Horizonte Minerals PLC Annual Report 2015
Horizonte Minerals
is an AIM and TSX quoted
nickel development company
focussed in Brazil.
Company Overview
01 2015 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
12 Strategic Report
15 Financial Report
Corporate Governance
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
53 Statutory Information
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2015 Highlights
> Successful outcome in January for the Public Hearing held at the Company’s operational base at Conceição
do Araguaia. With over 1,000 participants from the local community along with a number of senior State
level officials, the Public Hearing, a culmination of 18 months of social and environmental work, is a key
part of the Brazilian environmental licence process, necessary to obtain the Preliminary Licence (‘LP’) for
the extraction and processing of nickel at Araguaia. The Social and Environmental Impact Assessment
was presented to attendees in partnership with the Department of Environment and Sustainability.
> The Phase 4 infill resource drilling programme at Araguaia was completed in April, on time and
within budget, with the objective of the programme being to convert the first 7 to 8 years of the
modelled mine life to the Measured Resource category. The programme amounted to a total of 310
holes totalling 10,255 metres.
> The completion of a bulk sampling programme and subsequent successful pilot plant testing
programme. A circa 160 wet tonne sample, representative of the first 10 years of production was
successfully treated through a Rotary Kiln Electric Furnace (‘RKEF’) pilot plant in Brazil to produce
high grade commercial ferronickel on a continuous basis over an 11 day period. No critical flaws
were identified. The successful pilot campaign confirmed that smelting of Araguaia ore by the
proven RKEF process is feasible and provided a wealth of technical data to be incorporated in due
course into the Feasibility Study.
> Conclusion in late September of an agreement to acquire the neighbouring Glencore Araguaia
Project (‘GAP’) from a subsidiary of Glencore Canada Corporation ('Glencore'). Combined with the
Company’s 100% owned high-grade Araguaia nickel project, GAP and Araguaia together create
one of the world’s largest nickel saprolite projects in terms of size and grade, with a high grade
core anticipated for the first 10 years of mine life while offering operational flexibility for increased
annual production in the future. Total purchase price of US$8 million with initial consideration of
US$2 million in Horizonte shares, with remaining US$1 million due on release of a Feasibility study
and US$5 million on first production.
‘2015 was another productive year for the
Company, despite a backdrop of highly
challenging commodities prices: the successful
pilot plant programme proves the suitability of
Araguaia to generate ferronickel product using
the proven RKEF process, while the agreement
with Glencore to acquire the neighbouring
nickel project is a game changing transaction
for Horizonte, it means that we have been able
to create one of the leading nickel projects
globally. The Company is now well positioned for
the recovery in the mining sector over the next
few years with a low cost strategy to de-risk the
project to ensure we can deliver maximum value
for shareholders.’
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.
The Araguaia project plans to use the
proven Rotary Kiln Electric Furnace process
to produce circa 15,000 tonnes per annum
of nickel in a 20% grade ferronickel product.
In 2015 the Company completed
its
4th phase of infill drilling at Araguaia and
concluded a successful pilot plant test
on a 160 tonne bulk sample to produce
commercial grade ferronickel. Horizonte
agreement with
also
Glencore
its neighbouring
to acquire
Glencore Araguaia Project (‘GAP’).
reached
an
Horizonte’s next steps will be to integrate
GAP and Araguaia and update its Pre-
Feasibility Study to reflect the benefits of
the enlarged project as well as continuing to
advance project permitting.
Panoramic View of Araguaia Project Area
Araguaia Project Overview
Araguaia Project Overview
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Araguaia is an advanced nickel laterite project being developed by the Company as the next major
nickel project in Brazil.
> 100% owned by Horizonte Minerals plc
> Located in established mining district in northern Brazil, with good access to infrastructure
> 110 km2 total licence area
> NI 43-101 compliant Pre-Feasibility Study
> NI 43-101 Resource: 71.98 Mt grading 1.33% Ni (Indicated) and 25.35 Mt at 1.21% Ni (Inferred)
> Project Base Case to deliver circa 15 Ktpa nickel in ferronickel over the 25 year mine life
> Phase 4 Resource infill drilling campaign completed in 2015, with aim to provide 7-8 years
production from Measured category
> Successful 160 tonne pilot plant campaign in 2015 confirms suitability of Araguaia ore for proven
Rotary Kiln Electric Furnace production process
> Transaction in 2015 with Glencore to acquire neighbouring Vale dos Sonhos and Serra da
Tapa nickel deposits places enlarged project among the largest high grade nickel saprolite
projects globally
Our Year in Review
January 2015
Successful public hearing in Conceição
do Araguaia to present the SEIA
to the local community as well as senior
State level officials
April 2015
Fourth phase 10,255 metre resource infill
drilling campaign completed at Araguaia
September 2015
Agreement with Glencore to acquire
adjacent advanced ‘Glencore Araguaia
Project — GAP’
September 2015
£1.5 million private placement completed
with existing shareholders
November 2015
Successful pilot plant campaign produced
commercial grade ferronickel from
160 tonne bulk sample of Araguaia ore
Horizonte Employees in Conceiçao do Araguaia
Investing counter cyclically, whether in
M&A or organic growth,
is an often-
stated mantra that
is rarely executed.
I am delighted to say that this is exactly
what Horizonte has done with
its
acquisition of GAP.
is
The consolidation of the Araguaia district
is a major achievement for Horizonte.
The enlarged project
ideally placed
in the commodity cycle to be advanced
with the aim of commencing production
within the next five years when the
supply / demand fundamentals for nickel
will be more favourable.
I would sincerely like to thank our share-
holders for your continued support. I will
leave you with this fact — Horizonte is
valued at C$0.01 per pound of nickel in the
ground. The last major nickel transaction
was the acquisition of Canico Resources by
Vale in 2006 for a project of similar scale
and grade at C$0.23 per pound nickel in the
ground at the feasibility study stage.
I would like to extend my appreciation to
our ever hard working management team
led by Jeremy Martin and also my fellow
Board members — Owen Bavinton, Alex
Christopher of Teck, Bill Fisher and Allan
Walker whose belief in the quality of the
Araguaia asset that Horizonte owns is as
enduring as mine.
David J Hall
Chairman
15 March 2016
4
Chairman’s Statement
Chairman’s Statement David J Hall
campaign generated a wealth of technical
data to be incorporated into the Feasibility
Study that will
include the acquired
Glencore project.
Key milestones in 2016 and significant
pieces of news flow to look out for will
be an updated resource estimate for the
combined projects along with an updated
Pre-Feasibility Study.
You may ask is it worth doing this work
given the state of the resource sector. The
answer is a firm ”yes” as we are in a cyclical
industry and it is our intention to have
Araguaia established as the next generation
nickel project in terms of advanced de-
risked Tier 1 assets globally.
Why? Because demand for nickel will
continue to grow.
As McKinsey reported in November 2015
(”Is there hidden treasure in the mining in-
dustry,”) a look at mining fundamentals of-
fers a less gloomy view. Demand for met-
als continues to grow worldwide, albeit at a
slower pace, as has production. For almost
all commodities, production is at record
levels. The slower rate of demand growth
in China has let growing supply overtake
demand in a number of commodities, and
this overcapacity has pulled prices down,
for now. The McKinsey analysis suggests
that the steadily deteriorating quality of
accessible resources, combined with the
current cuts in new mine investment, will
likely squeeze supply in the face of slow,
steady demand growth, causing prices to
rebound. This is supported by number of
reports for example, Capital Economics
stated, “…we think that the pieces are fall-
ing into place for a significant rally in the
price of nickel in 2016. The expected re-
bound in demand, at a time of falling sup-
ply, will send the market into deficit. Once
the buffer of stocks has been exhausted,
we forecast that the tighter market will lift
prices to US$17,000 by end-year.” Time
will tell, but Horizonte is positioned for the
long term which will see us benefit from
the forecast rise in nickel prices.
Dear Shareholders
Though 2015 was an extremely difficult
year for the resource / commodities sector,
it has been a pivotal, game changing one
for Horizonte. In parallel with further de-
risking of our flagship Araguaia nickel
project we secured the acquisition of the
adjacent Glencore Araguaia Project (‘GAP’)
to create a Tier 1 project in Brazil. The
combined projects create one of the largest
nickel saprolite resources in the world, at
the upper end of the grade curve, located
in a proven mining region.
The cost of this acquisition in immediate
terms was US$2.0 million payable in shares,
with additional milestone payments in the
future (total consideration US$8 million)
thus at a minimal dilution to current
shareholders. GAP is an advanced project,
with a significant amount of high quality
work completed initially by Falconbridge
and subsequently Xstrata / Glencore,
with some 1,302 diamond drill holes for
55,334 metres. Total historic spend on
the project is in the order of US$75 million,
demonstrating the demonstrating the very
significant discount of our acquisition to
the money previously expended. And this
is key — such an acquisition would never
have been done in the bull market from
2009 to 2014 — it was only possible due
to the market rout that we have today,
with majors wishing to sell off non-core
assets. This was not a spur of the moment
decision either — Horizonte had been
wanting to acquire GAP since it was taken
over by XStrata as part of Falconbridge.
The real driver behind this transaction is
that by creating a Tier 1 asset, it has the
potential to supply a high grade core for
the first 10 years of mine life, which has
a significant positive effect on the overall
enlarged project economics.
Another key milestone in 2015 was the
completion of the pilot plant campaign,
the results of which were announced
in November. The key objectives of the
integrated pilot plant campaign were to
confirm the smelting behaviour of the
Araguaia ore, the mode of operation of the
dryer/agglomerator-kiln-electric
furnace,
as well as the production of ferronickel
and slag at the temperatures and quality
under conditions similar to a commercial
operation. We were delighted with the
success of the pilot campaign which
confirmed that Araguaia will support the
production of high grade ferronickel by
the proven RKEF process. In addition the
Chairman’s Statement
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Pequizeiro Deposit Area
Pequizeiro Deposit Area
6
Operations Review
Operations Review Jeremy Martin
Araguaia Nickel Project
Bulk Sample Collection and Pilot Plant Testing
The completion of a bulk sampling programme and subsequent pilot plant testing of
a circa 160 wet tonne sample from Araguaia to produce ferronickel was a major de-risking
milestone for the Company in 2015. This demonstrated that the proven Rotary Kiln Electric
Furnace ('RKEF') process is suitable for the Araguaia ore.
Drill Testing of Selected Bulk Sample Sites and Wide Diameter Auger Drilling
The programme commenced with the drilling of 64 test holes totalling 944 metres across
the four selected bulk sample sites. The aim of this drilling was to ensure that the in-situ
grade of the bulk sample is well understood and that the sample can be blended to match
the chemistry of the commercial mining operation.
Analysis of the test holes was followed by drilling off 23 auger holes of 1 metre diameter,
with a total length of 261 metres at selected locations. A total of 286 samples were
collected with a total wet weight of 261 tonnes.
High grade nickel intersections received from bulk sampling drilling included:
> 11.45 metres grading 2.68% Ni
> 8.38 metres grading 2.42% Ni
> 12.51 metres grading 2.14% Ni
The samples were then delivered to the RKEF pilot plant located at Morro Azul in Minas
Gerais, southern Brazil. This plant was originally built by Anglo American and is now
operated by metallurgical consultants IGEO. It has been used by several major nickel
companies (including Vale and Anglo American) for pilot test work, staff training and final
product testing.
Pilot Plant Testing Programme
The pilot plant processed 160 wet tonnes of ore over a continuous 11 day period, pouring
metal twice a day with the bulk sample representative of the ore which the Company
anticipates to be processed during the first nine years of commercial operation at Araguaia.
First and foremost the campaign confirmed production of high grade commercial ferronickel
from representative Araguaia ore on a continuous and sustained basis and with the key
equipment operating in a stable condition. No critical flaws were identified and all of the
information generated during this test will now be utilised in due course to finalise the
commercial RKEF design in the Feasibility Study (‘FS’).
Drying and agglomeration produced excellent feed material for processing in the high
temperature rotary kiln while good quality calcine was continuously produced in the rotary
kiln with very low dust generation and favourable pre-reduction levels of about 60% for
iron oxide and 10% nickel oxide reduction. Electric furnace smelting of the calcine produced
high quality ferronickel over a target range of commercial nickel grades and at a nickel
recovery of over 93%; both ingot casting and nickel granulation of the Fe-Ni product was
successfully demonstrated.
The key objectives of the integrated pilot plant campaign were to confirm the smelting
behaviour of the Araguaia ore, the mode of operation of the dryer / agglomerator-rotary
kiln-electric furnace, as well as the production of ferronickel and slag under conditions
similar to a commercial operation.
Diamond Drill Core From The
Phase 4 Programme Showing
High Grade Nickel Mineralisation
Phase 4 Diamond Drilling On The
Pequizeiro Target
Operations Review
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Phase 4 Resource Infill Drilling Programme
The Phase 4 infill resource drilling programme at Araguaia was completed in April, on time and within budget. The aim of the programme
was to convert the first 7 to 8 years of the modelled mine life to the Measured Resource category and in the process give a higher degree
of confidence in regard to the nickel mineralisation for the initial period of mine life. The programme comprised infill drilling on 50 metre
x 50 metre grids on selected parts of the Pequizeiro and Jacutinga deposits. It amounted to a total of 310 holes totalling 10,255 metres,
261 holes totalling 8,764 metres on the Pequizeiro deposit and 49 holes totalling 1,491 metres on the Jacutinga deposit.
High grade nickel intersections from infill resource drilling
on the Pequizeiro deposit included:
> 11.30 metres grading 2.95% Ni
> 9.21 metres grading 2.50% Ni
> 11.82 metres grading 2.39% Ni
> 14.05 metres grading 2.33% Ni
> 18.99 metres grading 2.27% Ni
High grade nickel intersections from infill resource
drilling on the Jacutinga deposit included:
> 4.44 metres grading 3.04% Ni
> 12.13 metres grading 2.43% Ni
> 17.44 metres grading 2.38% Ni
> 19.67 metres grading 2.07% Ni
> 17.30 metres grading 2.07% Ni
Completion of the Phase 4 infill programme takes the total number of HQ core holes drilled at Araguaia to 1,722 comprising 45,468 metres.
Acquisition of Glencore Araguaia Project
Transaction Overview
Conclusion in late September of an agreement to acquire the advanced
Glencore Araguaia Project (‘GAP’) located to the north of Horizonte’s
existing project in central Brazil was a major achievement and a game
changing transaction for Horizonte. Combined with the Company’s 100%
owned high-grade Araguaia project, the ‘Enlarged Project’ creates one
of the world’s largest nickel saprolite projects in terms of size and grade,
in a premier mining jurisdiction that has a defined path to Feasibility.
The additional resources generate the potential to provide a high grade
core for the first 10 years of mine life for the single line RKEF plant
as contemplated in the Base Case of the Pre-Feasibility Study (‘PFS’),
with the higher nickel grades expected to significantly improve project
economics, delivering a shorter capital repayment period and a lower
breakeven nickel price while offering operational flexibility for increased
annual production in the future.
To integrate GAP the Company will need to re-estimate the mineral
resources and update the mining and economic study to be presented in
a revised PFS before preparation of a FS for the Enlarged Project.
The total acquisition cost was US$8,000,000, comprising:
> US$2,000,000 on closing, in ordinary shares in the capital of the
Company and split between the deposit areas comprising GAP and
payable once the Company is registered as holder of the GAP deposit
areas by the DNPM (the National Department of Mineral Production of
Brazil), which is allowed to take up to one year under the terms of the
agreement. The Vale dos Sonhos (‘VdS’) deposit area was transferred
in November and subsequently US$660,000 was paid in shares to
a subsidiary of Glencore. The transfer of the Serra do Tapa and Pau
Preto deposit areas (together: ‘SdT’) is still being processed by the
DNPM, following the completion of which a further US$1,340,000 will
be issued in shares in the Company.
> US$1,000,000 after the date of issuance of a joint FS for the
Enlarged Project area, to be satisfied in HZM Shares or cash, at
the election of the Company; and
> US$5,000,000 will be paid in cash, as at the date of first
commercial production from any of the resource areas within
the Araguaia or GAP areas.
Phase 4 Drilling Campaign
8
Operations Review
Operations Review continued
Project Details
The geological setting of GAP is similar to
Araguaia. They are both located in Neo-
Proterozoic Araguaia Fold Belt, and the
nickel laterite deposits in both projects are
developed on peridotites that form part of
mafic-ultramafic complexes representing
tectonic remnants of ophiolites emplaced
in metasediments that form the western,
external zone, of the Araguaia Belt.
Exploration work
in the original GAP
concessions was started by Falconbridge
(later Xstrata Nickel) in 2003. By 2008
this work included the completion of over
2,500 diamond drill holes. Drilling on the
Serra do Tapa and Vale dos Sontos deposits
was completed on 80m x 80m grids and
on a 160m x 160m grid on the Pau Preto
deposit. Small areas of closer spaced
drilling were completed to evaluate short-
scale variability.
The historical estimate for GAP at a 0.90%
nickel cut-off is presented in the table
below. This estimate was prepared
in
accordance with CIM Definition Standards.
The table also presents the Araguaia
Mineral Resource Estimate at a 0.95%
nickel cut-off from the Canadian NI 43-101
compliant PFS published by the Company:
Deposits
Ni cut-off grade
Mt
% Ni
Mt
% Ni
Mt
% Ni
GAP historical estimate *
0.90
16.1
1.44
89.0
1.31
105.1
1.33
Measured Mineral
Resources
Indicated Mineral
Resources
Measured
& Indicated
Resources
Inferred Mineral
Resources
Mt
18
% Ni
1.3
Horizonte Araguaia Project **
0.95
— — 72.0
1.33
72.0
1.33
25
1.2
*Source: GlencoreXstrata — Resources & Reserves Report dated 31 December 2013.
**Source: Horizonte Araguaia Project Pre-Feasibility Study dated 25 March 2014.
Operations Review
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Sustainability
Horizonte Minerals
is committed to responsible exploration and development.
We are focussed on working sustainably, managing our impact, and providing value
to our communities.
In 2015, our team implemented new policies and revised existing policies to ensure that
the Company adheres to best-practice standards, such as IFC Performance Standards,
Equator Voluntary Principles on Security & Human Rights, and Brazilian CONAMA
regulations. New / enhanced policies implemented throughout 2015 include:
> Business Integrity;
> Complaints Handling Procedures;
> Community Engagement Framework;
> Resettlement Planning; and
> Environmental Monitoring and Management Procedures.
Environment
To the Company's employees, sustainability means that we minimise harm to the
environment by planning, operating and closing our projects in an environmentally as
well as a socially responsible manner. Our approach is based on the robust identification,
assessment and control of risks across all phases of the project and work in partnership
with environmental authorities and local community groups.
In 2015, a strong focus on environmental impact management was demonstrated
through the following highlighted activities:
> Completion of an internal and external review of all environmental monitoring & data
collection procedures, including training to all employees on new procedures;
> Rehabilitation of over 285 drill hole areas;
> Internal audit of vegetation rehabilitation in areas affected by drilling activities,
confirming that the Company's environmental procedures are being implemented
correctly;
> Integration of GAP into the environmental baseline data campaign; and
> Environmental education activities within rural and urban communities.
Low Impact Mine Design
The mine design for the future project has been optimised to reduce environmental
impacts wherever possible.
Key features include:
> Plans to recycle over 80% of water requirements;
> Locations of plant, waste & slag piles designed to minimise environmental impacts, by
avoiding protected environmental areas, streams and native reserves;
> Internal roads that optimise travel distance, whilst also following existing
infrastructure in the region; and
> Process design to include the granulation of slag, providing the potential to re-utilise
the slag for construction or fertilizer projects in the region.
Team Safety Briefing
10
Operations Review
Operations Review continued
Permitting
The Araguaia Project is currently in transition from exploration to development, and therefore requires new permits from the Pará State
Government Environmental Agency ('SEMAS'). We have made significant progress on the environmental permitting process and are on
track to receive the Preliminary Mine Licence ('LP') in 2016.
Below is a summary of the environmental permit process for the Araguaia Project:
Araguaia Project Environment Mine Permit Process in Brazil from Exploration to Construction
Exploration
Licence
Social &
Environmental
Impact
Assessment
Public Hearing
LP Approval
Installation
Licence Approval
(LI)
DNPM grants mineral exploration rights
Company elaborates exploration licence
SEMAS approves exploration licence
Company formally requests LP
State Environment Agency publishes LP request
Company completes full year baseline data collection
Company finalises and submits Social & Environmental Impact Assessment
Public Hearing conducted in local community to discuss Social & Environmental Impact
Company presents Public Hearing documentation to SEMAS
Site Visit with SEMAS technical team
•
•
•
•
•
•
Company formally requests LI
SEMAS publishes LI request
Company elaborates environmental control plans and other permits in accordance with
obligations set out in the LP
SEMAS analyses and approves mine LI
State Environmental Agency governing body meeting to approve Preliminary mine Licence
Formal approval and publication of Preliminary mine Licence
Assessment for mine
To ensure that future permits for the Araguaia Project can be obtained efficiently, the team conducted further permitting activities
throughout 2015, including:
> Additional baseline data collection for water quality, water quantity, soil, air, gas, noise, and weather;
> Hydrological studies;
> Chemical analysis of slag taken from the successful Araguaia pilot plant campaign; and
> Socio-economic development and community engagement activities.
Community and Social Responsibility ('CSR')
The Company works in partnership with ru-
ral communities and demonstrates the ut-
most respect for our local farming families.
In 2015, the Company conducted socio-
economic development and community
engagement activities including:
> Rural road refurbishments to improve
access for communities to goods and
services;
> Employee volunteer work in local
schools and community NGOs;
> A visitor programme for universities and
training institutions;
> Health clinics in rural and urban areas;
> Environmental education activities;
> Community presentations and visits to
stakeholders within the project area of
influence; and
> Support for cultural festivals and other
local community activities.
In 2015, the Company commenced an employee volunteer project with the Serra
Verde School. The school is located within the area of influence of the Araguaia
Project and is one of the most impoverished in the region. Employees provide
activities and resources to enrich the education and livelihoods of students.
Operations Review
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Planning the Araguaia Project to deliver net positive benefit for our communities
Throughout the Araguaia Nickel Project's construction and operation, we will focus our efforts on three pillars in the local communities:
economic development, social development and care & respect for our community.
Economic Development Pillar
> Maximising local employment
opportunities in our company
> Developing local suppliers who can
provide services to our company and
others in the region
> Developing small & medium enterprises,
particularly in the rural area
Social Development Pillar
> Providing capacity building programmes
Care & Respect Pillar
> Public health programme, including
to the local government and
communities where we operate
> Eventually investing in education and
cultural activities once the project
moves to operation
sexual health education
> Environment education programme
> Resettlement programme aligned with
IFC guidelines
> Mine closure plan and environmental
management plans
> Engagement and continuous
communication
Next Phase of Project Development
Following the rapid deterioration in market conditions in 2015 the Company has implemented a cost reduction programme with the aim
of ensuring a robust cash position through 2016 while ensuring the continued development of the project. The aim during 2016 is to
complete the following:
Integration of GAP and Resource Update
The Company will be working towards an updated resource estimate that takes into account the results of the Phase 4 resource in-fill
drilling campaign at Araguaia, as well as the integration of GAP. The updated resource incorporating GAP will then be fed into the PFS
update outlined below.
Update to the PFS
With the purchase of GAP there is a significant amount of information that requires integration with the existing Araguaia Project, the
main work area being resource integration. The principal operating and financial assumptions of the PFS will be reviewed and updated
as appropriate — these will include the impact of a weaker Brazilian Real on project operating and capital costs, review of alternative
suppliers of major capital items as well as energy, including taking account of the changes in market conditions.
Phase 4 Diamond Drilling
Permitting
Following the public hearing for the
Araguaia Project in 2015 the Company
continues to work towards receipt of the
LP, which it anticipates receiving in 2016.
The Group is undertaking environmental
baseline studies which are required for
receipt of the LI. The LI is the next step in
the licencing process following award of the
LP and together with an approved Mine
Plan, would enable Horizonte Minerals to
start construction of the Araguaia Project’s
mine and plant infrastructure.
12
Strategic Report
Strategic Report
Company Manager Inspecting
Drill Core
The Directors of the Company and its sub-
sidiary undertakings (which together com-
prise ‘the Group’) present their Strategic Re-
port for the year ended 31 December 2015.
Review of the Business
The Group is focussed on the development
of the enlarged 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
locally domiciled
permits held through
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, Lontra
Empreendimentos e Participaçoes Ltda.,
Champol Brasil Mineração Ltda and Cluny
Mineração 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 development
to
through
of
feasibility stage and into development.
the Araguaia Project
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
of 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 integrate
the Glencore Araguaia Project (‘GAP’) ac-
quired in 2015 and update the Pre-Fea-
sibility Study for the combined GAP and
Araguaia projects (together the ‘Enlarged
Project’). This will be a further milestone
in progressive development and de-risking
of the Araguaia project. This has been the
core focus of the Group since the acquisi-
tion of Araguaia in August 2010. The Group
continues to plan towards producing a Fea-
sibility Study for the Enlarged Project when
market conditions and financing allow.
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.
Strategic Report
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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 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
environmental
factors,
and
hazards, industrial accidents, occupation
and health hazards and weather conditions
or other acts of God.
seismic
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
is able to profitably develop or
of 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.
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.
and offers
Brazil is the current focus of the Group’s
activity
stable political
frameworks and actively supports foreign
It has a well-developed
investment.
exploration and mining code with proactive
support for foreign companies. Economic
growth has however faltered and the
country has moved into a recession in 2015.
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
is
aggregate effect of these factors
impossible to predict. Fluctuations
in
commodity prices in the long-term may
adversely affect the returns of the Group’s
exploration projects.
A significant reduction in the global 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.
any project
Financing
The successful exploration of natural
requires
resources on
significant capital investment. The Group
currently sources finance through the issue
of additional equity capital. The Group’s
ability to raise further funds will depend
on the success of its investment strategy
and acquired operations. The Group may
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.
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.
the Group,
The principal assets of
comprising
exploration
the mineral
licences are subject to certain financial and
legal commitments. If these commitments
are not fulfilled the licences could be
revoked. The Group closely monitors on
an ongoing basis its commitments and
the expiry terms 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.
future
resource
Any
figures will be
estimates 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, particularly nickel, could render
reserves containing relatively lower grades
of these resources uneconomic to recover.
14
Strategic Report
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
2015
2014
£2,738,905
£5,030,968
3.3%
4.2%
£5,715,108
£2,018,658
Administrative expenses as a percentage of total assets have been reduced following streamlining in the year in the context of the
deterioration in the financial market environment prevalent in the sector in which the Group operates.
Exploration costs capitalised as intangible assets relate to expenditure on the Araguaia project. Development activity at Araguaia in
2014 focussed on advancing permitting on the project and planning for the Feasibility Study, together with the 4th Phase infill drilling
campaign commenced in early November 2014. Development activity in 2015 included the majority of the costs of the 4th Phase infill
drilling campaign, the bulk sample and pilot plant programme as well as the acquisition of GAP.
At 31 December 2015 the Group’s intangible assets had a carrying value of £20,046,102.
Non-Financial Key Performance Indicators (‘KPIs’)
The Board monitors the following 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
Completion of a pilot plant programme: the successful completion of a pilot plant programme treating circa 160 wet tonnes of Araguaia
ore, representative of circa the first 10 years of production to produce commercial grade ferronickel, represented a significant de-risking
step. Furthermore in concluding an agreement with a subsidiary of Glencore to acquire GAP, the Group has been successful in its strategy
of consolidating its landholdings in the Araguaia area.
Fundraising
On 2 October 2015 a total of 112,500,000 shares were issued through a private placement at a price of £0.01 per share to raise
£1,125,000 before expenses. On 9 October 2015 a total of 42,500,000 shares were issued through a private placement at a price of
£0.01 per share to raise £425,000 before expenses.
By order of the Board
Jeffrey Karoly
Company Secretary
15 March 2016
Financial Report Jeffrey Karoly
Financial Report
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‘The weakening
Brazilian Real versus
Dollar and Sterling has
signifi cantly helped in
holding down the cost
base in tough markets’
Loss before taxation
Cash and cash equivalents
Exploration assets
Net assets
Loss per share (pence)
Year ended
31 December
2015
£
Year ended
31 December
2014
£
(1,654,552)
(1,241,936)
2,738,905
5,030,968
19,854,074
20,499,387
19,547,252
26,171,171
(0.311)
(0.283)
loss for the year
Loss for the year
The
increased by
£412,616 to £1,654,552 due to in part to
a one-off non-cash impairment charge
in 2015 of £253,006 relating to avail-
financial assets, which
able-for-sale
comprised a reclassification from the re-
serves relating to available-for-sale assets,
with an offsetting credit to Other Com-
prehensive Income.
The Group has continued to keep a
tight control on its administrative costs,
which reduced in the year by £446,796
to £864,892, due to savings principally
achieved in Brazil.
2014 also benefitted from a £415,702
credit to the
Income Statement due
to changes in fair value of contingent
consideration, as compared to credit in
2015 of £138,515. This is due to changes in
foreign exchange and timing assumptions
as regards the contingent consideration
payable and is a non-cash item. In 2015
there was a loss on foreign exchange of
£251,409 as certain of the cash deposits of
the Group are held in currencies other than
Sterling. This compared to a loss in 2014
of £46,634.
Finance costs increased by £164,527 from
£173,903 to £338,430 due the unwinding
of the discounting on the contingent
considerations payable to Teck Resources
and Xstrata Brasil Mineração. These are
non-cash items.
comprehensive
total
Furthermore,
income attributable to equity holders of
£(8,669,278) included currency translation
differences of £(7,267,732). This was due
to the Brazilian real continuing to weaken
against Sterling as at 31 December 2015,
as compared to 31 December 2014.
Cash and Cash Equivalents
The closing cash balance for the Group
of £2,738,905 is net of £2,603,260 of
direct exploration expenditure
in the
year, as compared to £1,843,161 in 2014.
Expenditure in 2015 was higher than in
2014 and driven by the 10,255 metre, 4th
Phase Resource in-fill drilling campaign,
which was completed during the year,
together with the pilot plant metallurgical
testing programme.
included £3,174,275
Exploration Assets
Exploration assets, which
comprise
the Araguaia project, have decreased
to £19,854,074 as at 31 December
to £20,499,387
2015 as compared
as at 31 December 2014: the Group
incurred addition expenditure in the year,
which
in relation
to licences acquired from a subsidiary
of Glencore, however this was offset by
a negative foreign exchange revaluation of
£6,360,421 as the Brazilian Real continued
to devalue against Sterling. The exploration
assets of the business are recorded in the
functional currency of Brazil, the country
in which they are located.
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,
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 and
Colombia. In April 2002, Mr. Hall became an
executive director of Minmet and operations
director in September 2002. Mr. Hall led the
divestment 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.
from
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 a Master's Degree in mineral
exploration
the University of
Leicester. He has worked in South America,
Central America and Europe, where he
was responsible for grassroots regional
metalliferous exploration programmes
through to resources definition and mine
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, Company
Secretary and Chief Financial Officer
Mr Karoly has a degree in Geology 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
Dr. Bavinton graduated from the University
of Queensland in Geology in 1969, 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 minerals
exploration and mining sector 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,
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 to London in 1998, initially as
Head 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
all stages of development,
including
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
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Key Advisers
Roger Billington P.Geo
Senior Nickel Adviser
Mr Billington is the former head of Falcon-
bridge nickel laterite exploration worldwide.
He has project development experience
including senior roles in the discovery and
evaluation of the Touba- Biankouma nickel
laterite deposits (Côte d’Ivoire), the Koniam-
bo nickel laterite deposit (New Caledonia),
the Sechol nickel laterite deposit (Guatema-
la) and the GlobeStar nickel laterite deposit
(Dominican Republic).
Dr Philip Mackey P.Eng, PhD, FCIM
Senior Metallurgical Adviser
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
sulphide smelting and nickel
laterite
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.
Allan M. Walker, MA
Non-Executive Director
Mr. Walker has over 30 years of experience
in investment banking and funds man-
agement, primarily focussed on energy
sector project finance and private equity,
particularly in emerging markets. He has
extensive contacts in the renewable en-
ergy sector worldwide, as well as with
governments, multilateral agencies and
regional development banks. Mr Walker is
currently a consultant with UK Trade and
Investment, where he is Head of Project
Finance on the Institutional Investment
and Infrastructure team, focusing on at-
investment
tracting foreign direct
into
infrastructure projects.
UK energy and
Previously he was with Masdar Capital in
Abu Dhabi, as Executive Director, respon-
sible for managing the third party private
equity funds management business for
Masdar, the Abu Dhabi government’s clean
energy and sustainability company. Pri-
or to that he founded (in 2005) and ran a
similar private equity fund for Black River
Asset Management (UK) Limited, an indi-
rectly held subsidiary of Cargill Inc. Prior to
Black River, Mr. Walker was head of power
and infrastructure in London for Standard
Bank Plc, a world leader in emerging mar-
kets resource banking. Mr. Walker was also
previously a director in the Global Energy
and Project Finance Group of Credit Suisse
First Boston in London and ran the energy
group at CSFB Garantia in Sao Paulo, Brazil
from 1998 to 2001, where he spent sev-
en years covering Latin America. He also
spent three years in the energy group of
ING Barings in New York. Mr. Walker grad-
uated with an MA in economic geography
from Cambridge University in 1982 and
received his financial training on a one
year residential training programme with
JP Morgan in New York in 1983. He speaks
Portuguese and Spanish.
the mining
Alexander N. Christopher, BSc (hons), P.Geo
Non-Executive Director
Mr. Christopher, a professional geologist,
has some 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. He is
also currently a member of the Board
of Directors of the Prospectors and
Developers Association of Canada.
William 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
in Africa, Australia, Europe and
posts
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, Bill 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).
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 2015.
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.
SEIA
As the project moves towards the Feasibility Stage, the focus is
now on creating one integrated Social and Environmental Impact
Assessment based on International Finance Corporation / World
Bank standards. Ongoing data collection will continue to be
undertaken in 2016, including social resettlement data, water, air
and other data required to place the Group in good stance with
strong baseline studies to further advance permitting and provide a
basis to progress the Araguaia Project through the Feasibility Stage.
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
15 March 2016.
Major shareholders
Number of shares
% of issued capital
Teck Resources Limited
188,689,929
Henderson Global Investors
114,632,667
Richard Griffiths
City Financial
Anglo Pacific Group Plc
Quantom Holdings
Glencore
99,839,049
40,333,333
34,228,821
25,280,105
23,777,273
28.1
17.0
14.9
6.0
5.1
3.8
3.5
Principal activities
The principal activity of the Group and Company 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 £1,654,552 (2014: £1,241,936).
The Group is currently involved in exploration and evaluation activities and
not actively mining. As a result, the Group is not revenue generative.
On 2 October 2015 a total of 112,500,000 shares were issued
through a private placement at a price of £0.01 per share to
raise £1,125,000 before expenses. On 9 October 2015 a total of
42,500,000 shares were issued through a private placement at a
price of £0.01 per share to raise £425,000 before expenses. On
25 November 2015 a total of 23,777,273 shares were issued at
£0.0184 per share in consideration for the purchase of the Vale
dos Sonhos mineral concession from Xstrata Brasil Mineração Ltda.
At 31 December 2015 the Group had cash and cash equivalents of
£2,738,905 (2014: £5,030,968). 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 (2014: £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.
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.
Directors’ Report
19
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Share capital
Changes in the share capital of the Company are set out in note 15 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
2015 are as follows:
Director
David Hall
Jeremy Martin
Owen Bavinton
Allan Walker
William Fisher
Alex Christopher
31 December 2015
31 December 2014
Shares
Options
Shares
Options
1,039,955
5,000,000
765,908
4,000,000
1,083,908
11,000,000
1,083,908
8,250,000
2,000,000
3,500,000
—
4,400,000
—
—
2,500,000
3,400,000
20,000
3,500,000
20,000
2,500,000
—
—
—
—
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 2015 and 15 March 2016.
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.
Matters covered in the Strategic Report
The business review, review of KPIs and details of the future developments are included in the Operations Review and Strategic Report.
Events after the reporting date
The events after the reporting date are set out in note 30 to the Financial Statements.
Future developments
In 2016 the Group will be working on updating the Resource Estimate for Araguaia, including the integration of the deposits acquired
from Glencore in November 2015. An updated Pre-Feasibility Study will also be prepared and which will include integration of GAP.
Furthermore the permitting for the Araguaia project will continue to be advanced.
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 2015 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.
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
15 March 2016
20
Statement of Directors’ Responsibilities
Statement of Directors’ Responsibilities
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; and
> prepare the Financial Statements on a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and to 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
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.
information
included
By Order of the Board
Jeffrey Karoly
Company Secretary
15 March 2016
Front Row: Jeremy Martin, David Hall. Back Row: Alexander Christopher, Jeffrey Karoly, Allan Walker, Owen Bavinton.
Corporate Governance Report
Corporate Governance Report
21
The Board of Directors
As at 31 December 2015, the Board of
Directors comprised six members: one
Executive Director and five Non-Executive
Directors including the 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. Mr Owen Bavinton,
Mr William Fisher and Mr Allan Walker are
classified as Independent by the Toronto
Stock Exchange.
includes
the approval of
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
those matters reserved for its decision.
This
the
budget and business plan, major capital
expenditure, acquisitions and disposals,
risk management policies and the approval
of
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
Corporate governance practices
The Board recognises the importance of
sound corporate governance commensu-
rate 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 Corporate
Governance Code’), as published by the Fi-
nancial Reporting Council so far as is prac-
ticable and considers them to be appropri-
ate taking into account the size and nature
of the Company.
Risk management
The Board considers risk assessment to
be important in achieving its strategic ob-
jectives. There is a process of evaluation
of performance targets through regular re-
views by senior management of forecasts.
Project milestones and timelines are regu-
larly reviewed.
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.
Relations with shareholders
The Board
is committed to providing
the
effective
communication with
shareholders of the Company. Significant
developments are disseminated through
stock exchange announcements and
regular updates on the Company website.
The Board views the Annual General
Meeting as a forum for communication
between the Company and its shareholders
and
participation
in its agenda.
encourages
their
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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.
22
Independent Auditor’s Report
Independent Auditor’s Report to the Members
of Horizonte Minerals Plc
for
We have audited the Financial Statements
of Horizonte Minerals Plc
the
year ended 31 December 2015 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
the Consolidated and Parent
Flows,
Company Statements of Changes
in
Equity and the related notes. The financial
reporting
that has been
applied in their preparation is applicable
law and International Financial Reporting
Standards (‘IFRSs’) as adopted by the
European Union and, as regards the Parent
Company Financial Statements, as applied
in accordance with the provisions of the
Companies Act 2006.
framework
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.
free
Scope of the audit of the Financial
Statements
involves obtaining evidence
An audit
the amounts and disclosures
about
in the Financial Statements sufficient
to give reasonable assurance that the
Financial Statements are
from
material misstatement, whether caused
includes an
by fraud or error. This
assessment of: whether the accounting
policies are appropriate to the Group and
the Parent Company’s 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
in the Annual Report to
information
identify material
inconsistencies with
the audited Financial Statements and to
identify any 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 aware of any apparent
material misstatements or inconsistencies
we consider the implications for our report.
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 2015 and of the Group’s loss
for the year then ended;
> the Group Financial Statements have
been properly prepared in accordance
with
the
IFRSs as adopted by
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
the
requirements of the Companies Act 2006.
in accordance with
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.
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
Financial
Statements are not in agreement with
the accounting records and returns; or
Company
> certain
disclosures
Directors’
remuneration specified by law are not
made; or
of
> 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
15 March 2016
1 Westferry Circus
Canary Wharf
London E14 4HD
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2015
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
Other losses — impairment of available-for-sale assets
Operating loss
Finance income
Finance costs
Loss before taxation
Income tax
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)
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L
Year ended
31 December
2015
£
Year ended
31 December
2014
£
Notes
—
—
—
—
—
—
(864,892)
(1,311,688)
(100,248)
(125,107)
138,515
—
(251,409)
(253,006)
415,702
(31,989)
(46,364)
—
(1,331,040)
(1,099,446)
14,918
31,413
(338,430)
(173,903)
(1,654,552)
(1,241,936)
—
—
(1,654,552)
(1,241,936)
253,006
(22,729)
(7,267,732)
(1,438,422)
(7,014,726)
(1,461,151)
(8,669,278)
(2,703,087)
(0.311)
(0.311)
(0.283)
(0.283)
19
6
13
6
8
8
9
13
18
21
21
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
24
Consolidated Statement of Financial Position
Consolidated Statement of Financial Position
Company number: 05676866
As at 31 December 2015
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
2015
£
31 December
2014
£
Notes
10
11
9
12
13
14
15
16
18
19
9
19
20,046,102
20,770,312
11,888
54,390
3,590,675
5,065,976
23,648,665
25,890,678
40,912
22,709
—
—
2,738,905
5,030,968
2,779,817
5,053,677
26,428,482
30,944,355
6,712,044
4,924,271
31,252,708
31,095,370
(7,336,327)
(321,601)
(11,081,173)
(9,526,869)
19,547,252
26,171,171
5,171,629
2,235,512
1,560,581
2,201,778
6,732,210
4,437,290
149,020
149,020
335,894
335,894
6,881,230
4,773,184
26,428,482
30,944,355
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
The Financial Statements were authorised for issue by the Board of Directors on 15 March 2016 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 2015
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 equity shareholders
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
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S
S
G
O
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A
N
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E
C
O
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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
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C
C
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A
A
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L
31 December
2015
£
Notes
31 December
2014
£
11
26
12
14
15
16
18
19
19
1,254
44,698,874
44,700,128
18,739
2,568,266
2,587,005
2,291
37,768,225
37,770,516
13,818
4,208,984
4,222,802
47,287,133
41,993,318
6,712,044
31,252,708
10,888,760
(7,240,881)
41,612,631
4,924,271
31,095,370
10,888,760
(7,652,755)
39,255,646
5,171,629
5,171,629
2,235,512
2,235,512
502,873
502,873
5,674,502
47,287,133
502,160
502,160
2,737,672
41,993,318
The above Company Statement of Financial Position should be read in conjunction with the accompanying notes.
The Financial Statements were authorised for issue by the Board of Directors on 15 March 2016 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 2015
Consolidated
As at 1 January 2014
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
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 2015
Company
As at 1 January 2014
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
Profit 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 2015
Attributable to owners of the parent
Share
capital
£
Share
premium
£
Retained
losses
£
Other
reserves
£
Total
£
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
—
—
—
(22,729)
— (1,438,422)
(22,729)
(1,438,422)
— (1,241,936)
—
—
125,107
125,107
4,564,389
(467,017)
—
4,097,372
(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)
— (1,654,552)
(321,601)
26,171,171
— (1,654,552)
—
—
—
—
253,006
—
— (7,267,732)
253,006
(7,267,732)
—
1,787,773
—
—
1,787,773
— (1,654,552)
—
—
100,248
100,248
200,300
(42,962)
—
157,338
(7,014,726)
—
—
—
—
(8,669,278)
1,988,073
(42,962)
100,248
2,045,359
6,712,044
31,252,708
(11,081,173)
(7,336,327)
19,547,252
Attributable to equity shareholders
Share
capital
£
Share
premium
£
Retained
losses
£
Merger
reserves
£
Total
£
4,011,395
—
—
912,876
—
—
912,876
4,924,271
—
—
1,787,773
—
—
1,787,773
6,712,044
26,997,998
—
—
4,564,389
(467,017)
—
4,097,372
31,095,370
—
—
200,300
(42,962)
—
157,338
31,252,708
(7,551,817)
(226,045)
(226,045)
—
—
125,107
125,107
(7,652,755)
311,626
311,626
—
—
100,248
100,248
(7,240,881)
10,888,760
—
—
—
—
—
—
10,888,760
—
—
—
—
—
—
10,888,760
34,346,336
(226,045)
(226,045)
5,477,265
(467,017)
125,107
5,135,355
39,255,646
311,626
311,626
1,988,073
(42,962)
100,248
1,945,111
41,612,631
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the year ended 31 December 2015
Cash flows from operating activities
Loss before taxation
Finance income
Finance costs
Impairment of Peruvian reserves
Impairment of available-for-sale financial assets
Charge for share options granted
Impairment of intangible assets
Gain on sale of property, plant and equipment
Exchange differences
Change in fair value of contingent consideration
Depreciation
Operating loss before changes in working capital
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
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 (decrease)/increase 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
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31 December
2015
£
31 December
2014
£
Notes
(1,654,552)
(1,241,936)
(14,918)
338,430
17,200
253,006
100,248
-
(24,453)
251,409
(31,413)
173,903
-
-
125,107
31,989
-
46,364
(138,515)
(415,702)
1,419
3,666
(870,726)
(1,308,022)
(19,635)
(37,154)
39,417
55,558
(927,515)
(1,213,047)
(2,663,260)
(1,843,161)
26,734
14,918
—
31,413
(2,621,608)
(1,811,748)
1,550,000
5,477,265
(42,962)
(467,017)
1,507,038
5,010,248
(2,042,085)
1,985,453
5,030,968
3,091,880
(249,978)
(46,365)
14
2,738,905
5,030,968
Major non-cash transactions
During the year ended 31 December 2015 additions to intangible exploration assets included £27,296 (2014: £46,261) in relation to
depreciation charges on property, plant and equipment used for exploration activities.
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
28
Company Statement of Cash Flows
Company Statement of Cash Flows
For the year ended 31 December 2015
Cash flows from operating activities
Profit/(loss) before taxation
Finance income
Charge for share options granted
Exchange differences
Depreciation
Operating profit/(loss) before changes in working capital
(Increase) in trade and other receivables
Increase in trade and other payables
31 December
2015
£
31 December
2014
£
Notes
311,626
(6,952)
100,248
(375,747)
1,037
30,212
(4,921)
713
(226,045)
(14,006)
125,107
(91,966)
2,846
(204,064)
(1,783)
26,929
Net cash flows generated from/(used in) operating activities
26,004
(178,918)
Cash flows from investing activities
Loans to subsidiary undertakings
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 (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the year
(3,180,712)
(3,392,720)
6,952
14,006
(3,173,760)
(3,378,714)
1,550,000
5,477,265
(42,962)
(467,017)
1,507,038
5,010,248
(1,640,718)
1,452,616
4,208,984
2,756,368
14
2,568,266
4,208,984
Major non-cash transactions
On 25 November 2015 a total of 23,777,273 shares were issued at £0.0184 per share in consideration for the purchase of the Vale
dos Sonhos mineral concession from Xstrata Brasil Mineração Ltda. No cash consideration were exchanged.
The above Company Statement of Cash Flows should be read in conjunction with the accompanying notes.
Notes on the Financial Statements
29
Notes to the Financial Statements
1 General information
The principal activity of Horizonte Minerals Plc (‘the Company’) and its subsidiaries (together ‘the Group’) is the exploration and
development of base metals. The Company’s shares are listed on the AIM market of the London Stock Exchange and on the Toronto Stock
Exchange. The Company is incorporated and domiciled in 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 available-for-sale financial assets and 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
There are no IFRSs or IFRIC interpretations that were effective for the first time for the financial year beginning 1 January 2015 that have
had a material impact on the Group or Company.
b) New and amended standards, and interpretations issued but not yet effective for the financial year beginning 1 January 2015 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 listed
below. The Group intends to adopt these standards, if applicable, when they become effective. Unless stated below, there are no IFRSs
or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
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Standard
IAS 1 (Amendments)
IAS 7 (Amendments)
IAS 12 (Amendments)
IAS 16 (Amendments)
IAS 19 (Amendments)
IAS 27 (Amendments)
IAS 38 (Amendments)
IFRS 9
IFRS 11 (Amendments)
IFRS 15
IFRS 16
Annual Improvements
Annual Improvements
*Subject to EU endorsement
Presentation of Financial Statements: Disclosure Initiative
Disclosure Initiative
Recognition of Deferred Tax
Clarification of Acceptable Methods of Depreciation
Defined Benefit Plans: Employee Contributions
Separate Financial Statements
Clarification of Acceptable Methods of Amortisation
Financial Instruments
Joint Arrangements: Accounting for Acquisitions of
Interests in Joint Operations
Revenue from Contracts with Customers
Leases
2010 – 2012 Cycle
2012 – 2014 Cycle
Effective Date
1 January 2016
*1 January 2017
*1 January 2017
1 January 2016
1 February 2015
1 January 2016
1 January 2016
*1 January 2018
1 January 2016
*1 January 2018
*1 January 2019
1 February 2015
1 January 2016
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.
30
Notes on the Financial Statements
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.
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
Horizonte Exploration Ltd
Horizonte Minerals (IOM) Ltd
HM Brazil (IOM) Ltd
Cluny (IOM) Ltd
Champol (IOM) ltd
Horizonte Nickel (IOM) Ltd
HM do Brasil Ltda
Araguaia Niquel Mineração Ltda
Lontra Empreendimentos e
Participações Ltda
Typhon Brasil Mineração Ltda
Trias Brasil Mineração Ltda
Parent company
Country of incorporation
Nature of business
Horizonte Minerals Plc
Horizonte Exploration Ltd
Horizonte Minerals (IOM) 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
Cluny (IOM) Ltd
Champol (IOM) Ltd
England
Isle of Man
Isle of Man
Isle of Man
Isle of Man
Isle of Man
Brazil
Brazil
Mineral Exploration
Holding company
Holding company
Holding company
Holding company
Holding company
Mineral Exploration
Mineral Exploration
Brazil
Brazil
Brazil
Mineral Exploration
Mineral Exploration
Mineral Exploration
Notes on the Financial Statements
31
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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 cash reserves which are considered sufficient by the Directors to fund the Group’s committed expenditure both operationally
and on its exploration projects for the foreseeable future. However, as additional projects are identified and the Araguaia project moves
towards production, additional funding will be required.
As a result of considerations noted above, the Directors have a reasonable expectation that the Group and Company have adequate
resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of
accounting in preparing these Financial Statements.
2.5 Intangible Assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets,
liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition. Goodwill arising on the acquisition of subsidiaries
is included in ‘intangible assets’. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.
Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash-generating
units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose,
identified according to operating segment.
(b) Exploration and evaluation assets
The Group recognises expenditure as exploration licenses or 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 Group has decided to discontinue such activities of that unit, the associated expenditures
are written off to profit or loss.
2.6 Property, plant and equipment
All property, plant and equipment is stated at historic cost less accumulated depreciation. Historic cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All
repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred.
32
Notes on the Financial Statements
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%
25% – 33%
The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its
estimated recoverable amount.
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.
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 entities is Brazilian Real. The Consolidated Financial Statements are presented in Pounds Sterling,
rounded to the nearest pound, which is the Company’s functional and Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
(c) Group companies
The results and financial position of all the Group’s entities (none of which has the currency of a hyperinflationary economy) that have a
functional currency different from the presentation currency are translated into the presentation currency as follows:
1.
2.
3.
assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that
statement of financial position;
each component of profit or loss is translated at average exchange rates during the accounting period (unless this average is not
a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of monetary items
receivable from foreign subsidiaries for which settlement is neither planned nor likely to occur in the foreseeable future are taken
to other comprehensive income. When a foreign operation is sold, such exchange differences are recognised in profit or loss as part
of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate.
2.9 Financial assets
The Group classifies its financial assets in the following 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.
Notes on the Financial Statements
33
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(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’ and ‘cash and cash equivalents’ in the
Statement of Financial Position.
Derecognition
A financial asset is derecognised when the rights to receive cash flows from the asset have expired.
2.10 Cash and cash equivalents
In the Statement of Financial Position and Statement of Cash Flows, cash and cash equivalents comprise cash at bank and in hand and
demand deposits with banks and other financial institutions, that are readily convertible into known amounts of cash and which are
subject to an insignificant risk of changes in value.
2.11 Impairment of financial assets
(a) Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective
evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that
loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be
reliably estimated.
For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial
asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the
Consolidated Income Statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised
impairment loss is recognised in the Consolidated Income Statement.
(b) Assets classified as available-for-sale
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial
assets is impaired.
For equity investments, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets
are impaired. If any such evidence exists the cumulative loss — measured as the difference between the acquisition cost and the
current fair value, less any impairment loss on that financial asset previously recognised in profit or loss — is removed from equity
and recognised in profit or loss. Impairment losses recognised in the Consolidated Income Statement on equity instruments are not
reversed through the Consolidated Income Statement.
2.12 Taxation
The tax credit or expense for the period comprises current and deferred tax. Tax is recognised in the Income Statement, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
The charge for current tax is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period
in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
34
Notes on the Financial Statements
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 Statement of Financial
Position date and are expected to apply to the period when the asset is realised or the liability is settled.
Deferred tax assets and liabilities are not discounted.
2.13 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown
in equity as a deduction, net of tax, from the proceeds.
2.14 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.
2.15 Contingent consideration
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an
outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision
due to passage of time is recognised as finance cost.
2.16 Operating leases
Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor are
classified as operating leases. Operating lease payments are charged to the Income Statement on a straight-line basis over the period
of the respective leases.
2.17 Share-based payments and incentives
The Group operates equity-settled, share-based compensation plans, under which the entity receives services from employees as
consideration for equity instruments (options) of the Group. The fair value of employee services received in exchange for the grant of
share options are recognised as an expense. The total expense to be apportioned over the vesting period is determined by reference
to the fair value of the options granted:
> including any market performance conditions;
> excluding the impact of any service and non-market performance vesting conditions; and
> including the impact of any non-vesting conditions.
Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be
satisfied. At the end of each reporting period the Group revises its estimate of the number of options that are expected to vest.
Notes on the Financial Statements
35
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It recognises the impact of the revision of original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
When options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs
are credited to share capital (nominal value) and share premium.
The fair value of goods or services received in exchange for shares is recognised as an expense.
2.18 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer, the
Company’s chief operating decision-maker ('CODM').
2.19 Finance income
Interest income is recognised using the effective interest method, taking into account the principal amounts outstanding and the interest
rates applicable.
2.20 Contingent Liabilities
Contingent liabilities are potential obligations that arise from past events and whose existence will only be confirmed by the occurrence
of one or more uncertain future events that, however, are beyond the control of the Group. Furthermore, present obligations may
constitute contingent liabilities if it is not probable that an outflow of resources will be required to settle the obligation, or a sufficiently
reliable estimate of the amount of the obligation cannot be made.
3 Financial risk management
3.1 Financial risk factors
The main financial risks to which the Group’s activities are exposed are liquidity and fluctuations on foreign currency. The Group’s overall
risk management programme focusses on the unpredictability of financial markets and seeks to minimise potential adverse effects on
the Group’s financial performance.
Risk management is carried out by the Board of Directors under policies approved at the quarterly Board meetings. The Board frequently
discusses principles for overall risk management including policies for specific areas such as foreign exchange.
(a) Liquidity risks
In keeping with similar sized mineral exploration groups, the Group’s continued future operations depend on the ability to raise sufficient
working capital through the issue of equity share capital. The Group monitors its cash and future funding requirements through the use
of cash flow forecasts.
All cash, with the exception of that required for immediate working capital requirements, is held on short-term deposit.
(b) Foreign currency risks
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the Brazilian Real, US Dollar and the 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 2015, if the US Dollar had weakened/strengthened by 20% against Pound Sterling and Brazilian Real with all other
variables held constant, post tax loss for the year would have been approximately £12,820/£19,230 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.
(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.
36
Notes on the Financial Statements
(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 2015 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.
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 2015 of £19,854,074 (2014: £20,499,389). Management tests
annually whether exploration projects have future economic value in accordance with the accounting policy stated in note 2.7. 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 do not
consider any impairment is necessary.
4.2 Estimated impairment of goodwill
Goodwill has a carrying value at 31 December 2015 of £192,028 (2014: £270,923). 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 10 to the
Financial Statements.
Notes on the Financial Statements
37
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4.3 Contingent consideration
Contingent consideration has a carrying value of £5,171,629, at 31 December 2015 (2014: £2,235,512). Following the purchase of
the Vale dos Sonhos mineral concession from Xstrata Brasil Brasil Mineração Ltda in November 2015 (refer note 19) there are two
contingent consideration arrangements in place as at 31 December 2015:
> A contingent consideration arrangement that requires the Group to pay the former owners of Teck Cominco Brasil S.A (subsequently
renamed Araguaia Niquel Mineração Ltda) 50% of the tax 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.
> A contingent consideration arrangement that requires the Group to pay Xstrata Brasil Mineração Ltda US$1,000,000 after the date
of issuance of a feasibility study comprising the Araguaia project and the Vale dos Sonhos (‘VdS’) and Serra do Tapa (‘SdT’) project
areas (‘GAP’) (together the ‘Enlarged Project’), to be satisfied in shares in the Company (at the 5 day volume weighted average
price taken on the tenth business day after the date of such issuance) or cash, at the election of the Company; and remaining
consideration of US$5,000,000 to be paid in cash, as at the date of first commercial production from any of the resource areas within
the Enlarged Project area.
The fair value of these potential considerations have 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. Commercial production is assumed to commence in 2019.
If the estimated discount rate of 7% used in determining the fair value of contingent consideration payable to the former owners of Teck
Cominco Brasil S.A. and Xstrata Brasil Mineraçâo Ltda was 2% higher, then Management’s estimates of the amount payable would
decrease by £181,098 and £184,870, respectively. If the discount rate was 2% lower, the amount payable would increase by £200,176
and £202,995.
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 Other areas
Other estimates include but are not limited to future cash flows associated with assets, useful lives for depreciation and fair value of
financial instruments.
38
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.
2015
Administrative expenses
Loss on foreign exchange
Loss from operations per reportable segment
Inter segment revenues
Depreciation charges
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
2014
Administrative expenses
Profit/(loss) on foreign exchange
Project and intangible fixed asset impairment
UK
2015
£
(662,305)
(114,838)
(777,143)
Brazil
2015
£
(189,234)
(136,571)
(325,805)
—
872,643
(1,037)
(382)
—
(645,313)
2,687,317
23,741,165
5,260,018
1,621,212
Other
2015
£
Total
2015
£
(13,353)
(864,892)
—
(251,409)
(13,353)
(1,116,301)
—
—
—
872,643
(1,419)
(645,313)
— 26,428,482
—
6,881,230
UK
2014
£
Brazil
2014
£
Other
2014
£
Total
2014
£
(848,454)
(456,832)
(6,402)
(1,311,688)
39,089
—
(85,453)
(31,989)
—
—
(46,364)
(31,989)
Loss from operations per reportable segment
(809,365)
(574,274)
(6,402)
(1,390,041)
Inter segment revenues
Depreciation charges
Additions to non-current assets
Reportable segment assets
Reportable segment liabilities
—
677,635
(2,846)
(820)
— (2,018,658)
4,349,901
26,594,454
2,348,686
2,424,498
—
—
677,635
(3,666)
— (2,018,658)
— 30,944,355
—
4,773,184
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 19)
Charge for share options granted
Impairment of available-for-sale asset
Finance income
Finance costs
Loss for the year from continuing operations
2015
£
2014
£
(1,116,301)
(1,390,041)
138,515
(100,248)
(253,006)
14,918
415,702
(125,107)
—
31,413
(338,430)
(173,903)
(1,654,552)
(1,241,936)
Notes on the Financial Statements
39
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A
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M
M
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E
N
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F
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A
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6 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 11)
Loss on foreign exchange
Change in fair value of contingent consideration
Impairments of intangible fixed assets
Impairment of available-for-sale financial asset
Operating lease charges
Profit on disposal of property, plant and equipment
Other expenses
Total operating expenses
2015
£
456,255
55,019
43,945
100,248
1,419
251,409
2014
£
680,080
29,227
166,866
125,107
3,666
46,364
(138,515)
(415,702)
—
31,989
253,006
95,182
(24,453)
237,525
—
64,153
—
367,696
1,331,040
1,099,446
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.
7 Auditor remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor
and its associates:
Group
Fees payable to the Company’s auditor and its associates for the audit of the parent company and
consolidated financial statements
Fees payable to the Company’s auditor and its associates for other services:
– Audit related assurance services
–Tax compliance services
8 Finance income and costs
Group
Finance income:
2015
£
2014
£
37,500
30,000
7,000
1,900
4,525
2,380
2015
£
2014
£
– Interest income on cash and short-term bank deposits
14,918
31,413
Finance costs:
– Contingent consideration: unwinding of discount
Net finance costs
(338,430)
(323,512)
(173,903)
(142,490)
40
Notes on the Financial Statements
9 Income Tax
Group
Tax charge
Current tax charge for the year
Deferred tax charge for the year
Tax on loss for the year
Reconciliation of current tax
Group
Loss before income tax
Current tax at 32.52% (2014: 23.1%)
Effects of:
Expenses not deducted for tax purposes
Utilisation of tax losses brought forward
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
Total tax
No tax charge or credit arises on the loss for the year.
2015
£
—
—
—
2014
£
—
—
—
2015
£
2014
£
(1,654,552)
(1,241,936)
(538,060)
(330,757)
82,043
(150,480)
—
606,497
—
62,451
—
131,940
136,366
—
The weighted average applicable tax rate of 32.52% 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. The weighted average applicable tax rate has increased from
23.1% to 32.52% as a greater proportion of loss before income tax arose in Brazil.
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
2015
£
2014
£
3,590,675
3,590,675
5,065,976
5,065,976
(1,560,581)
(2,201,778)
(1,560,581)
(2,201,778)
2,030,094
2,864,198
2015
£
2014
£
2,864,198
3,038,142
(834,104)
(173,944)
2,030,094
2,864,198
Notes on the Financial Statements
41
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S
G
O
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N
A
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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
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S
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F
F
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N
A
A
N
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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 2014
Exchange differences
At 31 December 2014
Exchange differences
At 31 December 2015
Deferred tax
liabilities
Fair value gains
£
Deferred tax
assets
Tax Losses
£
Total
£
(2,335,492)
5,373,634
3,038,142
133,714
(307,658)
(173,944)
(2,201,778)
5,065,976
2,864,198
641,197
(1,475,301)
(834,104)
(1,560,581)
3,590,675
2,030,094
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.
The Group has tax losses of approximately £17,363,000 (2014: £18,190,000) in Brazil and excess management charges of approximately
£1,690,000 (2014: £2,590,000) 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.
10 Intangible assets
Intangible assets comprise exploration licenses, exploration and evaluation costs and goodwill. Exploration and evaluation costs
comprise acquired and internally generated assets.
Group
Cost
At 1 January 2014
Additions
Impairments
Exchange rate movements
At 31 December 2014
Additions
Exchange rate movements
Net book amount at 31 December 2015
Goodwill
£
Exploration
Licenses
£
Exploration and
evaluation costs
£
Total
£
287,378
— 19,754,559
20,041,937
—
—
(16,453)
270,925
—
—
2,018,658
2,018,658
(31,989)
(31,989)
— (1,241,841)
(1,258,294)
— 20,499,387
20,770,312
—
3,174,275
2,540,833
5,715,108
(78,897)
192,028
— (6,360,421)
(6,439,318)
3,174,275
16,679,799
20,046,102
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.
(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 licenses, exploration and evaluation assets is presented below:
Group
Brazil — Araguaia/Lontra/Vila Oito and Floresta
Brazil — Vale dos Sonhos (refer note 28)
2015
£
2014
£
16,679,799
3,174,275
19,854,074
20,499,387
—
20,499,387
The adjacent Araguaia/Lontra/Vila Oito and Floresta exploration sites (‘the Araguaia Project’), together with the Vale dos Sonhos deposit
acquired from Xstrata Brasil Mineração Ltda comprise a resource of a sufficient size and scale to allow the Company to create a significant
single nickel project. For this reason, at the current stage of development, these two projects are viewed and assessed for impairment by
management as a single cash generating unit.
42
Notes on the Financial Statements
The mineral concession for the Vale dos Sonhos deposit was acquired from Xstrata Brasil Mineração Ltda, a subsidiary of Glencore
Canada Corporation, in November 2015.
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, which is still relevant and applicable throughout
2015, and judged that no impairment was required with regards to the Araguaia Project.
Sensitivity to changes in assumptions
For the base case NPV8 of the Araguaia Project of US$519 million as per the PFS to be reduced to the book value of the Araguaia Project
as at 31 December 2015, the discount rate applied to the cash flow model would need to be increased from 8% to 20%.
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.
11 Property, plant and equipment
Group
Cost
At 1 January 2014
Foreign exchange movements
At 31 December 2014
Disposals
Foreign exchange movements
At 31 December 2015
Accumulated depreciation
At 1 January 2014
Charge for the year
Foreign exchange movements
At 31 December 2014
Charge for the year
Disposals
Foreign exchange movements
At 31 December 2015
Net book amount as at 31 December 2015
Net book amount as at 31 December 2014
Vehicles and
other field
equipment
£
Office
equipment
£
161,070
(8,981)
152,089
(40,089)
(37,353)
74,647
63,761
46,452
(6,096)
104,117
26,245
(26,916)
(37,807)
65,639
9,008
47,972
15,175
(445)
14,730
—
(2,134)
12,596
5,033
3,475
(196)
8,312
2,469
—
(1,065)
9,716
2,880
6,418
Total
£
176,245
(9,426)
166,819
(40,089)
(39,487)
87,243
68,794
49,927
(6,292)
112,429
28,714
(26,916)
(38,872)
75,355
11,888
54,390
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
Depreciation charges of £27,295 (2014: £46,261) 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 2015 of £1,419 (2014: £3,666) has been
charged in ‘administrative expenses’ under ‘Depreciation.’
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 2014
Additions
At 31 December 2014 and 2015
Accumulated depreciation
At 1 January 2014
Charge for the year
At 31 December 2014
Charge for the year
At 31 December 2015
Net book amount as at 31 December 2015
Net book amount as at 31 December 2014
12 Trade and other receivables
Other receivables
Current portion
2015
£
2014
£
74,647
152,089
(65,639)
(104,117)
9,008
47,972
Field
equipment
£
Office
equipment
£
4,208
—
4,208
2,894
1,314
4,208
—
4,208
—
—
7,403
—
7,403
3,580
1,532
5,112
1,037
6,149
1,254
2,291
Total
£
11,611
—
11,611
6,474
2,846
9,320
1,037
10,357
1,254
2,291
Group
Company
2015
£
40,912
40,912
2014
£
22,709
22,709
2015
£
18,739
18,739
2014
£
13,818
13,818
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
2015
£
22,173
18,739
40,912
2014
£
4,922
17,787
22,709
2015
£
—
18,739
18,739
2014
£
—
13,818
13,818
As of 31 December 2015 the Group’s and Company’s other receivables of £40,912 (2014: £22,709) 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.
44
Notes on the Financial Statements
13 Available-for-sale financial assets
The Group had investments in equity shares as at 31 December 2015. Following assessment by the Directors of the Company, these
shares have been fully impairment to £Nil. The fair value of the investments is £Nil as at 31 December 2014 and 2015.
14 Cash and cash equivalents
Cash at bank and on hand
Short-term deposits
Group
2015
£
2014
£
Company
2015
£
2014
£
2,676,160
4,982,219
2,519,018
4,160,235
62,745
48,749
49,248
48,749
2,738,905
5,030,968
2,568,266
4,208,984
The Group’s cash at bank and short-term deposits are held with institutions with the following credit ratings (Fitch):
A
BBB-
15 Share capital
Group and Company
Issued and fully paid
Ordinary shares of 1p each
At 1 January
Issue of ordinary shares
At 31 December
Group
2015
£
2014
£
Company
2015
£
2014
£
2,616,981
4,280,358
2,519,018
4,160,235
121,924
750,610
49,248
48,749
2,738,905
5,030,968
2,568,266
4,208,984
2015
Number
2015
£
2014
Number
2014
£
492,427,105
4,924,271
401,139,497
4,011,395
178,777,273
1,787,773
91,287,608
912,876
671,204,378
6,712,044
492,427,105
4,924,271
On 2 October 2015 a total of 112,500,000 shares were issued through a private placement at a price of £0.01 per share to raise
£1,125,000 before expenses.
On 9 October 2015 a total of 42,500,000 shares were issued through a private placement at a price of £0.01 per share to raise £425,000
before expenses.
On 25 November 2015 a total of 23,777,273 shares were issued at £0.0184 per share in consideration for the purchase of the Vale dos
Sonhos mineral concession from Xstrata Brasil Mineração Ltda.
16 Share premium
Group and Company
At 1 January
Premium arising on issue of ordinary shares
Issue costs
At 31 December
2015
£
2014
£
31,095,370
26,997,998
200,300
(42,962)
4,564,389
(467,017)
31,252,708
31,095,370
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
17 Share-based payments
The Directors have discretion to grant options to the Group employees to subscribe for Ordinary shares up to a maximum of 10% of the
Company’s issued share capital. One third of options are exercisable at each six months anniversary from the date of grant, such that all
options are exercisable 18 months after the date of grant and all lapse on the tenth anniversary of the date of grant or the holder ceasing
to be an employee of the Group. 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:
Outstanding at 1 January
Forfeited
Granted
Outstanding at 31 December
Exercisable at 31 December
Number of
options
2015
£
38,300,000
(2,790,000)
13,250,000
48,760,000
30,693,333
Weighted
average
exercise
price
2015
£
0.119
0.151
Number of
options
2014
£
25,860,000
(2,010,000)
0.04
14,450,000
0.096
0.124
38,300,000
23,850,000
Weighted
average
exercise
price
2014
£
0.148
0.151
0.073
0.119
0.148
The options outstanding at 31 December 2015 had a weighted average remaining contractual life of 7.45 years (2014: 7.53 years).
The fair value of the share options was determined using the Black-Scholes valuation model.
The parameters used are detailed below.
Group and Company
Date of grant or reissue
Weighted average share price
Weighted average exercise price
Expiry date
Options granted
Volatility
Dividend yield
Option life
Annual risk free interest rate
Forfeiture discount
Marketability discount
Total fair value of options granted
2015
options
2014
options
10/06/2015
09/05/2014
2.63 pence
6.42 pence
4.00 pence
7.25 pence
09/06/2025
09/05/2024
13,250,000
14,450,000
17.3%
Nil
10 years
2.83%
—
5%
17.3%
Nil
10 years
2.83%
—
5%
£54,700
£256,786
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:
2015
Weighted
average
exercise price
(£)
2015
Number of
shares
2015
Weighted
average
remaining life
expected
(years)
2015
Weighted
average
remaining life
contracted
(years)
2014
Weighted
average
exercise price
(£)
2014
Weighted
average
remaining life
expected
(years)
2014
Weighted
average
remaining life
contracted
(years)
2014
Number of
shares
0.060
30,300,000
0.154
18,460,000
8.62
5.53
8.62
5.53
0.076
17,200,000
0.154
21,100,000
8.65
6.63
8.65
6.63
Range of exercise
prices (£)
0–0.1
0.1–0.2
46
Notes on the Financial Statements
18 Other reserves
Group
At 1 January 2014
Other comprehensive income
Currency translation differences
At 31 December 2014
Other comprehensive income
Currency translation differences
At 31 December 2015
Company
At 1 January 2014 and 31 December 2014
At 1 January 2015 and 31 December 2015
Available for sale
reserve
£
Merger
reserve
£
Translation
reserve
£
Other
reserve
£
Total
£
(230,276)
(22,730)
—
(253,006)
253,006
—
— 10,888,760
(8,470,834)
10,888,760
—
—
— (1,438,421)
(9,909,255)
10,888,760
—
—
— (7,267,732)
(17,176,987)
1,139,550
(1,048,100)
—
(22,730)
— (1,438,421)
(321,601)
(1,048,100)
—
253,006
— (7,267,732)
(7,336,327)
(1,048,100)
Merger
reserve
£
Total
£
10,888,760
10,888,760
10,888,760
10,888,760
The merger and other reserve as at 31 December 2015 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). Movements in the translation reserve are linked to the changes in the value of the Brazilian Real against Sterling: the
intangible assets of the Group are located in Brazil, and their functional currency is the Brazilian Real, which decreased in value against Sterling
in both 2014 and 2015.
19 Trade and other payables
Contingent consideration payable to former owners of Teck
Cominco Brasil S.A.
Contingent consideration payable to Xstrata Brasil Mineração
Ltda (refer note 28)
Group
2015
£
2014
£
Company
2015
£
2014
£
2,364,751
2,235,512
2,364,751
2,235,512
2,806,878
—
2,806,878
—
Total contingent consideration
5,171,629
2,235,512
5,171,629
2,235,512
Current
Trade and other payables
Amounts due to related parties (refer note 22)
Social security and other taxes
Accrued expenses
16,038
28,380
—
—
21,519
111,463
149,020
27,303
280,211
335,894
10,377
413,930
15,533
63,033
3,239
413,930
15,040
69,951
502,873
502,160
Total trade and other payables
5,320,649
2,571,406
5,674,502
2,737,672
Trade and other payables include amounts due of £65,748 (2014: £204,066) in relation to exploration and evaluation activities.
Contingent Consideration payable to the former owners of Teck Cominco Brasil S.A.
The fair value of the potential contingent consideration arrangement with the former owners of Teck Cominco Brasil S.A. 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.
Notes on the Financial Statements
47
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
As at 31 December 2015, there was a finance expense of £323,925 (2014: £173,903) 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.
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, other than during 2015 the assumed date for commencement of commercial
production was revised from 2017 to 2019. The change in the fair value of contingent consideration payable to the former owners of
Teck Cominco Brasil S.A. generated a credit to profit or loss of £194,686 for the year ended 31 December 2015 (2014: £415,072) due to
exchange rate changes in Management’s assumptions and in the functional currency in which the liability is payable.
Contingent Consideration payable to Xstrata Brasil Mineração Ltda
The contingent consideration payable to Xstrata Brasil Mineração Ltda comprises two elements: US$330,000 due after the date of
issuance of a joint feasibility study for the combined Enlarged Project areas, together with US$5,000,000 consideration as at the date
of first commercial production from any of the resource areas within the Enlarged Project area. The key assumptions underlying the
treatment of the contingent consideration the US$5,000,000 are as per those applied to the contingent consideration payable to the
former owners of Teck Cominco Brasil S.A.
As at 31 December 2015, there was a finance expense of £14,505 (2014: £Nil) 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.
20 Dividends
No dividend has been declared or paid by the Company during the year ended 31 December 2015 (2014: £Nil).
21 Earnings per share
(a) Basic
The basic earnings per share of 0.311p loss per share (2014 loss per share: 0.283p) 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
2015
£
2014
£
(1,654,552)
(1,241,936)
531,868,151
439,259,597
(b) Diluted
The basic and diluted earnings per share for the years ended 31 December 2015 and 31 December 2014 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 17.
22 Related party transactions
The following transactions took place with subsidiaries in the year:
A fee totalling £232,829 (2014: £202,045) was charged to HM do Brazil Ltda and £639,814 (2014: £475,589) to Araguaia Niquel
Mineração Ltda by Horizonte Minerals Plc in respect of consultancy services provided and funding costs.
Amounts totalling £4,919,360 (2014: £2,076,925) were lent to HM Brazil (IOM) Ltd, HM do Brasil Ltda, Araguaia Niquel Mineraçao Ltda
and Typhon Brasil Mineração Ltda to finance exploration work during 2015, by Horizonte Minerals Plc. Interest is charged at an annual
rate of 4% on balances outstanding during the year.
48
Notes on the Financial Statements
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
Typhon Brasil Mineração Ltda
Total
2015
Assets
£
845,808
—
4,725,314
28,747,037
4,605,395
253,004
2015
Liabilities
£
—
—
—
2014
Assets
£
274,678
3,848
4,493,680
— 26,916,381
—
—
3,478,592
253,004
2014
Liabilities
£
—
—
—
—
—
—
—
413,930
3,174,275
—
—
—
413,930
—
42,350,833
413,930
35,420,183
413,930
All Group transactions were eliminated on consolidation.
On 2 October 2015 a total of 112,500,000 shares were issued through the first tranche of a private placement at a price of £0.01 per
share, to raise £1,125,000 before expenses. As part of this private placement, Henderson Global Investors subscribed for 45,000,000
shares representing 40 percent of the first tranche of the private placement. By reason of its existing shareholdings in the Company, the
participation of Henderson Global Investors in the private placement of 2 October 2015 constituted a related party transaction under
AIM Rule 13 of the AIM Rules for Companies.
On 9 October 2015 a total of 42,500,000 shares were issued through the second and final tranche of a private placement at a price
of £0.01 per share, to raise £425,000 before expenses. Mr Richard Griffiths subscribed for 45,500,000 shares representing 100 percent
of the second tranche of the private placement. By reason of his existing shareholdings in the Company, the participation of Mr Griffiths
in the second tranche of the private placement of 9 October 2015 constituted a related party transaction under AIM Rule 13 of the AIM
Rules for Companies.
On 31 July 2014 a total of 50,000,000 shares were issued through a public offering in Canada, at a price of C$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 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.
23 Ultimate controlling party
The Directors believe there to be no ultimate controlling party.
24 Directors’ remuneration (including Key Management)
Group 2015
Non-Executive Directors
Alexander Christopher
David Hall
William Fisher
Allan Walker
Owen Bavinton
Executive Directors
Jeremy Martin
Key Management
Jeffrey Karoly
Group 2014
Non-Executive Directors
Alexander Christopher
David Hall
William Fisher
Allan Walker
Owen Bavinton
Executive Directors
Jeremy Martin
Key Management
Jeffrey Karoly
Notes on the Financial Statements
49
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
Aggregate
emoluments
£
Other
emoluments
£
Pension
costs
£
—
33,600
24,000
24,000
25,608
—
—
—
—
—
—
—
—
—
—
Total
£
—
33,600
24,000
24,000
25,608
149,000
1,950
39,104
190,054
99,000
355,208
—
1,950
48,656
87,760
147,656
444,918
Aggregate
emoluments
£
Other
emoluments
£
Pension
costs
£
—
44,008
24,000
24,000
24,000
—
—
—
—
—
—
—
—
—
—
Total
£
—
44,008
24,000
24,000
24,000
146,000
66,442
44,312
256,754
99,000
361,008
20,000
86,442
47,943
92,255
166,943
539,705
The Company does not operate a pension scheme. Pension costs comprise contributions to Defined Contribution pension plans held
by the relevant Director or Key Management.
25 Employee benefit expense (including Directors and Key Management)
Group
Wages and salaries
Social security costs
Indemnity for loss of office
Share options granted to Directors and employees (note 17)
Management
Field Staff
Average number of employees including Directors and Key Management
2015
£
844,343
198,064
55,216
100,248
2014
£
916,650
266,136
29,227
125,107
1,197,871
1,337,120
6
26
32
6
25
31
Employee benefit expenses includes £586,348 (2014: £502,706) of costs capitalised and included within intangible non-current assets.
Share options granted include costs of £81,883 (2014: £53,379) relating to Directors.
50 Notes on the Financial Statements
26 Investment in subsidiaries
Company
Shares in Group undertakings
Loans to Group undertakings
2015
£
2014
£
2,348,042
2,348,042
42,350,832
35,420,183
44,698,874
37,768,225
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 one year and are renewable at the end of the lease period at market rate. The leases can be cancelled by payment of up to one month’s
rental as a cancellation fee. The lease payments charged to profit or loss during the year are disclosed in note 6.
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Group
Not later than one year
Total
Capital Commitments
Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows:
Group
Intangible assets
2015
£
46,596
46,596
2015
£
42,100
2014
£
22,201
22,201
2014
£
7,004
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.
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
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28 Contingent Liabilities
(a) Glencore Araguaia Project
On 28 September 2015 the Company announced that it had reached agreement to indirectly acquire through wholly owned subsidiaries
in Brazil the advanced high-grade Glencore Araguaia nickel project (‘GAP’) in north central Brazil. GAP is located in the vicinity of the
Company’s Araguaia Project.
Pursuant to a conditional asset purchase agreement (‘Asset Purchase Agreement’) between, amongst others, the Company and Xstrata
Brasil Exploraçâo Mineral Ltda ('Xstrata'), a wholly-owned subsidiary of Glencore Canada Corporation ('Glencore'), the Company has
agreed to pay a total consideration of US$8 million to Xstrata, which holds the title to GAP. The consideration is to be paid according the
following schedule;
> US$2,000,000 in ordinary shares in the capital of the Company (the ‘Initial Consideration Shares’), split between the SdT and VdS
deposit areas and payable on the relevant closing date for such deposit area. The closing date is linked to the date on which the
Company or a subsidiary of it is registered as holder of such deposit areas by the National Department of Mineral Production of Brazil
(‘DNPM’), the deadline for which can be extended after 6 months at the option of the Company for a period of up to a year from the
date of the signing of the Asset Purchase Agreement. The transfer of the mineral concession for the VdS deposit area from Xstrata
was completed in November 2015 and following approval received at a general meeting of its shareholders convened on 25 November
2015, Initial Consideration Shares to the value of US$660,000 were issued to Xstrata. As at 31st December 2015, the registration of
the transfer of the mineral concession for the SdT deposit area from Xstrata to a subsidiary of the Company had not been completed
by the DNPM. Should this take place within the deadlines outlined above, at the time of closing the Company will issue the Initial
Consideration Shares to Xstrata to the value of US$1,340,000 at a price per Initial Consideration Share equal to the 5 day volume
weighted average share price on AIM taken on the business day prior to the relevant closing. As such no provision has been made until
such time as registration of the transfer has been completed.
> US$1,000,000 after the date of issuance of a joint feasibility study for the combined Araguaia & GAP project areas, to be satisfied
in HZM Shares (at the 5 day volume weighted average price taken on the tenth business day after the date of such issuance) or
cash, at the election of the Company. Following transfer of the concession for the VdS deposit area to a subsidiary of the Company,
US$330,000 of this US$1,000,000 has been included in contingent consideration payable; and
> The remaining US$5,000,000 consideration will be paid in cash, as at the date of first commercial production from any of the resource
areas within the Enlarged Project area. Following transfer of the concession for the VdS deposit area to a subsidiary of the Company,
this has been included in contingent consideration payable.
The SdT deposit area concessions are subject to on-going litigation with a Brazilian third party. Glencore has disputed these claims.
The parties have agreed certain protections including the receipt by HZM from Glencore of certain indemnities in respect of such litigation.
The Asset Purchase Agreement contains customary warranties regarding the GAP project and the parties' ability to enter into
the Proposed Transaction and is subject to customary termination rights and confidentiality obligations.
(b) Other Contingencies
The Group has received a claim from various trade union organisations in Brazil regarding outstanding membership fees due in relation
to various subsidiaries within the Group. Some of these claims relate to periods prior to the acquisition of the relevant subsidiary and
would be covered by warranties granted by the previous owners at the date of sale. The Directors are confident that no amounts
are due in relation to these proposed membership fees and that the claims will be unsuccessful. No subsequent actions, claims or
communications from the various trade union organisations have been received subsequent to the requests for payment. As a result, no
provision has been made in the Financial Statements for the year ended 31 December 2015 for amounts claimed. Should the claim be
successful, the maximum amount payable in relation to fees not subject to the warranty agreement would be approximately £64,000.
In 2013 the Group received an infraction notice from the Brazilian Environmental Agency’s (’IBAMA‘) district office in Conceição do
Araguaia in connection with carrying out drilling activities in 2011 without the relevant permits. Drilling equipment was furthermore
impounded. The Group strongly believes that it operated with all necessary permits and has initiated legal proceedings to overturn the
infraction notice. The Group has secured cancellation of the injunction and has appealed the associated fine of approximately £22,000.
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.
52
In December 2014 the Group received a writ from the State Attorney in Conceiçao do Araguaia regarding alleged environmental damages
caused by drilling activities in 2011. To ensure proper environmental stewardship, the Group conducts certified baseline studies prior
to all drill programmes and ensures that areas explored are properly maintained and conserved in accordance with local environmental
legislation. After drilling has occurred, drill sites and access routes are rehabilitated to equal or better conditions and evidence is retained
to demonstrate that such rehabilitation work has been completed. In January 2015 the Group filed a robust defence against the writ.
A court hearing was held in May 2015 at which documents were requested to confirm that valid environmental authorisations were in
place. These were subsequently submitted as requested. No substantive financial claim continues to be made against the Group under
the terms of the writ. The Group continues to believe that the writ is flawed and is working towards having it withdrawn in due course.
As a result no provision has been made in the Financial Statements for the year ended 31 December 2015.
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 profit for the year was £311,625 (2014: £226,045 loss).
30 Events after the reporting date
No significant events have occurred since the reporting date.
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 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)2077 637 157
E. info@horizonteminerals.com
www.horizonteminerals.com