ in the Statement of Financial Position.
36
Notes on the Financial Statements
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 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 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.
In principle, 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 balance sheet 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.
2.12 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.
2.13 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.
2.14 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.
Notes on the Financial Statements
37
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
I
I
F
F
N
N
A
A
N
N
C
C
I
I
A
A
L
L
2.15 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.
2.16 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.
2.17 Finance income
Interest income is recognised using the effective interest method, taking into account the principal amounts outstanding and the
interest rates applicable.
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 focuses 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 UK pound.
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 2014, if the US Dollar had weakened/strengthened by 5% against Pound Sterling and Brazilian Real with all other
variables held constant, post tax loss for the year would have been approximately £15,641/£17,287 lower/higher mainly as a result
of foreign exchange losses/gains on translation of US Dollar 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.
38
Notes on the Financial Statements
d. Price risk
The Group is exposed to commodity price risk as a result of its operations. However, 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. The Group’s listed equity securities are susceptible to price risk
arising from uncertainties about future values of the securities.
e. Credit risk
Credit risk arises from cash and cash equivalents as well as exposure to joint venture partners including 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. Management does not expect
any losses from non-performance by joint venture partners.
No debt finance has been utilised and if required this is subject to pre-approval by the Board of Directors. The amount of exposure
to any individual counter party is subject to a limit, which is assessed by the Board.
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 2014 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 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. As this is an observable input
all fair value estimates fall within level 2.
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 estimates and assumptions 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 2014 of £20,499,389 (2013: £19,754,559). Management tests
annually whether exploration projects have future economic value in accordance with the accounting policy stated in note 2.5. 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 Directors have reviewed the estimated value of each project prepared by
management and consider a full impairment charge necessary for the Rio Maria licence, for which the impairment charge was
£31,989. In 2013 the El Aguila Project was fully impaired, with a charge of £738,103 together with the Falcao Project, for which the
impairment charge was £310,179.
4.2 Estimated impairment of goodwill
Goodwill has a carrying value at 31 December 2014 of £270,923 (2013: £287,378). 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. See also note 9 to the
Financial Statements.
Notes on the Financial Statements
39
4.3 Contingent consideration
Contingent consideration has a carrying value of £2,235,512 at 31 December 2014 (2013: £2,477,310). The contingent consideration
arrangement requires the Group to pay the former owners of Teck Cominco Brasil S.A (subsequently renamed Araguaia Niquel
Mineração Ltda) 50% of the tax effect on 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.
The fair value of this potential consideration has been determined using the operating and financial assumptions in the cash flow
model derived from the Pre-Feasibility Study published by the Group in March 2014 in order to calculate the ability to utilise the
acquired tax losses, together with the timing of their utilisation. 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 upward or downward movements in several factors to include commodity prices, operating costs, capital expenditure,
production levels, grades, recoveries and interest rates.
The carrying value of contingent consideration would not be affected were the operating cash flows to vary by as much as 50% from
management’s estimates.
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
has been recognised on acquisition of Araguaia Niquel Mineração Ltda for the utilisation of the available tax losses acquired. Should
the actual final outcome regarding the utilisation of these losses be different from management’s estimations, the Group may need
to revise the carrying value of this asset.
4.5 Share-based payment transactions
The Group has made awards of options and warrants over its unissued share capital to certain Directors and employees as part
of their remuneration package.
The valuation of these options and warrants involves making a number of critical estimates relating to price volatility, future dividend
yields, expected life of the options and forfeiture rates. These assumptions have been described in more detail in note 16.
Were the actual number of options that vest to differ by 10% from management’s estimates, the overall option charge would
increase / decrease by £11,156.
4.6 Other areas
Other estimates include but are not limited to employee benefit liabilities, future cash flows associated with assets, useful lives for
depreciation and fair value of financial instruments.
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
I
I
F
F
N
N
A
A
N
N
C
C
I
I
A
A
L
L
40
Notes on the Financial Statements
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.
2014
Administrative expenses
Profit/(loss) on foreign exchange
Project and intangible fixed asset impairment
Loss from operations per reportable segment
Inter segment revenues
Depreciation charges
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
2013
Administrative expenses
Loss on foreign exchange
Project and intangible fixed asset impairment
Loss from operations per reportable segment
Inter segment revenues
Depreciation charges
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
UK
2014
£
Brazil
2014
£
Other
2014
£
Total
2014
£
(848,454)
(456,832)
(6,402)
(1,311,688)
39,089
—
(809,365)
—
(2,846)
(85,453)
(31,989)
(574,274)
677,635
(820)
—
(2,018,658)
4,349,901
26,594,454
2,348,686
2,424,498
—
—
(46,364)
(31,989)
(6,402)
(1,390,041)
—
—
—
—
—
677,635
(3,666)
(2,018,658)
30,944,355
4,773,184
UK
2013
£
(768,244)
(59,916)
—
(828,160)
—
(2,869)
Brazil
2013
£
(498,874)
(89,283)
(295,137)
(883,294)
511,766
(1,501)
—
(4,241,762)
Other
2013
£
Total
2013
£
(21,640)
(1,288,758)
—
(149,199)
(738,103)
(759,743)
65,740
—
—
(1,033,240)
(2,471,197)
577,506
(4,370)
(4,241,762)
3,342,399
25,354,609
2,750
28,699,758
2,544,042
2,416,813
—
4,960,855
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:
Loss from operations per reportable segment
Changes in fair value of contingent consideration (refer note 18)
Charge for share options granted
Finance income
Finance costs
Loss for the year from continuing operations
2014
£
2013
£
(1,390,041)
(2,471,197)
415,702
(125,107)
31,413
46,940
(171,277)
47,451
(173,903)
(165,138)
(1,241,936)
(2,713,221)
Notes on the Financial Statements
41
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
I
I
F
F
N
N
A
A
N
N
C
C
I
I
A
A
L
L
6 Operating loss
Loss from operations is stated after charging the following:
Group
Depreciation
Project and fixed asset impairment
Auditors’ remuneration
— Fees payable for the audit of Parent and consolidated financial statements
— Fees payable for audit related assurance services
— Fees payable for tax compliance
Operating lease charges
2014
£
3,666
31,989
30,000
4,525
2,380
64,153
2013
£
4,370
1,033,240
30,000
7,500
2,400
92,773
Project and fixed asset impairment costs in 2014 of £31,989 consist of the impairment charge on intangible assets attributable to the
Rio Maria project. Project and fixed asset impairment costs in 2013 of £1,033,240 consist of the impairment charge on intangible
assets attributable to the El Aguila and Falcao projects (refer note 9) of £738,103 and £310,179 respectively. A receipt of £15,042
(USD 25,000) in connection with the signing of a purchase and sale agreement for the Falcao project in December 2013 was netted
off against the impairment of that project so that the net impact on profit or loss of the impairment of Falcao amounted to £295,037
(see note 9 Intangible Assets).
7 Finance income and costs
Group
Finance income:
2014
£
2013
£
— Interest income on cash and short-term bank deposits
31,413
47,451
Finance costs:
— Contingent consideration: unwinding of discount
Net finance costs
8 Taxation
Income tax expense
Group
Analysis of tax charge
Current tax charge
— UK Corporation tax charge for the year
— Foreign tax
Current tax charge for the year
Deferred tax charge for the year
Tax on profit/(loss) for the year
(173,903)
(142,490)
(165,138)
(117,687)
2014
£
2013
£
—
—
—
—
—
—
—
—
—
—
42
Notes on the Financial Statements
Reconciliation of current tax
Group
Loss before income tax
Current tax at 26.6% (2013: 23.1%)
Effects of:
Expenses not deducted for tax purposes
Tax losses carried forward for which no deferred income tax asset was recognised — UK
Tax losses carried forward for which no deferred income tax asset was recognised — Brazil and Peru
Total tax
No tax charge or credit arises on the loss for the year.
2014
£
2013
£
(1,241,936)
(2,713,221)
(330,757)
(626,754)
62,451
131,940
136,366
—
370,226
207,143
49,385
—
The weighted average applicable tax rate of 26.6% used is a combination of the 21.5% effective standard rate of corporation tax in the
UK, 34% Brazilian corporation tax and 30% Peruvian corporation tax. During 2013 the Brazil registered subsidiaries elected to adopt
the Actual Profit system to determine income tax. As a result the losses incurred are eligible for tax purposes.
Deferred income tax
An analysis of deferred tax assets and liabilities is set out below.
Group
Deferred tax assets
— Deferred tax asset to be recovered after more than 12 months
Deferred tax liabilities
— Deferred tax liability to be settled after more than 12 months
Deferred tax asset (net)
The gross movement on the deferred income tax account is as follows:
Group
At 1 January
Exchange differences
At 31 December
2014
£
2013
£
5,065,976
5,065,976
5,373,634
5,373,634
(2,201,778)
(2,335,492)
(2,201,778)
(2,335,492)
2,864,198
3,038,142
2014
£
3,038,142
(173,944)
2,864,198
2013
£
3,566,966
(528,824)
3,038,142
The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting
of balances within the same tax jurisdiction, is as follows:
Group
At 1 January 2013
Exchange differences
At 31 December 2013
Exchange differences
At 31 December 2014
Deferred tax
liabilities
Fair value gains
£
(2,742,012)
406,520
(2,335,492)
133,714
(2,201,778)
Deferred tax
assets
Tax Losses
£
6,308,978
(935,344)
5,373,634
(307,658)
5,065,976
Total
£
3,566,966
(528,824)
3,038,142
(173,944)
2,864,198
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.
Notes on the Financial Statements
43
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
F
F
I
I
N
N
A
A
N
N
C
C
I
I
A
A
L
L
The Group has tax losses of approximately £18,190,000 (2013: £17,751,000) in Brazil and excess management charges of approximately
£2,590,000 (2013: £2,387,000) in the UK available to carry forward against future taxable profits. With the exception of the deferred
tax asset arising on acquisition of Araguaia Niquel Mineração Ltda (formerly Teck Cominco Brasil S.A). in 2011, no deferred tax asset
has been recognised in respect of tax losses because of uncertainty over the timing of future taxable profits against which the losses
may be offset.
9 Intangible assets
Intangible assets comprise exploration and evaluation costs and goodwill. Exploration and evaluation costs comprise acquired and
internally generated assets.
Group
Cost
At 1 January 2013
Additions — internally generated
Impairments
Exchange rate movements
At 31 December 2013
Additions internally generated
Impairments
Exchange rate movements
Net book amount at 31 December 2014
Goodwill
£
Exploration and
evaluation costs
£
Total
£
342,765
20,074,974
20,417,739
—
—
(55,387)
287,378
4,241,762
4,241,762
(1,048,282)
(1,048,282)
(3,513,895)
(3,569,282)
19,754,559
20,041,937
—
—
2,018,658
2,018,658
(31,989)
(31,989)
(16,453)
270,925
(1,241,841)
(1,258,294)
20,499,387
20,770,312
Impairment charges in 2014 of £31,989 were included in profit or loss as the intangible assets attributable to the Rio Maria project
were written off. Impairment charges in 2013 of £1,048,282 were included in profit or loss as the intangible assets attributable to
El Aguila and Falcao were written off following suspension of exploration activities at El Aguila and termination of the Falcao joint
venture with AngloGold Ashanti plc. In December 2013 the Company signed a sale and purchase agreement with Falcao Mineradora
Ltda, a Brazilian company. USD 25,000 (£15,042) was paid upon signature and offset against the £310,179 impairment charge in the
year for Falcao. Further consideration of USD 140,000 shall be paid to the Company in the event that the Final Exploration Report for
the Falcao project is accepted by the Brazilian Department of Mines (‘DNPM’).
a. Exploration and evaluation assets
Impairment reviews for exploration and evaluation assets are carried out either on a project by project basis or by geographical area.
The Group’s exploration and evaluation projects are at various stages of exploration and development and are therefore subject
to a variety of valuation techniques.
An operating segment-level summary of exploration and evaluation assets is presented below.
Group
Brazil — Araguaia/Lontra/Vila Oito and Floresta
Brazil — Other
2014
£
20,499,387
—
20,499,387
2013
£
19,697,507
57,052
19,754,559
The adjacent Araguaia/Lontra/Vila Oito and Floresta exploration sites (‘the Araguaia Project’) 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.
In March 2014 a Canadian NI 43-101 compliant Pre-Feasibility Study (‘PFS’) was published by the Company regarding the Araguaia
Project. The financial results and conclusions of the PFS clearly indicate the economic viability of the Araguaia Project. The Directors
undertook an assessment of impairment through evaluating the results of the PFS and judged that no impairment was required
with regards to the Araguaia Project.
44
Notes on the Financial Statements
Sensitivity to changes in assumptions
For the base case NPV8 of the Araguaia Project of USD 519 million as per the PFS to be reduced to the book value of the Araguaia
Project as at 31 December 2014, the discount rate applied to the cash flow model would need to be increased from 8% to 20%, or
the assumed long-term real nickel price of USD 19,000 per tonne would need to be reduced to approximately USD 13,975 per tonne.
Other early stage exploration projects in Brazil are at an early stage of development and no JORC/Canadian NI 43-101
or non-JORC/ Canadian NI 43-101 compliant resource estimates are available to enable value in use calculations to be prepared.
The Directors therefore undertook an assessment of the following areas and circumstances which could indicate impairment:
> The Group’s right to explore in an area has expired, or will expire in the near future without renewal.
> No further exploration or evaluation is planned or budgeted for, whether by the Company directly or through a joint venture agreement.
> A decision has been taken by the Board to discontinue exploration and evaluation in an area due to the absence of a commercial
level of reserves.
> Sufficient data exists to indicate that the book value will not be fully recovered from future development and production.
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.
10 Property, plant and equipment
Group
Cost
At 1 January 2013
Additions
Disposals
Foreign exchange movements
At 31 December 2013
Foreign exchange movements
At 31 December 2014
Accumulated depreciation
At 1 January 2013
Charge for the year
Disposals
Foreign exchange movements
At 31 December 2013
Charge for the year
Foreign exchange movements
At 31 December 2014
Net book amount as at 31 December 2014
Net book amount as at 31 December 2013
Vehicles and
other field
equipment
£
Office
equipment
£
Total
£
271,882
94,574
(165,590)
(39,796)
161,070
(8,981)
152,089
134,730
81,489
(132,555)
(19,903)
63,761
46,452
(6,096)
104,117
47,972
97,309
10,633
5,643
282,515
100,037
—
(165,590)
(921)
15,175
(445)
14,730
2,221
2,990
(40,717)
176,245
(9,426)
166,819
136,951
84,479
—
(132,555)
(178)
5,033
3,475
(196)
8,312
6,418
10,142
(20,081)
68,794
49,927
(6,292)
112,429
54,390
107,451
Depreciation charges of £46,261 (2013: £80,109) 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 2014 of £3,666 (2013: £4,370) has
been charged in ‘administrative expenses’ under ‘Depreciation.’
Notes on the Financial Statements
45
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
F
F
I
I
N
N
A
A
N
N
C
C
I
I
A
A
L
L
Vehicles and other field equipment include the following amounts used to perform exploration activities:
Group
Cost
Accumulated depreciation
Net book amount
Company
Cost
At 1 January 2013
Additions
At 31 December 2013 and 2014
Accumulated depreciation
At 1 January 2013
Charge for the year
At 31 December 2013
Charge for the year
At 31 December 2014
Net book amount as at 31 December 2014
Net book amount as at 31 December 2013
11 Trade and other receivables
Other receivables
Current portion
2014
£
152,089
(104,117)
47,972
2013
£
161,070
(63,761)
97,309
Field
equipment
£
Office
equipment
£
4,208
—
4,208
1,505
1,389
2,894
1,314
4,208
—
1,314
4,853
2,550
7,403
2,101
1,479
3,580
1,532
5,112
2,291
3,823
Total
£
9,061
2,550
11,611
3,606
2,868
6,474
2,846
9,320
2,291
5,137
Group
Company
2014
£
22,709
22,709
2013
£
62,127
62,127
2014
£
13,818
13,818
2013
£
12,035
12,035
Trade and other receivables are all due within one year. The fair value of all receivables is the same as their carrying values stated above.
The carrying amounts of the Group and Company’s trade and other receivables are denominated in the following currencies:
Brazilian Real
UK Pound
Group
Company
2014
£
4,922
17,787
22,709
2013
£
12,898
49,229
62,127
2014
£
—
13,818
13,818
2013
£
—
12,035
12,035
As of 31 December 2014 the Group’s and Company’s other receivables of £22,709 (2013: £62,127) were fully performing.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group
and Company do not hold any collateral as security.
46
Notes on the Financial Statements
12 Available for sale financial assets
Quoted equity shares
Total Current
Group
Company
2014
£
—
—
2013
£
22,729
22,729
2014
£
—
—
2013
£
—
—
The Group had investments in listed equity shares as at 31 December 2013. The fair value of these equity shares was determined
by reference to published price quotations in an active market. As at 31 December 2013 all other financial assets carried at fair
value in the Statement of Financial Position were categorised under Level 1 and denominated in Canadian Dollars. The investments
delisted in the year and have been reclassified as Level 3. The fair value of the investments is £nil as at 31 December 2014.
The following table presents the changes in Level 3 instruments for the year ended 31 December 2014:
Opening balance
Transfers into Level 3
Change in value recognised in other comprehensive income
Assets held as available for sale
2014
£
—
22,729
(22,729)
—
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1:
Level 2:
Level 3:
quoted (unadjusted) prices in active markets for identical assets.
other techniques for which all inputs that have a significant effect on the recorded fair value are observable,
either directly or indirectly.
techniques that use inputs that have a significant effect on the recorded fair value that are not based
on observable market data.
13 Cash and cash equivalents
Cash at bank and on hand
Short-term deposits
Group
2014
£
2013
£
Company
2014
£
2013
£
4,982,219
1,602,206
4,160,235
1,266,694
48,749
5,030,968
1,489,674
3,091,880
48,749
4,208,984
1,489,674
2,756,368
The Group’s cash at bank and short-term deposits are held with institutions with the following credit ratings (Fitch):
A
BBB-
Group
2014
£
2013
£
Company
2014
£
2013
£
4,279,358
1,490,199
4,160,235
1,266,694
750,610
5,030,968
1,601,681
3,091,880
48,749
4,208,984
1,489,674
2,756,368
Notes on the Financial Statements
47
14 Share capital
Group and Company
Issued and fully paid
Ordinary shares of 1p each
At 1 January
Issue of ordinary shares
At 31 December
2014
Number
2014
£
2013
Number
2013
£
401,139,497
4,011,395
360,046,170
3,600,462
91,287,608
912,876
41,093,327
410,933
492,427,105
4,924,271
401,139,497
4,011,395
On 31 July 2014 a total of 50,000,000 shares were issued through a public offering in Canada, at a price of CAD 0.11 per share and
a private placement was closed for a total of 41,287,608 shares, at a price of £0.06 per share, to raise £5,447,265 before expenses.
On 11 June 2013, 41,093,327 ordinary shares of 1p each were issued fully paid for cash consideration at 7.5 pence per share to raise
£3.1 million before expenses.
15 Share premium
Group and Company
At 1 January
Premium arising on issue of ordinary shares
Issue costs
At 31 December
2014
£
2013
£
26,997,998
24,384,527
4,564,389
(467,017)
2,671,066
(57,595)
31,095,370
26,997,998
16 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. The options are exercisable two years from the date of grant and lapse on the tenth
anniversary of the date of grant or the holder ceasing to be an employee of the Group. 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:
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
F
F
I
I
N
N
A
A
N
N
C
C
I
I
A
A
L
L
Outstanding at 1 January
Forfeited
Granted
Outstanding at 31 December
Exercisable at 31 December
Number of
options
2014
£
25,860,000
(2,010,000)
14,450,000
38,300,000
23,850,000
Weighted
average
exercise
price
2014
£
0.148
0.151
0.073
0.119
0.148
Number of
options
2013
£
26,730,000
(870,000)
—
25,860,000
22,360,000
Weighted
average
exercise
price
2013
£
0.138
0.154
—
0.148
0.147
The options outstanding at 31 December 2014 had a weighted average remaining contractual life of 7.53 years (2013: 7.55 years).
The fair value of the share options was determined using the Black-Scholes valuation model.
48
Notes on the Financial Statements
The parameters used are detailed below.
Group and Company
Date of grant or reissue
2014
options
2012
options
2011
options
2010
options
2009
options
09/05/2014
24/09/2012
21/09/2011
17/11/2010
25/09/2009
Weighted average share price
6.42 pence
9.43 pence
13.94 pence
14.0 pence
8.00 pence
Weighted average exercise price
7.25 pence
15.40 pence
15.40 pence
15.50 pence
9.5 pence
Expiry date
Options granted
Volatility
Dividend yield
Option life
Annual risk free interest rate
Forfeiture discount
Marketability discount
09/05/2024
24/09/2022
21/09/2021
17/11/2020
01/09/2019
14,450,000
3,500,000
14,380,000
10,100,000
4,050,000
17.3%
Nil
10 years
2.83%
—
5%
14.2%
Nil
17%
Nil
17%
Nil
50%
Nil
10 years
10 years
10 years
10 years
2.50%
2.50%
2.50%
—
5%
—
5%
—
5%
3.3%
—
5%
Total fair value of options granted
£256,786
£29,315
£404,832
£313,228
£107,932
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:
2014
Weighted
average
exercise price
(£)
2014
Weighted
average
remaining life
expected
(years)
2014
Weighted
average
remaining life
contracted
(years)
2013
Weighted
average
exercise price
(£)
2014
Number of
shares
2013
Weighted
average
remaining life
expected
(years)
2013
Weighted
average
remaining life
contracted
(years)
2013
Number of
shares
0.076
0.154
17,200,000
21,100,000
8.65
6.63
8.65
6.63
0.095
0.133
2,850,000
23,010,000
4.0
6.6
6.0
7.6
Range of
exercise prices
(£)
0–0.1
0.1–0.2
17 Other reserves
Group
At 1 January 2013
Other comprehensive income
Currency translation differences
At 31 December 2013
Other comprehensive income
Currency translation differences
At 31 December 2014
Company
At 1 January 2013 and 31 December 2013
At 1 January 2014 and 31 December 2014
Available for sale
reserve
£
(55,291)
(174,985)
—
(230,276)
(22,729)
—
(253,005)
Merger
reserve
£
10,888,760
—
—
10,888,760
—
—
10,888,760
Translation
reserve
£
(4,346,470)
—
(4,124,364)
(8,470,834)
—
(1,438,422)
(9,909,256)
Other
reserve
£
(1,048,100)
—
—
(1,048,100)
—
—
(1,048,100)
Total
£
5,438,899
(174,985)
(4,124,364)
1,139,550
(22,729)
(1,438,422)
(321,601)
Merger
reserve
£
Total
£
10,888,760
10,888,760
10,888,760
10,888,760
The other reserve as at 31 December 2014 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 2.8c).
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
F
F
I
I
N
N
A
A
N
N
C
C
I
I
A
A
L
L
Notes on the Financial Statements
49
Group
2014
£
2013
£
Company
2014
£
2013
£
2,235,512
2,477,310
2,235,512
2,477,310
2,235,512
2,477,310
2,235,512
2,477,310
18 Trade and other payables
Non-current
Contingent consideration
Current
Trade and other payables
Amounts due to related parties (refer note 21)
—
—
413,930
Social security and other taxes
Accrued expenses
27,303
280,211
335,894
28,322
108,099
148,053
15,040
69,951
502,160
28,380
11,632
3,239
6,203
413,930
13,000
42,100
475,233
Total trade and other payables
2,571,406
2,625,363
2,737,672
2,952,543
Trade and other payables include amounts due of £204,066 (2013: £72,694) in relation to exploration and evaluation activities.
Contingent consideration
The fair value of the potential contingent consideration arrangement was estimated at the acquisition date according to when future
taxable profits against which the tax losses may be utilised were anticipated to arise. The fair value estimates were based on the
current rates of tax on profits in Brazil of 34%. A discount factor of 7.0% was applied to the future dates at which the tax losses will
be utilised and consideration paid.
As at 31 December 2014, there was a finance expense of £173,903 (2013: £165,138) 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.
At 31 March 2014, Management reassessed the fair value of the potential contingent consideration in accordance with the Group
accounting policy. The cash flow model used to estimate the contingent consideration was adjusted, to take into account changed
assumptions in the timing of cash flows as derived from the Pre-Feasibility Study as published by the Group in March 2014. The key
assumptions underlying the cash flow model are unchanged as at 31 December 2014. The change in the fair value of contingent
consideration has generated a credit to profit or loss of £415,702 for the year ended 31 December 2014 due to exchange rate changes
in Management’s assumptions and in the functional currency in which the liability is payable. During 2013, the change in fair value
of £46,940 was due to exchange rate changes.
19 Dividends
No dividend has been declared or paid by the Company during the year ended 31 December 2014 (2013: nil).
20 Earnings per share
a. Basic
The basic loss per share of 0.283p (2013 loss per share: 0.709p) 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.
Group
Loss attributable to owners of the parent
Weighted average number of ordinary shares in issue
2014
£
2013
£
(1,241,936)
(2,713,221)
439,259,597
382,737,815
b. Diluted
The basic and diluted earnings per share for the years ended 31 December 2014 and 31 December 2013 are the same as the effect
of the exercise of share options would be anti-dilutive.
Details of share options that could potentially dilute earnings per share in future periods are set out in note 16.
50 Notes on the Financial Statements
21 Related party transactions
The following transactions took place with subsidiaries in the year:
A fee totalling £202,045 (2013: £183,241) was charged to HM do Brazil Ltda, £nil (2013: £64,740) to Minera El Aguila SAC and
£475,589 (2013: £368,344) to Araguaia Niquel Mineração Ltda by Horizonte Minerals Plc in respect of consultancy services provided
and funding costs. In 2013 the balance due from HM do Brasil Ltda of £554,372, from Minera El Aguila SAC of £1,283,978, from
HM Brazil (IOM) Ltd of £2,000,000, to PMA Geoquimica Ltda of £111,016 and from Brazil Mineral Holdings Ltd of £536,867 were
impaired through profit or loss.
Amounts totalling £2,076,925 (2013: £3,828,388) were lent to HM Brazil (IOM) Ltd, HM do Brasil Ltda, Araguaia Niquel Mineraçao Ltda,
PMA Geoquimica Ltda, Minera El Aguila SAC and Minera El Cotahuasi SAC to finance exploration work during 2014, by Horizonte
Minerals Plc. Interest is charged at an annual rate of 4% on balances outstanding during the year.
Balances with subsidiaries at the year end were:
Company
HM do Brasil Ltda
Minera El Aguila SAC
HM Brazil (IOM) Ltd
Horizonte Nickel (IOM) Ltd
Araguaia Niquel Mineração Ltda
Horizonte Minerals (IOM) Ltd
Horizonte Exploration Ltd
Total
2014
Assets
£
274,678
3,848
4,493,680
26,916,381
3,478,592
253,004
—
35,420,183
2014
Liabilities
£
—
—
—
—
—
—
413,930
413,930
2013
Assets
£
—
—
4,078,148
25,158,763
2,687,382
253,004
—
32,177,297
2013
Liabilities
£
—
—
—
—
—
—
413,930
413,930
All Group transactions were eliminated on consolidation.
On 31 July 2014 a total of 50,000,000 shares were issued through a public offering in Canada, at a price of CAD 0.11 per share and
a private placement was closed for a total of 41,287,608 shares, at a price of £0.06 per share, to raise £5,447,265 before expenses.
As part of this private placement, Teck Resources Limited subscribed for 18,115,942 shares representing 43.9 percent of the private
placement and Henderson Global Investors subscribed for 8,333,333 shares, representing 20.2 percent of the private placement.
By reason of their existing shareholdings in the Company, the participation of Teck Resources Limited and Henderson Global
Investors in the private placement each constitute a related party transaction under AIM Rule 13 of the AIM Rules for Companies.
On 11 June 2013, 41,093,327 ordinary shares of 1p each were issued fully paid for cash consideration at 7.5 pence per share to raise
£3.1 million before expenses. As part of this private placement, Teck Resources Limited subscribed for 20,000,000 shares representing
48.7 percent of the placing and Henderson Global Investors subscribed for 12,133,329 shares, representing 29.5 percent of the
placing. By reason of their existing shareholdings in the Company, the participation of Teck Resources Limited and Henderson Global
Investors in the private placement each constitute a related party transaction under AIM Rule 13 of the AIM Rules for Companies.
On 27 June 2013 the Company signed an agreement for an £8 million Equity Financing Facility (‘EFF’) with Darwin Strategic Limited
(‘Darwin’), a majority owned subsidiary of Henderson Global Investors’ Volantis Capital. The EFF agreement with Darwin provides
Horizonte with an equity line facility which, subject to certain conditions and restrictions, can be drawn on any time over 36 months.
The floor subscription price in relation to each draw down is set at the discretion of the Company. Horizonte is under no obligation
to make a draw down and there are no penalty fees if the Company does not use the facility.
22 Ultimate controlling party
The Directors believe there to be no ultimate controlling party.
23 Expenses by nature
Group
Staff costs
Indemnity for loss of office
Exploration related costs expensed (excluding staff costs)
Charge for share options granted
Depreciation (note 10)
Loss on foreign exchange
Change in fair value of contingent consideration
Impairments of intangible fixed assets
Other expenses
Total operating expenses
24 Directors’ remuneration
Group 2014
Non-Executive Directors
Alexander Christopher
David Hall
William Fisher
Allan Walker
Owen Bavinton
Executive Directors
Jeremy Martin
Group 2013
Non-Executive Directors
Alexander Christopher
David Hall
William Fisher
Allan Walker
Owen Bavinton
Executive Directors
Jeremy Martin
Notes on the Financial Statements
51
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
S
T
T
A
A
T
T
E
E
M
M
E
E
N
N
T
T
S
S
F
F
I
I
N
N
A
A
N
N
C
C
I
I
A
A
L
L
2014
£
680,080
29,227
166,866
125,107
3,666
46,364
(415,702)
31,989
431,849
2013
£
228,505
77,847
188,438
171,277
4,370
149,199
(46,940)
1,033,240
789,598
1,099,446
2,595,534
Basic salary
and fees
£
Other
benefits
£
Discretionary
performance
related bonus
£
—
44,008
24,000
24,000
24,000
—
—
—
—
—
—
—
—
—
—
Total
£
—
44,008
24,000
24,000
24,000
146,000
364,000
45,754
45,754
65,000
65,000
256,754
372,762
Basic salary
and fees
£
Other
benefits
£
Discretionary
performance
related bonus
£
—
47,870
24,000
24,000
24,000
—
—
—
—
—
146,000
265,870
45,754
45,754
—
—
—
—
—
—
—
Total
£
—
47,870
24,000
24,000
24,000
191,754
311,624
The Company does not operate a pension scheme. Included in other benefits for the year of £45,754 (2013: £45,754) are contributions
to a Defined Contribution pension plan held by Mr Jeremy Martin of £44,313 (2013: £44,313). The bonus paid to Mr Martin in 2014 of
£65,000 (2013: £nil) was in respect of delivery of the Pre-Feasibility Study.
52 Notes on the Financial Statements
25 Employee benefit expense (including directors)
Group
Wages and salaries
Social security costs
Indemnity for loss of office
Share options granted to Directors and employees (note 16)
Average number of employees including Directors
2014
£
916,650
266,136
29,227
125,107
2013
£
999,956
286,990
77,847
171,277
1,337,120
1,536,070
31
43
Employee benefit expenses includes £502,706 (2013: £1,058,441) of costs capitalised and included within intangible non-current
assets. In 2014 no employee benefit expenses have been reimbursed by joint venture partners (2013: £nil).
Share options granted include costs of £53,379 (2013: £101,918) relating to Directors.
26 Investments
Company
Shares in Group undertakings
Loans to Group undertakings
2014
£
2013
£
2,348,042
2,348,042
35,420,183
32,177,297
37,768,225
34,525,339
Investments in Group undertakings are stated at cost.
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.
27 Commitments
Operating lease commitments
The Group leases office premises under cancellable and non-cancellable operating lease agreements. The cancellable lease terms are
up to two years and are renewable at the end of the lease period at market rate. The leases can be cancelled by payment of up to three
months 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:
Group
Not later than one year
Later than one year and no later than five years
Total
Capital Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
Group
Intangible assets
2014
£
22,201
—
22,201
2013
£
9,849
—
9,849
2014
£
7,004
2013
£
421,051
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.
Notes on the Financial Statements
53
O
V
E
R
V
I
E
W
C
O
M
P
A
N
Y
R
E
V
I
E
W
B
U
S
I
N
E
S
S
G
O
V
E
R
N
A
N
C
E
C
O
R
P
O
R
A
T
E
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
Other Commitments
On 12 January 2012 the Company signed an option agreement with Anglo Pacific Group plc (‘Anglo Pacific’) for a future Net Smelter
Royalty (‘NSR’). The option was exercisable by Anglo Pacific upon completion of a Pre-Feasibility Study on the site where they would
pay Horizonte USD 12.5 million and receive a NSR. The NSR would be at a rate of 1.5% of nickel revenue produced up to 30,000 tonnes
per annum, reduced by 0.02% for every 1,000 tonnes per annum above this rate. The rate was fixed at a minimum rate of 1.1% for
production of 50,000 tonnes per annum and above. The Pre-Feasibility Study was completed in March 2014 and Anglo Pacific elected
not to exercise its option in regard of a future NSR. The option agreement with Anglo Pacific thus lapsed during 2014.
28 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 2014 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 £90,000.
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 on the Group’s property. The Group strongly believes that it operated with all necessary permits and has initiated legal
proceedings to overturn the impounding of the drilling equipment.The Group is also concurrently in discussions with the authorities
aimed at cancelling the injunction and its associated fine of approximately £33,000.
In August 2014 the Group received a claim from a former employee in Brazil with regard to amounts allegedly due under the terms
of his employment. The Group is defending the claim and it is not currently practicable to estimate the extent of any liability that
may arise.
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. The Group has filed a robust defence in
January 2015 and no substantive financial claim has currently been made against the Group under the terms of the writ. The Group
is working towards having the writ withdrawn in due course and as a result no provision has been made in the Financial Statements
for the year ended 31 December 2014.
29 Parent Company Statement of Comprehensive Income
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 Parent Company’s loss for the year was £226,045 (2013: £4,378,222 loss).
30 Events after the reporting date
No significant events have occurred since the reporting date.
54
Statutory Information
Directors
David John Hall (Non-Executive Chairman)
Jeremy John Martin (Chief Executive Officer)
William James Fisher (Non-Executive Director)
Allan Michael Walker (Non-Executive Director)
Alex Nicholas Christopher (Non-Executive Director)
Owen Alexander Bavinton (Non-Executive Director)
Company Secretary
Jeffrey Laszlo Karoly
Company Number
05676866
Registered Office
Horizonte Minerals Plc
26 Dover Street
London
W1S 4LY
United Kingdom
Nominated Adviser and Broker
finnCap
60 New Broad Street
London
EC2M 1JJ
United Kingdom
Independent Auditor
PKF Littlejohn LLP
Statutory Auditor
1 Westferry Circus
Canary Wharf
London
E14 4HD
United Kingdom
Solicitors to the Company
As to English law:
Greenberg Traurig Maher LLP
200 Gray’s Inn Road
London
WC1X 8HF
United Kingdom
As to Canadian law:
Cassels Brock and Blackwell LLP
2100 Scotia Plaza
Toronto ON
M5H 3C2
Canada
As to Brazilian law:
Campos Fialho AdvogadosBelo Horizonte — MG
Av Getulio Vargas 447CEP 01451.010 Brazil
Registrar
For shares listed on the London Stock Exchange:
Computershare Investor Services (Ireland) Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
Ireland
For shares listed on the Toronto Stock Exchange:
Computershare Investor Services Inc.
100 University Avenue
8th Floor
Toronto ON
M5J 2Y1
Canada
Horizonte Minerals Plc, 26 Dover Street, London W1S 4LY, United Kingdom
T. +44 (0)2077 637157
E. info@horizonteminerals.com
www.horizonteminerals.com
Horizonte Minerals Plc
26 Dover Street
London W1S 4LY
United Kingdom
T. + 44 (0) 207 763 7157
E. info@horizonteminerals.com
www.horizonteminerals.com