Horizonte Minerals PLC Annual Report 2016
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Horizonte Minerals
is an AIM and TSX listed
nickel development company
focussed in Brazil.
Company Overview
01 2016 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
21 Statement of Directors’
Responsibilities
22 Corporate Governance Report
Financial Statements
23 Independent Auditor’s Report
25 Consolidated Statement
of Comprehensive Income
26 Consolidated Statement
of Financial Position
27 Company Statement
of Financial Position
28 Statements of Changes in Equity
29 Consolidated Statement
of Cash Flows
30 Company Statement of Cash Flows
31 Notes to the Financial Statements
57 Statutory Information
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2016 Highlights
During 2016, Horizonte Minerals plc (’the Company‘) achieved four key milestones which place it in
a strong position to capitalise on any shift in sentiment towards development stage nickel projects.
Firstly, our low-cost acquisition of the adjacent nickel project from Glencore was a game-changer for
Horizonte enabling the integration of additional resource into our existing Araguaia project. Secondly.
In May of 2016 Horizonte Minerals successfully obtained the Preliminary Environmental Licence for
the Araguaia project. A key milestone was achieved with the release a revised Pre-Feasibility Study
(’PFS‘) on the enlarged Araguaia Project (the ’Project‘) in October 2016. Finally we ended the year with
a successful fundraise of £9 million in December to fund the Feasibility Study, that will define how the
enlarged Araguaia project is moved toward production.
We are pleased with the positive results from the PFS which delivered a post-tax Net Present Value
NPV8 of US$328M and an Internal Rate of Return (‘IRR’) of 19.3% based on a long-term nickel price
of US$12,000/t. If we use the banks’ consensus mid-term nickel price of US$14,000/t, the NPV
increases to US$581M with an IRR of 26.4% showing the significant gearing that is available with
any future increase in nickel prices. Importantly the PFS demonstrates that the Project is cash flow
positive at today’s nickel prices which puts Araguaia within a limited group of global nickel assets that
are considered viable in the current low price nickel environment. The value is demonstrated in this
new PFS which now has an overall grade for the first 10 years of mining averaging 1.96% nickel and
the Life Of Mine (‘LOM’) grade over 28 years averaging 1.77% nickel which places the Project firmly in
the upper quartile of the global grade curve for this type of deposit.
The Project is expected to generate US$1.3 billion in free cash flow over the LOM with the planned
operation producing around 14,500 tonnes per year of nickel in ferronickel at a grade of 30% utilising
the proven Rotary Kiln Electric Furnace (’RKEF‘) process.
“The next major milestone in the development of
Araguaia is the Feasibility Study which started
in earnest in March 2017 having appointed
key consultants to undertake the work.
In parallel with this we will be looking at the
development funding options available as well
as offtake partners.”
We believe that the timeline for the development of Araguaia is well aligned with the market’s
expectation of an increase in nickel price over the mid-term. Future demand looks robust with
predicted growth running between 2% and 4% this year and demand is anticipated to outpace supply,
ensuring that Araguaia is a compelling project to generate value for shareholders. This, combined with
strong economic fundamentals, confirms that Araguaia is well positioned to be one of the next major
nickel projects to be developed.
In December, the Company announced a successful fundraise totalling £9 million. This was supported
by the principle existing shareholders; Henderson Global Investors, Richard Griffiths, City Financial and
Teck, with the addition of two new significant institutions; JP Morgan and Hargreave Hale. Following
the fundraise these groups now hold, 14.1%, 14.5%, 5.6%, 17.9%, 8.4% and 6.4% of the share capital
respectively. This represents a very strong shareholder register and is a great endorsement for the
Company going forwards. The funds will be used to complete the Feasibility Study during 2017.
Jeremy Martin CEO
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 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 RKEF process to produce 14,500
tonnes per annum of nickel in a 30% grade
ferronickel product.
In 2016 the Company completed the
acquisition of the Glencore Project from
Xstrata and successfully integrated it with
the existing Araguaia project.
A new PFS for the enlarged Araguaia
project was published in October 2016,
which highlighted a positive NPV8 of
US$328m using a nickel price of $12,000/t.
The project is moving into the Feasibility
Study stage with an anticipated completion
planned for the end of 2017
Panoramic of the northern section of the 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 south of the Carajas Mining district in northern Brazil, with good access to infrastructure
> Transaction with Glencore completed in 2016 to acquire neighbouring Vale dos Sonhos deposit places enlarged project
among the largest high grade nickel saprolite projects globally
> Updated NI 43-101 compliant PFS issued during 2016, showing the following:
• Robust economics based on a 28 year LOM producing ~14,500 tonnes per annum (‘TPA’) nickel in ferronickel from a
single line RKEF.
• Post tax NPV8 of US$581 million at a nickel price of US$14,000/t and an NPV8 of US$328 million at US$12,000/t Ni
• Post tax IRR of 26.4% at US$14,000/t and 19.3% at US$12,000/t Ni
• Project is expected to generate US$1.3 billion in free cash flow over LOM at US$12,000/t Ni
• High grade ore with average nickel grade of 1.96% for the first 10 years of production
• Project on the lower range of the global cost curve with C1 cash costs of US$3.15/lb Ni (US$6,948/t Ni)
• 43-101 Proven and Probable Mineral Reserve Estimate of 24.6 Mt grading 1.77% Ni
• Established permitting pathway with Preliminary Licence successfully obtained.
Our Year in Review
February 2016
Four new exploration concessions awarded to Horizonte
May 2016
Preliminary Environmental Licence granted by State Government of Para, for the
Araguaia Project and process plant
July 2016
Three additional new exploration concessions awarded to Horizonte expanding its land
position in the Araguaia belt
August 2016
Completion of the ‘Glencore Araguaia Project — GAP’ to acquire adjacent
advanced project
October 2016
Updated Pre-Feasibility Study report published highlighting robust economics of the
enlarged Araguaia project
December 2016
£9.0 million before expenses raised by way of placing to fund the Feasibility Study on
the Araguaia project
POST PERIOD END
January 2017
Appointment of Feasibility Study manager and commencement of tender process to
appoint key consultants for the Feasibility Study
Sustainability team submitted new environmental permit requests to ensure progress
continues towards our Installation Licence for the Araguaia project.
March 2017
Appointment of key consultants and formal commencement of the PFS process
Vale do Sonho farm containing
nickel deposit acquired
from Glencore
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 4
Chairman’s Statement
Chairman’s Statement David J Hall
Dear Shareholders
2016 was a significant year for Horizonte
which saw us achieve numerous major
milestones at our Araguaia Nickel Project
in Brazil. These include the delivery of a
Pre-Feasibility Study (‘PFS’), the receipt
of our Preliminary Environmental Licence,
and raising the funds to deliver a Feasibility
Study in 2017. We are now focussed on
taking this project up the value curve,
through the Feasibility Study process and
into development as one of the lower
cost ferronickel operations in the market,
benefitting from its high grade resource
and low capital intensity.
Our updated PFS demonstrates that the
enlarged Araguaia Project is one of the
largest and highest grade undeveloped
nickel saprolite resources globally. It will
generate US$1.3 billion in free cash flow
over the Life of Mine (‘LOM’) considering
an estimation of $12,000/ tonne long term.
Having combined Glencore’s adjacent
nickel project with our own Araguaia
project in a low-cost acquisition which was
completed in 2016, the new compelling
economics highlight a post-tax NPV of
U$328 million and IRR of 19% based on
a long-term nickel price of US$12,000/t.
Using the bank’s consensus of a mid-
term nickel price of US$14,000/t, the NPV
increases to US$581 million with an IRR
of 26.4% showing the significant gearing
that is available with any future increase in
nickel prices.
Photo showing the company office and facilities where the Feasibility will be run
from in the northern part of the project
Once developed, Araguaia, is expected to
produce around 14,500 tonnes of nickel
per year, with a resource that is now a
Tier 1 world class asset in terms of size
and grade. The value is demonstrated in
this updated PFS which now shows an
average grade for the first 10 years of
mining of 1.96% nickel, and the life of mine
grade over 28 years averaging 1.77% nickel.
This places the project firmly in the upper
quartile of the global grade curve for this
type of deposit.
the
PFS
significantly
also
Most
demonstrates that Araguaia is cash flow
positive at today's nickel prices, which
puts the project within a limited group of
global assets that are considered viable in
the current low nickel price environment.
The start of 2016 saw nickel prices at a
13 year low of US$7,750/t, however after
base metals rallied in the last quarter
of 2016, many banks and analysts raised
their 2017 forecasts for nickel. There are
multiple reasons for this including the
United States of America’s ambitious
infrastructure spending plans which are
expected to boost global metal demand
growth over the coming years, coupled
with the closing of multiple nickel mines
which will slow market growth and
curtail supply.
Morgan Stanley and Credit Suisse both
picked nickel as its number one metal
for 2016. Wood Mackenzie have cited
that the "optimistically resurgent Chinese
stainless market" will be the contributing
factor to the predicted favourable pricing
fundamentals and Macquarie has stated
that nickel use in batteries could more than
double over the next 10 years. Now is the
time to be developing the next generation
projects at the low-price range to create
maximum value. We are targeting nickel
production from Araguaia by 2019 which
aligns the project ideally with this predicted
increase in nickel price over the mid-term,
offering leveraged exposure to one of the
world’s next major nickel mines at the
optimum time.
Another testament to the quality of
Araguaia, is that we successfully raised £9
million in November 2016 from institutions
in both the UK and Canada to fund the
Feasibility Study. As a result, we were
delighted to welcome two new significant
institutional
investors, JP Morgan and
Hargreave Hale, to our already strong
shareholder register which also includes
Teck, Henderson, City Financial, Richard
Griffiths. I believe that the calibre of this
group of cornerstone investors is a strong
endorsement for a company of our size.
Eager to move forward we appointed a
Feasibility Study Manager in January 2017.
With a high calibre nickel development team
(ex Falconbridge; Xstrata; Anglo American)
already
in place we believe Wagner
Oliveira will be a valuable addition to our
team, bringing considerable experience
in the nickel arena having worked with
its Barro Alto
Anglo American plc on
ferronickel operation and prior to this at
the Codemin ferronickel plant in Brazil.
We have already finalised the selection of
the engineering groups to undertake the
Feasibility Study with a view to delivering
the full report by the end of 2017. Having
been granted the Preliminary Licence in
2016 which demonstrated the Pará State
government’s confidence in the credibility
and viability of Araguaia, we have been
able to progress the work towards the
Installation Licence which we will apply for
this year, the receipt of which will permit
the construction of the project.
Conclusion
As a team, I am proud that we have taken
Araguaia from a grassroots discovery up
the development curve to where we stand
today, about to embark on a Feasibility
Study for one of the largest nickel projects
in the world. Despite difficult nickel pricing,
2016 was a year of growth for Horizonte
and the year ahead will see us transform
into a near-term nickel producer, taking
advantage of the forecasted rise in the
price of the metal. I would like to take this
opportunity to thank the Horizonte Board
and Management team for their continued
hard work towards the development of
your company and I look forward to the
year ahead with great confidence.
David J Hall
Chairman
16 March 2017
Chairman’s Statement
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Horizonte Technical team visiting Anglo American's Barro Alto nickel mine
Planning hydrology testwork programme
Serra do Tapa drill core samples
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 6
Operations Review
Operations Review Jeremy Martin
Araguaia Nickel Project
Pre-Feasibility Study
In October 2016, the Company announced the results of its recently undertaken
Pre-Feasibility Study on the enlarged Araguaia nickel Project. The Project, which is 100%
owned by Horizonte, is located on the eastern margin of the State of Pará, north-eastern
Brazil, to the north of the town of Conceição do Araguaia (population of 46,206), south
of the main Carajás Mining District. The Project has good regional infrastructure including
a network of Federal highways and roads, with access to low tariff hydro-electric power.
The Carajás Mining District, situated approximately 200km northwest of the Project, is host
to a number of major iron and copper mines operated by mining major Vale SA. The report
considers open pit mining for the exploitation of nickel laterite to establish the production of
run of mine (‘ROM’) from eight open pits to supply a targeted 0.9 million tonnes per annum
(‘Mt/a’) of ore to a processing and smelter facility.
This facility will use the proven RKEF process with the product being sold at free on board
(‘FOB’) at the selected port of export. A Base Case of 0.9 Mt/a production throughput was
selected because of the Company’s objective to minimise the capital expenditure and
overall capital intensity, and to optimise overall cash flow, payback, and the economics of
the Project. Opportunity exists to increase production subject to further engineering and
there is potential to increase the mineral reserve base.
A summary of the results is included below:
Nickel price
NPV8 post tax
IRR post tax
Initial mine life
Capital Costs – pre-production
C1 costs
Free cash flow over LOM (after capital payback)
Payback period (After taxation)
Breakeven Ni price on NPV8 post tax
Targeted Production per annum
Average Ni grade – Year 1 to 10
Product grade quality
$12,000/t
$328M
19.3%
28 years
$354M
$3.15/lb
$6,948/t
$1,259M
4.5 years
$9,426/t
$14,000/t
$581M
26.4%
28 years
$354M
$3.15/lb
$6,948/t
$1,946M
3.4 years
$9,426/t
~ 14,500tpa
~ 14,500tpa
1.96%
1.96%
30% Ni in FeNi
30% Ni in FeNi
Mineral Resources
Mineral Resources reported for the Project deposits, which are included in the PFS, were
prepared under the supervision of Mr. Andrew F. Ross BSc (Hons), MSc, FAusIMM, an Inde-
pendent Qualified Person as defined in NI 43-101.
A total of 46,000 meters (1,786 holes) of core drilling have been completed to date on
the Horizonte Araguaia Nickel Project HZMA and 28,860 meters (839 holes) of core drilling
completed on the Vale dos Sonhos deposit in the Glencore Araguaia Project “GAP”. Of this a
total of 40,330 meters (1,494 holes) from HZMA and 28,860 meters (839 holes) from GAP
were used in the Mineral Resource Estimation reported in the PFS.
Ferronickel production at the
Morro Azul test facility
Araguaia North coreshed
acquired from Glencore
Operations Review
7
Mineral Resources for the combined HZMA and GAP as at September 2016 by material type (0.90% Ni cut-off grade)
Araguaia
Category
Material type
Tonnage (kT)
Bulk density
(t/m3)
Contained Ni
metal (kT)
Subtotal
Subtotal
Subtotal
Total
Subtotal
Subtotal
Subtotal
Total
Total
Subtotal
Subtotal
Subtotal
Total
Measured
Measured
Measured
Measured
Indicated
Indicated
Indicated
Indicated
Measured
+
Indicated
Inferred
Inferred
Inferred
Inferred
Limonite
Transition
Saprolite
All
Limonite
Transition
Saprolite
All
All
Limonite
Transition
Saprolite
All
1,232
6,645
10,291
18,168
19,472
31,143
51,279
101,893
1.39
1.26
1.40
1.35
1.40
1.20
1.32
1.30
15
116
130
261
218
444
610
1,272
Ni
(%)
1.20
1.75
1.27
1.44
1.12
1.43
1.19
1.25
Fe
(%)
37.43
18.89
12.03
16.26
36.02
MgO
(%)
2.00
10.20
24.08
17.51
2.39
21.39
11.24
SiO2
(%)
17.15
42.06
41.24
39.91
20.53
38.92
11.82
25.79
40.58
19.40
16.87
36.24
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120,061
1.30
1,533
1.28
18.93
16.97
36.80
2,837
4,955
5,643
13,435
1.37
1.20
1.35
1.30
31
65
65
161
1.08
34.80
1.31
21.20
11.80
1.16
1.20
2.97
11.11
24.31
23.05
39.05
41.80
36.83
20.12
14.94
Mineral Reserves
Mineral Reserves reported for the Project deposits, which are included in the PFS were established by Snowden in accordance with the
CIM Definition Standards using only Indicated and Measured Resources, under the supervision of Mr. Frank Blanchfield B.Eng, FAusIMM,
an Independent Qualified Person as defined in NI 43-101. A Mineral Reserve estimate of 24,646.6 kt (dry) at an average grade of 1.77%
Ni was estimated. The detailed breakdown of the Mineral Reserve allocated by deposit is presented in the following table:
Class
Probable
Probable
Probable
Probable
Probable
Probable
Probable
Deposit
Baião
Pequizeiro
Pequizeiro West
Jacutinga
Vila Oito East
Vila Oito
Vila Oito West
Probable
VDS
Total Probable
Proven
Total Proven and Probable
Ore dry mass (kt)
2,381
11,828
165
1,198
1,190
2,449
549
4,886
24,646
Ni
(%)
1.80
1.73
1.67
1.82
1.64
1.79
1.73
1.85
1.77
Fe
(%)
18.7
16.8
19.7
16.7
15
14.2
20.3
22.7
17.9
Al2O3
(%)
SiO2/MgO
4.93
5.91
4.47
3.16
3.74
3.62
5.04
6.28
5.39
2.52
2.83
3.58
2.16
1.99
2.05
3.65
2.72
2.58
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24,646
1.77
17.9
5.39
2.58
A nickel spot price of US$12,000/tonne was used in the Mineral Reserve estimate. The Mineral Reserve estimate resulted in a marginal
cut-off grade of 1.28% Ni.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 8
Operations Review
Operations Review continued
Mining
Seven shallow open pits were designed for HZMA and one for GAP through a process of pit optimisation using costs and process
recoveries. All eight pits are designed using smoothed pit shells with the removal of small satellite pits through a standard process of pit
optimisation, waste dump design and pit design.
To minimise capital, the Base Case also assumes contractor mining using typical truck and excavator fleet which includes ore haulage to
the plant. This fleet is supported by the usual array of support and ancillary equipment. Grade and mineralogy will be closely monitored
in the mining process using close spaced grade control drilling ahead of mining.
High grade nickel feed is targeted in the early years of production. The average nickel grade of the feed to the plants is as follows:
> Years 1 to 5 — average grade 2.0% Ni
> Years 6 to 10 — average grade 1.9% Ni
> Years 11 to 28 — average grade 1.7% Ni
A number of processing constraints were applied to the schedule. These included a 13-month processing feed quantity ramp-up period,
and specific process feed grade constraints throughout the life of the Project:
> Fe grade between 15.0% and 18.0%
> Al2O3 grade between 4.0% and 5.5%
> SiO2/MgO ratio between 2.2 and 2.6
Pits
Horizonte Minerals base in Araguaia South
Operations Review
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Processing
The Company completed laboratory scale test work between 2011 and 2013 which
included batch smelting test, slag testing, agglomeration behaviour of the ore, Liquidus
measurement of FeNi slag under conditions corresponding to electric furnace smelting,
performance of the nickel laterite in rotary kiln processing and evaluation of briquetting
behavior. These laboratory tests carried out showed that the ore was suitable for
processing using the RKEF process.
Pilot plant testing of the drying and agglomeration step and piloting of the full RKEF
process flowsheet (excluding refining) to confirm final operating characteristics were
recommended in the 2014 PFS report. This pilot testing was carried out in the first and
second quarters of 2015.
Pilot plant
A fully integrated pilot test of the RKEF process comprising ore preparation, drying
and agglomeration, calcination and electric furnace smelting, including slag and metal
granulation, was carried out in April/May 2015. The pilot test work facility at the Morro
Azul plant in the State of Minas Gerais, Brazil was used for the test. A total of 160 wet
tonnes of ore, representative of the planned operational feed, were processed. This ore
was collected from selected sites within the Pequizeiro deposit in a bulk sampling exercise
in early 2015 using wide diameter auger drilling.
Highlights from the pilot plant campaign include:
> Production of high grade commercial FeNi from representative ore
> Drying and agglomeration produced excellent feed for calcination
> Good quality calcine continuously produced with very low dust generation and good
prereduction of iron and nickel
> High quality FeNi produced over the target range of commercial Ni grades
> No critical flaws were identified in the process flow sheet
> A full set of technical data was produced and included in the PFS process study
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 10
Operations Review
Operations Review continued
Social and Environmental
The areas within the Project are located 100% within the Pará State, therefore the Project will continue to be permitted by the State
Environmental Agency for the majority of environmental permits. The Brazilian mine permitting process with environmental agencies
generally has three key stages:
> The recently obtained preliminary licence (‘LP’);
> The installation licence (‘LI’), which permits the start of construction;
> Finally, the licence to operate once construction is complete (‘LO’).
The granting of the LP is often regarded as the most important licence as it outlines the parameters of the Project as agreed upon by
all stakeholders and is the only environmental licensing process that requires approval of the State Government Environmental Council.
The Council awarded the LP to Horizonte Minerals in May 2016 with unanimous approval by all present councillors.
Integration and completion of Glencore Araguaia Project
Planned Vale Dos Sonhos pit
Transaction Overview
The transaction completed during 2016 following the final and complete transfer of the advanced Glencore Araguaia Project (‘GAP’)
located to the north of Horizonte’s existing project in central Brazil. This was a major achievement and a game changing transaction for
Horizonte, as the GAP 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 company has successfully delivered a PFS on the Enlarged Project, which highlights a shorter capital repayment period and a lower
breakeven nickel price while offering operational flexibility for increased annual production in the future. The additional resources and
higher nickel grades included in the first 10 years of mine life, as determined by the updated PFS, significantly improved the economics
of 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 which was split between the deposit areas comprising
GAP. US$660,000 was paid in shares to a subsidiary of Glencore during 2015 and the transfer of the Serra do Tapa and Pau Preto
deposit areas (together: ‘SdT’) during 2016 initiated the final completion of the transaction with a further US$1,340,000 shares in
the Company issued to Glencore.
> US$1,000,000 remains payable and becomes due 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
> A further 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
Araguaia or GAP areas.
Operations Review
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Next Phase of Project Development
Following the publication of the updated Pre-Feasibility Study during 2016 including the newly acquired Glencore Araguaia Project
(‘GAP’), the Company intends to work towards completing a Feasibility Study for the Araguaia project. Work on this has already com-
menced around the end of 2016, with the appointment of key consultants and a Feasibility Study manager in early 2017.
The data collection programme for the Feasibility Study will commence in May 2017 and will comprise; geotechnical and hydrogeological
programme, trial mining, crushing and screening test together with additional test work to enhance the process flow sheet.
Permitting
The Company will now focus on moving the project to ‘construction ready’ with all relevant permits in place and adherence to both
Brazilian and international sustainability standards. The key permits required to move to ‘construction ready’ phase include:
> Final exploration report with Federal Mining agency DNPM for mine and infrastructure areas;
> Approved Economic Mine Plan and Mining Servitude by DNPM;
> The Installation Licence (’LI‘), which once awarded, in parallel with the mining concession, allows construction to start;
> Integration of Vale dos Sonhos into the mining and environmental permitting schedules;
> Mining concession once all above permits obtained.
In addition to this, the company will commence the permitting of the energy line in 2017.
Horizonte will also work in partnership with the State Government of Pará and local university to undertake studies identifying
possibilities for use of the slag from Araguaia and potential local industries, which could benefit from the final ferronickel product.
The objective of the Company’s Sustainability Department in 2017 will be to collect new baseline data, particularly for the recently
acquired Vale dos Sonhos project area, and integrate the environmental and social data for the project, to provide one holistic analysis
of combined social and environmental impacts. The Feasibility Study will be based on international standards, such as the International
Finance Corporations Environmental and Social Performance Standards and the Equator Principles.
With a full permitting schedule planned for 2017, the sustainability team took proactive action by submitting new environmental permit
requests, including the exploration Operational Licence for Vale dos Sonhos and the fauna and flora licence for the enlarged Araguaia
project in late 2016. Approval of these permits are expected in H1 2017.
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Strategic Report
Strategic Report
The Directors of the Company and its sub-
sidiary undertakings (which together com-
prise ‘the Group’) present their Strategic
Report for the year ended 31 December
2016.
Review of the Business
The Group is focussed on the development
of the enlarged Araguaia nickel project,
in Brazil.
Aims, Strategy & Business Plan
The Group’s aim is to create value for
shareholders through the development of
the Araguaia Project through to feasibility
stage and into development.
The Group’s strategy is to continue to prog-
ress the development of the 100% owned
Araguaia project and to consolidate the
Group’s existing landholdings in the Ara-
guaia 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 advance the
combined and newly integrated Glencore
Araguaia Project (‘GAP’) and Araguaia proj-
ects (together the ‘Enlarged Project’) and
enhance shareholder value. The first step is
to undertake a Feasibility Study, which will
be a further milestone in progressive de-
velopment and de-risking of the Araguaia
project and has been the core focus of the
Group since the acquisition of Araguaia in
August 2010.
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 of-
fice 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 plac-
ings. As the Group continues to develop
its projects, there may be opportunities to
obtain funding through other financial in-
struments, including royalty, debt or other
arrangements with strategic parties.
Principal Risks and Uncertainties
Set out below are the principal risks and
uncertainties facing the Group:
Exploration risks
The exploration and mining business is
controlled by a number of global factors,
principally supply and demand which in
turn is a key driver in global metal prices;
these factors are beyond the control of the
Group. Exploration is a high-risk business
and there can be no guarantee that any
mineralisation discovered will result
in
proven and probable reserves or go on
to be an operating mine. At every stage
of the exploration process the projects
are rigorously reviewed, both internally
and by qualified third party consultants
to determine if the results justify the
next stage of exploration expenditure,
ensuring that funds are only applied to high
priority targets.
Garnierite is a nickel ore which has formed as a result of lateritic weathering of ultramafic rocks
Strategic Report
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Title risk
The Group’s current and future operations
will require approvals and permits from
various federal, state and local govern-
mental authorities, and such operations
are and will be governed by laws and reg-
ulations governing prospecting, develop-
ment, mining, production, taxes, labour
standards, health, waste disposal, toxic
substances, land use, environmental pro-
tection, mine safety and other matters.
There is no assurance that delays will not
occur in connection with obtaining all nec-
essary renewals of such approvals and
permits for the existing operations or addi-
tional approvals or permits for any possible
future changes to operations. Prior to any
development on any of its properties, the
Group must receive permits from appropri-
ate governmental authorities. There can be
no assurance that the Group will continue
to hold all permits necessary to develop or
continue operating at any particular prop-
erty or obtain all required permits on rea-
sonable terms or on a timely basis.
Uninsured risk
The Group, as a participant in exploration
and development programmes, may be-
come 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 vari-
ety of risks and hazards that are beyond its
control, including geological, geotechnical
and seismic factors, environmental haz-
ards, industrial accidents, occupation and
health hazards and weather conditions or
other acts of God.
Financial risks
The Group’s operations expose it to a va-
riety of financial risks, particularly relating
to foreign currency exchange rates as a re-
sult of the Group’s foreign operations. The
Group has a risk management programme
in place that seeks to limit the adverse ef-
fects of these risks on the financial perfor-
mance of the Group.
Details of the Group’s financial risk man-
agement objectives and policies are set out
in note 3 to the Financial Statements.
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 and reserves estimates
The Group’s reported resources and re-
serves are only estimates. No assurance
can be given that the estimated resourc-
es 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 peri-
ods based on further drilling or actual pro-
duction experience.
Any future resource figures will be esti-
mates and there can be no assurance that
the minerals are present, will be recovered
or that they can be brought into profitable
production. Furthermore, a decline in the
market price for natural resources, partic-
ularly nickel, could render reserves con-
taining relatively lower grades of these
resources uneconomic to recover.
Country risk
The Group’s licences and operations are
located in foreign jurisdictions. As a result,
the Group is subject to political, economic
and other uncertainties, including but not
limited to, changes in policies or the per-
sonnel administering them, appropriation
of property without fair compensation,
cancellation or modification of contract
rights, royalty and tax increases and other
risks arising out of foreign governmental
sovereignty over the area in which these
operations are conducted.
Brazil is the current focus of the Group’s
activity and offers stable political frame-
works and actively supports foreign invest-
ment. It has a well-developed exploration
and mining code with proactive support for
foreign companies. Brazil remains in a re-
cession and the overall economic environ-
ment remains challenging.
Volatility of commodity prices
Historically, commodity prices (including in
particular the price of nickel) have fluctu-
ated and are affected by numerous factors
beyond the Group’s control. The aggregate
effect of these factors is impossible to
predict. Fluctuations in commodity prices
in the long-term may adversely affect the
returns of the Group’s exploration projects.
A significant reduction in the global de-
mand 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 posi-
tion of the Group.
Financing
The successful exploration of natural re-
sources on any project requires significant
capital investment. The Group currently
sources finance through the issue of ad-
ditional 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. As
the Group is currently in the exploration
stage it does not generate revenues and is
therefore reliant on its cash resources and
obtaining additional financing to funds its
operations, should the cash resources de-
plete and should there be a lack of available
financing alternatives the Group may find it
difficult to fund its working capital.
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 person-
nel, the retention of their services cannot
be guaranteed. The development and suc-
cess of the Group depends on the ability to
recruit and retain high quality and experi-
enced staff. The loss of service of key per-
sonnel 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.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 14
Strategic Report
Financial Performance Review
The Group is not yet producing minerals and so has no income other than bank interest. Consequently, the Group is not expected to
report profits until it disposes of or is able to profitably develop or otherwise turn to account its exploration and development projects.
The principal financial key performance indicators (‘KPIs’) monitored by the Board concern levels and usage of cash.
The three main financial KPIs for the Group allow it to monitor costs and plan future exploration and development activities and are
as follows:
Cash and cash equivalents
Administrative expenses as a percentage of Total assets
Exploration costs capitalised as intangible assets during the year
2016
2015
£9,317,781
£2,738,905
2.4%
3.7%
£2,265,831
£5,715,108
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 including the cost of acquisition of the
Glencore Araguaia Project, which concluded during 2016.
At 31 December 2016, the Group’s intangible assets had a carrying value of £32,017,796.
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 significant reportable incidents in the current or prior year.
Operational performance
Integration of the Glencore Araguaia Project into the existing portfolio and the publication of the revised Pre-Feasibility Study on the
enlarged project were successfully completed during the year.
Fundraising
On 30 November 2016, a total of 374,000,000 new ordinary shares were issued through a private placement in the United Kingdom and
on 2 December 2016 a total of 76,000,000 shares were issued through a non-brokered private placement in Canada, both placements
were undertaken a price of £0.02 per share to raise £9,000,000 before expenses.
By order of the Board
Simon Retter
Company Secretary
16 March 2017
View looking south across the project area
Financial Report
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Financial Report Simon Retter
Loss for the year
The loss for the year increased slightly to
£1,746,334 from £1,544,699 in 2015 due
to an overall reduction in cost base during
the year offset by adverse foreign ex-
change movements during the year.
The Group has continued to keep a tight
control on its administrative costs, which
increased in the year by £144,730 to
£1,009,622, any savings obtained by cost
reduction were unfortunately offset by
adverse effects of foreign exchange move-
ments due to the strengthening USD and
BRL which increased the administrative
costs in Brazil.
During the year, the group recognised a
prior year restatement as a result of ad-
justments to the carrying value of deferred
tax assets, deferred tax liabilities and the
carrying value of contingent consideration.
The net effect of these is to increase the
net assets on the opening balance sheet
by £91,532. During 2016 there was an
increase in the value of the contingent
consideration during the year which is also
denominated in USD resulting in a loss of
£260,632 compared with a £26,969 loss in
the prior year.
increased by £157,724
Finance costs
from £63,093 to £220,817 due the un-
winding of the discounting on the contin-
gent considerations payable to Teck and
Xstrata Brasil Mineração.
In the prior year, there was a one-off, non-
cash impairment charge of £253,006 re-
lating to available-for-sale financial assets,
which comprised a reclassification from
the reserves relating to available-for-sale
assets, with an offsetting credit to Other
Comprehensive Income
total comprehensive
in-
Furthermore,
come attributable to equity holders of
£7,837,352
included currency transla-
tion differences of £9,315,180. This was
due to the Brazilian real strengthening
against Sterling as at 31 December 2016,
as compared to 31 December 2015 and
the strengthening of the US Dollar against
Sterling over the period.
Ferronickel granules produced from Araguaia ore
Year ended
31 December 2016
£
Year ended
31 December 2015
(Restated)
£
(1,746,334)
9,317,781
32,017,796
37,054,455
0.240p
(1,544,699)
2,738,905
20,361,355
19,638,784
0.290p
Loss before taxation
Cash and cash equivalents
Exploration assets
Net assets
Loss per share (pence)
Cash and Cash Equivalents
The closing cash balance for the Group of £9,317,781 which is significantly higher than
£2,738,905 in the prior year, following the fund raise of £9,000,000 before expenses by
way of issuing 450,000,000 new shares at a price of 2 pence per share during the year.
Direct exploration expenditure was £1,246,688 in the year, as compared to £2,603,260
in 2015. Expenditure in 2016 was lower than in 2015 due to the focus of 2016 being
on the publication of an updated Feasibility Study compared to field work undertaken
in the prior year.
Exploration Assets
Exploration assets, which comprise the Araguaia project, have increased to £32,017,796
as at 31 December 2016 as compared to £20,361,355 as at 31 December 2015: The
Group incurred addition expenditure in the year, which included £1,012,620 in relation
to licences acquired from a subsidiary of Glencore, as well as a significant foreign
exchange revaluation of £9,400,610 as Sterling depreciated against the Brazilian Real.
The exploration assets of the business are recorded in the functional currency of Brazil,
the country in which they are located.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 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 Master’s 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.
Simon J Retter BSc (Hons), ACA
Chief Financial Officer and
Company Secretary
Mr Retter has a degree in Accounting and
Finance from the University of Bristol
and is a Chartered Accountant with over
10 years of experience
in the mining
industry. He has undertaken numerous
corporate finance transactions across a
broad range of industries including initial
public offerings, reverse take overs and
secondary fund raisings. He has served
as finance director of Paragon Diamonds
Ltd and currently holds the role of Finance
Director of Vale International Group Ltd a
listed special purpose acquisition vehicle
targeting the technology sector. Mr Retter
is a member of the Institute of Chartered
Accountants in England and Wales.
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
Master’s 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
17
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.
Alexander N. Christopher, BSc (Hons), P.Geo
Non-Executive Director
Mr. Christopher, a professional geologist, has over
30 years of experience in mineral exploration
and the mining 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 Senior Vice President,
Exploration, Projects & Technical Services 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 where he
holds the position of Second Vice President.
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
posts
in Africa, Australia, Europe and
Canada in both exploration and mining
positions. Under his leadership, Karmin
Exploration discovered the Aripuanã base
metal sulphide deposits in Brazil. From
1997 to 2001 Mr. Fisher was Vice President,
Exploration for Boliden AB, a major
European mining and smelting company
where he was responsible for thirty five
projects in nine countries. From 2001 to
2008, 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).
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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.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 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 2016.
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 £1,746,334 (2015: £1,544,699). The Group is currently involved in exploration and evaluation
activities and not actively mining. As a result, the Group is not revenue generative.
On 30 November 2016, a total of 374,000,000 shares were issued through a private placement at a price of £0.02 per share to raise
£7,480,000 before expenses. On 2 December 2016, a total of 76,000,000 shares were issued through a private placement at a price of
£0.02 per share to raise £1,520,000 before expenses.
On 8 August 2016, the Company issued 50,729,922 new Ordinary shares in the company at a price of £0.0199 per share to Xstrata as
consideration for the acquisition of certain licences for the Glencore Araguaia Project from Xstrata Brasil Exploraçâo Mineral Ltda.
At 31 December 2016, the Group had cash and cash equivalents of £9,317,781 (2015: £2,738,905). 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 (2015: £Nil).
Sustainability
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. The company makes significant efforts to make sure that any activity associated
with exploration leave minimal impact on the surrounding environment. 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.
Horizonte has a string record of rehabilitating any area where it has been undertaking exploration activities and where practical,
improvements carried out on local roads and infrastructure.
The Group also provides in-kind support through our employees to assist local landowners partake in good environmental stewardship
practices, for example, the rehabilitation of natural springs and planting of native shrubs.
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 2017, including social resettlement data, water quality, hydrology, gas, soil, weather 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 and Construction stages.
In 2016, the sustainability team commenced work programmes in Vale dos Sonhos to collect baseline data and integrate the deposit
into the licensing schedule.
Safety
Over one year LTI free
People
Horizonte has a favourable percentage of local employees
and also of female employees
Social
Over 15 small rural community projects implemented,
including volunteering in impoverished schools within zone
of directly affected area of the future Araguaia nickel project
Rehabilitation
Horizonte has a strong record of rehabilitating any area where
it has been undertaking exploration activities.
Fauna & Flora
New native nursery created on camp to boost production of native flora
Permits
Preliminary Licence granted and Installation Licence
work programme commenced
Directors’ Report
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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 16 March 2017.
Major shareholders
Teck Resources Limited
Richard Griffiths
Henderson Global Investors
JP Morgan
Glencore
Hargreave Hale
City Financial
Number of shares
% of issued capital
210,207,179
169,414,049
165,376,242
98,394,838
74,507,195
75,000,000
65,333,333
17.9
14.5
14.1
8.4
6.4
6.4
5.6
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 20
Directors’ Report
Share capital
Changes in the share capital of the Company are set out in note 13 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
2016 are as follows:
Director
David Hall
Jeremy Martin
Owen Bavinton
Allan Walker
William Fisher
Alex Christopher
31 December 2016
31 December 2015
Shares
Options
Shares
Options
1,039,955
6,500,000
1,039,955
5,000,000
1,083,908
13,500,000
1,083,908
11,000,000
2,000,000
5,000,000
2,000,000
3,500,000
—
5,900,000
—
4,400,000
820,000
5,000,000
20,000
3,500,000
—
—
—
—
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 2016 and 16 March 2017.
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 and review of KPIs are included in the
Operations Review and Strategic Report.
Financial risk management
The Company is exposed through its operations to the following
financial risks:
> Commodity price risk
> Foreign currency risk
> Credit risk
> Interest rate risk
> Liquidity risk
In common with all other businesses, the Group is exposed
to risks that arise from its area of operation, these along with
managements policies surrounding risk management are
included in note 3.
Events after the reporting date
The events after the reporting date are set out in note 29 to the
Financial Statements.
Future developments
In 2017 the Group will be working on publishing a Feasibility
Study on the enlarged Araguaia project. Furthermore, the
permitting for the Araguaia project will continue to be advanced.
Directors and Officers Insurance
The Group provided Directors and Officers insurance for both the
current and prior periods.
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 2016
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
PKF Littlejohn LLP were replaced as auditor during the year
following a routine rotation of advisers undertaken by the
Company, they were replaced by BDO LLP.
The current auditor, BDO LLP, will be proposed for reappointment
in accordance with section 485 of the Companies Act 2006.
BDO LLP has signified its willingness to continue in office as
auditor.
By Order of the Board
Simon Retter
Company Secretary
16 March 2017
Statement of Directors’ Responsibilities
Statement of Directors’ Responsibilities
21
The directors are responsible for preparing the strategic report,
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 elected to prepare the group and 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 company and
of the profit or loss of the group and company for that period.
The directors are also required to prepare financial statements
in accordance with the rules of the London Stock Exchange for
companies trading securities on the Alternative Investment
Market and in accordance with the rules of the Toronto Stock
Exchange.
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 they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any
material departures disclosed and explained in the financial
statements;
> prepare the financial statements on the 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 disclose with reasonable accuracy at any time
the financial position of the company 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 hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report
and the financial statements are made available on a website.
Financial statements are published on the company's website
in accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The maintenance
and integrity of the company's website is the responsibility of
the directors. The directors' responsibility also extends to the
ongoing integrity of the financial statements contained therein.
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By Order of the Board
Simon James Retter
Company Secretary
16 March 2017
David Hall and Jeremy Martin
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 22 Corporate Governance Report
Corporate Governance Report
The Board of Directors
As at 31 December 2016, 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
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.
Independent Auditor’s Report
23
Independent Auditor’s Report to the Members
of Horizonte Minerals Plc
We have audited the financial statements of Horizonte Minerals plc for the year ended 31 December 2016 which comprise the
consolidated statements of comprehensive income, the consolidated and company statements of financial position, the consolidated
and company statements of changes in equity, the consolidated and company statements of cash flows and the related notes. The
financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards
(’IFRSs‘) as adopted by the European Union.
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 auditors
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 Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the financial statements:
> give a true and fair view of the state of Group and Company’s affairs as at 31 December 2016 and of the Group’s loss for the year
then ended;
> have been properly prepared in accordance with IFRSs as adopted by the European Union; and
> have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
> the information given in the strategic report and directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
> the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
> adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited
by us; or
> the financial statements are not in agreement with the accounting records and returns; or
> certain disclosures of directors’ remuneration specified by law are not made; or
> we have not received all the information and explanations we require for our audit.
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Stuart Barnsdall (senior statutory auditor)
For and on behalf of BDO LLP,
statutory auditor
London, UK
Date: 16 March 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 24 Independent Auditor’s Report
Independent Auditor’s Report in Respect of Canadian National
Instrument 52-107 (Acceptable Accounting Principals and Auditing Standards)
To the Shareholders of Horizonte Minerals PLC
We have audited the accompanying financial statements of Horizonte Minerals PLC for the year ended 31 December 2016 which
comprise the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the
consolidated and company statements of changes in equity, the consolidated and company statements of cash flows for the year then
ended, and a summary of significant accounting policies and other explanatory information. The financial reporting framework that
has been applied in the preparation of the consolidated financial statements is applicable law and International Financial Reporting
Standards (’IFRSs‘).
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the applicable
financial reporting framework, and for such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with
Canadian Generally Accepted Auditing Standards (Canadian GAAS). Those standards require that we comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement
of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.
An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Horizonte Minerals
PLC as at 31 December 2016 and its financial performance and its cash flows for the year then ended in accordance with IFRSs.
Other matters
During the year ended 31 December 2016, the Company changed its auditor and as such the audit of the financial statements for the
year ended 31 December 2015 was performed by the Group’s previous auditors, except for the restated amounts and disclosures
relating to the prior year adjustment described in note 21 which we have audited.
BDO LLP
London
United Kingdom
16 March 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2016
Consolidated Statement of Comprehensive Income
25
Administrative expenses
Charge for share options granted
Changes in fair value of contingent consideration
Gain/(loss) on foreign exchange
Other losses – impairment of available-for-sale assets
Operating loss
Finance income
Finance costs
Loss before taxation
Income tax
Year ended
31 December
2016
£
(1,009,623)
(324,890)
(260,632)
65,241
—
Year ended
31 December
2015 (Restated)
£
(864,892)
(100,248)
(26,969)
(251,409)
(253,006)
(1,529,904)
(1,4,96,524)
4,387
(220,817)
14,918
(63,093)
(1,746,334)
(1,544,699)
—
—
Notes
17
6
8
8
9
Loss for the year from continuing operations attributable to owners of the parent
(1,746,334)
(1,544,699)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Impairment in value of available-for-sale financial assets
—
253,006
Currency translation differences on translating foreign operations
16
9,315,180
(6,354,056)
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to owners of the parent
Loss per share from continuing operations attributable to owners of the parent
9,315,180
(6,101,050)
7,568,846
(7,654,749)
Basic and diluted (pence per share)
19
(0.240)
(0.290)
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The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 26
Consolidated Statement of Financial Position
Consolidated Statement of Financial Position
Company number: 05676866
As at 31 December 2016
Assets
Non-current assets
Intangible assets
Property, plant & equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Equity attributable to owners of the parent
Share capital
Share premium
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
2016
£
31 December
2015 (Restated)
£
1 January
2015 (Restated)
£
Notes
10
32,017,796
20,351,355
21,075,565
862
11,888
54,390
32,018,658
20,363,243
21,129,955
35,493
40,912
22,709
12
9,317,781
2,738,905
5,030,968
9,353,274
2,779,817
5,053,677
41,371,932
23,143,060
26,183,632
13
14
16
17
9
17
11,719,343
6,712,044
4,924,271
35,767,344
31,252,708
31,095,370
4,467,064
(4,848,116)
1,252,934
(14,899,297)
(13,477,853)
(12,033,402)
37,054,454
19,638,783
25,239,173
3,643,042
3,161,592
282,450
193,665
3,925,492
3,355,257
391,986
391,986
149,020
149,020
4,317,478
3,504,277
335,327
273,238
608,895
335,894
335,894
944,459
41,371,932
23,143,060
26,183,632
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 16 March 2017 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 2016
Company Statement of Financial Position
27
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
31 December
2016
£
31 December
2015 (Restated)
£
1 January
2015 (Restated)
£
Notes
11
25
12
13
14
16
17
17
283
1,254
2,291
43,670,347
40,292,156
33,361,507
43,670,630
40,293,410
33,363,798
35,423
9,143,993
9,179,416
18,739
13,818
2,568,266
4,208,984
2,587,005
4,222,802
52,850,046
42,880,415
37,586,600
11,719,343
6,712,044
4,924,271
35,767,344
31,252,708
31,095,370
10,888,760
10,888,760
10,888,760
(9,915,498)
(9,637,561)
(10,159,288)
48,459,949
39,215,951
36,749,113
3,643,042
3,643,042
3,161,591
3,161,591
747,055
747,055
502,873
502,873
4,390,097
3,664,464
335,327
335,327
502,160
502,160
837,487
52,850,046
42,880,415
37,586,600
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The above Company Statement of Financial Position should be read in conjunction with the accompanying notes, loss for the period
was £602,827 (2015:£421,479 profit).
The Financial Statements were authorised for issue by the Board of Directors on 16 March 2017 and were signed on its behalf.
David J Hall
Chairman
Jeremy J Martin
Chief Executive Officer
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 28
Statements of Changes in Equity
Statements of Changes in Equity
For the year ended 31 December 2016
Consolidated
As at 1 January 2015 (previously reported)
Refer note 22 c
Refer note 22 d
As at 1 January 2015 (Restated)
Loss for the year
Other comprehensive income:
Impairment 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 (Restated)
Loss for the year
Other comprehensive income:
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 2016
A breakdown of other reserves is provided in note 18.
Attributable to owners of the parent
Share
capital
£
Share
premium
£
Retained
losses
£
Other
reserves
£
Total
£
4,924,271
—
31,095,370
—
(9,526,869)
—
(321,601)
1,574,535
26,171,171
1,574,535
—
— (2,506,533)
— (2,506,533)
4,924,271
31,095,370
(12,033,402)
1,252,934
25,239,173
—
—
—
—
— (1,544,699)
— (1,544,699)
—
—
—
253,006
253,006
— (6,354,056)
(6,354,056)
— (1,544,699)
(6,101,050)
(7,654,749)
1,787,773
—
—
200,300
(42,962)
—
1,787,773
157,338
—
—
100,248
100,248
—
—
—
—
1,988,073
(42,962)
100,248
2,045,359
6,712,044
31,252,708
(13,477,853)
(4,848,116)
19,638,783
—
—
—
— (1,746,334)
— (1,746,334)
—
—
9,315,180
9,315,180
— (1,746,334)
9,315,180
7,568,846
5,007,299
5,005,321
— (490,685)
—
—
5,007,299
4,514,636
—
—
324,890
324,890
— 10,012,620
—
—
—
(490,685)
324,890
9,846,825
11,719,343
35,767,344
(14,899,297)
4,467,064
37,054,454
Company
As at 1 January 2015 previously reported
Refer note 22 d
4,924,271
—
31,095,370
—
(7,652,755)
(2,506,533)
10,888,760
—
39,255,646
(2,506,533)
Attributable to equity shareholders
Share
capital
£
Share
premium
£
Retained
losses
£
Merger
reserves
£
Total
£
As at 1 January 2015 (Restated)
Loss and 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 (Restated)
4,924,271
—
1,787,773
—
—
1,787,773
6,712,044
31,095,370
—
200,300
(42,962)
—
157,338
31,252,708
(10,159,288)
421,479
—
—
100,248
100,248
(9,637,561)
Loss and total comprehensive income for the year
—
—
(602,827)
Issue of ordinary shares
Issue costs
Share-based payments
5,007,299
—
—
5,005,321
(490,685)
—
Total transactions with owners, recognised directly in equity
5,007,299
4,514,636
—
—
324,890
324,890
As at 31 December 2016
11,719,343
35,767,344
(9,915,498)
The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.
10,888,760
—
—
—
—
—
10,888,760
36,749,113
421,479
1,988,073
(42,962)
100,248
2,045,359
39,215,951
—
(602,827)
— 10,012,620
—
(490,685)
324,890
9,846,825
48,459,949
—
—
10,888,760
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
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
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
Decrease/(increase) in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Issue costs
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange gain/(loss) on cash and cash equivalents
Cash and cash equivalents at end of the year
Consolidated Statement of Cash Flows
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31 December
2016
£
31 December
2015 (Restated)
£
Notes
(1,746,334)
(1,544,699)
(4,387)
220,817
—
—
324,890
—
(177,940)
260,632
1,084
(14,918)
63,093
17,200
253,006
100,248
(24,453)
251,409
26,969
1,419
(1,121,238)
(870,726)
22,588
242,965
(19,635)
(37,154)
(855,685)
(927,515)
(1,253,212)
(2,663,260)
—
4,387
26,734
14,918
(1,248,825)
(2,621,608)
9,000,000
1,550,000
(380,685)
(42,962)
8,619,315
1,507,038
6,514,805
(2,042,085)
2,738,905
5,030,968
64,071
(249,978)
12
9,317,781
2,738,905
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Major non-cash transactions
On 8 August 2016 the Company issued 50,729,922 new Ordinary shares in the company at a price of £0.0199 per share to Xstrata as
consideration for the acquisition of certain licences for the Glencore Araguaia Project from Xstrata Brasil Exploraçâo Mineral Ltda.
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 30
Company Statement of Cash Flows
Company Statement of Cash Flows
For the year ended 31 December 2016
Cash flows from operating activities
(Loss)/profit before taxation
Finance income
Charge for share options granted
Exchange differences
Change in fair value of contingent consideration
Depreciation
Operating profit before changes in working capital
Increase in trade and other receivables
Increase in trade and other payables
Net cash flows generated from operating activities
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 increase/(decrease) in cash and cash equivalents
Exchange loss on cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the year
31 December
2016
£
31 December
2015 (Restated)
£
Notes
(602,827)
(1,668)
324,890
283,555
260,632
971
265,553
(16,683)
244,182
493,052
421,479
(6,952)
100,248
(375,747)
26,969
1,037
30,212
(4,921)
713
167,034
(2,573,088)
(3,321,742)
1,668
6,952
(2,571,420)
(3,314,790)
9,000,000
1,550,000
(380,685)
(42,962)
8,619,315
1,507,038
6,540,947
(1,640,718)
34,779
—
2,568,266
4,208,984
12
9,143,993
2,568,266
Major non-cash transactions
On 8 August 2016 the Company issued 50,729,922 new Ordinary shares in the company at a price of £0.0199 per share to Xstrata as
consideration for the acquisition of certain licences for the Glencore Araguaia Project from Xstrata Brasil Exploraçâo Mineral Ltda.
The above Company Statement of Cash Flows should be read in conjunction with the accompanying notes.
Notes to the Financial Statements
Notes on the Financial Statements
31
1 General information
The principal activity of Horizonte Minerals Plc (‘the Company’) and its subsidiaries (together ‘the Group’) is the exploration and
development of base metals. The Company’s shares are listed on the AIM market of the London Stock Exchange and on the Toronto
Stock Exchange. The Company is incorporated and domiciled in England and Wales. The address of its registered office is 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 with IFRS and their interpretations
issued by the IASB. The consolidated financial statements have also been prepared in accordance with and those parts of the Companies
Act 2006 applicable to companies reporting under IFRS. The Financial Statements have been prepared under the historical cost
convention as modified by the revaluation of available-for-sale financial assets.
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 2016 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 2016 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
IFRS 15 Revenue from Contracts with Customers
IFRS 9 Financial Instruments
IFRS 16 Leases *
*Subject to EU endorsement
Effective Date
01-Jan-18
01-Jan-18
01-Jan-19
The only standard which is anticipated to be significant or relevant to the Group is IFRS 9 “Financial Instruments”, the Group is in the
process of assessing the impact of the standards on the Financial Statements. Both IFRS 15 and IFRS 16 are not expected to have a
material impact on the Group at this stage of the Group’s operations.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 32
Notes on the Financial Statements
2.3 Basis of consolidation
Horizonte Minerals Plc was incorporated on 16 January 2006. On 23 March 2006 Horizonte Minerals Plc acquired the entire issued
share capital of Horizonte Exploration Limited ('HEL') by way of a share for share exchange. The transaction was treated as a group
reconstruction and was accounted for using the merger accounting method as the entities were under common control before and after
the acquisition.
Subsidiaries are entities controlled by the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to affect those returns through its power over the investee.
The Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
> The contractual arrangement with the other vote holders of the investee.
> Rights arising from other contractual arrangements.
> The Group’s voting rights and potential voting rights.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control
of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the
consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.
Other than for the acquisition of HEL as noted above, the Group uses the acquisition method of accounting to account for business
combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities
incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as
incurred unless they result from the issuance of shares, in which case they are offset against the premium on those shares within equity.
If an acquisition is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree
is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to
the fair value of the contingent consideration that is deemed to be an asset or a liability is recognised in accordance with IAS 39 either
in profit or loss or as a change in other comprehensive income. The unwinding of the discount on contingent consideration liabilities
is recognised as a finance charge within profit or loss. Contingent consideration that is classified as equity is not remeasured, and its
subsequent settlement is accounted for within equity.
The excess of the consideration transferred and the acquisition date fair value of any previous equity interest in the acquiree over the
fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Accounting
policies of subsidiaries have been changed where necessary to ensure consistency with policies adopted by the Group.
Investments in subsidiaries are accounted for at cost less impairment.
Notes on the Financial Statements
33
The following 100% owned subsidiaries have been included within the consolidated Financial Statements:
Subsidiary undertaking
Held
Registered Address
Horizonte Exploration Ltd
Horizonte Minerals (IOM) Ltd
Directly
Indirectly
HM Brazil (IOM) Ltd
Cluny (IOM) Ltd
Champol (IOM) ltd
Indirectly
Indirectly
Indirectly
Horizonte Nickel (IOM) Ltd
Indirectly
HM do Brasil Ltda
Indirectly
Araguaia Niquel Mineração Ltda
Indirectly
Lontra Empreendimentos e
Participações Ltda
Indirectly
Typhon Brasil Mineração Ltda
Indirectly
Trias Brasil Mineração Ltda
Indirectly
26 Dover Street, London, W1S 4LY
Devonshire House, 15 St Georges St, Douglas,
Ilse of Man,
Devonshire House, 15 St Georges St, Douglas,
Ilse of Man,
Devonshire House, 15 St Georges St, Douglas,
Ilse of Man,
Devonshire House, 15 St Georges St, Douglas,
Ilse of Man,
Devonshire House, 15 St Georges St, Douglas,
Ilse of Man,
CNPJ 07.819.038/0001-30 com sede na
Avenida Amazonas, 2904, loja 511, Bairro
Prado, Belo Horizonte – MG. CEP: 30.411-186
CNPJ 97.515.035/0001-03 com sede na
Avenida Amazonas, 2904, loja 511, Bairro
Prado, Belo Horizonte – MG. CEP: 30.411-186
CNPJ 11.928.960/0001-32 com sede na
Avenida Amazonas, 2904, loja 511, Bairro
Prado, Belo Horizonte – MG. CEP: 30.411-186
CNPJ 23.282.640/0001-37 com sede
Alameda Ezequiel Dias, n. 427, 2º andar, bairro
Funcionários, Município de Belo Horizonte,
Estado de Minas Gerais, CEP 30.130-110.
CNPJ 23.282.280/0001-73 com sede na
Alameda Ezequiel Dias, n. 427, 2º andar, bairro
Funcionários, Município de Belo Horizonte,
Estado de Minas Gerais, CEP 30.130-110
Country of
incorporation
Nature of business
England Mineral Exploration
Holding company
Isle of Man
Isle of Man
Holding company
Isle of Man
Holding company
Isle of Man
Holding company
Isle of Man
Holding company
Brazil Mineral Exploration
Brazil Mineral Exploration
Brazil Mineral Exploration
Brazil Mineral Exploration
Brazil Mineral Exploration
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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 expenditure required in relation to its current exploration projects. The
Group has cash reserves which are considered sufficient by the Directors to fund the Group’s committed expenditure both operationally
and on its exploration projects for the foreseeable future. However, as additional projects are identified and the Araguaia project moves
towards production, additional funding will be required.
As a result of considerations noted above, the Directors have a reasonable expectation that the Group and Company have adequate
resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of
accounting in preparing these Financial Statements.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 34
Notes on the Financial Statements
2.5 Intangible Assets
(a) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets,
liabilities and contingent liabilities of the acquired subsidiary at the date of acquisition. Goodwill arising on the acquisition of subsidiaries
is included in ‘intangible assets’. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.
Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill
relating to the entity sold.
Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash-generating
units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose,
identified according to operating segment.
(b) Exploration and evaluation assets
The Group capitalises expenditure in relation to exploration and evaluation of mineral assets when the legal rights are obtained.
Expenditure included in the initial measurement of exploration and evaluation assets and which are classified as intangible assets relate
to the acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching,
sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource.
Exploration and evaluation assets arising on business combinations are included at their acquisition-date fair value in accordance with
IFRS 3 (revised) ‘Business combinations’. Other exploration and evaluation assets and all subsequent expenditure on assets acquired as
part of a business combination are recorded and held at cost.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount of
an asset may exceed its recoverable amount. The assessment is carried out by allocating exploration and evaluation assets to cash
generating units, which are based on specific projects or geographical areas.
Whenever the exploration for and evaluation of mineral resources does not lead to the discovery of commercially viable quantities of
mineral resources or the Group has decided to discontinue such activities of that unit, the associated expenditures are written off to
profit or loss.
2.6 Property, plant and equipment
All property, plant and equipment is stated at historic cost less accumulated depreciation. Historic cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All
repairs and maintenance costs are charged to profit or loss during the financial period in which they are incurred.
Notes on the Financial Statements
35
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.
2.7 Impairment of non-financial assets
Assets that have an indefinite useful life, such as goodwill or intangible exploration assets not ready to use, are not subject to amortisation
and are tested annually for impairment. Intangible assets that are subject to amortisation and property, plant and equipment are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
2.8 Foreign currency translation
(a) Functional and presentation currency
Items included in the Financial Statements of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (the ‘functional currency’). The functional currency of the UK and Isle of Man entities is Pounds Sterling
and the functional currency of the Brazilian entities is Brazilian Real. The Consolidated Financial Statements are presented in Pounds
Sterling, rounded to the nearest pound, which is the Company’s functional and Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions or valuation where such items are re-measured. Foreign exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
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(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 retranslated at the end of each reporting period.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS
36
Notes on the Financial Statements
2.9 Financial assets
The Group classifies its financial assets as loans and receivables.
(a) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate method,
less impairment. The Group’s loans and receivables comprise ‘trade and other receivables’ and ‘cash and cash equivalents’ in the
Consolidated Statement of Financial Position and loans to group undertakings in the Company Statement of Financial Position.
Derecognition
A financial asset is derecognised when the rights to receive cash flows from the asset have expired.
2.10 Cash and cash equivalents
In the Statement of Financial Position and Statement of Cash Flows, cash and cash equivalents comprise cash at bank and in hand and
demand deposits with banks and other financial institutions, that are readily convertible into known amounts of cash and which are
subject to an insignificant risk of changes in value.
2.11 Impairment of financial assets
(a) Assets carried at amortised cost
The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial
assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective
evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that
loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be
reliably estimated.
For loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the
present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial
asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the
Consolidated Income Statement.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised
impairment loss is recognised in the Consolidated Income Statement.
2.12 Taxation
The tax credit or expense for the period comprises current and deferred tax. Tax is recognised in the Income Statement, except to the
extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in
other comprehensive income or directly in equity, respectively.
The charge for current tax is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period
in the countries where the company and its subsidiaries operate and generate taxable income. Management periodically evaluates
positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred tax is accounted for using the liability method in respect of temporary differences arising from differences between the carrying
amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.
However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss.
Notes on the Financial Statements
37
Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it
is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax assets are
recognised on tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is
probable.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Company is able to control the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the same taxable
entity or different taxable entities where there is an intention to settle the balances on a net basis.
Deferred tax is calculated at the tax rates (and laws) that have been enacted or substantively enacted by the Statement of Financial
Position date and are expected to apply to the period when the asset is realised or the liability is settled.
Deferred tax assets and liabilities are not discounted.
2.13 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new ordinary shares or options are shown
in equity as a deduction, net of tax, from the proceeds.
2.14 Financial liabilities
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired.
Fair value through profit or loss
This category comprises the contingent consideration which are carried in the consolidated statement of financial position at
fair value with changes in fair value recognised in the consolidated statement of comprehensive income.
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Other financial liabilities
Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised
cost using the effective interest method.
2.15 Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from
suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as
non-current liabilities.
Trade payables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.
2.16 Operating leases
Leases of assets under which a significant amount of the risks and benefits of ownership are effectively retained by the lessor are
classified as operating leases. Operating lease payments are charged to the Income Statement on a straight-line basis over the period
of the respective leases.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS
38
Notes on the Financial Statements
2.17 Share-based payments and incentives
The Group operates equity-settled, share-based compensation plans, under which the entity receives services from employees as
consideration for equity instruments (options) of the Group. The fair value of employee services received in exchange for the grant of
share options are recognised as an expense. The total expense to be apportioned over the vesting period is determined by reference
to the fair value of the options granted:
> including any market performance conditions;
> excluding the impact of any service and non-market performance vesting conditions; and
> including the impact of any non-vesting conditions.
Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be
satisfied. At the end of each reporting period the Group revises its estimate of the number of options that are expected to vest.
It recognises the impact of the revision of original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
When options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs
are credited to share capital (nominal value) and share premium.
The fair value of goods or services received in exchange for shares is recognised as an expense.
2.18 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Executive Officer, the
Company’s chief operating decision-maker ('CODM').
2.19 Finance income
Interest income is recognised using the effective interest method, taking into account the principal amounts outstanding and the interest
rates applicable.
2.20 Provisions and Contingent Liabilities
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an
outflow of resources will be required to settle the obligation; and the amount can be reliably estimated.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision
due to passage of time is recognised as finance cost.
Contingent liabilities are potential obligations that arise from past events and whose existence will only be confirmed by the occurrence
of one or more uncertain future events that, however, are beyond the control of the Group. Furthermore, present obligations may
constitute contingent liabilities if it is not probable that an outflow of resources will be required to settle the obligation, or a sufficiently
reliable estimate of the amount of the obligation cannot be made.
Notes on the Financial Statements
39
3 Financial risk management
3.1 Financial risk factors
The main financial risks to which the Group’s activities are exposed are liquidity and fluctuations on foreign currency. The Group’s overall
risk management programme focusses on the unpredictability of financial markets and seeks to minimise potential adverse effects on
the Group’s financial performance.
Risk management is carried out by the Board of Directors under policies approved at the quarterly Board meetings. The Board frequently
discusses principles for overall risk management including policies for specific areas such as foreign exchange.
(a) Liquidity risks
In keeping with similar sized mineral exploration groups, the Group’s continued future operations depend on the ability to raise sufficient
working capital through the issue of equity share capital. The Group monitors its cash and future funding requirements through the use
of cash flow forecasts.
All cash, with the exception of that required for immediate working capital requirements, is held on short-term deposit.
(b) Foreign currency risks
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with
respect to the Brazilian Real, US Dollar and the Pound Sterling.
Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign
operations that are denominated in a foreign currency. The Group holds a proportion of its cash in US Dollars and Brazilian Reals to hedge
its exposure to foreign currency fluctuations and recognises the profits and losses resulting from currency fluctuations as and when they
arise. The volume of transactions is not deemed sufficient to enter into forward contracts.
At 31 December 2016, if the Brazilian Real had weakened/strengthened by 20% against Pound Sterling and US Dollar with all other
variables held constant, post tax loss for the year would have been approximately £41,448 lower/higher mainly as a result of foreign
exchange losses/gains on translation of Brazilian Real expenditure and denominated bank balances.
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(c) Interest rate risk
As the Group has no borrowings, it is not exposed to interest rate risk on financial liabilities. The Group’s interest rate risk arises from
its cash held on short-term deposit for which the Directors use a mixture of fixed and variable rate deposits. As a result, fluctuations in
interest rates are not expected to have a significant impact on profit or loss or equity.
(d) Price risk
Given the size and stage of the Group’s operations, the costs of managing exposure to commodity price risk exceed any potential
benefits. The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature.
(e) Credit risk
Credit risk arises from cash and cash equivalents and outstanding receivables. The Group maintains cash and short-term deposits with
a variety of credit worthy financial institutions and considers the credit ratings of these institutions before investing in order to mitigate
against the associated credit risk.
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 2016 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.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS
40
Notes on the Financial Statements
3.3 Fair value estimation
The carrying values of trade receivables and payables are assumed to be approximate to their fair values, due to their short-term nature.
The fair value of contingent consideration is estimated by discounting the future expected contractual cash flows at the Group’s current
cost of capital of 7% based on the interest rate available to the Group for a similar financial instrument.
4 Critical accounting estimates and judgements
The preparation of the Financial Statements in conformity with IFRSs requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting
period and the reported amount of expenses during the year. Actual results may vary from the estimates used to produce these
Financial Statements.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
Significant items subject to such 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 2016 of £31,737,737 (2015: £20,159,327 ). 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.
4.2 Estimated impairment of goodwill
Goodwill has a carrying value at 31 December 2016 of £280,059 (2015: £192,028 ) which is included in intangible assets. The Group
tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.7.
Management has concluded that there is no impairment charge necessary to the carrying value of goodwill. See also note 10 to the
Financial Statements.
4.3 Contingent consideration
Contingent consideration has a carrying value of £3,643,042, at 31 December 2016 (2015: £3,161,591). there are two contingent
consideration arrangements in place as at 31 December 2016:
> 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 upon utilisation of the tax losses existing in Teck Cominco Brasil S.A at
the date of acquisition. Under the terms of the acquisition agreement, tax losses that existed at the date of acquisition and which are
subsequently utilised in a period greater than 10 years from that date are not subject to the contingent consideration arrangement.
This acquisition was accounted for as a business combination and an assessment of the fair value of the contingent consideration was
made at the date of acquisition. This fair value is reassessed in each subsequent accounting period. In arriving at an estimate of the fair
value management make an assessment of the probability of utilisation of all or part of the tax losses by the end of the 10 year period which
is August 2020. The Group has used discounted cash flow analysis to determine when it is anticipated that the tax losses will be utilised
and any potential contingent consideration paid. These cash flows could be affected by movements in a number of factors including the
timing of the development and commissioning of the project, commodity prices, operating costs, capital expenditure, production levels,
grades, recoveries and interest rates. Because of the condition of the acquisition agreement to utilise tax losses prior to August 2020 a
critical assumption in the assessment of value of the contingent consideration is the timing of commencement of profitable production.
As explained in note 21, following a reassessment of the IFRS accounting requirements, management has determined that the value
attributed to the contingent consideration must be reviewed at the end of each reporting period and adjusted to reflect the current
best estimate. This review was not completed in prior years and accordingly, a restatement of prior years’ financial statements
has been made.
Notes on the Financial Statements
41
> 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 critical assumptions relating to the assessment of the contingent
consideration of US$5,000,000 are similar to those described above for the contingent consideration payable to the former owners
of Teck Cominco Brasil S.A.
The Contingent consideration is considered to be a level 3 hierarchy valuation, the following are unobservable inputs for the valuation
model: Discount rate and probability factor. In addition, the model includes the foreign exchange rate.
Management have sensitized the fair value calculation to reasonable changes in the unobservable inputs and note that if the discount
rate were to increase to 10% then the FV would decrease to £3,387,315.
Management have sensitized the probability factor and note that a change in the probability weighting of 25% would cause the overall
value of the contingent consideration to increase by £96,207.
There has been no change in valuation technique during the period.
4.4 Current and deferred taxation
The Group is subject to income taxes in numerous jurisdictions. Judgment is required in determining the worldwide provision for such
taxes. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the
final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the current and
deferred income tax assets and liabilities in the period in which such determination is made.
Deferred tax liabilities have been recognised on the fair value gains in exploration assets arising on the acquisitions of Araguaia Niquel
Mineração Ltda (formerly Teck Cominco Brasil S.A) and Lontra Empreendimentos e Participações Ltda. A deferred tax asset in respect
of the losses has been recognised on acquisition of Araguaia Niquel Mineração Ltda to the extent that it can be set against the deferred
tax liability arising on the fair value gains. In determining whether a deferred tax asset in excess of this amount should be recognized
management must make an assessment of the probability that the tax losses will be utilized and a deferred tax asset is only recognised
if it is considered probable that the tax losses will be utilized.
As explained in note 21, following a reassessment of the IFRS accounting requirements, management has determined based on
information available at the time of preparation of the 2010 financial statements, the utilization of these losses had a lower probability
at the time of the acquisition in 2010 and a restatement derecognizing the deferred tax asset has been made. Management review the
position each financial period and this assessment remains.
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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.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS
42
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.
2016
Administrative expenses
Loss on foreign exchange
Loss from operations per reportable segment
Depreciation charges
Additions to non-current assets
Reportable segment assets
Reportable segment non-current assets
Reportable segment liabilities
2015 (Restated)
Administrative expenses
Loss on foreign exchange
Loss from operations per reportable segment
Depreciation charges
Additions to non-current assets
Reportable segment assets
Reportable segment non-current assets
Reportable segment liabilities
UK
2016
£
Brazil
2016
£
Other
2016
£
Total
2016
£
(802,409)
(207,214)
—
(1,009,623)
46,454
18,787
(755,955)
(188,427)
(970)
(114)
— 11,578,410
9,309,132
32,062,800
— 32,018,658
3,969,966
347,511
—
—
—
65,241
(944,382)
(1,084)
— 11,578,410
— 41,371,932
— 32,018,658
—
4,317,477
UK
2015
£
(662,305)
(114,838)
(777,143)
(1,037)
Brazil
2015
£
Other
2015
£
Total
2015 (Restated)
£
(189,234)
(136,571)
(13,353)
—
(864,892)
(251,409)
(325,805)
(13,353)
(1,116,301)
(382)
—
(645,313)
2,687,317
20,455,743
— 20,363,243
3,249,980
254,296
—
—
(1,419)
(645,313)
— 23,143,060
— 20,363,243
—
3,504,276
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 17)
Charge for share options granted
Impairment of available-for-sale asset
Finance income
Finance costs
Loss for the year from continuing operations
2016
£
2015 (Restated)
£
(944,382)
(1,116,301)
(260,632)
(324,890)
(26,969)
(100,248)
—
(253,006)
4,387
(220,817)
14,918
(63,093)
(1,746,334)
(1,544,699)
6 Expenses by nature
Group
Charge for share options granted
Depreciation (note 11)
Operating lease charges
Profit on disposal of property, plant and equipment
Notes on the Financial Statements
43
2016
£
2015 (Restated)
£
324,890
100,248
1,084
36,053
1,419
95,182
—
(24,453)
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 (2015: PKF Littlejohn)
Fees payable to the Company’s auditor and its associates for other services:
– Audit related assurance services (paid to PKF Litteljohn)
–Tax compliance services
8 Finance income and costs
Group
Finance income:
– Interest income on cash and short-term bank deposits
Finance costs:
– Contingent consideration: unwinding of discount
Net finance costs
2016
£
2015
£
32,000
37,500
5,000
2,000
7,000
1,900
2016
£
2015 (Restated)
£
4,387
14,918
(220,817)
(216,430)
(63,093)
(48,175)
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M
E
N
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I
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A
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I
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COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 44
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 22.87% (2015: 32.52%)
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
2016
£
2015 (Restated)
£
—
—
—
—
—
—
2016
£
2015 (Restated)
£
(1,746,334)
(1,544,699)
(399,387)
(502,336)
9,080
—
—
46,319
(150,480)
—
Tax losses carried forward for which no deferred income tax asset was recognised – Brazil
408,466
606,497
Total tax
—
—
No tax charge or credit arises on the loss for the year.
The weighted average applicable tax rate of 22.87% used is a combination of the 20% effective standard rate of corporation tax in the UK,
34% Brazilian corporation tax. The weighted average applicable tax rate has decreased from 32.52% to 22.87% as a greater proportion of
loss before income tax arose in the UK.
Deferred income tax
An analysis of deferred tax assets and liabilities is set out below.
Group
Deferred tax assets
Deferred tax liabilities
– Deferred tax liability to be settled after more than 12 months
Deferred tax liabilities (net)
The movement on the net deferred tax liabilities is as follows:
Group
At 1 January
Exchange differences
At 31 December
2016
£
2015 (Restated)
£
4,744,885
6,920,143
(5,027,335)
(7,113,808)
(282,450)
(193,665)
2016
£
2015 (Restated)
£
(193,665)
(273,273)
(88,785)
79,608
(282,450)
(193,665)
Deferred tax assets are recognised on tax losses carried forward to the extent that the realisation of the related tax benefit through
future taxable profits is probable.
Deferred tax liabilities are recognised in respect of fair value adjustments to the carrying value of intangible assets as a result of the
acquisition of such assets.
The Group has tax losses of approximately £18,132,502 (2015: £17,363,000) in Brazil and excess management charges of approximately
£2,492,408 (2015: £1,690,000) in the UK available to carry forward against future taxable profits. Deferred tax asset have been
recognised up to the amount of the deferred tax liability arising on the fair value adjustments potential deferred tax assets of £6,663,532
have not been recognised.
Notes on the Financial Statements
45
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 2015 (Restated)
Additions
Exchange rate movements
At 31 December 2015 (Restated)
Additions
Exchange rate movements
Goodwill
£
Exploration
Licenses
£
Exploration and
evaluation costs
£
Total
£
270,925
— 20,804,640
21,075,565
—
3,174,275
2,540,833
5,715,108
(78,897)
192,028
— (6,360,421)
(6,439,318)
3,174,275
16,985,052
20,351,355
—
1,012,620
1,253,212
2,265,831
88,032
1,458,290
7,854,288
9,400,610
Net book amount at 31 December 2016
280,060
5,645,185
26,092,551
32,017,796
(a) Exploration and evaluation assets
No indicators of impairment were identified during the year.
In October 2016, a Canadian NI 43-101 compliant Pre-Feasibility Study (‘PFS’) was published by the Company regarding the enlarged
Araguaia Project which included the areas recently acquired from Glencore Xstrata. The financial results and conclusions of the PFS
clearly indicate the economic viability of the Araguaia Project. The Directors undertook an assessment of impairment through evaluating
the results of the PFS and judged that no impairment was required with regards to the Araguaia Project.
(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.
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E
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T
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A
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Impairment reviews for exploration and evaluation assets are carried out either on a project by project basis or by geographical area.
The adjacent Araguaia/Lontra/Vila Oito and Floresta exploration sites (‘the Araguaia Project’), together with the Vale dos Sonhos
deposit acquired from Xstrata Brasil Mineração Ltda comprise a resource of a sufficient size and scale to allow the Company to create
a significant single nickel project. For this reason, at the current stage of development, these two projects are viewed and assessed for
impairment by management as a single cash generating unit.
The mineral concession for the Vale dos Sonhos deposit was acquired from Xstrata Brasil Mineração Ltda, a subsidiary of Glencore
Canada Corporation, in November 2015.
The recoverable amount has been determined by reference to the PFS undertaken during the year on the Araguaia Project. The key inputs
and assumptions in deriving the value in use were, the discount rate of 8%, Nickel price of US$12,000/t and a life of mine of 28 years.
Sensitivity to changes in assumptions
For the base case NPV8 of the Araguaia Project of US$581 million using a nickel price of US$14,000/t and US$328 million using
US$12,000/t as per the PFS to be reduced to the book value of the Araguaia Project as at 31 December 2016, the discount rate applied
to the cash flow model would need to be increased from 8% to 21%.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 46
Notes on the Financial Statements
11 Property, plant and equipment
Group
Cost
At 1 January 2015
Disposals
Foreign exchange movements
At 31 December 2015
Foreign exchange movements
At 31 December 2016
Accumulated depreciation
At 1 January 2015
Charge for the year
Disposals
Foreign exchange movements
At 31 December 2015
Charge for the year
Foreign exchange movements
At 31 December 2016
Net book amount as at 31 December 2016
Net book amount as at 31 December 2015
Net book amount as at 1 January 2015
Vehicles and
other field
equipment
£
Office
equipment
£
152,089
(40,089)
(37,353)
74,647
31,657
106,304
104,117
26,245
(26,916)
(37,807)
65,639
11,766
28,320
14,730
—
(2,134)
12,596
1,802
14,398
8,312
2,469
—
(1,065)
9,716
2,614
1,785
Total
£
166,819
(40,089)
(39,487)
87,243
33,459
120,702
112,429
28,714
(26,916)
(38,872)
75,355
14,380
30,105
105,725
14,115
119,840
579
9,008
47,972
283
2,880
6,418
862
11,888
54,390
Depreciation charges of £13,296 (2015: £27,295 ) 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 2016 of £1,084 (2015: £1,419 ) has been
charged in ‘administrative expenses’ under ‘Depreciation.’
Notes on the Financial Statements
47
Field
equipment
£
Office
equipment
£
4,208
—
4,208
4,208
—
4,208
—
4,208
—
—
—
7,403
—
7,403
5,112
1,037
6,149
971
7,120
283
1,254
2,291
Total
£
11,611
—
11,611
9,320
1,037
10,357
971
11,328
283
1,254
2,291
Group
2016
£
2015
£
Company
2016
£
2015
£
9,250,281
2,676,160
9,094,308
2,519,018
67,500
62,745
49,685
49,248
9,317,781
2,738,905
9,143,993
2,568,266
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N
A
N
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I
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Company
Cost
At 1 January 2015
Additions
At 31 December 2015 and 2016
Accumulated depreciation
At 1 January 2015
Charge for the year
At 31 December 2015
Charge for the year
At 31 December 2016
Net book amount as at 31 December 2016
Net book amount as at 31 December 2015
Net book amount as at 1 January 2015
12 Cash and cash equivalents
Cash at bank and on hand
Short-term deposits
The Group’s cash at bank and short-term deposits are held with institutions with the following credit ratings (Fitch):
A
BBB-
Group
2016
£
2015
£
Company
2016
£
2015
£
9,217,380
2,616,981
9,094,308
2,519,018
100,401
121,924
49,685
49,248
9,317,781
2,738,905
9,143,993
2,568,266
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 48
Notes on the Financial Statements
13 Share capital
Group and Company
Issued and fully paid
Ordinary shares of 1p each
At 1 January
Issue of ordinary shares
At 31 December
2016
Number
2016
£
2015
Number
2015
£
671,204,378
6,712,044
492,427,105
4,924,271
500,729,922
5,007,299
178,777,273
1,787,773
1,171,934,300
11,719,343
671,204,378
6,712,044
Share capital comprises amount subscribed for shares at the nominal value.
2016
On 8 August 2016, a total of 50,729,922 new ordinary shares were issued at the prevailing market price of £0.0199 per share in
consideration for the purchase of the Vale dos Sonhos mineral concession from Xstrata Brasil Mineração Ltda.
On 30 November 2016, a total of 374,000,000 shares were issued through a private placement at a price of £0.02 per share to raise
£7,480,000 before expenses.
On 2 December 2016, a total of 76,000,000 shares were issued through a private placement at a price of £0.02 per share to raise
£1,520,000 before expenses.
2015
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.
14 Share premium
Group and Company
At 1 January
Premium arising on issue of ordinary shares
Issue costs
At 31 December
2016
£
2015
£
31,252,708
31,095,370
5,005,662
(490,685)
200,300
(42,962)
35,767,344
31,252,708
Share premium comprises the amount subscribed for share capital in excess of nominal value.
Notes on the Financial Statements
49
15 Share-based payments
The Directors have discretion to grant options to the Group employees to subscribe for Ordinary shares up to a maximum of 10% of the
Company’s issued share capital. One third of options are exercisable at each six 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. Should holders cease employment then the options remain valid for a period of 3 months after
cessation of employment, following which they will lapse. Neither the Company nor the Group has any legal or constructive obligation to
settle or repurchase the options in cash.
Movements on number of share options and their related exercise price are as follows:
Outstanding at 1 January
Forfeited
Granted
Outstanding at 31 December
Exercisable at 31 December
Number of
options
2016
£
48,760,000
(8,450,000)
15,000,000
55,310,000
36,760,000
Weighted
average
exercise
price
2016
£
0.124
0.092
0.030
0.079
0.102
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
0.040
0.096
0.124
The options outstanding at 31 December 2016 had a weighted average remaining contractual life of 7.28 years (2015: 7.45 years).
The fair value of the share options was determined using the Black-Scholes valuation model.
The parameters used are detailed below.
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A
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E
M
E
N
T
S
F
I
N
A
N
C
I
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L
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
2016
options
2015
options
01/09/2016
10/06/2015
2.03 pence
2.63 pence
3.00 pence
4.00 pence
31/08/2026
09/06/2025
15,000,000
13,250,000
64%
Nil
10 years
2.83%
75%
Nil
10 years
2.83%
The expected volatility is based on historical volatility for the six months prior to the date of grant. The risk free rate of return is based on
zero yield government bonds for a term consistent with the option life.
The range of option exercise prices is as follows:
2016
Weighted
average
exercise price
(£)
2016
Number of
shares
2016
Weighted
average
remaining life
expected
(years)
2016
Weighted
average
remaining life
contracted
(years)
2015
Weighted
average
exercise price
(£)
2015
Weighted
average
remaining life
expected
(years)
2015
Weighted
average
remaining life
contracted
(years)
2015
Number of
shares
0.049
39,850,000
0.154
15,460,000
8.34
4.57
8.34
4.57
0.060
30,300,000
0.154
18,460,000
8.62
5.53
8.62
5.53
Range of exercise
prices (£)
0–0.1
0.1–0.2
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 50
Notes on the Financial Statements
16 Other reserves
Group
At 1 January 2015 (As previously reported)
Refer note 22 c
At 1 January 2015 (Restated)
Permanent diminution taken to income
Currency translation differences
At 31 December 2015 (Restated)
Other comprehensive income
Currency translation differences
At 31 December 2016
Company
At 1 January 2015 and 31 December 2015
At 1 January 2016 and 31 December 2016
Available for sale
reserve
£
Merger
reserve
£
Translation
reserve
£
Other
reserve
£
Total
£
(253,006)
—
(253,006)
253,006
—
— 10,888,760
—
—
—
—
— 10,888,760
(9,909,255)
10,888,760
1,574,535
—
(8,334,720)
10,888,760
—
—
— (6,354,056)
(14,688,776)
—
9,315,180
(5,373,596)
(321,601)
(1,048,100)
1,574,535
—
1,252,934
(1,048,100)
253,006
—
— (6,354,056)
(4,848,116)
—
9,315,180
4,467,064
(1,048,100)
—
—
(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 2016 arose on consolidation as a result of merger accounting for the acquisition of the entire
issued share capital of Horizonte Exploration Limited during 2006 and represents the difference between the value of the share capital and
premium issued for the acquisition and that of the acquired share capital and premium of Horizonte Exploration Limited.
Currency translation differences relate to the translation of Group entities that have a functional currency different from the presentation
currency (refer note 2.8). Movements in the translation reserve are linked to the changes in the value of the Brazilian Real against the Pound
Sterling: the intangible assets of the Group are located in Brazil, and their functional currency is the Brazilian Real, which increased in value
against Sterling during the year.
The available for sale reserve represents changes in the fair value of assets that are held available for sale.
17 Trade and other payables
Non-current
Contingent consideration payable to former owners of Teck
Cominco Brasil S.A.
Contingent consideration payable to Xstrata Brasil Mineração Ltda
(refer note 27)
Group
Company
2016
£
2015 (Restated)
£
2016
£
2015 (Restated)
£
115,100
354,713
115,100
354,713
3,527,942
2,806,878
3,527,942
2,806,878
Total contingent consideration
3,643,042
3,161,591
3,643,042
3,161,591
Current
Trade and other payables
Amounts due to related parties (refer note 22)
Social security and other taxes
Accrued expenses
229,046
16,038
—
—
19,088
143,851
391,985
21,519
111,463
149,020
148,985
413,930
19,088
165,052
747,055
10,377
413,930
15,533
63,033
502,873
Total trade and other payables
4,035,027
3,310,611
4,390,097
3,664,464
Trade and other payables include amounts due of £65,053 (2015: £65,748 ) in relation to exploration and evaluation activities.
Notes on the Financial Statements
51
Contingent Consideration payable to the former owners of Teck Cominco Brasil S.A.
The fair value of the contingent consideration arrangement with the former owners of Teck Cominco Brasil S.A. was estimated at the
acquisition date according to the probability and timing of when future taxable profits will arise against which the tax losses may be
utilised in accordance with the terms of the acquisition agreement.
As explained in note 21 the estimate of fair value has been restated and is now assessed to be £115,100 (2015 £354,713). The critical
assumptions underlying the fair value estimate are set out in note 4.3. Estimates were also based on the current rates of tax on profits in
Brazil of 34% and a discount factor of 7.0% was applied to the future dates at which the tax losses will be utilised and consideration paid.
Contingent Consideration payable to Xstrata Brasil Mineração Ltda
On 28 September 2015 the Company announced that it had reached agreement to indirectly acquire through wholly owned subsidiaries
in Brazil the advanced high-grade Glencore Araguaia nickel project (‘GAP’) in north central Brazil. GAP is located in the vicinity of the
Company’s Araguaia Project.
Pursuant to a conditional asset purchase agreement (‘Asset Purchase Agreement’) between, amongst others, the Company and Xstrata
Brasil Exploraçâo Mineral Ltda (’Xstrata‘), a wholly-owned subsidiary of Glencore Canada Corporation (’Glencore‘), the Company has
agreed to pay a total consideration of US$8 million to Xstrata, which holds the title to GAP. The consideration is to be paid according the
following schedule;
> US$2,000,000 in ordinary shares in the capital of the Company which as at 31 December 2016 had been settled by way of issuing
new shares in the Company.
> US$1,000,000 after the date of issuance of a joint Feasibility Study for the combined Araguaia & GAP project areas, to be satisfied
in HZM Shares (at the 5 day volume weighted average price taken on the tenth business day after the date of such issuance) or cash,
at the election of the Company; and
> The remaining US$5,000,000 consideration will be paid in cash, as at the date of first commercial production from any of the
resource areas within the Enlarged Project area. Following transfer of the concession for the VdS deposit area to a subsidiary of the
Company, this has been included in contingent consideration payable.
The critical assumptions underlying the treatment of the contingent consideration are set out in note 4.3.
As at 31 December 2016, there was a finance expense of £193,868 (2015: £14,505) recognised in finance costs within the Statement of
Comprehensive Income in respect of the contingent consideration arrangement, as the discount applied to the contingent consideration
at the date of acquisition was unwound.
18 Dividends
No dividend has been declared or paid by the Company during the year ended 31 December 2016 (2015: nil).
19 Earnings per share
(a) Basic
The basic loss per share of 0.240p loss per share (2015 loss per share: 0.290p) 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
2016
£
2015
£
(1,746,334)
(1,544,699)
727,096,642
531,868,151
(b) Diluted
The basic and diluted loss per share for the years ended 31 December 2016 and 31 December 2015 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 15.
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
A
L
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 52 Notes on the Financial Statements
20 Related party transactions
The following transactions took place with subsidiaries in the year:
A fee totaling £312,043 (2015: £232,829) was charged to HM do Brazil Ltda, £872,784 (2015: £639,814) to Araguaia Niquel Mineração
Ltda and £58,806 to Typhon Brasil Mineração Ltda by Horizonte Minerals Plc in respect of consultancy services provided and funding costs.
Amounts totaling £782,926 (2015: £4,919,360) 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 2016, by Horizonte Minerals Plc. Interest is charged at an annual rate
of 6% on balances outstanding during the year.
Balances with subsidiaries at the year end were:
Company
HM do Brasil Ltda
Minera El Aguila SAC
HM Brazil (IOM) Ltd
Horizonte Nickel (IOM) Ltd
Araguaia Niquel Mineração Ltda
Horizonte Minerals (IOM) Ltd
Horizonte Exploration Ltd
Typhon Brasil Mineração Ltda
Total
2016
Assets
£
792,301
—
4,933,377
26,070,923
6,074,517
253,004
2016
Liabilities
£
—
—
—
2015
Assets
£
845,808
—
4,725,314
— 24,340,018
—
—
4,605,395
253,004
2015
Liabilities
£
—
—
—
—
—
—
—
413,930
—
413,930
3,198,183
—
3,174,275
—
41,322,305
413,930
37,944,114
413,930
All Group transactions were eliminated on consolidation.
On 30 November 2016 a total of 374,000,000 shares were issued through a private placement at a price of £0.02 per share, to raise
£7,480,000 before expenses. As part of this private placement, Henderson Global Investors subscribed for 50,000,000 shares and
Richard Griffiths subscribed for 62,235,000 shares representing 13.4 percent and 16.6 percent respectively of the private placement. By
reason of its existing shareholdings in the Company, the participation of Henderson Global Investors and Richard Griffiths in the private
placement of 30 November 2016 constituted a related party transaction under AIM Rule 13 of the AIM Rules for Companies.
On 2 December 2016 a total of 76,000,000 shares were issued through a non brokered private placement in Canada, at a price of C$0.04
per share. As part of this private placement, Teck Resources Limited subscribed for 21,517,250 shares representing 28.3 percent of the
private placement. By reason of their existing shareholdings in the Company, the participation of Teck Resources Limited 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 did not utilise this facility during
the period and it has now lapsed.
Notes on the Financial Statements
53
21 Restatements of contingent consideration and deferred tax asset
These financial statements reflect prior year adjustments in respect of a deferred tax asset, contingent consideration and associated
exchange differences and finance costs. Both the deferred tax asset and contingent consideration arose from the acquisition of Teck
Cominco Brasil S.A. in 2010, which was accounted for as a business combination. The initial recognition of both of these items required
management to make an assessment of the probabilities of the tax losses being utilised and the fair value of the contingent consideration
to be paid.
Following the recent review undertaken of the relevant recognition criteria, and conditions relating to both items it has been concluded
that the level of deferred tax recognised at the time of the acquisition requires re-calculation. The recognition of the deferred tax asset
at an early stage in the Araguaia project did not meet the criteria prescribed by IAS 12 - Income Taxes, of it being probable that they
could be utilised.
It has also been concluded that the fair value of the contingent consideration applied at time of acquisition similarly requires re calculation.
This liability relates to payments due to the vendors upon utilisation of brought forward tax losses of Teck Cominco. The payments
would be 50% of the tax effect of the losses utilised from the date of acquisition up to August 2020. The fair value originally calculated
assumed 100% utilisation of the brought forward tax losses and was not a probability weighted to reflect the underlying risks of the
project and the requirement to utilise the losses within a set timeframe.
Management now believes that it would be appropriate to restate the Financial Statements to derecognize the deferred tax asset and
re-measure the contingent consideration as follows:
a) Deferred tax asset
A deferred tax asset of £5,065,976 has been derecognised at 1 January 2015.
A deferred tax asset of £3,590,675 has been derecognised at 31 December 2015.
b) Contingent consideration and finance costs
A contingent consideration liability has been reduced to £335,327 at 1 January 2015.
Finance costs are reduced by £275,336 in the year ended 31 December 2015 in respect of reversing the unwinding of the discount
on the contingent consideration.
A contingent consideration liability has been reduced to £3,161,591 at 31 December 2015.
c) Foreign exchange translation reserve
An adjustment of £1,574,535 has been made to the foreign exchange translation reserve at 1 January 2015 in respect of the above
adjustments.
A further adjustment of £913,675 has been made to the foreign exchange translation reserve at 31 December 2015 in respect of
further movements of the deferred tax asset and contingent consideration during 2015.
S
T
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E
M
E
N
T
S
F
I
N
A
N
C
I
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d) Retained losses
The net impact on retained losses at 1 January 2015 of the above adjustments is £2,506,533.
e) Intangible assets
An increase in carrying value of intangible exploration and evaluation assets as at 1 January 2015 of £305,253.
22 Ultimate controlling party
The Directors believe there to be no ultimate controlling party.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS
54
Notes on the Financial Statements
23 Directors’ remuneration (including Key Management)
Group 2016
Non-Executive Directors
Alexander Christopher
David Hall
William Fisher
Allan Walker
Owen Bavinton
Executive Directors
Jeremy Martin
Key Management
Jeffrey Karoly
Simon Retter
Group 2015
Non-Executive Directors
Alexander Christopher
David Hall
William Fisher
Allan Walker
Owen Bavinton
Executive Directors
Jeremy Martin
Key Management
Jeffrey Karoly
Aggregate
emoluments
£
Social Security
charges
£
Other
emoluments
£
—
29,000
29,000
29,000
—
—
3,312
—
4,002
—
—
—
—
—
—
Share based
payment
charge
£
—
24,520
24,520
24,520
24,520
Pension
costs
£
—
—
—
—
32,167
Total
£
—
56,832
53,520
57,522
56,687
170,000
31,326
59,236
67,430
17,000
344,992
128,000
15,541
400,541
13,524
2,145
54,309
9,600
8,000
76,836
61,300
15,553
—
—
165,510
64,720
227,977
25,686
823,216
Aggregate
emoluments
£
Social Security
charges
£
Other
emoluments
£
Share based
payment
charge
£
Pension
costs
£
—
33,600
24,000
24,000
25,608
—
—
—
3,312
3,534
—
—
—
—
—
—
4,128
4,128
4,128
4,128
—
—
—
—
—
Total
£
—
37,728
28,128
31,440
33,270
149,000
20,562
1,950
11,353
39,104
221,969
99,000
355,208
12,672
40,080
—
1,950
10,321
38,188
48,656
87,760
170,649
523,184
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.
Notes on the Financial Statements
55
24 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
Group
2016
£
809,954
134,096
50,519
324,890
2015
£
844,343
198,064
55,216
100,248
Compnay
2016
£
627,155
49,463
30,000
324,890
1,319,459
1,197,871
1,031,508
6
12
18
6
26
32
6
—
6
2015
£
524,501
47,611
—
100,248
672,360
6
—
6
Employee benefit expenses includes £393,712 (2015: £586,348 ) of costs capitalised and included within intangible non-current assets.
Share options granted include costs of £165,510 (2015: £81,883 ) relating to Directors.
25 Investment in subsidiaries
Company
Shares in Group undertakings
Loans to Group undertakings
2016
£
2015 (Restated)
£
2,348,042
2,348,042
41,332,305
37,944,114
43,670,347
40,292,156
S
T
A
T
E
M
E
N
T
S
F
I
N
A
N
C
I
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L
Investments in Group undertakings are stated at cost. The loans to Group undertakings are repayable on demand and currently carry
interest at 6%, however there is currently no expectation of repayment within the next twelve months and therefore loans are treated
as non-current.
On 23 March 2006 the Company acquired the entire issued share capital of Horizonte Exploration Limited by means of a share for share
exchange; the consideration for the acquisition was 21,841,000 ordinary shares of 1 penny each, issued at a premium of 9 pence per
share. The difference between the total consideration and the assets acquired has been credited to other reserves.
26 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
2016
£
11,996
11,996
2015
£
46,596
46,596
2016
£
—
2015
£
42,100
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.
COMPANYOVERVIEWBUSINESSREVIEWCORPORATEGOVERNANCEFINANCIALSTATEMENTS 56
Notes on the Financial Statements
27 Contingent Liabilities
(a) Glencore Araguaia Project
The SdT deposit area concessions are subject to on-going litigation with a Brazilian third party. Glencore has disputed these claims.
The parties have agreed certain protections including the receipt by HZM from Glencore of certain indemnities in respect of such litigation.
The Asset Purchase Agreement contains customary warranties regarding the GAP project and the parties' ability to enter into
the Proposed Transaction and is subject to customary termination rights and confidentiality obligations.
(b) Other Contingencies
The Group has received a claim from various trade union organisations in Brazil regarding outstanding membership fees due in relation
to various subsidiaries within the Group. Some of these claims relate to periods prior to the acquisition of the relevant subsidiary and
would be covered by warranties granted by the previous owners at the date of sale. The Directors are confident that no amounts
are due in relation to these proposed membership fees and that the claims will be unsuccessful. No subsequent actions, claims or
communications from the various trade union organisations have been received subsequent to the requests for payment. As a result, no
provision has been made in the Financial Statements for the year ended 31 December 2016 for amounts claimed. Should the claim be
successful, the maximum amount payable in relation to fees not subject to the warranty agreement would be approximately £64,000.
In 2013 the Group received an infraction notice from the Brazilian Environmental Agency’s (‘IBAMA’) district office in Conceição do
Araguaia in connection with carrying out drilling activities in 2011 without the relevant permits. Drilling equipment was furthermore
impounded. The Group strongly believes that it operated with all necessary permits and has initiated legal proceedings to overturn the
infraction notice. The Group has secured cancellation of the injunction and has appealed the associated fine and infraction notices of
approximately £68,000 which has not been recognised in these financial statements.
In August 2014, the Group received a claim from a former employee in Brazil with regard to amounts allegedly due under the terms of
his employment. The Group is defending the claim and it is not currently practicable to estimate the extent of any liability that may arise.
In December 2014, the Group received a writ from the State Attorney in Conceiçao do Araguaia regarding alleged environmental damages
caused by drilling activities in 2011. To ensure proper environmental stewardship, the Group conducts certified baseline studies prior
to all drill programmes and ensures that areas explored are properly maintained and conserved in accordance with local environmental
legislation. After drilling has occurred, drill sites and access routes are rehabilitated to equal or better conditions and evidence is retained
to demonstrate that such rehabilitation work has been completed. 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 2016.
28 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 £602,827 loss (2015: £421,479 profit).
29 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
Simon James Retter
Company Number
05676866
Registered Office
Horizonte Minerals Plc
26 Dover Street
London
W1S 4LY
United Kingdom
Nominated Adviser and Broker
finnCap Ltd
60 New Broad Street
London
EC2M 1JJ
United Kingdom
Independent Auditor
BDO LLP
55 Baker Street
Marylebone
London
W1U 7EU
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:
Freitas Ferraz Advogados
Belo Horizonte – MG
Rua Paraiba, no 550, 9 ander, Bairro Savassi
CEP 30.130.-141 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